The “contra proferentem” rule in contract law states that ambiguous clauses in a contract should be interpreted against the interests of the person who insisted on including them. This can be used to balance the power dynamic in unfair contracts, but it’s still important to review and address problematic clauses before signing.
The Latin phrase “contra proferentem” is used to refer to a rule in contract law which states that, if a clause in a contract appears to be ambiguous, it should be interpreted against the interests of the person who insisted that the clause be included. In other words, when people speak ambiguously in a contract, their words can literally be used against them. This is designed to discourage people from including ambiguous or vague terms in contracts because it would go against their best interests.
The concept usually emerges when a contract is challenged in court. If the court examines a contract and finds that a clause is objectionable or could have more than one meaning, it determines which party intended that clause to be included and interprets in favor of the other party. The contra proferentem doctrine does not apply when a contract has been negotiated and both parties have been involved in the formulation and inclusion of the problematic clause.
A classic example where this could occur is when someone sues an insurer. Insurers are notorious for having very strict contracts and not being willing to negotiate with customers. If a customer can demonstrate that a provision of an insurance contract is subject to contra proferentem, the insurer may be required to do something against his interests, such as reinstating a canceled policy or providing cover for a condition that he intended to exclude .
Some legal systems believe that certain types of contracts are inherently unfair because there is an imbalance of power between the parties. Insurance contracts can actually be a good example of this problem because people generally need insurance, while insurers don’t necessarily need an individual’s business. This puts an insurer in a position of power, since he can demand concessions from a customer who is desperate for a written policy.
The contra proferentem doctrine may help somewhat balance the scales for people who are involved in contracts that may not be entirely fair. Contracts that include ambiguous language can be turned to the other party’s advantage if these ambiguities are later discovered and become a problem. It’s important to note, however, that it’s still strongly advised for people to review a contract before signing and address problematic clauses before signing, if possible, rather than relying on the possibility of legal action in the future to resolve them.
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