Key Takeaways

  • Contra proferentem is a contract law doctrine directing courts to interpret ambiguous terms against the party that drafted or requested them.
  • It is generally applied only after other interpretation methods fail and often appears in insurance disputes, where policyholders may have less bargaining power.
  • The rule’s rationale is to discourage deliberate use of vague language for later advantage and to protect the nondrafting party.
  • Courts assess ambiguity by first examining plain meaning, then looking for evidence of mutual intent, and finally applying contra proferentem if ambiguity remains unresolved.
  • The doctrine does not apply if both parties contributed to the ambiguous language or if the dispute is between sophisticated parties with equal bargaining power.
  • In insurance law, insurers sometimes attempt to limit or waive this protection through policy language, but enforceability depends on state law.

What Is Contra Proferentem?

Contra proferentem, meaning “against the offeror,” is a rule of contract law that requires any ambiguous clause to be interpreted with the meaning that is most in favor of the party that did not draft or request the clause. This doctrine can also be called the Ambiguity Doctrine. Contra proferentem typically comes into play when a contract is challenged in court. In general contra proferentem is a last resort, used only when other language interpretation does not reveal the parties’ intent.

A court, in reviewing a contract, will determine if a clause could have more than one meaning. If that is the case, the clause is ambiguous, and the court must determine which party wanted that clause included in the contract. The court must then interpret the ambiguous clause in favor of the other party.

However, if both parties were involved in the wording or inclusion of the ambiguous clause in the contract, then the contra proferentem doctrine cannot be applied. Contracts can be the complex result of long negotiations. Each party is likely looking out for its own best interest and trying to include their proposed language in the final document. After changing the contract language more than once over the course of negotiations in order to accommodate what each party wants, some ambiguous or unclear terms are likely to result. This may lead the parties to interpret the contract differently from one another. But the contra proferentem rule is designed to prevent parties from intentionally introducing ambiguous or vague language into the contract in order to get their way later down the line. This would be unfair to the other contracting party rather than just a natural result of negotiations.

Historical Origins and Rationale

The concept of contra proferentem has roots in Roman law and was adopted into English common law before becoming a well-established principle in U.S. contract interpretation. Historically, it was seen as a fairness mechanism: if one party had the advantage of drafting the agreement, that party bore the risk of any ambiguity. The doctrine promotes clarity in drafting and discourages inserting vague provisions that could later be manipulated in the drafter’s favor. Courts also use the rule to balance bargaining power, especially in standard-form contracts where one side has little opportunity to negotiate terms.

Determining if Contra Proferentem Applies

Courts should use these steps in determining whether the contra proferentem doctrine applies to a clause in a contract.

  1. First, a court should read plain meaning of the contract language and determine whether the clause has two possible meanings and is therefore ambiguous enough to cause uncertainty.
  2. If the court finds the clause to be ambiguous, the court should then determine what the intent of both parties was for this clause at the time of contract formation.
  3. If evidence shows an agreed upon intent that is not ambiguous then the contract will be enforced according to what that evidence provides.
  4. If the evidence does not solve the ambiguity, then the court should apply contra proferentem, determine which party drafted or requested the clause, and interpret the clause with the meaning that is most in favor of the party that did not offer the language.

In most insurance contracts, the contra proferentem rule leads to reading the clause against the insurer if it is vague and in favor of finding coverage for the insured. This interpretation doctrine recognizes that there is often an imbalance in bargaining power between an insurer and a policyholder. The insurance company has more resources and is more aware of possible ambiguities, especially when dealing with boilerplate contracts.

However, sometimes the doctrine of contra proferentem does not apply in insurance cases.

Limitations and Exceptions

Contra proferentem is not universally applied in every contractual dispute. Courts often decline to use it in the following situations:

  • Negotiated Terms – If both parties were equally involved in drafting the language, the rationale for applying the rule diminishes.
  • Sophisticated Parties – When both sides are experienced and have equal bargaining power, courts may instead rely on other interpretative methods.
  • Statutory or Regulatory Context – Certain industries, such as insurance, have state-specific statutes that can override or modify the rule’s application.
  • Clear Evidence of Intent – If extrinsic evidence resolves the ambiguity, courts enforce the contract according to that evidence rather than relying on the doctrine.

In insurance law, while the doctrine is generally applied in favor of policyholders, some insurers attempt to insert provisions that waive its use. The enforceability of such waivers varies by jurisdiction and often depends on whether the court views the waiver as undermining public policy.

Contra Proferentem in Insurance Contracts

Insurance contracts are a primary area where contra proferentem appears, largely because policies are typically drafted by insurers without input from the insured. When a policy term is open to more than one reasonable interpretation, courts often construe it in the insured’s favor to maximize coverage. This approach reflects the recognition that policyholders rarely have the expertise or leverage to negotiate complex insurance language.However, insurers may attempt to limit the rule’s reach by:

  • Including clauses stating that ambiguities will not be construed against either party.
  • Using state-approved forms that they argue should not trigger the doctrine.
  • Arguing that the insured is a sophisticated commercial entity capable of understanding the terms.

Despite these attempts, many courts continue to apply contra proferentem in insurance cases where ambiguity remains unresolved, emphasizing the doctrine’s consumer-protection role.

Practical Drafting Tips to Avoid Disputes

Parties can reduce the likelihood of a contra proferentem dispute by:

  1. Using Clear, Precise Language – Avoid terms with multiple interpretations.
  2. Defining Key Terms – Include definitions for potentially ambiguous words.
  3. Reviewing Industry Standards – Align language with recognized terminology.
  4. Seeking Legal Review – Have contracts reviewed by experienced counsel.
  5. Documenting Negotiations – Keep records of drafting discussions to provide extrinsic evidence if needed.

These proactive steps not only help prevent litigation but also strengthen a party’s position if a dispute arises.

Example Contra Proferentem Case

In a coverage dispute between two insurance companies in Economy Premier Assurance Co. v. Western National Mutual Ins. Co., the Minnesota Court of Appeals interpreted the policies and the two categories of vehicles in the “other insurance” provision in Minnesota’s insurance policies. One category received primary liability coverage. The language in that category was “rental vehicles” or “temporarily loaned vehicles.” The other category only received the additional coverage needed on top of insurance provided by a different insurance policy. The language in that category was “temporary substitute.”

Economy argued that there was an ambiguity that must be resolved by contra proferentem to determine which company was required to cover the insured individual. The ambiguity was in determining whether the policies covered the truck that was loaned to the insured temporarily while the truck was being serviced “temporary loaned vehicles” or whether the truck was a “temporary substitute.”

The court did not determine whether the provisions were ambiguous at all but rather found that applying the contra proferentem doctrine, in this case, would stray from the doctrine’s rationale. The doctrine of contra proferentem protects insured from big bad insurance companies, but when the dispute is between two insurers, especially one of whom was not involved in contract formation of the policy at issue, the rationale dissipates.

Additional Case Examples

Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) – The U.S. Supreme Court applied contra proferentem to interpret an ambiguous arbitration clause against the brokerage firm that drafted it.

  • State Farm Mut. Auto. Ins. Co. v. Pridgen (Fla. 2012) – The Florida Supreme Court construed ambiguous policy language in favor of the insured, reaffirming the rule’s strong role in insurance disputes.
  • Hillis Oil Co. v. City of Eveleth (8th Cir. 1997) – The court declined to apply the doctrine because both parties contributed equally to drafting the contested language.

These cases illustrate that the doctrine’s application depends heavily on context, the parties’ relative bargaining power, and the drafting process.

Frequently Asked Questions

1. Does contra proferentem apply to oral agreements?

It can apply if the oral agreement is later reduced to writing and ambiguity exists, but oral terms are often harder to prove and interpret.

2. Can a business waive contra proferentem in a contract?

Yes, some contracts attempt to waive it, but courts may refuse to enforce waivers that conflict with public policy, especially in consumer or insurance contexts.

3. How do courts determine which party drafted a clause?

They look at evidence such as correspondence, prior drafts, and testimony to see who proposed and controlled the language’s final form.

4. Is the rule used outside of insurance law?

Yes, contra proferentem applies in various commercial contracts, employment agreements, and other legal documents where ambiguity exists.

5. Why is contra proferentem considered a last-resort rule?

Courts prefer to resolve ambiguity using plain meaning, context, and extrinsic evidence before applying the rule, which shifts interpretation against the drafter.

If you need help with contra proferentem, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.