Table of Contents
In Short
- Contracts should be clear and precise to avoid misinterpretations and unintended liabilities.
- Ambiguous terms in contracts are interpreted against the party that drafted them, underscoring the need for clarity.
- A lawyer can help ensure your contracts are well-drafted, enforceable, and aligned with your business needs.
Tips for Business Owners
Prioritise clear and unambiguous language in all contract terms. Avoid vague clauses, particularly in areas like liability, termination, and performance metrics. Working with a lawyer can help ensure your contracts are robust and protect your business from potential risks and misunderstandings.
A well-drafted and clear commercial contract is crucial for any trading business. It can help your business prevent misunderstandings, manage risks, and define terms clearly for all parties involved in a project. However, vague or unclear language can lead to significant legal and commercial pitfalls. The “contra proferentem” rule addresses contract ambiguity by interpreting unclear terms against the party that drafted them. Understanding this principle is essential for business owners to remind them to ensure their contracts are drafted clearly. This article explores the contra proferentem rule in business-to-business contracts and the importance of ensuring your commercial agreements are well-drafted and precise.
What is the Contra Proferentem Rule and Why Does it Matter?
The contra proferentem rule (also known as “interpretation against the draftsman”) applies when a contract term is ambiguous. If a term within a contract appears unclear, then the courts may interpret it in favour of the party who did not draft it.
The rule emphasises the importance of business owners drafting contracts with precision, as unclear terms can lead to unintended liabilities.
Despite suggestions that the contra proferentem rule is becoming less significant nowadays, certain legal cases highlight that it remains a key principle of contractual interpretation. Your business should, therefore, remember this rule and draft your contracts carefully to ensure they are free from ambiguity and as clear as possible.
Why are Clear and Transparent Commercial Contracts Important?
Contracts are essential documents to protect a business from risk when trading. As such, they should be a top business priority.
Clear and transparent contracts can help you establish smooth business relationships. When you draft a well-structured contract, both parties will better understand their rights, obligations, and responsibilities, thereby reducing the risk of disputes. If your business is responsible for the contract, making sure each term is explicit and crystal clear is vital.
You can strengthen your business’s legal position by carefully reviewing and clarifying every clause. Transparent contracts form a solid foundation for relationships, providing mutual clarity and protection against misinterpretation.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
Key Risks to Watch Out For
Your business should watch out for a range of risks in commercial contracts which can arise when terms are unclear, e.g.:
- unclear or unenforceable limitation of liability clauses can expose your business to significant financial risk if a breach occurs;
- vague termination rights that restrict your business’s ability to exit a contract if circumstances change;
- key performance indicators that must be clearly defined can make measuring and enforcing obligations hard;
- missing dispute resolution clauses leaves your business unprepared to handle disagreements efficiently;
- unclear payment terms cause misunderstandings about deadlines and lead to cash flow problems; and
- addressing these risks ensures your contracts remain enforceable, clear, and protective.
How Can a Lawyer Help You?
Contracts are key legal documents, but they can become complicated and require technical legal expertise. Seeking legal advice can be invaluable when drafting, reviewing, and negotiating commercial contracts.
The contra proferentem rule is a key reminder of the risks of unclear contracts. Lawyers can help your business address these risks by ensuring contract language complies with the law and avoids unenforceable terms that others might challenge if they are unclear.
Download this free Supplier Contracts Checklist to ensure your contracts will meet your business’ needs.
Key Takeaways
The contra proferentem rule highlights the need for clarity in commercial contracts. Any ambiguous terms will be interpreted against the drafting party. For business owners, this serves as a reminder to draft contracts with precise, transparent language to avoid unintended liabilities and reduce the likelihood of disputes. In practice, commercial contracts can be challenging to draft and get right. As such, working with a lawyer can significantly support your business. A commercial contracts lawyer can support your business by drafting contract terms strongly tailored to your needs, ensuring they avoid any potential ambiguities and putting your business in a solid legal position to protect itself from risks.
If you need help drafting clear contracts for your business, our experienced contract lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers who can answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
The contra proferentem rule is a principle of contract interpretation that resolves ambiguities in favour of the party who did not draft the term.
Legal advice is crucial when drafting commercial contracts because it helps your business identify and clarify ambiguous language and ensure that your contract terms have a better chance of being enforceable.
We appreciate your feedback – your submission has been successfully received.
