Rhode Island Life Insurance Practice Exam

What is another term for a contract that is imposed on one party without negotiation?

1. Contract of adhesion

2. Mutual agreement

3. Advisory contract

4. Negotiated contract

The correct answer is: Contract of adhesion

A contract that is imposed on one party without any negotiation is known as a contract of adhesion. This type of contract is typically drafted by one party, often in a position of greater power or control, and presented to the other party on a take-it-or-leave-it basis. The weaker party has little to no ability to negotiate the terms and must accept the contract as it is written. Contracts of adhesion are common in various industries, including insurance, where the insurance company provides a policy that the insured must accept without the opportunity to alter its terms. This characteristic highlights the imbalance in bargaining power and can lead to scrutiny regarding the fairness and enforceability of the contract. The other terms provided do not accurately capture the essence of a non-negotiated contract. Mutual agreement typically implies that both parties have negotiated and agreed to terms. An advisory contract usually relates to agreements where one party provides guidance or recommendations rather than entering a binding agreement. A negotiated contract, as the name suggests, involves discussions and compromises between the involved parties.