Avoiding the Pitfalls of Preprinted Legal Contracts

Understanding the concepts of unconscionability and adhesion contracts.

Many risks in the fitness profession can be avoided with careful planning and attention to detail. One critical detail that often gets overlooked is the use of valid contracts, especially waivers. Preparing legal documentation can be time-consuming, and hiring contract attorneys is expensive.

That’s one reason why many facility and studio owners turn to preprinted legal forms, which can be readily found at office warehouse stores. These ready-to-print forms are certainly a step in the right direction to managing your professional risks; however, they do present some unique problems that could handicap your risk management. This article introduces you to the concepts of unconscionability and adhesion contracts, two common problems associated with preprinted forms.

What Is Unconscionability?

When you use preprinted contracts—especially waivers or contracts that contain a “release of liability” clause—the primary legal issue activated is unconscionability. This concept focuses on the validity and subsequent enforcement of the waiver or release-of-liability clause.

Unconscionability is defined as “a doctrine under which courts may deny enforcement of unfair or oppressive contracts because of procedural abuses arising out of the contract formation, or because of substantive abuses relating to [the] terms of the contract, [including those terms that] violate reasonable expectations of [the] parties . . .” (Black 1990).

Put simply, the doctrine of unconscionability can deny the enforcement of certain contractual terms because of misrepresentation, fraud, duress or unequal bargaining power during contract formation.

How Is Unconscionability Determined?

Courts can refuse the enforcement of all or part of a contract that is deemed to be unconscionable. The test for evaluating unconscionability rests on the following point: “. . . whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract . . .” (UCC §203, Comment 1).

What does this mean in the case of a fitness contract? If a contract appears to be extremely favorable to one party (say, your facility) at the detriment of the other (say, a member of your club), then it is considered unfair and cannot be enforced. Thus, an unconscionable contract is an unenforceable contract. The classic example of this is a sale of goods made to foreign residents who have difficulty understanding and/or reading the English language. Some merchants will purposefully raise the price of products sold to those individuals because they know the language barrier will prevent them from recognizing the inflation. Such a contract, one that involves intentionally taking advantage of another person, would be deemed unconscionable.

In the fitness setting, contracts often contain a waiver section that is buried in the middle of the document without being adequately highlighted. A client could sign a contract like this without knowing that any waiver was included. Such a contract could be declared unconscionable. Other examples include hidden costs (e.g., towel fees) and noncommunicated expiration dates on training sessions.

At What Point Is a Contract Unconscionable?

One important element of the test for unconscionability is timing. A contract must be judged unconscionable at the time of the signing of the contract (Emanuel 1999). This means that if a client reneges on his or her part of a contract after it is signed, that does not constitute unconscionability; instead, it is considered a breach of contract and an act of bad faith (Emanuel 1999).

At the time of the signing, if a facility or trainer were somehow to take advantage of a client’s trust, illiteracy, language barrier or lack of experience, then that may be indicative of unconscionability. The law allows the client to litigate the validity of his or her contract by alleging that the contract itself was one of “adhesion,” and, therefore, unconscionable.

What Is an Adhesion Contract?

Clients bearing the burden of litigating a contract based on unconscionability frequently do so because they have signed what is legally termed an adhesion contract. An adhesion contract is defined as a “standardized contract form offered to [a consumer] of services on essentially [a] ‘take it or leave it’ basis without affording [the client] realistic opportunity to bargain and under such conditions that [the client] cannot obtain desired service except by acquiescing in the form contract” (Black 1990).

Adhesion contracts involve the use of preprinted form contracts, produced in mass quantities: You just fill in a few blanks with the respective names, prices and quantities. Little room is left for negotiation. Health club membership contracts and contracts for personal training services are significant examples of adhesion contracts!

Standardized preprinted form contracts contain nonnegotiated terms that are not discussed with the client at the time the contract is signed. Examples of nonnegotiated terms that are highly suggestive of unequal bargaining power are waivers, release-of-liability clauses, assumptions of the risk and disclaimers of warranty. These terms are typically complicated, unclear, incomplete or “buried” in fine print (Emanuel 1999). When using a preprinted form, a club or trainer (the party for whom the form contract was manufactured) often has more bargaining power than the client (Emanuel 1999).

Any clause of a contract that limits liability is a material term, meaning that it cannot be hidden in fine print; hiding it would materially alter the agreement. But even material terms that are more obvious and not hidden can alter a contract. For example, a release-of-liability clause that is written in boldface but not brought to the client’s attention is still considered a material term because the client did not agree to that alteration.

A contract with hidden or nonnegotiated clauses can be made unenforceable through the following steps. First, the contract must be identified as a standardized preprinted form contract. Second, some disproportionate bargaining power must be established. (Together, these two steps make the contract an adhesion contract.) Third, to actually cancel the adhesion contract, the agreement must be shown to be unconscionable.

It’s Not a Perfect World

Ideally, preprinted forms should never be an issue if you are diligently professional, because professionals explain the details and terms of their contracts! The real issue is the failure of fitness professionals to explain waivers or similar clauses to potential clients (and the failure to require client signatures acknowledging the waivers!).

Far too many in our industry don’t recognize the significance and seriousness of what they do. By offering and accepting a training services contract, the parties in question are entering into a legally binding agreement that is enforceable or voidable in a court of law.

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Sean Riley, JD, MS

IDEA Author/Presenter
Sean Riley earned his JD from Loyola Law School and works as a sole practitioner in Los Angeles. He ... more less
References
Black, H.C. (Ed.). 1990. Black’s Law Dictionary (6th ed.). St. Paul: West.

Cotten, D. 1996. Before the fall. Athletic Business. www.

urmia.org/docs/cotten.htm; retrieved September 3, 2005.

Emanuel, S. 1999. The Emanuel Law Outline Series: Contracts. New York: Aspen Publishers.

Uniform Commercial Code (UCC). 1998. Article 2. St. Paul, MN: American Law Institute & National Conference of Commissioners on Uniform State Laws.

April 2006

© 2006 by IDEA Health & Fitness Inc. All rights reserved. Reproduction without permission is strictly prohibited.

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