- July 30, 2013
- Posted by: Seth Heyman
- Category: Business Law
Contra proferentem is a Latin term used to describe a legal doctrine of contractual interpretation known as “interpretation against the draftsman.” The term literally translates as “against the offeror,” and that is basically what the doctrine calls for.
If a written agreement includes a term that is confusing or ambiguous, Contra proferentem calls for the term to be interpreted against the interests of whoever drafted that confusing or ambiguous term. The doctrine is often applied to situations involving standardized “boilerplate” contracts that are thrust upon a person with no bargaining power.
These form contracts (also known as “contracts of adhesion”) have traditionally been viewed as the product of a bargain between two unequal parties (virtually no one is given the opportunity to request changes to a standard insurance contract or loan agreement). A contract is supposed to be the result of a give-and-take agreement between two parties, and not a take-it-or-leave-it proposition.
Courts view this sort of arrangement as unfair, and contra proferentem is applied to mitigate this unfairness by giving the benefit of any doubt that lies within a contract in favor of the party upon whom the contract was foisted. The doctrine of contra proferentem also places the cost of losses on the party who was in the best position to avoid the harm, which is most often the party who drafted the contract.
An excellent example of the application of contra proferentem is an insurance dispute. Insurance policies are classic examples of adhesion contracts, and courts nearly always view any ambiguous policy provision in favor of the insured. Insurance companies are also better able to bear any loss that may result from a poorly drafted policy, and are in the best position to correct the problem in the future.