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Contracts/Contra proferentem
Template:ContractLaw Contra proferentem is a rule of contract interpretation that a contractual term found to be ambiguous should be construed against the party that drafted the contract. That is, the preferred interpretation will be the one that works in favor of the party who did not draft the contract.
The reasoning behind this rule is to encourage the drafter of a contract to be as clear and explicit as possible and to take into account as many foreseeable situations as he can.
Additionally, the rule reflects the court's inherent dislike of standard-form take-it-or-leave-it contracts also known as contracts of adhesion (e.g., standard form insurance contracts for individual consumers, residential leases, etc.). The court perceives such contracts as arising from an unfair or uneven bargaining in favor of the party providing the contract. To compensate for this perceived unfairness, courts in many states will apply the doctrine of contra proferentem to give the benefit of the doubt in interpreting the meaning of an ambiguous term to the party upon whom the contract was foisted. Some courts when seeking a particular result will use contra proferentem to take a strict approach against insurers and other powerful contracting parties and go so far as to interpret terms of the contract in favor of the other party, even where the meaning of a term would appear clear and unambiguous on its face, although this application is disfavored.
Contra proferentem also places the cost of losses on the party who was in the best position to avoid the harm. This is generally the person who drafted the contract. An example of this is the insurance contract, a great example of the contract of adhesion, above. There, the insurance company is the party that is completely in control of the terms of the contract and is generally in a better position to, for example, avoid contractual forfeiture. This is a principle of long standing. See, for example, California Civil Code §1654 (“In cases of uncertainty . . . the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.") California enacted this section in 1872. Numerous other states have codified the rule as well.
As of today, 2006, international legislation such as the European Principles of Contract Law, have also codified this rule of law. Also, in the arbitration procedures of the International Chamber of Commerce there are (few) cases in which arbitrators recall the principle of contra proferentem in their legal reasoning.
The term is frequently mis-spelled "contra proferentum". The derivation is the Latin contra (against) proferentem (the one bringing forth).
