In an adhesion contract, how is the contract typically created?

In an adhesion contract, one party typically sets the terms, leading to a situation where the other party has little to no ability to negotiate or modify those terms. These contracts are usually take-it-or-leave-it agreements, where the stronger party—often the insurer in an insurance context—drafts the contract with all the stipulations included. The weaker party, which could be the insured individual, must accept it as is to receive coverage or service.

This structure is particularly prevalent in insurance agreements where standardized contracts are issued to consumers. Because these contracts involve a power imbalance, they are often subject to special rules and judicial scrutiny to protect the interests of the weaker party. The focus in adhesion contracts is on the terms set by the drafting party rather than mutual agreement, which is why the correct answer reflects that one party solely establishes the conditions of the agreement.