Wednesday, February 25, 2004

Adhesion Contracts

More nasty business. Take it or leave it. Those are the words that would accompany the phrase "Adhesion Contract" if the world had its own set of subtitles to describe legal terms. (Maybe it should.)

I like Wikipedia, and am tempted to expand their definition of Adhesion contracts. Seems like a good idea. It's the closest we may have to that set of subtitles.

What is the harm in an adhesion contract? Well, one party has all of the power and decision-making authority, and the other has nothing. There's no give-and-take exchange of responsibilities or obligations.

No negotiation, or alternatives. Terms that only benefit the company in a position of power. Often leading to a large profit. This type of contract is most frequently seen in a deal between a corporation and a consumer, and rarely does anything to make businesses look good.

Small businesses often use customer service as their unique selling proposition to attract customers. It's something that large businesses can do also. But, many of them seem to grow too large, and reduce the value of customer service in their business models. It's an oversight that has cost many companies their customers. It's also within that context that we see adhesion contracts arise.

Another phrase that you might see when the words "adhesion contract" come up is the term "dealing at arm's length." That means that both parties have a say. It's often much better to be able to deal at arm's length. If a company doesn't offer you the opportunity to deal at arm's length, but would rather feed you an adhesion contract to sign, consider working with someone else, if it is an option.

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