Contra Proferentem Rule

What Is the Contra Proferentem Rule?

The contra proferentem rule is a legal doctrine in contract law which states that any clause considered to be ambiguous should be interpreted against the interests of the party that created, introduced, or requested that a clause be included. The contra proferentem rule guides the legal interpretation of contracts and is typically applied when a contract is challenged in court.

Contra proferentem places fault on the party creating or introducing an ambiguous contract clause.

The Contra Proferentem Rule Explained

Contracts can be complex documents created after long periods of protracted negotiations. Each party in the contract is ostensibly looking out for its own best interests and will want the contract language to be to each party's favor. This can create scenarios in which the contract language is ambiguous or unclear, leading one party to interpret the contract differently from the other party.

The phrase contra proferentem in Latin translates to against the offeror which can be further interpreted to "guilt of the drafter." Overall, the contra proferentem rule is known for placing fault on the party who created or requested that an ambiguous clause be included. It is designed as a caveat as well as a penalty or legal punishment for introducing and including an intentionally vague contract clause into a contract.

The underlying idea is that the drafting or introducing party is intentionally using ambiguity to create or provide for results that favor their own interests. Intentional vagueness or ambiguity is an act that the contra proferentem rule seeks to mitigate and when enforced rules in favor of the innocent party citing the ambiguity as unfair.

Determining if the Contra Proferentem Rule Applies

Courts use a multi-step process in determining whether the contra proferentem rule applies in the review of a contract. The first step is to review the contract language to determine whether a clause is ambiguous enough to cause uncertainty. If the clause is determined to be ambiguous, the court will then attempt to determine the intention of the drafting party when the contract was entered into. If evidence indicates that the intent of the drafting or introducing party was not to be ambiguous, then the contract is applied according to what the evidence suggests.

However, if the evidence does not dispel the ambiguous nature of the contract language, then contra proferentem is applied, and the court rules against the party that created or introduced the clause to be included and in favor of the innocent, unknowing party.

Examples of the Contra Proferentem Rule

Contra proferentem can be identified in any contract signed by two agreeing parties. It is a ruling that can change a contract’s interpretation or results after both parties have mutually agreed on the contract.

Contra proferentem usually requires intermediation and ruling by a court in order for a contract’s interpretation to be changed.

Any contract can be debated for contra proferentem by a complaint filed in court. One industry where contra proferentem may be prevalently questioned is in the insurance industry. Insurance contracts are created by insurers and signed by insurees.

Insurees must usually agree to all terms of an insurance contract in order to receive insurance coverage. Insurance contracts are usually solely drafted by the insurer, which gives the insurer a great deal of power and authority to potentially include vague or ambiguous language that may limit their requirements for paying an insurance claim.

An insuree may choose to file a contra proferentem complaint with a court in order to further request that an insurance company pay their claim. This filing would require intermediation from the court and could result in a payout by the insurance company if the court finds an insurance clause to be intentionally vague or ambiguously written by the insurer to avoid a claim payment.