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Limited role of contra proferentum in interpreting commercial contract exclusion clauses – Persimmon Homes Ltd v Ove Arup & Partners Ltd [2017]

10 July 2017 #Commercial


The contra proferentum rule dictates that where the contract is drafted ambiguously, it will be interpreted against the party who drafted it or who seeks to rely on it.

The Court of Appeal has offered some clarity on this rule in Persimmon Homes Ltd v Ove Arup & Partners Ltd [2017] EWCA Civ 373. The court confirmed that the rule now has a very limited role in relation to the interpretation of commercial contracts negotiated between parties of equal bargaining power.

Background

Persimmon brought a claim against the Arup, claiming that they had negligently failed to identify and report on asbestos on their site. Arup relied on exclusion clauses in the commercial contracts. But Persimmon argued that a restrictive approach should be taken to the exclusion clauses, only applying to liability “for causing” pollution, contamination, or asbestos, and not applying to Arup’s own negligence.

Decision

The Court of Appeal refused to apply the restrictive rules suggested by Persimmon and agreed with Arup’s interpretation of the exclusion clauses.

They decided that:

  • Persimmon’s reading of the exclusion clauses was unworkable and did not reflect business common sense with regards to the relationship between the parties.
  • The meaning of the clauses was clear and unambiguous and should be given effect to.
  • Accordingly, the contra proferentum rule was not relevant.

Comment

This decision reveals the continuing modern approach of the courts in relation to the proper interpretation of limitation and exclusion clauses.

It acknowledges that commercial parties to a contract are free to assign risks as they see fit and so exclusion clauses should therefore be given their ordinary and natural meaning in the same way as any other clause of a contract.

Furthermore, by upholding the wording Arup used to exclude liability in the commercial contracts, the court agreed that the wording of the clauses in this case was sufficiently clear to demonstrate the risk allocation agreed by the parties at the time of the agreements in question, rendering the contra proferentum rule of no assistance.

Clarkslegal, specialist Commercial lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Commercial matter please contact Clarkslegal's commercial team by email at contact@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Stanley  Kamalu

Stanley Kamalu
Solicitor

E: skamalu@clarkslegal.com
T: 0207 539 8081
M: 0799 059 5483

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