The Influence of Global Politics on Contracts of Adhesion

The influence of global politics and economic developments on world affairs is a major factor in the interconnected global legal world. As such, contracting practices and economic legislation in one place are felt elsewhere. One such concept that has a global reach is the contract of adhesion, which is a contentious issue at the intersection of private and public (state) law fields.

A contract of adhesion is defined as an agreement which is presented to the subscriber without negotiation and wherein the terms contained therein may not be altered and cannot be the subject of a counter-offer by the subscriber.

The term “adhesion contract” was used by the famous French legal historian Léon Duguit in his 1898 work. The origins of contracts of adhesion trace back to the latter part of the 19th century, in several countries, including the United States of America, France, Switzerland, Germany, and many Arab States.

As an example of a contract of adhesion in the geopolitical realm, one could argue that international treaties and alliances are the quintessential example of an adhesion contract. An example in this context is a treaty between the United States and North Korea, signed on June 12, 2018, over denuclearization of the Korean Peninsula, where the United States set the terms for the agreement, and said any deviation whatsoever from the agreement would be considered additional sanctions-meaning total compliance with the U.S. strict demands will be essential to ensure no further sanctions will be imposed. This specificity is what characterizes a contract of adhesion, which leaves no room whatsoever for any counter-offer.

One of the effects of the contract of adhesion in the realm of international trade and commerce, is found in trade agreements that explicitly state that the capital investors will be protected against any expropriation of their investments, whether by lawful or unlawful means, and in exchange for international investment, will receive certain guarantees in the future. These obligations can be caught by international law. Breaches of these rules will have a clear effect of international law, and potentially economic or fiscal sanctions, whatever is the case.

By way of example in the digital economy, Spain was the first country to introduce an e-consumer protection law, in 2002. The aim of Spain’s new legislation was to protect users of digital services, giving them a grace period of seven days to cancel the comprehensive contract of adhesion examples. However, the practical aspects of enforcing these laws can sometimes be very difficult to implement.

In the context of the Arab World, many of the states are signatories to the “Arab League Consumer’s Rights Declaration,” which seeks to safeguard consumers with regards to contract of adhesion agreements. For instance Article 52 of the declaration prohibits any clause or agreement that cannot be reviewed according to court rulings. In Egypt, the newly adopted “Consumer Protection Law” was adopted by the Egyptian House of Representatives on November 30, 2017, which prescribes various regulations with respect to a consumer’s rights. The new law seeks to prevent abuses by suppliers in consumer contracts and to ensure that the consumer is aware of all terms and conditions. The law provides various limitations of liability and restrictions as to who can recover damages.

In the Emirates there has been no much recent case law on contract of adhesion. But in the context of the UAE, for an UAE contract to be valid, one of the essential requirements under UAE law is the consent of both parties. It has long been remarked that the California state law differs from the UAE law, in that there no freedom of contract exists. There are few significant changes which may affect the UAE regulations.

For example, where courts in the UAE have already established that arbitration clauses may even be void if the parties are not equal, given the asymmetry of bargaining power, it will be interesting how this plays out in light of the California amendment of the Federal Arbitration Act 21 U.S.C. §10(b).

These amendments, which were signed into law by Governor Jerry Brown, on 27 September 2018, prohibit companies from including mandatory arbitration clauses in employment contracts, preventing individual employees from joining together in class action lawsuits over sexual harassment claims.

The application of the “Consumers Advocate Protection Act of 2018” to the UAE however, remains to be seen. Many observers expect the State of California will become a trendsetter and adopt more of a progressive role internationally on these issues.