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The Contra Proferentem Rule: Contract Law’s Great Survivor
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Queen Mary University of London
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Oxford Journal of Legal Studies, Vol. 39, No. 3 (2019), pp. 483– doi:10/ojls/gqz Published Advance Access February 27, 2019
The Contra Proferentem Rule: Contract
Law’s Great Survivor
Joanna McCunn*
Abstract—Thecontra proferentemrule has been under sustained attack in recent years, as judges doubt whether it has any role to play in modern commercial contract law. This article sheds light on the function of the rule by examining its historical development. The rule has been part of English contract law for over 600 years, playing very different roles at each stage of its development. Lawyers since the medieval period have criticised the rule, but have succeeded in continually repurposing it to fit with new conceptions of contract law and to address the most pressing concerns of their day. This article shows that thecontra proferentemrule can provide a fascinating case study in the development of common law doctrine, and argues that the future need not be wholly bleak for one of our longest-lived canons of construction.
Keywords:contract law, legal history, interpretation, contra proferentem
1
Thecontra proferentemrule is in its death throes, at least if recent dicta are to be believed. ‘There are now only skeletal, if any, remains’ of the rule; 1 it is ‘rarely, if ever, of any assistance’, 2 ‘of uncertain application and little utility’, 3 and ‘very much a last refuge, almost an admission of defeat, when it comes to construing a document’. 4 The weaknesses of the rule are well rehearsed: it is out of step with the ordinary principles of contractual interpretation; it relies on the ‘abstruse’ process of identifying aproferens; and it ultimately leads to arbitrary results. 5 These criticisms, however, are nothing new. Thecontra proferentemrule
- University of Bristol. Email: joanna@bristol.ac. Sources have been translated and spelling has been modernised throughout. My thanks go to the participants in workshops at Lund University and University College London, a staff seminar at the University of Bristol, the Obligations IX conference at the University of Melbourne, and the Oxford Legal History Forum, where earlier drafts of this article were presented. I am also grateful to Andrew Bell, Jeffrey Thomson and the anonymous reviewers for their helpful comments. 1 2 Multiplex Construction (Europe) v Dunne[2017] EWHC 3073 (TCC), [27]. 3 K/S Victoria Street v House of Fraser (Stores Management)[2011] EWCA Civ 904, [68]. 4 CDV Software Entertainment v Gamecock Media Europe[2009] EWHC 2965, [56]. 5 BNY Mellon Corporate Trustee Services v LBG Capital No 1[2016] UKSC 29, [53]. K/S Victoria Street v House of Fraser(n 2) [68]. ßThe Author(s) 2019. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals@oup
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has been part of English law since the medieval period, and lawyers have been noticing the same problems with it for centuries. Yet despite the opprobrium heaped upon it, the rule is perhaps our longest-lived maxim of construction. A full version of the rule was given by Edward Coke: ‘verba cartarum fortius accipiuntur contra proferentem’, 6 or ‘the words of deeds are to be taken more strongly against the one who put them forward’. Thus, when the words of a contract are ambiguous, the rule requires us to choose the meaning that is less favourable to the party who put forward the wording. The form of the rule has been remarkably consistent throughout the centuries. However, its substance is more slippery, continually evolving to fit the shifting priorities of contract law. Even today, the rule is difficult to pin down. In what sense must the words of the contract be ‘ambiguous’, 7 or a meaning ‘less favourable’? 8 And, perhaps most obviously, what does ‘put forward’ mean? 9 Staughton LJ, commenting on the difficulty of the rule, once suggested that ‘diligent historical research’ might help to clear it up. 10 Indeed, some modern criticisms of the rule seem to be based on a misunderstanding of its history. One account, for example, explains that it was imported from the civil law by Edward Coke and Francis Bacon. It had little role to play, perhaps applying only to unilateral grants, until the rise of standard form contracts. It was then put to use as ‘an early form of consumer protection’. 11 In fact, however, an investigation of the case law shows that the rule has played an important role in contractual interpretation for many centuries. This article will examine how the rule has been used in England since the medieval period: how have lawyers of the past identified aproferens, and why have they seen fit to construe against her? It will demonstrate that explanations of the rule have been constantly changing to adapt to new understandings of contracts. The rule therefore provides a case study in the development of common law contract doctrines, and the ways in which their substance can radically change while their form remains stable. A better understanding of the rule’s historical functions can also help us to identify the role it can play in contract law today. The article thus concludes by asking what the future ought to hold for thecontra proferentemrule. At this stage, it is worth offering one clarification. This article deals only with thecontra proferentemrulestricto sensu: that is, as explained above, a rule that obtains when the words of the contract are ambiguous. It excludes from its scope a separate, but closely related, rule, which requires exclusion clauses to be narrowly interpreted. The rule about exclusion clauses applies even to
6 Sir Edward Coke,The First Part of the Institutes of the Laws of England, or, A Commentary upon Littleton(The Societie of Stationers 1628) 36a. 7 8 JW Carter, ‘‘‘Commercial’’ Construction and the Canada SS Rules’ (1995) 9 JCL 69, 81–2. 9 Hin-Pro International Logistics v Compania Sud Americana de Vapores[2015] 1 CLC 901, [74]. 10 Sir Kim Lewison,The Interpretation of Contracts(6th edn, Sweet & Maxwell 2015) 391–3. 11 Youell v Bland Welch & Co (No 1)[1992] 2 Lloyds Rep 127, 134. Lewison (n 9) 388–9, quotingOxonica Energy v Neuftec[2008] EWHC 2127 (Pat), [90].
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fault if they later turned out to his disadvantage. In one 1494 case, for example, Sjt Rede argued that a party must perform a bond according to its letter, because ‘it was his folly that he wanted to be thus bound, and also the deed of a man is taken the most strongly against him who made the deed’. 23 This was of a piece with medieval lawyers’ generally uncompromising approach to parties who sought to escape their self-imposed obligations. 24 Others occasionally suggested a different rationale for the rule. Thirning CJ, for example, thought that a deed would be taken ‘for the greatest advantage of him to whom the deed was made, and to any meaning that may be understood... so that the grant may be performed, and the will of the grantor observed’. 25 The grantor had intended the grant to be made, and so it was better to give it some meaning than to allow it to fail for uncertainty. Even at this stage, there was some ambiguity as to who was aproferens. Was it the maker of the deed, as Newton CJ argued, or the grantor, as Juyn CB had suggested? In fact, the two were, at least in theory, one and the same person. During the medieval period, the courts had strict rules about which party must speak which terms in a deed. A grantor must be the one to set out the terms of his grant, whether he used a deed poll, sealed only by him, or an indenture, sealed by both parties. 26 Thus, it was possible for lawyers to identify the maker of the deed with the grantor. In a 1423 case, for example, Sjt Paston argued that a feoffment would be taken ‘most strongly against him who enfeoffed me, because it is his own deed’. 27 There was, though, a further complication. While many deeds could be made by the grantor alone, some required terms to be spoken by the grantee as well. For example, a lessor could grant the land and reserve the rent, 28 but it was the lessee who must covenant to keep the premises in good repair. 29 A lease involving such reciprocal grants would have to be made by an indenture, and was often written in the third person. 30 Who was theproferensof this kind of deed? In 1469, Choke J proposed an answer: an indenture containing reciprocal grants would simply be carved up into the terms spoken by each party. The court must ask ‘who made the deed in that clause which belongs to him’, considering, for example, who was granting something in the term at issue. 31 On this view, each term of a deed could be identified as the grant of one of the parties, so that each party was theproferensof some of the terms.
23 YB (1494) Hil 9 Hen VII pl 11 f17a–18a, 17b. See also YB (1462) Pas 2 Edw IV pl 6 f2a–4a, 2a. 24 AWB Simpson,A History of the Common Law of Contract: The Rise of the Action of Assumpsit(OUP 1975) 32; David Ibbetson, ‘Fault and Absolute Liability in Pre-Modern Contract Law’ (1997) 18 Journal of Legal History 1, 8–9. 25 26 YB (1406) Trin 7 Hen IV pl 9 f16b–17a, 16b. 27 JM Kaye,Medieval English Conveyances(CUP 2009) 8. 28 YB (1423) Mich 2 Hen VI pl 2 f4b–5a, 4b. 29 Kaye (n 26) 11. 30 Gibbons v Maltyard and Martin(undated) Popham 6, 8. 31 Kaye (n 26) 8. See also Thomas Littleton,Tenures(Robert Redman 1538) 112 (first published in 1481). YB (1469) Trin 9 Edw IV pl 22 f19b–22a, 21b.
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However, there was another contemporary view of indentures, which posed more significant problems for thecontra proferentemrule. Thomas Littleton, for example, wrote that an indenture sealed by both parties was ‘the deed of both, and also every part of the indenture is the deed of both parties’. 32 This was the case even if the terms had been spoken by only one party, or by each party separately in the first person. 33 But if every part of the indenture was made by both parties, how could one of them be identified as theproferensof the term? This problem was raised in a case in 1480. Sjt Townshend had argued that a bond must be ‘interpreted more beneficially for the grantee’. 34 Bryan CJ responded, ‘You speak well of a deed not indented, but when there is an indenture it is the deed of both of them, by my understanding, so it cannot be taken more beneficially to one than to the other’. 35 As early as the 15th century, then, a difficulty with the rule’s substance had been noted: in an agreement made by two parties, how could only one be theproferens? This problem would not easily be resolved.
3 and Intentions
Thecontra proferentemrule, however, continued to thrive. By 1535, it was so well established that Audley LC described it as ‘a maxim in the law’, 36 and it was one of the most frequently cited principles of construction in Plowden’s Commentariesand Coke’sReports. 37 Coke appears to have been the first to revive the Latin tagcontra proferentem, 38 followed by Bacon, who described the rule as ‘one of the most common grounds of the law’. 39 While the rule was generally seen as a means of interpreting ambiguous documents, it could also be used to determine which part of a contradictory deed would be valid. 40 As in the medieval period, lawyers identified theproferensby asking who was responsible for the term in question. Thus, a grant was to be ‘taken most strongly against the grantor’ 41 and ‘most beneficially for them to whom the grant or gift was made’. 42 Lawyers continued to argue that nobody should
32 Littleton (n 30) 112v. 33 Kaye (n 26) 10. 34 YB (1480) Mich 20 Edw IV pl 2 f8b–9a, 8b. 35 ibid. 36 YB (1535) Trin 27 Hen VIII pl 6 f14b–20a, 18b. On the use of maxims in this period, see generally Ian Williams, ‘The Role of Rules: Legal Maxims in Early-Modern Common Law Principle and Practice’ in Maksymilian Del Mar and Michael Lobban (eds),Law in Theory and History: New Essays on a Neglected Dialogue (Hart Publishing 2016). 37 By the 16th century, the courts had begun to enforce some informal contracts using the action of assumpsit. However, the interpretation of these contracts was a question for the jury: Sir John Baker,An Introduction to English Legal History(4th edn, OUP 2007) 351. Evidence of the rule, therefore, continues to be found only in cases involving contracts made by deed. 38 39 Coke (n 6) 36a. 40 Francis Bacon,The Elements of the Common Lawes of England(J More 1630) 11. 41 Baldwin’s Case(1589) 2 Co Rep 23a, 24a. 42 Throckmerton v Tracy(1555) Plow 145, 152. Reniger v Fogossa(1550) Plow 1, 10.
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grantor, and most available to the grantee’. However, ‘it is not so in a deed indented, because the law makes each party privy to the speech of the other’. 54 Although this argument was occasionally repeated, 55 there is no indication that it was ever successful. Other lawyers, therefore, attempted to fold thecontra proferentemrule into their new approach to the interpretation of deeds, linking the rule to the intentions of the parties. For example, in Edward Hake’sDialogue on Equity, composed at the end of the 16th century, one participant objected to the rule: a deed could not be ‘construed according to the intent of the parties’ and, at the same time, ‘most beneficially for the grantee’. Hake’s explanation was that, although ‘deeds and grants must be expounded most for the benefit of grantees’, the grantees were ‘not so to be favoured, as that the grant thereby should be expounded contrary to reason, which no doubt it should be if it were construed against the intent of the parties’. 56 Early modern lawyers had a strong presumption that the parties to a deed would have intended to do what was reasonable. 57 Their intentions could therefore be discovered using interpretive maxims based on reason, such as the contra proferentemrule. 58 InMiller v Manwaring(1633), for example, the court held that ‘deeds are to be construed, that they shall pass things according to the intent of the parties, and the strongest against the grantor according to the apparent intent’. 59 Since both parties wished the grant to be made, it was reasonable to assume that they intended the grantee to benefit by it. The rule was also linked with other interpretive maxims: for example, that a deed should be construed so as to have some effect. InDashper v Dashper(1592), the court explained that the parties did not wish their grant to be ‘utterly void, and therefore it may not reasonably be taken that the grantor intended a void and idle thing or act; therefore the law must expound this grant most beneficially for the grantee’. 60 Since the courts’ focus was on identifying what the parties would reasonably have intended, thecontra proferentemrule could be trumped with a reference to the demands of reason. InHumfrey Lofield’s Case (1612), a lessee tried to invoke the rule to avoid paying a year’s worth of rent. ‘The words of the reservation are the words of the lessor,’ he argued, ‘and the reservation is his act, and therefore shall not be extended beyond the words’. 61 He was
54 Browning v Beston(n 46) 134. 55 Saunders & Starkey v Stanfourde(undated) Hunt MS El 482 f70, f72v. This case probably dates from the 1580s. 56 57 Edward Hake,Epieikeia: A Dialogue on Equity in Three Parts(DEC Yale ed, Yale UP 1953) 54. See generally Joanna McCunn, ‘Revolutions in Contractual Interpretation: A Historical Perspective’ in Sarah Worthington, Andrew Robertson and Graham Virgo (eds),Revolution and Evolution in Private Law(Hart Publishing 2018) 148–50. 58 59 Throckmerton v Tracy(n 41) 160. 60 Miller and Johns v Manwaring(1633) Cro Car 397, 399. 61 Dashper v Dashper(1592) 1 And 289, 290. See alsoButt’s Case(1600) 7 Co Rep 23a, 23a. Humfrey Lofield’s Case(1612) 10 Co Rep 106a, 106b.
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unsuccessful. Coke, commenting on the case, observed that ‘a reservation shall be expounded according to the reasonable intention of the parties, to be collected by the words of their deed’. 62 Here, it was apparent that the parties had intended the rent to be paid for the whole duration of the lease, so there was no room for the contra proferentem rule to operate. 63 Similarly, if a constructioncontra proferentemwould destroy the force of the deed, the courts would prefer to read the document so as to preserve its effect. 64 By treating the rule as a means of identifying the parties’ reasonable intentions, lawyers could bypass the awkwardness of separating out their interests. However, they tended to fudge the question of how, exactly, the rule helped them identify the parties’ intention. In fact, when discussing the construction of wills, lawyers explicitly contrasted interpretation according to the writer’s intention with interpretation contra proferentem, suggesting some unease about the relationship between the two. 65 Indeed, other lawyers of the time seemed unconvinced by the usual explanation of the rule. They took a third approach: accepting that the rule did apply to the interpretation of indentures, but arguing that it had nothing to do with the intentions of the parties. Bacon, for example, explained that the rule made
an end of many questions and doubts about construction of words: for if the labour were only to pick out the intention of the parties, every judge would have a several sense, whereas this rule doth give them a sway to take the law more certainly one way. 66
For Bacon, the rule was simply a tiebreaker, which helped judges to construe words when the parties’ intentions were otherwise unidentifiable. Choosing to construe against theproferenswas a policy choice: taking deeds for the benefit of grantees was advantageous because it produced ‘quiet and certainty’ by favouring ‘acts and conveyances executed’. 67 He went on to warn that, being ‘a rule of some strictness and rigour’, it must be ‘the last to be resorted to, and is never to be relied upon but where all other rules of exposition of words fail’. 68 Thecontra proferentemrule, then, had survived a major reconceptualisation of contractual interpretation. Now that deeds were no longer seen as collections of each party’s separate grants, the rule was not so straightforward to apply. However, it had acquired a broadly accepted new explanation: that its function was to identify the reasonable common intention of the parties. But lawyers were not always sure that it could contribute to this goal. Some despaired,
62 Humfrey Lofield’s Case(n 61) 107b. 63 See alsoHill v Grange(1556) Plow 164, 171a. 64 Mallorye v Payne(1601) BL Add MS 25203 f358, f360v. 65 Le Serjaunts Case(1567) Hunt MS El 482 f3, f3;Ewer v Heydon(1599) 2 And 123, 123. 66 Bacon (n 39) 11. 67 Bacon (n 39). 68 Bacon (n 39) 16.
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prevent parties acting unfairly: it would ensure that ‘all manner of deceit in any grant is avoided’, since parties could not ‘affect ambiguous and intricate expressions’ to exploit later. He then retreated to the 16th century, citing Browningto explain that the rule did not apply to indentures, but only to deeds poll. He concluded by quoting Francis Bacon: ‘this, being a rule of some strictness and rigour, is the last to be resorted to, and is never to be relied upon, but where all other rules of exposition fail’. 75 Blackstone’s account, then, was heavily reliant on centuries-old sources. However, within decades, a slew of new treatises would reshape English understandings of contract law and put a new spin on thecontra proferentemrule.
4. Consensus and the Objective Principle
Contract law theory first got off the ground in England in the early 19th century. 76 Judges and treatise writers developed a model of contract law strongly influenced by will theory, especially by the writings of the French jurist Robert Joseph Pothier. 77 They emphasised the centrality of the parties’ agreement: a contract was formed when the minds of the parties met and reached a consensus. 78 It would obviously not be easy to fit the contra proferentemrule into this model. Pothier himself acknowledged the rule as one of last resort; its explanation, again, was that ‘the creditor must blame himself for not having explained himself better’. 79 Had English lawyers accepted will theory wholeheartedly, they might have continued to doubt whether the rule applied to agreements at all. Contra proferentem, however, was swiftly thrown a lifeline. The common law’s acceptance of will theory was attenuated by its adoption of the objective principle, which emphasised the parties’ apparent agreement over their actual states of mind. 80 The principle, as espoused by Joseph Chitty, was derived from the moral philosophy of William Paley. 81 Paley was more concerned with the promisee’s expectations than the intentions of the promisor. He argued that a promise must be understood in the sense ‘in which the promisor believed that the promisee accepted his promise’, 82 in order to prevent the promisor from
75 Blackstone (n 74) 380. 76 AWB Simpson, ‘Innovation in Nineteenth Century Contract Law’ (1975) 91 LQR 247, 250. By this stage, contracts not under seal had long been actionable. Jury trials began to disappear from contract cases in the mid- 19th century: Ibbetson (n 72) 221, fn 8. Thecontra proferentemcan therefore be found in cases on all kinds of contracts in this period. The courts applied the same rules of construction to all written contracts:Seddon v Senate 77 (1810) 13 East 63, 74. 78 Ibbetson (n 72) 220; Simpson (n 76) 255–6. 79 Simpson (n 76) 265–6. 80 Robert Joseph Pothier,Traite ́Des Obligations, vol 1 (Debure l’aıˆne ́1761) 109. 81 Ibbetson (n 72) 221. Joseph Chitty,A Practical Treatise on the Law of Contracts Not Under Seal(2nd edn, S Sweet 1834) 62–3. Paley’s theory was first included in Chitty’s expanded second edition. 82 William Paley,The Principles of Moral and Political Philosophy(R Faulder 1785) 107.
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exploiting deliberate ambiguities in his words. 83 Later in the century, the principle was refined. As Frederick Pollock observed, Paley’s rule might ‘give the promisee either too much or too little’. Pollock’s version of the principle therefore introduced an element of reasonableness: ‘the right meaning of any expression is that which may be fairly presumed to be understood by it’. 84 Nineteenth-century discussions of the contra proferentemrule were slotted into this model. Chitty, for example, made much the same points as Blackstone: the purpose ofcontra proferentemwas to ‘defeat studied ambiguity and deceitful intricacy of expression’, but, being ‘of some strictness and rigour’, it was a rule of last resort. 85 This explanation fitted well with Chitty’s wholesale adoption of Paley’s objective principle, which was also intended to prevent the promisor from making ‘his escape through some ambiguity in the expressions which he used’. 86 Later in the century, lawyers began to emphasise the rule’s association with a reasonable understanding of the contract, linking it to the later form of the objective principle. InFowkes v Manchester and London Life Assurance (1863), Blackburn J explained that the contra proferentem rule required ambiguous words ‘to be construed in that sense in which a prudent and reasonable man on the other side would understand them’. 87 Lawyers also continued to refer to the rule’s traditional justification: the proferensonly had himself to blame if he left an ambiguity in his terms. One casebook explained that ‘natural self-love will prevent a man from unneces- sarily using language to his own disadvantage’. 88 However, this explanation was now often combined with a concern for the other party’s interests. Richard Preston, for example, wrote that the purpose of the rule was both ‘to prevent any injury from the use of ambiguous terms, and to punish the party whose meaning they express’. 89 Again, such arguments were often linked to the objective principle. 90 As in the 16th century, however, there were sceptics. Some lawyers found the rule impossible to reconcile with their general approach to contractual interpretation, and concluded that it was simply a policy-based, or even an arbitrary, tiebreaker. Broom, for example, followed Bacon, explaining that the
83 ibid 108; see John Phillips, ‘Smith v Hughes (1871)’ in Charles Mitchell and Paul Mitchell (eds),Landmark Cases in the Law of Contract 84 (Hart Publishing 2008) 213. Sir Frederick Pollock,Principles of Contract(5th edn, Stevens and Sons 1889) 235. Compare the formulations of the principle offered by Blackburn J and Hannen J inSmith v Hughes(1870–71) LR 6 QB 597, at 607 and 610 respectively. 85 86 Chitty (n 81) 80. Chitty (n 81) 63. See also Thomas Platt,A Practical Treatise on the Law of Covenants(Saunders and Benning 1829) 141. 87 88 Fowkes v Manchester and London Life Assurance and Loan Association(1863) 3 B & S 917, 929–30. John William Smith,A Selection of Leading Cases on Various Branches of the Law, vol II (Thomas Willes Chitty, John Herbert Williams and Walter Hussey Griffith eds, 12th edn, Sweet & Maxwell 1915) 510. 89 Edward Hilliard and Richard Preston (eds),Sheppard’s Touchstone of Common Assurances(7th edn, J & WT Clarke 1820) 88. 90 Herbert Broom,A Selection of Legal Maxims, Classified and Illustrated(Herbert F Manisty and Herbert Chitty eds, 7th edn, Sweet & Maxwell 1900) 446. SeeMayer v Isaac(1840) 6 M & W 605, 612.
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‘necessity for resorting to presumptions in favour of or against either party’. 100 InTaylor v Corporation of St Helens(1877), Jessel MR argued trenchantly that, even as a rule of last resort, contra proferentem was entirely otiose. Although he admitted that it was found ‘in a great many textbooks, and, I am afraid, also in a great many judgments of ancient date’, he thought that it could not
be considered as having any force at the present day. The rule is to find out the meaning of the instrument according to the ordinary and proper rules of construc- tion. If we can thus find out its meaning, we do not want the maxim. If, on the other hand, we cannot find out its meaning, then the instrument is void for uncertainty. 101
A few later writers noted Jessel MR’s critique, but only to dismiss it. 102 They observed that the maxim had subsequently been approved by the House of Lords, without reference toTaylor. Furthermore, the cases cited by Jessel MR as authority for his ‘ordinary and proper rules of construction’ all concerned the interpretation of wills, to which thecontra proferentemrule had certainly never applied. 103 As theMichigan Law Journalpointed out, Jessel MR was somewhat begging the question by declaring that it was not one of these rules in the first place. 104 And, the authors argued, was it not better to adopt the contra proferentemrule than to let the grant perish, and permit the grantor to avoid his grant? 105 In the event, Jessel MR’s broadside had little effect. At the end of the 19th century, then, thecontra proferentemrule had been wrestled into a paradigm of contract law based on will theory and the objective principle. However, it also had its detractors. Many lawyers felt that their ordinary rules of construction were sufficient to identify the meaning of the contract. They thought of the contra proferentem rule as an extraordinary tiebreaker, and not a way of identifying meaning at all. The problems of using the rule in practice had also become more acute. Since lawyers were now so focused on the parties’ agreement, they found it difficult, if not impossible, to identify theproferensof a term.
5 Rise of Consumer Protection
The rule, however, was about to find a new niche. In the late 18th century, lawyers were already arguing that it was ‘peculiarly necessary’ to construe fire insurance policiescontra proferentembecause they were ‘entered into without
100 Birrell v Dryer(n 95) 350. 101 Taylor v Corporation of St Helens(1877) 6 Ch D 264, 270–1. 102 JM Lely,Wharton’s Law-Lexicon: Forming an Epitome of the Law of England(10th edn, Stevens and Sons 1902) 788; Joseph Chitty,A Treatise on the Law of Contracts(JM Lely ed, 14th edn, Sweet & Maxwell 1904) 102; Pollock (n 84) 245. 103 Bacon, for example, wrote that the ‘rule hath no place at all.. devises and wills’: Bacon (n 39) 24. See also the cases cited at n 65 above. 104 105 ‘Contra Proferentem’ (1897) 6 Mich LJ 213, 217. ‘Contra Proferentem’ (n 104) 218.
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examination, and without any previous negotiation’. 106 By the mid-19th century, the rule was being cited increasingly often in cases on standard form contracts, often consumer insurance policies. 107 In Anderson v Fitzgerald (1853), Lord St Leonards noted that such contracts were ‘often entered into with men in humble conditions of life, who can but ill understand them’. 108 As a result, they ‘ought to be so framed, that he who runs can read’. 109 Unless the words were clear, he warned, they would
lead a vast number of persons to suppose that they have made a provision for their families by an insurance on their lives, and by payment of perhaps a very considerable portion of their income, when in point of fact, from the very commencement, the policy was not worth the paper upon which it was written. 110
As the use of standard form contracts increased, and judicial fears over their propriety with it, thecontra proferentemrule began to be seen primarily as a tool for protecting these ‘humble men’. Standard form contracts themselves were nothing new. They had been used for marine insurance, for example, since the 16th century, but generally between merchants of equal commercial experience and bargaining power. 111 Problems only arose when parties with greater economic power began to use standard forms to impose terms disadvantageous to weaker parties. 112 This use of standard forms resulted in a fundamental shift in how contracts were understood. It was difficult to maintain that contracts were based on the parties’ will when, as Friedrich Kessler observed, one party’s contractual intention was ‘but a subjection more or less voluntary to terms dictated by the stronger party, terms whose consequences are often understood only in a vague way, if at all’. 113 The parties’ agreement was shown to be ‘little more than a fac ̧ade’. 114 What was bad for will theory was, however, a boon to thecontra proferentem rule. When one party simply assented to terms stipulated by the other, it was easy to identify theproferens. With the parties’ intentions in the background, greater reliance had to be placed on the objective principle. 115 And, as we have seen, lawyers had long thought that thecontra proferentemrule could be used to
106 Routledge v Burrell(1789) 1 H Bl 254, 256. 107 egBorradaile v Hunter(1843) 5 Man & G 639;Anderson v Fitzgerald(1853) IV House of Lords Cases (Clark’s) 484; 108 Fowkes v Manchester and London Life Assurance and Loan Association(n 87). 109 Anderson v Fitzgerald(n 107) 510. 110 Anderson v Fitzgerald(n 107). Anderson v Fitzgerald(n 107) 507. See alsoFowkes v Manchester and London Life Assurance and Loan Association 111 (n 87) 925. Guido Rossi,Insurance in Elizabethan England: The London Code(CUP 2016) 27. For a history of standard form contracts, see generally O Prausnitz,The Standardization of Commercial Contracts in English and Continental Law 112 (Sweet & Maxwell 1937) 10–20. 113 Prausnitz (n 111) 16. Friedrich Kessler, ‘Contracts of Adhesion—Some Thoughts about Freedom of Contract’ (1943) 43 Colum L Rev 629, 632. 114 115 Ibbetson (n 72) 248. Ibbetson (n 72) 246.
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fairness of the contract. In Kelly v Cornhill Insurance (1964), Lord Reid expressly linked thecontra proferentemrule to the realisation of a fair result: ‘if the company do not choose to be more explicit, we must reach a reasonable result as best we can’. 124 Lord Denning MR viewed all techniques of adverse construction as barely disguised attempts to control the substantive reason- ableness of terms. 125 Thecontra proferentemrule was only one of a suite of techniques of adverse construction used by the courts, alongside, for example, the rule that exclusion clauses must be narrowly construed and the doctrine of fundamental breach. 126 As has already been explained, we are here only concerned with thecontra proferentem rulestricto sensu: the rule that is invoked on the basis of some ambiguity in the language of the contract. In contrast, neither the rule about exclusion clauses nor the doctrine of fundamental breach is premised on the existence of ambiguous language. However, it would be remiss not to note how closely these rules are connected tocontra proferentem. They require the narrow construction of terms that allow a party ‘to diminish or exclude his basic obligation, or any common law duty which arises apart from contract’. 127 Although the words of the exclusion clause itself may be clear, the contract seems contradictory: the party is ‘taking with one hand what had been given with the other’. 128 This dissonance between the language of the clause and the apparent purpose of the contract creates an ambiguity of its own. 129 Thus, the rule about exclusion clauses can be seen as an instance of construing a contradictory document contra proferentem. As we have seen, the contra proferentemrule has been used in this way since the medieval period, and has long been linked to the principle that a grantor is presumed not to derogate from his own grant. In its broadest sense, then,contra proferentemalso covers the rule about exclusion clauses and the doctrine of fundamental breach. Indeed, some judges have used ‘contra proferentem’ loosely to describe the narrow construction of even unambiguous exclusion clauses. 130 The problem with adverse construction, however, is that it is an ineffective way to control the substantive fairness of contracts. Commentators have frequently warned that, at some point, the contract will be so clearly written that the court cannot possibly construe itcontra proferentem. 131 Examining the
124 Kelly v Cornhill Insurance Co[1964] 1 WLR 158, 168. 125 Gillespie Brothers & Co v Roy Bowles Transport[1973] QB 400, 415. 126 Waddams (n 119) 382. For a discussion of these techniques, see Dworkin (n 118) 100–5. 127 Youell v Bland Welch(n 10) 134. 128 Bank of Credit and Commerce International v Ali[2002] 1 AC 251, 278; see also Edwin Peel, ‘Whither Contra Proferentem?’ in Andrew Burrows and Edwin Peel (eds), 129 Contract Terms(OUP 2007) 66. 130 Andrew Robertson, ‘Purposive Contractual Interpretation’ Legal Studies (forthcoming). John Carter v Hanson Haulage[1965] 2 QB 495, 504;Adams v Richardson & Starling[1969] 1 WLR 1645, 1653. 131 Gillespie Brothers & Co v Roy Bowles Transport(n 125) 415; KN Llewellyn, ‘Book Review’ (1939) 52 Harv L Rev 700, 703; Dworkin (n 118) 99; Waddams (n 119) 379. A good example isRe Brown’s Claim[1915] 2 Ch 167. The Court of Appeal reluctantly refused to apply thecontra proferentemrule to an unambiguous insurance policy: 170.
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issue in 1975, the Law Commission concluded that exclusion clauses were ‘in many cases a serious social evil’ and that the rules of adverse construction were ‘far from adequate’ to control them. 132 Their report led to the Unfair Contract Terms Act 1977, which allowed the courts to control the substantive reasonableness of exclusion clauses. This was followed in 1994 by legislation implementing an EEC directive on unfair terms in consumer contracts. 133 The directive not only imposed controls on unfair terms, but also provided for a statutory form of thecontra proferentemrule: ‘where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail’. 134 Kim Lewison has observed that there is ‘no significant difference between thecontra proferentemprinciple and this statutory rule of interpret- ation’. 135 Except, presumably, the obvious: the statutory rule is solely a means of protecting consumers, the trader being conclusively presumed to be the proferens. This legislation prompted a ‘far reaching change in judicial attitude’ to the construction of contracts. 136 In Photo Production v Securicor (1980), for example, Lord Diplock noted that the courts had sometimes placed ‘very strained constructions upon exclusion clauses, mainly in what to-day would be called consumer contracts and contracts of adhesion’. He thought that ‘any need for this kind of judicial distortion of the English language has been banished’ by the 1977 Act. 137 The courts should rely on the protections of the Act, and no longer strain to find ambiguities in commercial contracts. 138 However, this did not necessarily mean that thecontra proferentemrule was surplus to requirements. Their Lordships’ disapproval was directed at techniques of adverse construction in general, rather thancontra proferentem in particular, and they specifically exempted cases that genuinely turned on the construction of the contract. 139 Where there was a true ambiguity, thecontra proferentemrule would still have a role to play. 140 Events, however, were to vindicate the warning given by Karl Llewellyn in 1939. Since rules of adverse construction ‘purport to construe, and do not really construe, nor are intended to, but are instead tools of intentional and creative misconstruction, they seriously embarrass later efforts at true
132 The Law Commission and Scottish Law Commission, ‘Exemption Clauses: Second Report’ (1975) Law Com No 69, Scot Law Com No 39, 19. 133 Council Directive 1993/13/EEC on unfair terms in consumer contracts. This was originally implemented by the Unfair Terms in Consumer Contracts Regulations 1994, SI 1994/3159; followed by the Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083; and now the Consumer Rights Act 2015, Part 2. 134 Dir 1993/13/EEC, art 5; UTCCR 1994, reg 6; UTCCR 1999, reg 7(2); Consumer Rights Act 2015, s 69(1). 135 136 Lewison (n 9) 403. 137 Lewison (n 9) 607. 138 Photo Production v Securicor Transport[1980] AC 827, 851. 139 See alsoGeorge Mitchell (Chesterhall) v Finney Lock Seeds[1983] QB 284, 297–9. Photo Production v Securicor Transport(n 137) 845. See alsoAilsa Craig Fishing Co v Malvern Fishing Co [1983] 1 WLR 964, 966. 140 See also Carter (n 7) 90.
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business common sense. 149 She would have no need for thecontra proferentem rule. In the wake ofICS, lawyers began to wonder whether contra proferentem remained part of their ‘intellectual hand luggage’ allowance. 150 The consensus was that it probably did, but that it was not a part of theICSscheme. Lord Neuberger described the rule as ‘very much a last refuge, almost an admission of defeat, when it comes to construing a document’. 151 It must only be resorted to if ordinary principles of construction failed. InK/S Victoria Street v House of Fraser(2011), he explained that
‘rules’ of interpretation such ascontra proferentemare rarely decisive as to the meaning of any provisions of a commercial contract. The words used, commercial sense, and the documentary and factual context, are, and should be, normally enough to determine the meaning of a contractual provision. 152
The rule, then, was generally rationalised as a policy tool. InEgan v Static Control Components(2004), Arden LJ suggested that thecontra proferentemrule would only apply when a ‘reason of public policy’ meant that the ICS principles should be displaced. 153 This reason was generally identified as the avoidance of unfairness to a party in a weaker bargaining position: 154 perhaps a small business, falling outside the scope of the consumer protection legislation. Sedley LJ, for example, explained that the ‘origin and first purpose’ of the rule was ‘to limit the power of a dominant contractor who is able to deal on his own take-it-or-leave it terms with others’. 155 Neuberger LJ thought that the rule might be of assistance only in construing a standard form contract. 156 Indeed, the most frequent observation made about the rule was that it had ‘a very limited role’ in the interpretation of ‘commercial contracts, negotiated between parties of equal bargaining power’. 157 At most, it was ‘a rule of last resort’ where theICSapproach ‘fails to provide a sure conclusion, or any conclusion at all, to the meaning intended by the parties’. 158 A minority of judges did continue to view the rule as part of the interpretive process. InBank of Credit and Commerce International v Ali(2002), for example, Lord Clyde explained that interpretive maxims are simply ‘reflections upon the
149 Rainy Sky SA v Kookmin Bank[2011] 1 WLR 2900, 2908. 150 The Tychy (No 2)[2001] 2 Lloyds Rep 403, [29]. 151 BNY Mellon v LBG Capital(n 4) [53]. 152 K/S Victoria Street v House of Fraser(n 2) [68]. 153 Egan v Static Control Components (Europe)[2004] EWCA Civ 392, [37]. 154 Gerard McMeel,The Construction of Contracts(2nd edn, OUP 2011) 287. 155 Association of British Travel Agents v British Airways[2000] 2 ER Comm 204, 220. See alsoTaberna Europe CDO II v Selskabet AF1 156 [2016] EWCA Civ 1262, [23]. Taylor v Rive Droite Music[2005] EWCA Civ 1300, [142]; see alsoCDV Software Entertainment v Gamecock Media Europe 157 (n 3) [56];SAS Institute v World Programming[2013] EWCA Civ 1482, [108]. Persimmon Homes v Ove Arup & Partners[2017] EWCA Civ 373, [52]; see alsoK/S Victoria Street v House of Fraser(n 2) [68];Transocean Drilling UK v Providence Resources[2016] EWCA Civ 372, [20];Haberdashers’ Aske’s Federation Trust v Lakehouse Contracts 158 [2018] EWHC 558 (TCC), [85]. Peel (n 128) 57.
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way in which people may ordinarily be expected to express themselves’. 159 Contra proferentem could contribute to an understanding of the parties’ meaning, because ‘if an agreement seeks to curtail the possible liabilities of one party, he, if not both of them, will generally be concerned to secure that the writing clearly covers that curtailment’. 160 But distaste for the rule did not arise solely from its putative basis in public policy. Lawyers were also concerned by the continued difficulty of identifying a proferens. Lord Neuberger described the question as ‘abstruse’. 161 In Australia, Campbell J cited several dozen conflicting cases on the identification of the proferens, fromBrowning v Bestononwards. 162 Peter Prescott QC, sitting as a deputy judge, understandably found the result ‘bewildering’. 163 It is little wonder that the rule was so unpopular when its effects seemed to be so arbitrary. 164 The rule about exclusion clauses, on the other hand, was thriving. The courts reasserted that the two were separate rules. 165 InNobahar-Cookson v Hut Group(2016), Briggs LJ accepted that the classiccontra proferentemrule was ‘not now regarded as of any significant weight for the purpose of construing commercial contracts’. 166 However, ‘recent decisions about exclusion clauses have continued to affirm the utility of the principle that, if necessary to resolve ambiguity, they should be narrowly construed, including in relation to commercial contracts’. 167 While the rule about exclusion clauses continued to be useful,contra proferentemwas to be consigned to the dustbin of history.
7. The Future of theContra ProferentemRule
Thecontra proferentemrule, then, seems to be coming to an ignominious end. It is seen as a tool of public policy, devised by interventionist judges to solve a problem that no longer exists. After all, there are now separate rules dealing with consumer contracts and exclusion clauses, the main preserves of thecontra proferentemrule for much of the 20th century. Even if the rule could be applied to commercial contracts, it seems unappealing: based on an outdated model of contracting, it will inevitably lead to arbitrary results. No wonder judges continue to doubt whether there is anything left of the rule at all. But nobody
159 Bank of Credit and Commerce International v Ali(n 128) 282. 160 Bank of Credit and Commerce International v Ali(n 128) 282. See alsoWhitecap Leisure v John H Rundle [2008] EWCA Civ 429, [21]-[22]. 161 162 K/S Victoria Street v House of Fraser(n 2) [68]. 163 North v Marina[2003] NSWSC 64, [57]–[72]. 164 Oxonica Energy v Neuftec(n 11) [89]. See Lewison (n 9) 391. Hoffmann J once opined that the rule should not be applied to a lease for this reason:Amax International v Custodian Holdings 165 [1986] 2 EGLR 111, 112. Transocean Drilling UK v Providence Resources(n 157) [20]. See alsoAssociation of British Travel Agents v British Airways(n 155) [43];Persimmon Homes v Ove Arup & Partners(n 157) [51]; Peel (n 128) 53; McMeel (n 154) 288; HG Beale, 166 Chitty on Contracts, vol 1 (32nd edn, Sweet & Maxwell 2015) 15-012. 167 Nobahar-Cookson v Hut Group[2016] EWCA Civ 573, [12]. Nobahar-Cookson v Hut Group(n 166) [16].
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The Contra Proferentem Rule: Contract Law’s Great Survivor
Module: Contract Law (LAW4104)
University: Queen Mary University of London
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