Future Business Leaders of America (FBLA) Business Law Practice Exam

Which of the following is a characteristic of an adhesion contract?

1. Mutually agreed terms

2. Equal bargaining power

3. Imbalance of negotiating power

4. Compulsory terms

The correct answer is: Imbalance of negotiating power

An adhesion contract is defined by its nature of being a standardized agreement created by one party, often a business, and presented to another party with minimal ability to negotiate the terms. The key characteristic of such a contract is the imbalance of negotiating power between the two parties. Typically, the party with more power drafts the contract, and the weaker party must accept the terms as they are presented without significant modifications. This characteristic reflects a common situation where one party, often a consumer agreeing to a form contract, lacks the leverage to negotiate or alter the terms set forth by the stronger party, such as a corporation or a service provider. The unequal bargaining power can lead to situations where the less powerful party may have no choice but to accept terms that may not be favorable to them. Understanding this dynamic is crucial when analyzing adhesion contracts, as they often raise concerns about fairness and the potential for exploitation of the weaker party. The other options, such as mutually agreed terms or equal bargaining power, do not accurately describe the essence of an adhesion contract and instead imply a negotiation environment that is absent in these types of agreements. Compulsory terms might be present in some adhesion contracts, but they are not defining characteristics of the contract itself.