The Legal Protection of the Adhering Party in Contracts of Adhesion: A Comparative Study in the Egyptian & UAE Laws

Abstract

Originally, any contract shall be characterized by free bargaining and fair negotiations; as each party shall be granted a fair chance to convince the other party with his own best possible terms and conditions.  That is to say, the ordinary model adopted for contracts in general is "free bargaining contracts", which shall be based on the agreement and assent of both wills, after the conclusion of fair bargaining and negotiation between the two contracted parties. However, there is another type of contracts that differs from this traditional model, where there is no bargaining or negotiations between the contract's parties. In this type of contracts, only one of the two parties is granted the advantage of stipulating the contract's terms and conditions in advance; while the other party's position is restricted within certain limits, mainly based on the principle of "take it or leave it". Hence, if the adhering party has accepted all terms and conditions, the contract may be concluded, and vice versa. In this case, it is safe to say that the adhering party has given in to the terms and conditions of the first party; therefore, this type of contract is known as "Contracts of Adhesion".

On this basis, Contracts of Adhesion may be defined as follows: "They are contracts where only one of the two contracted parties is entitled to stipulate the contract's terms and conditions, while the other party has no choice but either to accept or to reject all of those terms; i.e., the adhering party may not negotiate, add or omit any of the contractual terms". This type of contracting is usually fulfilled, when there is a discrepancy in the bargaining power of the two contracted parties; as one party enjoys the greater power, while the other party has a weaker bargaining power. Hence, the first party solely gets to set the terms and conditions of the contract, while the second party gets to choose either to accept all of these terms (hence concluding the contract), or to reject them (hence failing to conclude the contract).

In this regard, the legal validity of contracting used not to be compromised with this type of contracts; however, in his stipulations for the regulation of contracts, the legislator in most countries has not overlooked the reality of such unfair compliance; as the legislator has decided to provide a fair legal protection as required for the weaker party, hence rebalancing the contractual relationship. In other words, Contracts of Adhesion basically imply that the party with greater power alone gets to set the contract's terms and conditions, hence stipulating terms serving his interest at the expense of the adhering party; consequently, some of these terms could be characterized as being "arbitrary". Therefore, there is a real need to provide effective legal protection for the adhering party against any arbitrary terms.

As the case is with laws of most other countries, both the Egyptian and UAE Laws have adopted Contracts of Adhesion as legally valid; and that is based on the adhering party's voluntary approval and acceptance to submit to the will of the other party. Nonetheless, those two laws have not overlooked the fact that this type of contracting is characterized by a special nature, as it is based mainly on a great deal of discrepancy between the positions of each contracted party. That is to say, realistically, one party holds a position of power over the other party who has allowed the first party to dictate his own terms and conditions; while the second party has no choice but to submit to the will of the first party.  On this basis, the Egyptian and UAE Laws have stipulated some private legal provisions for the purpose of protecting the adhering party.

Interestingly, pursuant to the old Egyptian civil legislation, judiciary has acknowledged Contracts of Adhesion as true and legally valid contracts that shall be respected and honored. For instance, the terms and conditions printed in Lease Contracts or Insurance Contracts shall be honored; in addition, the printed regulations of some company, or the systems and regulations of the Railway Authority shall be respected. Nonetheless, in light of this old civil legislation, the Egyptian judiciary has adopted some controversial legal practices as follows: giving the written terms priority over printed terms; annulling the agreement by virtue of the exemption from liability; interpreting the contractual obligation in favor of the adhering party; and annulling the prior will by virtue of the subsequent will.

On the other hand, in light of the currently adopted civil legislation, the Egyptian legislator has stipulated a legislative protection for the adhering party, instead of the prior judicial one. Likewise, the UAE legislator has also adopted the same approach. That is to say, by virtue of the provisions of Article (149) of the Egyptian Civil Law and Article (248) of the UAE Civil Transactions Act, the following is stipulated: "In case of the stipulation of arbitrary terms in Contracts of Adhesion, the competent judge may amend these terms or release the adhering party from any obligations in this regard; and that is as required by virtue of justice, thus, any agreement to the contrary shall be considered as void".

In addition, pursuant to the provisions of Article (151) of the Egyptian Civil Law and Article (266) of the UAE Civil Transactions Act, the following is stipulated: "1- A doubt shall be interpreted in favor of the debtor; 2- However, the interpretation of ambiguous phrases in Contracts of Adhesion may not be damaging to the interest of the adhering party".