In the daily development of economics, when capacities of manufacturing, purchase, sale and facilities are growing and participants of the market are engaged in more and more contracts, along with the classical formalization of transactions, when parties, having equal bargaining power, enter into contract after negotiation, arise contracts, which are based on standard form terms, prepared by the party, having stronger bargaining position, to be signed by the party in a weaker position without any negotiation. Such standard form contracts, which are offered on take-it-or-leave-it basis, are termed as adhesion contracts.
Adhesion contracts are signed in daily life with mobile operators, insurance companies, banks, travel agencies, water, heating, electricity suppliers etc. Neither the Civil Code of the Republic of Lithuania nor other laws of the Republic of Lithuania provide characters of adhesion contracts leading to the difficulties in identifying whether the certain contract might be treated as adhesion contract or not. Relatively the following characters might be the esential ones when identifying adhesion contracts: the contract is formed under standard conditions and one party of the contract has a stronger bargaining power. Additional characters might be the following: the party which has prepared the contract has market power in a relevant market; the contract is prepared not for an individual case, but for repeated use; the contract is offered on take-it-or-leave-it basis.
Under the article 6.160 of the Civil Code of the Republic of Lithuania according to the manner of contracts’ conclusion, they are divided into contracts by mutual agreement and contracts of adhesion. The article 6.185 of the Civil Code of the Republic of Lithuania determines that standard conditions shall be such provisions which are prepared in advance for general and repeated use by one contracting party without their content being negotiated with the another party, and which are used in the formation of contracts without negotiation with the other party. However, neither Civil Code of the Republic of Lithuania nor other laws or case law determine the term of adhesion contracts and provide certain criteria which would help to identify whether the contarct was concluded by mutual agreement or as a contract of adhesion.
In accordance to the characters of adhesion contracts mentioned above it is possible to form the following concept of adhesion contract: adhesion contract – a contract between the contracting parties having different bargaining position, when the contract is concluded without any negotiation due to the reason that the contracting party having stronger bargaining position has prepared the contract with standard conditions and the contracting party having weaker position might either join the contract on take-it-or-leave-it basis or not to join the contract at all.
Adhesion contracts create assumption to include unfair provisions in them. Mostly such provisions are those helping to avoid responsibility to the stronger contracting party, providing more and wider rights to the stronger contracting party, including arbitral clause etc. Even if adhesion contracts create conditions for unfairness still under the Lithuanian law only the identification of a certain contract as an adhesion contract does not create preconditions to keep ceratin provision invalid or not binding. Standard conditions prepared by one of the parties shall be binding to the other if the latter was provided with an adequate opportunity of getting acquainted with the said conditions. And only surprising conditions are not binding as the article 6.186 of the Civil Code of the Republic of Lithuania determines that no surprising condition contained in a standard condition contract, i.e. such condition that the other party could not reasonably expect to be included in the contract, shall be effective.
The identification of a contract as an adhesion contract could result in a different situation in accordance to the fact whether the weaker contracting party is a consumer or a commercial subject. Considering the need of effective customer, as economically weaker party, protection, along with part 4 of article 6.188 of Civil Code of the Republic of Lithuania it would be reasonable to consider contract automatically procedurally unconscionable if it is found that contract is adhesive, and do not rise question of such contract’s procedural conscionability till the party, which has prepared standard terms, has explicitly asked to do so. Moreover, it is reasonable not to apply the same presumption in case the weaker contracting party is not a consumer, but a commercial organization. This is also in line with the regulation under the article 6.185 of the Civil Code of the Republic of Lithuania, which determines that in the event where both parties to a contract are enterprises (businessmen), it shall be considered that the other party was provided with the opportunity of getting acquainted with the standard conditions if:
- the party who prepared the standard conditions delivered thereof in written form to the other party before or at the time of signing the contract;
- the party who prepared the standard conditions informed the other party before the signing of the contract that the contract would be formed in accordance with standard conditions which were accessible to the other party in the place indicated by the party who prepared the standard conditions;
- a copy of standard conditions was offered to be sent to the other party if requested.
Taking everything into account identification of a contract as an adhesion contract does not itself let to consider certain provisions invalid or not binding as well as a contract being an adhesion contract does not automatically create unconscionability.
Dovile Aukstuolyte
Assistant to the Attorney at Law
ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora