The Contra Proferentem Rule VII

Reconciliation of ambiguous terms in commercial contracts has been a contentious issue across jurisdictions. Rainy Sky SA v. Kookmin Bank, [2011] UKSC 50 provided for resolution of such ambiguity, keeping ‘business common sense’ as central. The principle was further developed by UK Supreme Court in Arnold v. Britton, [2015] UKSC 36. A decisive method was suggested to construe ambiguity of a term used in a commercial contract. This was applied in Wood v. Capita Insurance Services Limited, [2017] UKSC 24.

Also, rule of Contra Proferentem protects insured from vagaries of an unfavorable interpretation of an ambiguous term to which it did not agree. The rule assumes special significance in standard form insurance policies in which insured has little to no countervailing bargaining power [Jacob Punnen v. United India Insurance Co. Ltd., (2021) SCC OnLine SC 1207].

Hon’ble Justice S. Ravindra Bhat, Haris Marine Products v. Export Credit Guarantee Corporation Limited, [Civil Appeal No. 4139 of 2020].