Courts scrutinize membership contracts and sometimes overturn certain provisions due to the possibility of unequal bargaining power, injustice and lack of scruples. These decisions include the nature of the agreement, the possibility of an unfair surprise, lack of notification, unequal bargaining power and material injustice. Courts often use the « doctrine of reasonable expectations » to justify invalidating part or all of a contract of adhesion: the weaker party is not ordered to comply with contractual terms that go beyond what the weaker party would reasonably have expected from the contract, even if what it reasonably expected was outside the strict agreement. Businesses of all sizes would not be able to operate effectively if the only way to enforce contracts was to negotiate each agreement separately. Instead, most companies prepare standard contracts that their potential customers can sign. If consumers are not satisfied with the agreement in its current form, they are free to move their business elsewhere. The court ruled in James` favour and ruled that the loan agreement, a standard liability agreement, could not be enforced because it was fundamentally unfair. The facts showed a lack of scruples. First, there was an inequality of bargaining power because the credit company and the applicant had not negotiated the terms of the loan: it was a standard standardized contract. Second, the loan agreement could not be easily understood by a non-lawyer because, although it was only six pages long, the first five pages contained substantial financial conditions that required a level of sophistication that the applicant, who did not have a high school education, did not possess. Finally, due to the APR of 838%, the bonds showed an overall imbalance, a price level that, according to the court, « shocks the conscience ». James` finding contrasts with the 1991 U.S. Supreme Court case, Gilmer v.
Interstate/Johnson Lane Corp. This latest case reinforces the idea that it is rare for a court to find that a detention contract is unscrupulous. There, the Claimant asserted that Interstate dismissed him from his employment because of his age when it terminated his employment contract at the age of 62. Instead of going to arbitration to resolve this dispute, as stated in his employment contract, Gilmer wanted to go to court to assert his claims of age discrimination and settle the dispute. An example of a liability contract is a standardised contract form that offers goods or services to consumers essentially on a « take it or leave it » basis, without giving consumers realistic opportunities to negotiate terms that would benefit their interests. In this case, the consumer will not be able to receive the desired product or service unless he accepts the standard contract. In addition, ambiguous terms are interpreted against the party who drafted them. The courts balance the above considerations against a person`s right to enter into contracts freely. Some common challenges for membership contracts include mandatory arbitration clauses, jurisdiction selection clauses, and limitations on damages.
In general, contracts are not unenforceable simply because they are membership contracts. However, these contracts also have certain disadvantages, the most important of which is the lack of price parity between the two parties to the membership contract. The party signing the contract waives the bargaining power that it usually has under the traditional contract design model.  By providing a standardized contract that includes non-negotiable terms, membership contracts reduce the need for tailor-made contracts that are specific to each consumer, thereby increasing efficiency and saving time for both buyer and seller. There is nothing unenforceable or even wrong with membership contracts. In fact, most companies would never complete their trading volume if it were necessary to negotiate all the terms of each consumer credit agreement. Insurance contracts and residential leases are other types of liability contracts. However, this does not mean that all liability contracts are valid. Many detention contracts are unscrupulous; they are so unfair to the weaker party that a court will refuse to apply them. An example would be strict penalties for non-payment of loan payments that are physically hidden by fine print in the middle of an obscure paragraph of a long loan agreement.
In such a case, a court may find that the opinions of the contracting parties do not coincide and that the weaker party has not accepted the terms of the contract. A type of contract, a legally binding agreement between two parties, doing a specific thing in which one party has all the bargaining power and uses it to draft the contract primarily to its advantage. Liability contracts are generally enforceable in the United States because the Uniform Commercial Code is followed by most U.S. states and contains specific provisions regarding liability agreements for the sale or lease of property. However, liability contracts are subject to special scrutiny. Since contract law is the law of the State, the treatment of contracts of adhesion varies from state to state. However, a common thread in the examination of membership contracts is the assessment of the unscrupulous nature of the contract or a particular contractual clause. The court will assess the meaning of the clause, the purpose of the clause and the circumstances of the performance of the contract.
In a membership contract, one party has much more power than the other in drafting the contract. In order for a liability contract to be concluded, the service provider must provide a customer with general terms and conditions identical to those offered to other customers. .