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]. limitation versus exclusion clauses, the latter being construed more vigorously. However, some may argue that little has changed. The construction of exclusion clauses and coverage provisions helps justify the objective intention of the contract. 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. 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. There is a growing recognition that parties to commercial contracts should be free to allocate risks as they see fit. 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. By signing up, you agree to receive commercial messages from us. The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. 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. This cannon of construction is derived from the Contra Proferentum rule which applies in the event of ambiguity. 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. However, it is also possible that the undertaking is pressed by unforeseeable consequences. Sample 1 On The clause must be constructed in the way that covers the particular breach. Sign up to receive the latest legal developments, insights and news from Ashurst. o The contra proferentem principle will be applied so that in cases of ambiguity . Commercial transactions - a checklist for UK companies forming new contracts with their European counterparts, Brexit - changes to the tariff and CE marking regimes on 1 January 2021, Do you have a European supply chain? However, some may argue that little has changed. We use cookies to improve your experience on our website. This article was written by Paul Herbert, Partner, Corporate, with assistance from Georgie Sharpley, Trainee Solicitor. Preview text Download Save. 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. 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. Liability for any claim in relation to asbestos is excluded.”. The contra proferentem rule now has a very limited role in relation to commercial contracts negotiated between parties of equal bargaining power. 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 … 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. The trial court decided the exclusion clause was ambiguous. 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. 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 guide is for general information and interest only and should not be relied upon as providing specific legal advice. 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 construed against the party attempting to rely on the clause. 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). contract . Contra proferentem. Persimmon Homes, Taylor Wimpey and BDW Trading were part of a consortium of site developers (“Developers”). The judge also noted the more lenient approach of the courts to upholding exclusion clauses since the enactment of UCTA. In addition to numerous common law rules limiting their operation, in England and Wales Consumer Contracts Regulations 1999. 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. For instance, the government changes and the new government decide to cut subsidies in the relevant sector. It has been common practice that coverage provisions should be interpreted broadly and exclusion clauses should be interpreted narrowly. COMMENTAIRE . 4. 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. UCTA applies to contracting business parties, where one party deals on the other’s written standard terms of business. What Is an Exclusion Clause Contract Law? The PDF server is offline. meaning, read in the light of the contract as a whole, there b y giving weight to . We bring together lawyers of the highest calibre; progressive thinkers driven by the desire to help our clients achieve business success. you disabled cookies on this website - some functions will not operate as intended. the context in which the clause appears including the nature a nd object of the . 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. 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. Similarly, the test for interpreting exclusion clauses in Canada Steamship now has little relevance in the context of commercial contracts. Clauses Browse A-Z. - Find out more. Clauses. Access all of the content that you have previously selected to bookmark. 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 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”. On UCTA applies to contracting business parties, where one party deals on the other's written standard terms of business. Contra Proferentem. If the language regarding liability is confusing, the contra proferentem rule comes into play. 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. 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. Search Contracts. 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. 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. 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. 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. 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. In other words, when people speak ambiguously in a contract, their words can literally be used against them. 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 … 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. 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. 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. It was only brought to the attention of the couple after they had checked in. This is evident in the insightful material we produce and news coverage we receive. 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, 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. Contracts Browse A-Z; Browse by Tag: Category Country Jurisdiction Company Person Law Firm Filing ID SEC Filing Type SEC Exhibit ID. Contra proferentem typically comes into play when a contract is challenged in court. Contra proferentem. you agreed to accept cookies from this website - thank you. 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”. Lord Justice Jackson noted that, in major commercial contracts, parties commonly agree how to allocate the risks between themselves and who will insure against what. 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. 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. 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. 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”. So, it is clear that the courts consider that the literal and natural meaning of the words used in the clause is to be of primary importance in interpreting exclusion clauses. Example: Baldry V Marshall [1925] 1 KB 260 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. 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. If the clause is ambiguous, the contra proferentem rule may operate to construe the clause against the party that seeks to rely on it. When negotiating the contract, the parties expressly considered what would happen if Arup had been negligent when providing Persimmon with the services. Arup was involved over many years in various capacities under a number of agreements. If you have forgotten your password, you can request a new one here. We are recognised as a foremost authority in law and go-to organisation for legal expertise. We use a range of cookies to improve your experience of our site. 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. 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. 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. The Alberta Court of Appeal, however, reversed this decision. In so far as the contra proferentem rule remained relevant, it was now more applicable to indemnity clauses than to exclusion clauses. Using principles such as contra proferentem to obtain a particular outcome is unlikely to succeed. There was no need to approach exclusion clauses with horror or with a mind-set determined to cut them down. It is essential that these clauses are drafted with clarity. 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. It was nonsensical to suggest that the clause was aimed at the possibility that Arup might cause contamination during their investigations of the site. Common law principles of exclusion clauses. Readers should take legal advice before applying it to specific issues or transactions. ​Scroll through these slides to access the personalised features of your Dashboard. UCTA applies to contracting business parties, where one party deals on the other’s written standard terms of business. 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. The court also confirmed that the contra proferentem rule now had a very limited role in Contra Proferentem. 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. If the clause is clear, the contra proferentem rule does not have any effect. In addition to numerous common law rules limiting their operation, in England and Wales Consumer Contracts Regulations 1999. Where this … If the clause is ambiguous, the contra proferentem rule may operate to construe the clause against the party that seeks to rely on it. Exclusion clauses have frequently been found not to exclude liability for negligence where it was not expressly mentioned. 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. Following Persimmon, it seems courts will focus on the approach identified in Wood when interpreting exemption clauses. 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, 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. For more information on how we use cookies, or how to change your browser settings, please see our Cookie Policy. Interpretation of exclusion clauses and contra proferentem . The contra proferentem rule applies. Contracts. 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. 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. The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. 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 … Accordingly Persimmon sought damages for breach of contract, negligence and breach of statutory duty. o An exclusion clause should be construed according to its natural and ordinary . Another example is cartel-formation. The doctrine of contra proferentem shall not apply to this Processing Agreement. 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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