By signing up, you agree to receive commercial messages from us. Contra proferentem typically comes into play when a contract is challenged in court. This is evident in the insightful material we produce and news coverage we receive. This is because a party who imposes terms on another must make those terms clear and should suffer the consequences if it fails to do so. It appears that exclusion clauses are not in a privileged interpretive bubble. The interpretation will therefore favour the party that did not insist on its inclusion. Contra proferentem means an exclusion clause is interpreted strictly against the party seeking to rely on it, so any ambiguity is resolved against them. Accordingly Persimmon sought damages for breach of contract, negligence and breach of statutory duty. Where this … Persimmon Homes, Taylor Wimpey and BDW Trading were part of a consortium of developers who purchased and developed a large site in Wales near Cardiff. Arup were engaged as engineers on the project. If the clause is ambiguous, the contra proferentem rule may operate to construe the clause against the party that seeks to rely on it. UCTA applies to contracting business parties, where one party deals on the other’s written standard terms of business. The contra proferentem rule, which requires any ambiguity in an exemption clause or indemnity clause to be resolved against the party who put the clause forward and relies upon it, originates in English law from the Privy Council decision in Canada Steamship Lines Ltd v The King [1952] AC 192. Preview text Download Save. This means that where there is any ambiguity in the wording of the clause, the courts will interpret the clause against the party seeking to rely on it. They argued that the exclusion clause should be restricted accordingly, relying on the “contra proferentem” rule and so should not exclude liability arising from a failure to advise about pre-existing asbestos. Clauses. An exclusion clause is one which excludes or restricts a party's contractual liability, whether by imposing time limits for instituting claims, narrowing or qualifying definitions of loss, restricting parties' recourse to rights or remedies, or curtailing the application of the rules of evidence or procedure. Persimmon, property developers, instructed Arup as civil engineers in connection with a construction project in Barry, Wales which included the provision of advice in relation to possible asbestos contamination at the site. This article was written by Paul Herbert, Partner, Corporate, with assistance from Georgie Sharpley, Trainee Solicitor. If the wording used supports more than one meaning, the relative “commerciality” of the possible interpretations of the clause and/or the extent to which they uphold the purpose of the clause should be considered. Example: Baldry V Marshall [1925] 1 KB 260 An exclusion clause or exemption clause is a term in a contract which restricts the liability or rights of the parties to the contract. Page 1 of 14 - About 131 essays. Interpretation of exclusion clauses and contra proferentem . Exclusion clauses can enter a contract with or without a signature. The contra proferentem rule now has a very limited role in relation to commercial contracts negotiated between parties of equal bargaining power. Development of the contra proferentem rule for exemption and indemnity clauses. In a commercial case, however, contracts are often negotiated between two sophisticated parties, rather than being presented and … The judge also noted the more lenient approach of the courts to upholding exclusion clauses since the enactment of UCTA. Our global industry teams work together to share knowledge and experience so that we can provide our clients with insightful, innovative commercial advice. The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. The principle is most often associated with contracts between parties of … In determining which meaning should be preferred the courts have often considered whether the contra proferentem rule remains relevant to the interpretation of an exclusion clause. Curtis v Chemical Cleaning (1951) Onerous exclusion clauses require more to be done to bring it to the attention of the party. The contra proferentem rule had a very limited role with regard to commercial contracts negotiated between parties of equal bargaining strength. UCTA applies to contracting business parties, where one party deals on the other’s written standard terms of business. you disabled cookies on this website - some functions will not operate as intended. Exclusion of Liability for Consequential Loss and the Role of the Contra Proferentem Rule In the recent case of Transocean Drilling U.K. Ltd v Providence Resources plc (2016) EWCA Civ 372 upheld the allocation of risk provisions and exclusion clauses contained within a freely negotiated contract by parties of equal bargaining power. CONTRA PROFERENTEM AT A TIME OF A PANDEMIC Introduction The Latin phrase ^contra proferentem _ is an established contractual rule 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. Traditionally, the district courts have sought to limit the operation of exclusion clauses. Find out more. In the recent case of Transocean Drilling U.K. Ltd v Providence Resources plc (2016) EWCA Civ 372 upheld the allocation of risk provisions and exclusion clauses contained within a freely negotiated contract by parties of equal bargaining power. We use cookies to improve your experience on our website. H&H contended that clause 45 of the works contract was an exclusion clause which should be interpreted “contra proferentem”, should be “read down” where it is inconsistent with the object and intent of the contract and does not apply in circumstances where there has been a fundamental breach of contract. The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. Exclusion clauses were a common contractual tool in major construction contracts for allocating risks, and there was no need for the courts to approach these with a mindset determined to restrict their application. Regarding the role of the contra proferentem rule, the court stressed that in order for the rule to apply, an ambiguity in the exclusion clause is required. When negotiating the contract, the parties expressly considered what would happen if Arup had been negligent when providing Persimmon with the services. If, after attempting to construe an exclusion clause (or indeed any other contractual term) in accord with its ordinary and natural meaning of the words, there is still ambiguity then (if the clause was imposed by one party upon the other without negotiation) the contra proferentem rule applies. What Is an Exclusion Clause Contract Law? The judge considered recent case law limiting the effect of the contra proferentem rule, and held that the court’s task was “essentially the same” when interpreting exclusion or limitation clauses as for any other contractual provision. Use of the contra proferentem rule to police the scope of an exclusion clause makes most sense in cases where one set of terms has been imposed wholesale by party A on a much weaker party B, and those terms include wide-ranging exclusions of A’s liability. Arup was involved over many years in various capacities under a number of agreements. For more information on how we use cookies, or how to change your browser settings, please see our Cookie Policy. Arup denied liability for a number of reasons, and argued that the Exclusion Clause excluded their liability (if any) in respect of the asbestos. In short, these clauses will now be interpreted in the same way as any other provision in the contract. Contra Proferentem. It is essential that these clauses are drafted with clarity. In the USA, disclaimer as well as limitation clauses in commercial contracts are subject to restrictions in the shape of Contra Proferentem16. The judge found that the exemption clause excluded all liability relating to asbestos, whether arising from negligence or not. The contra proferentem rule now had a very limited role in relation to commercial contracts negotiated between parties of equal bargaining strength. However, some may argue that little has changed. Common law principles of exclusion clauses Unilateral mistake Undue influence Damages under contract law Damages under contract law LW1PL1 pre-seen exam questions 2017-18. Following the discovery of asbestos on the site, the Developers sought damages from Arup for negligence based on Arup’s failure to identify and report the presence of asbestos on the site. We are recognised as a foremost authority in law and go-to organisation for legal expertise. If there is ambiguity or uncertainty as to the meaning of an exclusion clause the court will have to construe it contra proferentem that is to say it will judge it against the party who inserted it into the contract. Contra proferentem is a doctrine of contractual interpretation which provides that an ambiguous term will be construed against the party that imposed its inclusion in the contract – or, more accurately, against the interests of the party who imposed it. The Common Law rule of construction "verba chartarum fortius accipiuntur contra proferentem" means that ambiguity in the wording of the policy is to be resolved against the party who prepared it. If the clause is ambiguous, the contra proferentem rule may operate to construe the clause against the party that seeks to rely on it. ​Scroll through these slides to access the personalised features of your Dashboard. The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. We bring together lawyers of the highest calibre; progressive thinkers driven by the desire to help our clients achieve business success. The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract. The doctrine of contra proferentem shall not apply to this Processing Agreement. Clauses Browse A-Z. Our people are experts of law; progressive thinkers, in tune with economic, political and market conditions, driven to help to provide the clear commercial advice you need to achieve business success. The following contract and warranty wording became central to the case (the Exclusion Clause): “The Consultant’s aggregate liability under this [Agreement/Deed] whether in contract, tort (including negligence), for breach of statutory duty or otherwise (other than for death or personal injury caused by the Consultant’s negligence) shall be limited to [£12,000,000.00/£5,000,000.00] with the liability for pollution and contamination limited to £5,000,000.00 (five million pounds) in the aggregate. Statute may also impact the construction or effectiveness of exclusion clauses, ... and, where appropriate, construing the clause contra proferentem in case of ambiguity.” The same principles apply to the construction of limitation clauses: Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 at [16]. There is a growing recognition that parties to commercial contracts should be free to allocate risks as they see fit. 4. It should only be applied in cases where there is genuine ambiguity as to meaning. The contra proferentem rule broadly states that where there is doubt about the meaning of a contract, the words will be construed against the party who put them forward. In the alternative, the claimants submitted that the exclusion clauses should be construed against the defendants on the basis of contra proferentem, and/ or that they were not wide enough to exempt the defendants from liability for negligence. Contra Proferentem. Arup denied liability in respect of any asbestos related claim and argued that in any event it was excluded by the following exclusion clause, incorporated into both the contract for development of the site and the collateral warranties given to the Developers: “Liability for any claim in relation to asbestos is excluded”. Contracts Browse A-Z; Browse by Tag: Category Country Jurisdiction Company Person Law Firm Filing ID SEC Filing Type SEC Exhibit ID. Contra proferentem, meaning “against the offeror,” is a rule of contract law that requires any ambiguous clause to be interpreted with the meaning that is most in favor of the party that did not draft or request the clause. Interpreting an exclusion clause in a commercial contract can be a fertile area for dispute and the courts are often left to resolve the disagreement between the parties where there are ambiguities in the drafting. Contra proferentem. Exclusion clause: is a term in a contract which intends to exclude one of the parties from liability or limit the person’s liability to specific listed conditions, circumstances, or situations. The PDF server is offline. UCTA doesn’t apply to negotiated clauses and excludes various types of contract such as insurance and employment contracts, many company related contracts or contracts relating to interests in land. Asbestos was subsequently discovered on the site and Persimmon believed that Arup had been negligent by failing to identify and report the presence of asbestos at an early stage. Goodman Derrick LLP © 2019 Registered number: OC321066 A limited liability partnership authorised and regulated by the Solicitors Regulation Authority ID number 446195.Complaints Procedure    Price Transparency    Website Terms & Condition    GDPR    Cookies    Privacy Policy, A list of members is available for inspection at our registered office: 10 St Bride Street, London EC4A 4AD. The clause must be constructed in the way that covers the particular breach. Contractors and consultants would no doubt reflect the degree of risk that they take on in the fees that they charge. Contra proferentem typically comes into play when a contract is challenged in court. Breathing space for business extended to Spring 2021 - Corporate Insolvency and Governance Act - what has changed? Sample 1 The construction of exclusion clauses and coverage provisions helps justify the objective intention of the contract. However this principle has largely fallen away, particularly in relation to commercial contracts made between sophisticated parties which are usually negotiated on both sides. The decision goes against the argument that implied terms existed in the drafting of the exclusion; “liability for any claim in relation to asbestos (unless incurred in negligence) is excluded”. The judge at fist instance found in favour of Arup, noting the “increasing recognition that parties to commercial contracts are and should be left free to apportion and allocate risks and obligations as they see fit, particularly where insurance may be available to one or other or both parties to cover the risks being so allocated”(paragraph 25). COMMENTAIRE . On limitation versus exclusion clauses, the latter being construed more vigorously. Contra proferentem. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact. If the clause is clear, the contra proferentem rule does not have any effect. you agreed to accept cookies from this website - thank you. Using principles such as contra proferentem to obtain a particular outcome is unlikely to succeed. On this basis it was nonsensical to suggest the exclusion clause was predicated on the possibility that Arup might cause contamination during site investigation. A virtual library of regularly posted insights and legal updates based on your selected preferences. The contra proferentem rule applies. This doctrine can also be called the Ambiguity Doctrine. contra proferentem rule not to apply. H&H contended that clause 45 of the works contract was an exclusion clause which should be interpreted “contra proferentem”, should be “read down” where it is inconsistent with the object and intent of the contract and does not apply in circumstances where there has been a fundamental breach of contract. If a contract does incorporate an exclusion clause, the court must determine whether it covers the breach that has occurred. At Ashurst, we believe innovation means only one thing: continuous and disruptive improvement in all that we do - for the benefit of our clients, our employees and our wider corporate social responsibility. If, after attempting to construe an exclusion clause (or indeed any other contractual term) in accord with its ordinary and natural meaning of the words, there is still ambiguity then (if the clause was imposed by one party upon the other without negotiation) the contra proferentem … You may unsubscribe at any time. each provision will be interpreted without disadvantage to the party who (or whose representative) drafted or proffered that provision. This doctrine can also be called the Ambiguity Doctrine. 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