What Is Contra Proferentem in Contract Law

Contra proferentem is a legal term that refers to a principle in contract law. This principle governs the interpretation of ambiguous or unclear clauses in a contract. In essence, it states that any ambiguous or unclear clauses should be interpreted against the party who drafted or presented the contract.

The term contra proferentem comes from Latin, meaning “against the offeror”. It is also commonly referred to as the “contra proferentem rule”.

When two parties enter into a contract, they generally have different bargaining power and may have unequal knowledge or experience. The party with more bargaining power may draft the contract and present it to the other party for acceptance. In such cases, the contra proferentem principle provides some protection to the party with less bargaining power.

The principle is based on the idea that the party who drafted the contract is in the best position to clarify any ambiguity. If they failed to do so, it is presumed that the ambiguity was intentional or that they assumed the risk of any uncertainty.

As an example, imagine that a consumer purchases a product from a company through a website. The company’s terms of service include a clause stating that any dispute must be resolved through arbitration. The consumer later discovers that the product is defective and wants to take legal action against the company. They argue that the arbitration clause is unclear and ambiguous, and therefore should be interpreted against the company under the contra proferentem principle.

In such cases, a court may interpret the arbitration clause against the company and allow the consumer to proceed with legal action. This is because the company drafted the contract and had the opportunity to make the clause clear and unambiguous.

It is worth noting that the contra proferentem rule does not always apply. If a clause is clear and unambiguous, it will be enforced according to its plain meaning, regardless of who drafted the contract. Additionally, if the parties negotiated the contract terms on equal footing, the rule may not apply.

In conclusion, contra proferentem is a principle in contract law that provides some protection to parties with less bargaining power. It presumes that any ambiguous or unclear clauses in a contract should be interpreted against the party who drafted or presented the contract. However, this rule does not always apply, and the interpretation of a contract depends on the specific circumstances and language used.