4. 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. An exclusion clause or exemption clause is a term in a contract which restricts the liability or rights of the parties to the contract. 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 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. The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. 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. you agreed to accept cookies from this website - thank you. It appears that exclusion clauses are not in a privileged interpretive bubble. This doctrine can also be called the Ambiguity Doctrine. 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. Page 1 of 14 - About 131 essays. 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. Traductions en contexte de "ambiguitas contra proferentem" en anglais-français avec Reverso Context : 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. The judge also noted the more lenient approach of the courts to upholding exclusion clauses since the enactment of UCTA. Exclusion clauses can enter a contract with or without a signature. The judge found that the exemption clause excluded all liability relating to asbestos, whether arising from negligence or not. Sample 1 Following Persimmon, it seems courts will focus on the approach identified in Wood when interpreting exemption clauses. 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 judge referred to 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. UCTA applies to contracting business parties, where one party deals on the other’s written standard terms of business. It was only brought to the attention of the couple after they had checked in. 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. Having a deep understanding of our clients' industries and the challenges that they face is key to delivering excellent legal advice. Hotel denied liability, because of exclusion clause detailed on a sign on the. 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 interpretation will therefore favour the party that did not insist on its inclusion. 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. 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. 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. the context in which the clause appears including the nature a nd object of the . Clauses. 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. 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. By signing up, you agree to receive commercial messages from us. 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 interpretation will therefore favour the party that did not insist on its inclusion. Sign up to receive the latest legal developments, insights and news from Ashurst. There is a growing recognition that parties to commercial contracts should be free to allocate risks as they see fit. 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. 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. Arup were engaged as engineers on the project. The principle is most often associated with contracts between parties of … 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 … 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. Contra proferentem. Example: Baldry V Marshall [1925] 1 KB 260 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. 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. It appears that exclusion clauses are not in a privileged interpretive bubble. If you have forgotten your password, you can request a new one here. 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 … The contra proferentem rule is irrelevant to disputes involving ambiguous terms or clauses within legislated statutes (although the laws applicable to the interpretation of statutes and regulations may produce a similar result - interpretation against the drafter, the drafter being the provincial legislature or federal Parliament or even a municipality in the case of by-laws). 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. Please try after sometime. Traditionally, the district courts have sought to limit the operation of exclusion clauses. The court also confirmed that the contra proferentem rule now had a very limited role in Contracting parties should now more than ever ensure that exclusion and limitation clauses are drafted in clear and unambiguous terms so that the intended application is clear. The decision represents the latest in a recent chain of judgments from the Court of Appeal and the Supreme Court (see Impact Fuding v AIG Europe Insurance Ltd [2016] UKSC 57) regarding the correct interpretation of limitation and exclusion clauses in commercial contracts negotiated between parties of equal bargaining strength. 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. 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. contra proferentem rule not to apply. We are recognised as a foremost authority in law and go-to organisation for legal expertise. 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. 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. 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. 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. The construction of exclusion clauses and coverage provisions helps justify the objective intention of the contract. The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. It is sensible mechanism to allocate risk. Accordingly Persimmon sought damages for breach of contract, negligence and breach of statutory duty. A virtual library of regularly posted insights and legal updates based on your selected preferences. This is a matter of interpretation. For more information on how we use cookies, or how to change your browser settings, please see our Cookie Policy. Material personally selected by your relationship manager for your interest. In the context of exclusion clauses, this means the exclusion clause would be inapplicable - Houghton v Trafalgar Insurance Co. Ltd [1954] 1 QB 247. In addition to numerous common law rules limiting their operation, in England and Wales Consumer Contracts Regulations 1999. 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. Readers should take legal advice before applying it to specific issues or transactions. In so far as the contra proferentem rule remained relevant, it was now more applicable to indemnity clauses than to exclusion clauses. 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. This is evident in the insightful material we produce and news coverage we receive. 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 … 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”. This article was written by Paul Herbert, Partner, Corporate, with assistance from Georgie Sharpley, Trainee Solicitor. If the language regarding liability is confusing, the contra proferentem rule comes into play. Arup was involved over many years in various capacities under a number of agreements. An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract. Common law principles of exclusion clauses. 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. Arup denied liability for a number of reasons, and argued that the Exclusion Clause excluded their liability (if any) in respect of the asbestos. The PDF server is offline. 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. 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. Persimmon Homes, Taylor Wimpey and BDW Trading were part of a consortium of site developers (“Developers”). What Is an Exclusion Clause Contract Law? In short, these clauses will now be interpreted in the same way as any other provision in the contract. Contracting parties should therefore ensure that exclusions clauses are drafted in clear and unambiguous terms so that their intended application is clear. 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 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. On this basis it was nonsensical to suggest the exclusion clause was predicated on the possibility that Arup might cause contamination during site investigation. 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. Contra proferentem typically comes into play when a contract is challenged in court. 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. This cannon of construction is derived from the Contra Proferentum rule which applies in the event of ambiguity. Similarly, the test for interpreting exclusion clauses in Canada Steamship now has little relevance in the context of commercial contracts. If the clause is ambiguous, the contra proferentem rule may operate to construe the clause against the party that seeks to rely on it. 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. If a contract does incorporate an exclusion clause, the court must determine whether it covers the breach that has occurred. o An exclusion clause should be construed according to its natural and ordinary . 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. The Alberta Court of Appeal, however, reversed this decision. The doctrine of contra proferentem shall not apply to this Processing Agreement. 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. It is essential that these clauses are drafted with clarity. If the clause is ambiguous, the contra proferentem rule may operate to construe the clause against the party that seeks to rely on it. It should only be applied in cases where there is genuine ambiguity as to meaning. 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. In other words, when people speak ambiguously in a contract, their words can literally be used against them. Find out more. - The courts have used both the contra proferentem rule and Canada Steamship to strike down numerous exclusion clauses. 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. 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