Persmimmon Homes v Ove Arup [2017]

The end of the Contra Proferentem Rule?

In simple terms, the contra proferentem rule provides that, where there is any doubt about the meaning of a contract, the words will be construed against the party putting them forward. In practice, it is an argument that is all too often advanced by a party as a last resort after everything else has failed and, increasingly, both the courts and legal commentators have been asking what role, if any, it now has to play in the interpretation of commercial agreements.

Historically, the principal has been applied to any contractual term although, increasingly, its role has largely been limited to exemption and indemnity clauses or other terms limiting or excluding liability; since the decision in Lictor Ansalt v MIR Steel UK [2012] 2 All ER (Comm) 54, its application has been further narrowed to (largely) indemnity clauses.

The recent decision in Persimmon Homes Limited v Ove Arup [2017] EWCA Civ 373 reinforces this trend. The decision refers us back to Lord Neuberger’s decision in K/S Street v House of Fraser [2011] EWCA Civ 904 where he noted that

“rules of interpretation such as contra proferentem are rarely decisive as to the meaning of any provisions in a commercial contract”.

Instead, Lord Neuberger thought that the words used, commercial sense and the documentary and factual context should normally be enough to determine the meaning of a contractual provision. In Persimmon the Court of Appeal has gone one step further, suggesting that, in the context of a commercial contract negotiated between parties of equal bargaining power, the rule has only a very limited role.

No doubt the rule will still be dredged up when a party has nothing else to fall back on but in most commercial disputes use of the contra proferentem rule may signify nothing more than that a party doesn’t have much of a case at all. Rely on it now only at your peril in a commercial situation. Parties to commercial contracts are free to agree whatever terms they like to limit or exclude liability and the courts are likely to enforce such terms, even if there is an element of ambiguity


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