Which type of contract is characterized by unequal bargaining power where one party must accept the terms as offered?

A contract by adhesion is characterized by the unequal bargaining power between the parties involved, typically where one party prepares the terms and the other party has little or no ability to negotiate those terms. This type of contract is often seen in situations such as insurance policies, where the insurer creates the contract language, and the insured must either accept the terms as they are or forgo the insurance coverage altogether.

These contracts are usually presented on a take-it-or-leave-it basis, highlighting the imbalance in negotiation power. The fundamental principle is that the one who drafts the contract typically has more control over its provisions, making it challenging for the other party to negotiate specific terms. This is crucial for understanding how insurance contracts function, as many consumers do not have the expertise to negotiate fine details or are presented with standard contracts that are non-negotiable.

The other choices reflect different characteristics: a mutual contract implies active participation and agreement from both parties, a negotiated contract involves discussions and modifications to reach common ground, while a standard contract typically refers to contracts that follow a common, established format but may or may not include the adhesion feature.