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What is a Standard Form Contract?

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  • Written By: Dale Marshall
  • Edited By: Kristen Osborne
  • Last Modified Date: 28 October 2016
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A standard form contract, sometimes called an adhesion contract or a “take it or leave it” contract, is one usually entered into by parties of unequal size or strength, with the terms being dictated by the larger party and represented as non-negotiable. Some examples of standard form contracts are home security system monitoring, attendance at a professional sports event, the residential lease on an apartment, or a life insurance policy. In each of these cases, the seller is offering a product or service, acceptance of which is contingent upon accepting certain terms and conditions as is, without negotiation. If the buyer expresses a desire to make changes to the contract, the seller will simply refuse and find another buyer. Indeed, in the case of a professional sporting event, the contract is printed on the back of the ticket, and purchase of the ticket implies acceptance of the contract.

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While there are some advantages of standard-form contracts, especially to those offering them, there is a host of disadvantages. For example, although we’re told to read the entirety of any agreement we enter into, yet we rarely read the agreements covering things like computer software, also called shrink-wrap contracts because in most cases we can’t access and read the full contract until after we’ve bought and paid for the product. Contracts like this are of questionable enforceability. In many cases, in fact, consumers offered a standard form contract are discouraged from reading it, especially in a crowded retail environment like an airport auto rental counter.

The fact that one party insists on an unalterable set of terms and conditions can be seen as bullying, and in some cases, a standard form contract, or portions of it, may be set aside. One famous such case involved a consumer who purchased a suite of furniture on a time-payment plan, the terms and conditions of which, set forth on a standard form contract, stipulated that the furniture suite was a single item. When the consumer defaulted with only a very small balance unpaid, the furniture store attempted to repossess the entire furniture suite. The consumer sued, and the court ruled that reposing the entire suite, when less than the cost of the smallest item was outstanding, was unconscionable, and allowed the store to repossess only an end-table.

Or course, there are cases where alteration of a standard form contract would impose a hardship on the seller. It’s impractical for the promoters of a professional sporting event to renegotiate the terms of their contract with anyone who objects, for instance, and so they simply refund the ticket’s purchase price (if the event hasn’t started yet). Residential leases are similar — the landlord of an apartment complex, for example, would be ill-advised to negotiate different terms and conditions for every tenant.

Most consumer contracts, though, are standard form contracts, and of the contracts where negotiations are permitted, they’re only allowed by the seller in certain areas. For example, standard contract forms for listing and selling real estate contain many standard clauses, or boilerplates, but also contain a few clauses that invite or require specific input or negotiation by the parties. The most common consumer contracts in the United States, including cellular telephone service and credit card agreements, as well as computer software and insurance contracts, are all standard form contracts that are absolutely non-negotiable.

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Melonlity
Post 2

@Markerrag -- No, we will probably return to those days again for several reasons. One of the most important is that a lot of those contracts put together on standard forms have no real room for negotiation. The terms are what the terms are and people are free to accept or reject them.

Also, routine business practices would slow things down incredibly if everyone sat down and negotiated each and every detail of each and every contract.

Markerrag
Post 1

It is a shame that a lot of contracts are non negotiable. There was a movement once upon a time to void standard contracts where one party had all the negotiating power and the other party was never given a chance to put in terms of their own.

It would be a great thing to see a return to those days, huh? I doubt that will ever happen, however.

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