Year: 1986
Type: article
Abstract: Insurance contracts, the written policies of insurance, are, in the vast majority of cases,' clearly contracts of adhesion.2 Adhesion contracts in both insurance and non-insurance cases have long vexed courts attempting to apply the traditional rules of contract law, which are classically based on the theory of freedom of contract with the terms of the agreement bargained for between the parties, 3 to the realities of the adhesion contract where virtually all of the terms of the contract are dictated and determined solely by one side.That is, the basic terms of the form contract are offered to one party on a strict take-it-or-leave-it basis.In order to deal with the problems inherent in adhesion contracts * Professor of Law, Mississippi College School of Law.The author wishes to acknowledge the valuable research assistance of Gerald Jeutter, J.D., 1985, Mississippi College School of Law.1.It has been estimated that 99% of all contracts are on standard forms.Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 HARV.L. REV.529, 529 (1971).2. Adhesion contracts in insurance mean that the insured receives a standard insurance policy without any ability to negotiate the terms.Where the terms are negotiated or could be negotiated, the insurance contract, though contained in a standard policy, is not truly a contract of adhesion.See Holmes, A Contextual Study of Commercial Good Faith: Good-Faith Disclosure in Co ntract Formation, 39 U. PITT.L. REV.381 (1978), where the author points out that insurance contracts are adhesive for the following reasons: "the inequality of bargaining power and knowledge as between insurer and applicant, the technical character of the insurance contract, the fact that delivery of the policy often occurs after contract formation and premium payment, and the mass-standardized nature of insurance contracts."Id. at 397 (footnotes omitted).See also Neal v. State Farm Ins.Co., 188 Cal.App.2d 690, 694, 10 Cal.Rptr.781, 784 (1961).Cf Ponder v. Blue Cross of S. Cal., 145 Cal.App.3d 709, 719, 193 Cal.Rptr.632, 637 (1983) (inability of insured to negotiate individual terms rendered insurance contract a contract of adhesion).3. Holmes points out that insurance law never came within the classical law of contract.Holmes, supra note 2, at 393-95.
Author: William A. Mayhew
Institution: Pepperdine University
Language: English
Subfield: Law
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W152609758