Understanding Pre-formulated Standard Contracts and Their Implications
2. Pre-formulated Standard Contract
Adhesion Contracts: Contracts that are unilaterally written by one of the parties are adhesion contracts. The same model contract is used for every client.
It is true that these contracts have some benefits as their use lowers the costs of contract writing and dealing and speeds up the traffic.
However, the party that adheres to the contract does not have the possibility to negotiate its provisions. Therefore, the parties have different positions of strength in the agreement, and this might lead to abuses by the stronger party.
Unlike the idea of a contractual process seemingly underlying code provisions, the characteristics of mass production and mass trade in modern economies demand more flexible, standard, and better-suited instruments.
The advent of the so-called adhesion contract and the standard contract terms redraw transactional dynamics towards a “no bargain”, “mute trade”, or “contract without dealings” scenario.
The “Take-it or Leave-it” Alternative: Given the economic patterns of mass trade, contract terms are not negotiated individually, and the adherent is compelled to decide according to the two-option scheme of “take-it or leave-it.”
The foregoing well-known formula embodies the phenomenon of adhesion contracts with general conditions (not individually negotiated conditions).
General Conditions: The legal concept of “standard terms” or “general conditions” is defined in the Spanish legal system by the Standard Contract Terms Act (Law on General Conditions of Sale) 1998 according to the following features:
- No individually negotiated conditions predisposed by the seller or supplier (one of the contracting parties) for an indefinite number of transactions,
- Particularly in the context of pre-formulated contracts,
- To be accepted by the other contracting party (consumer but also professional),
- Under the radical alternative of take-it or leave-it.
Legal Control of the General Conditions of Sale
Consumer-biased legislation has recourse to the mandatory character of provisions to prevent abuses and unconscionability:
Markets fail, and State intervention to repair them is demanded when the imbalance between the parties renders private autonomy illusory.
With the ultimate goal of protecting the weakest party, legislators fix mandatory limits on private autonomy aiming at rebalancing an unfair situation.
To prevent and fight these abuses, the State enacted Law on General Conditions of Sale (GCSL). When the general conditions are used in contracts with consumers, articles 80 and following of the Rehashed Text of the Consumer Protection Law (RTCPL) (RD 1/2007) have to be taken into account.
As we know, article 1 GCSL gives us the concept of general conditions of sale. According to it, general conditions are prewritten clauses imposed by one party and incorporated into numerous contracts.
The regulation of the GCSL is based on two kinds of controls: the incorporation control and the control of content.
The first one, the incorporation control, is applied in contracts with entrepreneurs and with consumers, whereas the second one, the content control, only applies to the latter.
B) Content Control: In contracts with consumers, the general conditions of sale are valid only if they are not abusive (art. 8.2 GCSL). If abusive, the conditions are null and void and shall be deemed not to have been included in the contract.
The part of the contract that becomes null shall be integrated in accordance with the rules of article 1258 CC and the principle of good faith (art. 83.2 RTCPL).
When Are the General Conditions Abusive? The general conditions are abusive if they are contrary to good faith and cause an unbalance in the rights and obligations of the parties (art. 82.1 RTCPL).
Articles 85 to 90 Give Examples of Abusive Clauses