Question

Explain the operation of the contra proferentem rule. Is such a rule defensible in today’s business environment? (10 marks, maximum 300 words)

Answer 1

The contra proferentem rule is a lawful doctrine in contract law which states that any clause measured and considered to be ambiguous should be interpreted against the interests of the party that created, presented, demanded 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 responsibility on the party creating or introducing an ambiguous contract clause.

Contracts can be multifaceted or complex documents created after lengthy periods of prolonged negotiations. Each party in the contract is apparently looking out for its own best interests and will want the contract language to be to each party's favour. This can create situations in which the contract language is ambiguous or indistinct, 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 penalty or action for introducing and including a deliberately vague contract clause into a contract. The underlying idea is that the drafting or introducing party is intentionally using vagueness to create or provide for results that favour their own interests. Intentional vagueness or ambiguity is an act that the contra proferentem rule seeks to mitigate and when enforced rules in favour of the innocent party citing the ambiguity as unfair.

Determining the rules, it is highly defensible in today’s business environment because 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 try to determine the purpose 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. Though, if the indication and evidences 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 presented the clause to be comprised and in favour of the innocent, unwitting party.