When contracts are challenged and the dispute hinges on a provision in the agreement that can be interpreted in more than one way, courts in New York and around the country often apply what is known as the contra proferentem rule. This is a contract law doctrine that requires ambiguous terms to be interpreted in favor of the party that did not draft the agreement. The contra proferentem rule holds the party that wrote the contract responsible because they could have drafted clear and unambiguous terms if they had chosen to.
Intentionally ambiguous
Before applying the contra proferentem rule, courts first determine whether or not the term or provision in question is unclear enough to cause confusion. If it is, the court then seeks to determine if the party that drafted the contract used intentionally ambiguous language to further their interests. When the preponderance of the evidence suggests that the party responsible for writing the contract did not use ambiguous language intentionally, the matter is decided based on the facts of the case.
Insurance
The contra proferentem rule is often applied in contract disputes involving insurance companies that have refused to pay claims. Insurance companies have complete control over the contracts their policyholders sign, and they sometimes include ambiguous language that could allow them to deny claims that policyholders would assume are covered. Insurance companies use experienced and talented attorneys to draft their policy documents, so they may find it difficult to argue that ambiguous language is unintentional.
A risk worth taking
Courts apply the contra proferentem rule to hold parties responsible for unclear language in the contracts they draft, but not all people who are harmed after signing an ambiguous contract take legal action. This means that companies like insurance providers may view using ambiguous language as a risk worth taking. They will likely lose in court if their contracts are challenged, but that will probably not happen very often.