The clause must be constructed in the way that covers the particular breach. However this principle has largely fallen away, particularly in relation to commercial contracts made between sophisticated parties which are usually negotiated on both sides. For the clause to be effective, it needed to be brought to their attention at that time when the contract was formed: sydney city council v west (1965) 114 clr 481. In short, these clauses will now be interpreted in the same way as any other provision in the contract. Contra Proferentem 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 … Contra proferentem. There is a growing recognition that parties to commercial contracts should be free to allocate risks as they see fit. The contra proferentem principle essentially states that if there is any doubt about the meaning or scope of an exclusion clause, the ambiguity should be resolved against the party seeking to rely on the exclusion clause on the basis that parties are not lightly to be taken to have intended to cut down the remedies the law provides for breach of contract, unless the contract contains clear words to that effect. 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. contract . 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. The principle is most often associated with contracts between parties of … An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract. Interpretation of exclusion clauses and 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”. It determined the clause was clear and absolute, and that the words are to be given the natural meaning which anyone reading the contract would have inferred. 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. The logic behind this rule is that a party who imposes terms on another should make those terms clear and should be the one to suffer the consequences if they do not. 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. It determined the clause was clear and absolute, and that the words are to be given the natural meaning which anyone reading the contract would have inferred. If an ambiguity exists in this Processing Agreement, or in a specific provision, neither the Agreement nor the provision shall be construed against the party who drafted the Agreement or provision. The trial court decided the exclusion clause was ambiguous. Development of the contra proferentem rule for exemption and indemnity clauses. The Developers argued that the words “liability for” had a causative meaning and therefore only excluded liability for causing asbestos or the spread of it. It can be inserted into a contract which aims to exclude or limit one’s liability for breach of contract or negligence. Contra proferentem means an exclusion clause is interpreted strictly against the party seeking to rely on it, so any ambiguity is resolved against them. 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. o An exclusion clause should be construed according to its natural and ordinary . Exclusion clauses are interpreted ‘contra proferentum’ The contra proferentum rule is that where a term of a contract is uncertain and ambiguous, the term is to be … For more information on how we use cookies, or how to change your browser settings, please see our Cookie Policy. In R v Canada SS Lines Ltd [1952] AC 192 (“Canada Steamship”) a three stage approach was set out in relation to clauses purporting to exclude liability for negligence: The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. the context in which the clause appears including the nature a nd object of the . This eventuality was covered by professional indemnity insurance, so the clause under this heading stated that: ‘[Arup]’s aggr… In the USA, disclaimer as well as limitation clauses in commercial contracts are subject to restrictions in the shape of Contra Proferentem16. 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. Firstly, in Persimmon Homes, Jackson LJ drew a distinction between indemnity clauses and exclusion clauses observing that where an indemnity clause is involved, the contra proferentem rule and the Canada steamship guidelines will continue to be of assistance. In a commercial case, however, contracts are often negotiated between two sophisticated parties, rather than being presented and accepted on a “take it … 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. Exclusion clauses have frequently been found not to exclude liability for negligence where it was not expressly mentioned. It has confirmed a limited role for the contra proferentem rule and Canada Steamship, in favour of respecting the parties’ freedom to allocate risk as they see fit. 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 … In commercial contracts to which the Unfair Contract Terms Act 1977 does not apply, parties should be free to allocate risks as they see fit, and this clause was an example of that. The court also confirmed that the contra proferentem rule now had a very limited role in Arup was involved over many years in various capacities under a number of agreements. 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. 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]. By continuing to use our website, we understand that you are happy for us to do this. It is essential that these clauses are drafted with clarity. The contra proferentem rule now has a very limited role in relation to commercial contracts negotiated between parties of equal bargaining power. Arup were engaged as engineers on the project. Contracts Browse A-Z; Browse by Tag: Category Country Jurisdiction Company Person Law Firm Filing ID SEC Filing Type SEC Exhibit ID. 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. Contracts. Persimmon argued that “liability for” meant “liability for causing” pollution, contamination or asbestos and the Exclusion Clause should be interpreted narrowly, in accordance with the contra proferentem principle. 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. The Rule is used mainly in the interpretation of exculpatory clauses (exclusion clauses) An exculpatory clause [5] is a contract provision that relieves one party of liability if damages are caused during the execution of the contract. The Alberta Court of Appeal, however, reversed this decision. The Rule is used mainly in the interpretation of exculpatory clauses (exclusion clauses) An exculpatory clause [5] is a contract provision that relieves one party of liability if damages are caused during the execution of the contract. Where this … Restructuring, Insolvency & Special Situations, Ashurst advising Brighte on its A$100 million Series C capital raise, Ashurst advises Lendi on merger with Aussie Home Loans, Ashurst advises Pacific Aegis Capital Management on HK$300 million refinancing loan to HNA Group. Preview text Download Save. An exclusion clause or exemption clause is a term in a contract which restricts the liability or rights of the parties to the contract. 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. This is a matter of interpretation. Contractors and consultants would no doubt reflect the degree of risk that they take on in the fees that they charge. 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. - In the context of exclusion clauses, this means the exclusion clause would be inapplicable - Houghton v Trafalgar Insurance Co. Ltd [1954] 1 QB 247. However, the introduction of the Unfair Contracts Terms Act 1977 (“UCTA”) has led to the defeat of exclusion clauses in many contracts through different means. An exclusion clause, however, can be construed contra proferentem against any party which seeks to rely on it. 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. Our global industry teams work together to share knowledge and experience so that we can provide our clients with insightful, innovative commercial advice. In addition to numerous common law rules limiting their operation, in England and Wales Consumer Contracts Regulations 1999. 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. Another example is cartel-formation. Contra proferentem typically comes into play when a contract is challenged in court. Contra Proferentem. contra proferentem rule not to apply. An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract. Contra Proferentem. It appears that exclusion clauses are not in a privileged interpretive bubble. Exclusion clauses can enter a contract with or without a signature. The judge also noted the more lenient approach of the courts to upholding exclusion clauses since the enactment of UCTA. Arup denied liability for a number of reasons, and argued that the Exclusion Clause excluded their liability (if any) in respect of the asbestos. An exclusion clause in a contract is a clause that reduces or excludes a party’s liability for conduct that would otherwise amount to a breach of contract. In other words, when people speak ambiguously in a contract, their words can literally be used against them. 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. If the language regarding liability is confusing, the contra proferentem rule comes into play. Clauses. Page 1 of 14 - About 131 essays. limitation versus exclusion clauses, the latter being construed more vigorously. 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. The recent case of Persimmon Homes Ltd and others v Ove Arup & Partners Ltd and another [2017] EWCAhas clarified the courts’ approach to exclusion clauses in commercial contracts to which UCTA does not apply. 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. 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. 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. We are recognised as a foremost authority in law and go-to organisation for legal expertise. If the clause is clear, the contra proferentem rule does not have any effect. applied can the contra proferentem rule be employed to resolve an ambiguity against the party putting forward the document or clause – to use a familiar example, to broaden a coverage clause and/or narrow an exclusion clause against an insurer. Where negligence is the only possible basis of liability, it may be excluded by general wording; where this is not the case, only non-negligent liability will be excluded, unless it is too remote. The interpretation will therefore favour the party that did not insist on its inclusion. The contra proferentem principle essentially states that if there is any doubt about the meaning or scope of an exclusion clause, the ambiguity should be resolved against the party seeking to rely on the exclusion clause on the basis that parties are not lightly to be taken to have intended to cut down the remedies the law provides for breach of contract, unless the contract contains clear words to that … This is because the party which seeks to rely on an exclusion clause bears the burden of proving it. Example: Baldry V Marshall [1925] 1 KB 260 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. Contracting parties should therefore ensure that exclusions clauses are drafted in clear and unambiguous terms so that their intended application is clear. However, the introduction of the Unfair Contracts Terms Act 1977 (“UCTA”) has led to the defeat of exclusion clauses in many contracts through different means. Common law principles of exclusion clauses. Clauses Browse A-Z. Following Persimmon, it seems courts will focus on the approach identified in Wood when interpreting exemption clauses. Access all of the content that you have previously selected to bookmark. 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. It is essential that these clauses are drafted with clarity. It should only be applied in cases where there is genuine ambiguity as to meaning. The contra proferentem rule now had a very limited role in relation to commercial contracts negotiated between parties of equal bargaining strength. Find out more. A supply chain risk assessment and checklist will help you get ready, Tips for setting up an online business - Julia Weeks published in Retail Jeweller, Contract Killers - Paul Herbert provides Veterinary Practice magazine with contract law insight. Otherwise, if the words of written documents are clear, then contra proferentem has ARTICLE 4.6 (Règle contra proferentem) Mis à jour : 5 décembre 2013 | Imprimer | E-mail En cas d’ambiguïté, les clauses d’un contrat s’interprètent de préférence contre celui qui les a proposées. The judge found that the exemption clause excluded all liability relating to asbestos, whether arising from negligence or not. We use cookies to improve your experience on our website. ​Scroll through these slides to access the personalised features of your Dashboard. We bring together lawyers of the highest calibre with the technical knowledge, industry experience and regional know-how to provide the incisive advice our clients need. 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. This doctrine can also be called the Ambiguity Doctrine. 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. 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. 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. There was no need to approach exclusion clauses with horror or with a mind-set determined to cut them down. Nonetheless, when required to interpret exclusion clauses in commercial contracts to which UCTA does not apply, the courts have tended to look more to the intentions of the parties and have demonstrated a softening in their approach to strict literal interpretation, since the introduction of UCTA. That the language used by the parties and the application of business common sense should be the main determinants of the scope and meaning of exclusion clauses in commercial contracts. By signing up, you agree to receive commercial messages from us. The construction of exclusion clauses and coverage provisions helps justify the objective intention of the contract. This guide is for general information and interest only and should not be relied upon as providing specific legal advice. Where this … It has been common practice that coverage provisions should be interpreted broadly and exclusion clauses should be interpreted narrowly. With a network spanning Asia, Australia, Europe, the Middle East and North America, we offer global reach and insight combined with the knowledge and understanding of local markets. 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 … In so far as the contra proferentem rule remained relevant, it was now more applicable to indemnity clauses than to exclusion clauses. 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 interpretation will therefore favour the party that did not insist on its inclusion. In a commercial case, however, contracts are often negotiated between two sophisticated parties, rather than being presented and … However, some may argue that little has changed. If the clause is ambiguous, the contra proferentem rule may operate to construe the clause against the party that seeks to rely on it. Interfoto Picture Library v Stilletto (1989) Construction It is the wording of the exclusion clause. It appears that exclusion clauses are not in a privileged interpretive bubble. In the recent case of Persimmon Homes v Ove Arup [2017], the Court of Appeal has declined to apply the contra proferentem rule to an exclusion clause in a major commercial contract. Contra proferentem. A virtual library of regularly posted insights and legal updates based on your selected preferences. 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. 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. - you disabled cookies on this website - some functions will not operate as intended. Curtis v Chemical Cleaning (1951) Onerous exclusion clauses require more to be done to bring it to the attention of the party. In the USA, disclaimer as well as limitation clauses in commercial contracts are subject to restrictions in the shape of Contra Proferentem16. If you have forgotten your password, you can request a new one here. Any clause seeking to limit or exclude one party’s liability will be read “_contra proferentem_”, that is construed so that any doubt about the meaning is decided against the party seeking to rely upon the clause. 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. Readers should take legal advice before applying it to specific issues or transactions. The contra proferentem rule had a very limited role with regard to commercial contracts negotiated between parties of equal bargaining strength. It used a contract interpretation rule that the court should interpret an ambiguous contract term against the party that wrote the contract (contra proferentem rule) and decided the insurers were liable. This approach supports the growing judicial trend of supporting freedom of contract, and standing by the literal meaning of the words used and/or the commercial intention of the parties. Traductions en contexte de "ambiguitas contra proferentem" en anglais-français avec Reverso Context : This doctrine can also be called the Ambiguity Doctrine. 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. It will only be in circumstances where the wording is truly ambiguous, that the courts will be prepared to consider the application of the contra proferentem principle. Where this is the case, UCTA states that an exclusion clause will only be valid to the extent that it was a fair and reasonable clause to have been inserted having regard to the circumstances which ought to have been known to the parties at the time of contracting. 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. It is sensible mechanism to allocate risk. Please try after sometime. However, the introduction of the Unfair Contracts Terms Act 1977 ("UCTA") has led to the defeat of exclusion clauses in many contracts through different means. 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. Where wording is clear and unambiguous liability will be excluded; Where wording is general, any ambiguity will be resolved against the party relying on the clause; and. On this basis it was nonsensical to suggest the exclusion clause was predicated on the possibility that Arup might cause contamination during site investigation. Hotel denied liability, because of exclusion clause detailed on a sign on the. The contra proferentem rule applies. However, some may argue that little has changed. Breathing space for business extended to Spring 2021 - Corporate Insolvency and Governance Act - what has changed? The Latin phrase “contra proferentem” is used to refer to a standard in contract law that 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. limitation versus exclusion clauses, the latter being construed more vigorously. For instance, the government changes and the new government decide to cut subsidies in the relevant sector. 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. We bring together lawyers of the highest calibre; progressive thinkers driven by the desire to help our clients achieve business success. The PDF server is offline. 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. 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. 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