Standard Form Contracts

Mathew Volpe

LEGL 470.41

Dr. Jeffrey Schieberl

10/5/15

        GROUP C: What is a “standard form contract”? Why do some companies utilize them and what are some of the potential risks presented by standard form contracts?

Adhesion, and the Boilerplate

        Individuals and organizations commit to contractual relations between each other all the time, so much so that is becomes impossible to negotiate terms and conditions of every one of these contracts. However, many contracts contain similar trade usage and customary practice conditions that prevent needless disputes or litigation. Having those conditions in written form is smart way to keep track of your contractual obligations. The most common written contracts between businesses and individuals are known as, Standard Form Contracts.

        Standard form contracts are very common and it is important to understand why some companies utilize them and what potential risks are imposed onto the parties entering into this contractual agreement.

        Standard form contracts are agreements that utilize standard, non-negotiated provisions in a printed form. These contracts are also known as contracts of adhesion, boilerplate, or as take it or leave it contracts. The one party with the superior bargaining power that actively engages in reoccurring transactions usually drafts the terms, set in fine print, for the contracts. These terms are non-negotiable by the consumer.

        These business-to-consumer contracts increase efficiency in the marketplace of goods and services. By eliminating the need for negotiations of contract details, transaction costs and time can be reduced.  Companies also utilize these contracts to gain unequal bargaining power over the consumer. For a multinational corporation, such as Sony, a sales representative is unable to alter possible unfair terms that trick and abuse the potential consumer of a product, even if the consumer was able to understand the fine print of terms in the contract.

Standard form contracts are usually drafted by corporate lawyers, with company liability being the most important aspect of the contract. Consumers engage into these contracts daily, most don’t read the fine print, while others barely comprehend what it means.

        The fine print of contracts should merit the consumer’s attention, for some of the provisions that are stated work against the interest of the consumer. The consumer is usually not aware of these provisions, until the organization tries to enforce them. For instance, the fine print could say something along the lines of, if litigation ensues, then the loser will pay the winners attorney. That’s a big consideration when entering into a dispute and you would never want to be in that position. Entire industries can impose industry wide provisions leaving consumers with no alternative in their search for quality and practical goods and services.