AD Banker Comprehensive Practice Exam

A contract drafted without input from the insured is considered a(n):

1. Unilateral Contract

2. Conditional Contract

3. Contract of Adhesion

4. Aleatory Contract

The correct answer is: Contract of Adhesion

A contract drafted without input from the insured is considered a contract of adhesion. This type of contract is typically created by one party with significantly more power, usually the insurer, and it is presented to the other party, the insured, on a "take it or leave it" basis. The insured has little to no ability to negotiate the terms, which can lead to an imbalance in the parties' rights and obligations. In a contract of adhesion, the terms are generally standardized and the insured must either accept all the terms as presented or not enter into the agreement at all. This emphasizes the importance of clarity and fairness in the contract language, as ambiguities usually favor the party that did not draft the contract—in this case, the insured. The other contract types presented—unilateral, conditional, and aleatory—describe different characteristics of agreements but do not specifically capture the dynamic of one party drafting the entire contract without input from the other. A unilateral contract involves an obligation on one side only, a conditional contract depends on the occurrence of a specific event, and an aleatory contract is based on uncertain events, with benefits contingent upon those events. None of these terms fully describes the nature of a contract of adhesion, making the correct choice the one that