Adhesion Contract Clause

What It Does

For in-house counsel, adhesion can arise on either side of the relationship. You may approve standard terms your company gives every customer, then accept a vendor click-through no one will redline with you. The label describes the bargaining process; enforceability turns on the individual term and how assent was obtained.

Courts in most states treat adhesion as evidence of procedural unconscionability, the oppression-or-surprise half of the test. They then look for substantive unconscionability in the specific term under attack.

California put the two halves on a sliding scale in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000). The court held that the more substantively oppressive the term, the less evidence of procedural unconscionability a challenger needs.

A practical test: pull the three terms in your own standard form that a customer would be most surprised to find. Then ask whether each one would survive if a court struck the other two.

• Fixes the terms in advance so the drafting party can close the same deal thousands of times without a negotiation cycle.

• Signals disproportionate bargaining power, which most courts treat as the procedural half of an unconscionability challenge.

• Leaves an individual term open to attack while the rest of the agreement stands.

• Puts the reasonable-expectations doctrine in play, since Restatement (Second) of Contracts section 211(3) removes a term the drafter had reason to believe the adhering party would have refused.

• Shifts the drafting question from negotiation to notice, because assent turns on how the terms were presented and accepted.

The standard-form arbitration provisions in the filings below pair a class-action waiver with a stated opt-out window and a severability clause that says what happens if the waiver fails.

Examples

General Motors Financial Company, Inc. / Right Notes Investor

GM Financial Right Notes TermsUnilateral modificationOne-Sided2024

"We may change these Terms at any time at our sole discretion, either by adding new terms or conditions or by modifying or deleting existing ones. Except as we state below, any changes may be made without providing notice to you. Any changes will be filed with the SEC no later than the date that they are effective. You are responsible for visiting the SEC's website and reviewing the most recent version of these Terms that we have filed."

Source

WebBank / Synergy CHC Corp.

Merchant Loan AgreementArbitration opt-out windowOne-Sided2024

"YOU HAVE THE RIGHT TO REJECT THIS ARBITRATION PROVISION, BUT YOU MUST EXERCISE THIS RIGHT PROMPTLY. If You do not wish to be bound by this agreement to arbitrate, You must notify Us in writing within sixty (60) days after the date of this Agreement."

Source

WZ Franchise, LLC / Future Labs IX, Inc.

Franchise AgreementIndividual-basis arbitration and class barMutual2022

"Franchisee and Franchisor agree that arbitration shall be conducted on an individual basis, and may not be conducted on a class-wide, joint, or consolidated basis. The Federal Arbitration Act shall apply to all arbitration questions."

Source

SmartRent, Inc. / Daryl Stemm

Employee Arbitration AgreementArmendariz-style procedural minimumsMutual2023

"The arbitrator shall prepare a written decision containing the essential findings and conclusions on which the award is based so as to ensure meaningful judicial review of the decision. The arbitration proceedings will allow for reasonable discovery under the AAA Rules, and the arbitrator selected according to this agreement shall decide all discovery disputes. The arbitrator shall apply the same substantive law, with the same statutes of limitations and same remedies that would apply if the claims were brought in a court of law."

Source

Dropbox, Inc. / User

Dropbox Terms of ServiceClass and representative action waiverOne-Sided2025

"You may only resolve disputes with us on an individual basis, and may not bring a claim as a plaintiff or a class member in a class, consolidated, or representative action. Class arbitrations, class actions, private attorney general actions, and consolidation with other arbitrations aren't allowed."

Source

Atlassian / Customer

Atlassian Customer AgreementUnilateral modification by postingOne-Sided2026

"Atlassian may modify this Agreement (which includes the Policies, Product-Specific Terms and DPA) from time to time, by posting the modified portion(s) of this Agreement on Atlassian's website. Atlassian must use commercially reasonable efforts to post any such modification at least thirty (30) days prior to its effective date."

Source

Negotiate

Drafting Party Positions:

You want the same document to work across every counterparty and to survive the one challenge that reaches a judge.

• Give the adhering party a conspicuous way out of the arbitration provision, on the model of the sixty-day rejection window in the WebBank loan above. An opt-out is the strongest answer to a procedural unconscionability argument.
• Build the arbitration procedure to the Armendariz minimums even outside California: a neutral arbitrator, real discovery, a written decision, every remedy a court could award, and the forum costs on you.
• Write the severability clause to say what happens to the rest of the arbitration section if the class waiver fails. The Dropbox terms void the whole section rather than allow class arbitration.
• Require an affirmative act for assent, then keep the screen capture and the timestamp. Nguyen turned on the absence of any prompt, and Meyer turned on the design of the registration screen.
• Cap the modification right with a notice period and an effective date, since a term the counterparty had no way to see is the surprise a reasonable-expectations challenge is built on.

Adhering Party Positions:

You want the terms you read to be the terms that bind you, and you want a way to reject the ones you would have refused.

• Ask for the enterprise order form or an amendment that overrides named sections of the online terms, because a vendor's sales team holds authority the signup page does not.
• Calendar the arbitration opt-out the day you sign, since these windows run from the agreement date and expire on their own.
• Read the modification clause first and price the risk of a change taking effect without notice, as the GM Financial Right Notes Terms permit.
• Save the version you accepted, with the date and the screen, so a later posted revision has to be compared against something.
• Push the one term you would refuse if you had a choice, name it in an email, and keep the reply. Restatement section 211(3) turns on what the drafter had reason to believe about your assent.

Adhesion review is a volume problem: the same five questions recur across vendor terms, insurance forms, and click-throughs. GC AI's Playbooks hold your modification, arbitration, class-waiver, assent, and severability positions, while GC AI for Word runs them inside your standard form.

Red Flags

• A modification clause that lets the drafter change the terms at any time with no notice. The adhering party is bound to a document it has no way to read at the moment it changes, which is the surprise half of procedural unconscionability.

• A mandatory arbitration provision with no opt-out window and the forum costs on the adhering party. Under Armendariz, an employment arbitration agreement covering statutory claims has to cover the arbitrator and forum fees to be lawful in California.

• A class-action waiver with no rule for what happens if the waiver fails. A court that voids the waiver alone can leave the drafter in class arbitration, which Concepcion describes as interfering with fundamental attributes of arbitration.

• Terms available only behind a hyperlink with no prompt for the user to act. Nguyen held that a conspicuous link with no affirmative action is insufficient to give rise to constructive notice, which means there may be no agreement to enforce.

• A term the drafter knows most signers would refuse if they read it. Restatement section 211(3) states that where the drafter has reason to believe the adhering party would not have assented had it known of the term, the term is not part of the agreement.