What is a membership contract?
In a membership contract, one party has far more power than the other to create the contract. For a membership contract to exist, the offeror must provide a client with general conditions identical to those offered to other clients. These terms and conditions are not negotiable.
Explanation of the membership contract
An example of a membership contract is an insurance contract. In an insurance contract, the company and its agent have the power to draw up the contract, while the potential policyholder has only the right to refuse; they cannot counter the offer or create a new contract to which the insurer can subscribe. Before signing a membership contract, it is imperative to read it carefully, because all the information and rules have been written by the other party.
Membership contracts are generally enforceable in the United States since the Uniform Commercial Code is followed by most American states and contains specific provisions relating to membership contracts for the sale or rental of goods. Membership contracts are however subject to a specific examination.
History of membership contracts
Membership contracts as a concept have their origin in French civil law, but have not entered into American jurisprudence Harvard Law Review published an influential article by Edwin W. Patterson in 1919. Subsequently, most American courts adopted the concept, largely helped by a case from the California Supreme Court which approved the analysis of the accession in 1962.
Enforcement of membership contracts
For a contract to be treated as a membership contract, it must be presented as a “take it or leave it” agreement, giving no party the opportunity to negotiate because of its uneven negotiating position. Membership contracts are subject to scrutiny, which can take many forms:
- If the conditions are unreasonable for the person receiving (and not written) the contract, and if the contracting parties were on an unequal basis, such a contract is not enforceable. The reasonableness of a contract in its expectations depends on the importance of the terms, their purpose and the circumstances surrounding the acceptance of the contract.
- Section 211 of the American Law Institute’s Restatement (Second) of Contracts, which has persuasive, but not binding, force in court, provides:
When the other party has reason to believe that the party expressing such consent would not do so if it knew that the writing contained a particular clause, this clause is not part of the agreement.
- The doctrine of disbelief is a factual doctrine flowing from fair principles. Inaccessibility in membership contracts generally occurs if there is no significant choice on the part of a party due to unilateral contractual provisions, as well as unreasonably oppressive conditions that no one would reasonably accept.