Is it a real legal principle that any ambiguity in a contract is interpreted to the benefit of the side that did not write the contract?

Question

I have heard that there is a legal principle where any ambiguity in the contract is interpreted to the benefit of the side that did not draw up or suggest the contract text. This was presented to me somewhat anecdotally, but sounded reasonable - so I'm not sure what to make of it. Is there any such or similar thing, formalized to any degree? I'd prefer an answer in the context of both Common and Continental law.

Answer 1

Contra proferentem

However, it's a principle that is rarely applied in practice since it's at the end of a long line of judicial reasoning that gets applied first.

Ambiguity in contract provisions are usually resolved by the golden rule:

1. Determine the ordinary and natural meaning of the words used
2. Consider the context of the contract including its purpose, any "recitals" or "background" clauses and other relevant provisions
3. If the ordinary and natural meaning is inconsistent with the context or gives rise to absurdities, modify the meaning as appropriate.

In the vast majority of case, this approach will give a meaning the court adopts without needing to invoke the contra proferentem rule.

However, in the minority of cases where the rule is applied it works like this. The ambiguity should be interpreted against:

• the party who prepared the contract (particularly for standard form contracts offered on a "take it or leave it" basis)
• the party seeking to rely on the ambiguous position (e.g. the beneficiary of a guarantee, indemnity, limitation or exclusion provision).

Finally, contra proferentem may not apply because:

• it can be specifically excluded in the contract (which most drafters do)
• where the provision has been the subject of back-and-forth amendments by the parties it can be impossible to say that only one of the parties drafted it.

Answer 2

Is this a real legal principle?

Yes. It is known as the doctrine of contra proferentem. The Restatement (Second) of Contracts at § 206 calls it "interpretation against the draftsman". This doctrine is present in both common law and civil law.

The presumption is that the party who drafts the terms of the contract has greater bargaining power than the counterparty[-ies]. The doctrine of contra proferentem is intended for compensating—at least in part—that draftman's advantage.

The interpretation posited by the counterparty still needs to be reasonable, consistent with the parties' intent that is palpable from the rest of the contract.

Answer 3

Contra proferentem is codified in the UK's Consumer Rights Act 2015, s 69.

Section 69 should be a familiar provision to English lawyers because contra proferentem is a general rule of construction in English law. According to this rule any ambiguity in a term must be resolved against the party who is relying upon it. In so far as section 69(1) provides that the consumer must be given the benefit of any doubt about the meaning of a written term, it would appear to be no more than a statutory form of the contra proferentem rule.

Ewan McKendrick, Contract Law Text, Cases, and Materials (10th edn 2022, Oxford University Press), page 461.

8.10 Notice finally that, although contra proferentem is a common law rule, an equivalent principle is embodied in s 69(1) of the CRA that ‘if a term in a consumer contract, or a consumer notice, could have different meanings, the meaning that is most favourable to the consumer is to prevail’ (see para 8.66).

Janet O'Sullivan, O'Sullivan & Hilliard's The Law of Contract (10th edn 2022 Oxford University Press), page 202, para. 8.10.