INTRODUCTION
Today, I will talk about the case of Manmohan
Nanda v. United India Assurance Co. Ltd. & Anr., Civil Appeal No.
8386/2015, wherein the Hon’ble Supreme Court inter alia discussed the Doctrine
of Contra Proferentem in the field of statutory interpretation and
Insurance Contracts.
To know more about Insurance Contracts, please
visit my earlier show that could be accessed by clicking here.
MEANING
Contra Proferentem is a Latin Term
that literally means “against the offeror” and it is also a legal
doctrine that stipulates that “in interpreting documents, ambiguities are
to be construed unfavourably to the drafter.”
Basically, “when words are to be construed,
resulting in two alternative interpretations then, the interpretation which is
against the person using or drafting the words or expressions which have given
rise to the difficulty in construction, applies.”
STANDARD FORM OF CONTRACTS
The Contra Proferentem Rule is
mostly invoked in Standard Form of Contracts as “such contracts heavily
comprise of forms with printed terms which are invariably used for the same
kind of contracts.” Further, it has also been noticed that in today’s
world that is dominated by corporate entities, the Standard Form Contracts are “harshly
worded against individuals.” While entering into such contracts, the
individuals often do not read and understand the provisions, resulting in grave
legal implications later on. It is also pertinent that “when such
standard form contracts ordinarily contain exception clauses, they are
invariably construed contra proferentem against the person who has drafted the
same.”
Moreover, “in construing a document one must
have regard, not to the presumed intention of the parties, but to the meaning
of the words they have used. If two interpretations of the document are
possible, the one which would give effect and meaning to all its parts should
be adopted and for the purpose, the words creating uncertainty in the document
can be ignored.”
Thus, “where there is an ambiguity it is the
duty of the court to look at all the parts of the document to ascertain what
was really intended by the parties.”
CONTRA PROFERENTEM AND INSURANCE
CONTRACTS
In the present case, the Court invoked the Contra
Proferentem Rule in relation to a Contract of Insurance, that is also a
Standard Form Contract, and it was noted that “where there is an
ambiguity or doubt in the contract of insurance, it has to be construed contra
proferentem against the Insurance Company.”
The Court also cited Halsbury’s Laws of England on
the Contra Proferentem Rule and stated that “where there is
ambiguity in the policy the court will apply the contra proferentem rule. Where
a policy is produced by the insurers, it is their business to see that
precision and clarity are attained and, if they fail to do so, the ambiguity
will be resolved by adopting the construction favourable to the insured.”
Similarly, when the insured fills up the Proposal
Form or the Application Form, the language used in such Proposal or Application
is to be interpreted in a manner that is “favourable to the insurers will
prevail if the insured has created any ambiguity.”
WORD OF CAUTION
The Court also cautioned that the Contra
Proferentem Rule becomes operative only where the words are truly
ambiguous since “it is a Rule for resolving ambiguity and it cannot be
invoked with a view to creating a doubt. Therefore, where the words used are
free from ambiguity in the sense that, fairly and reasonably construed, they
admit of only one meaning, the Rule has no application.” Thus, “the
words should receive their ordinary and natural meaning unless that is
displaced by a real ambiguity either appearing on the face of the policy or,
possibly, by extrinsic evidence of surrounding circumstances.”
SUMMARY AND CONCLUSION
Therefore, in conclusion, the following pertinent
points emerge: -
a. Contra Proferentem means that “in
interpreting documents, ambiguities are to be construed unfavourably to the
drafter.”
b. The Contra Proferentem Rule is
mostly invoked in Standard Form of Contracts.
c. “When such standard form contracts
ordinarily contain exception clauses, they are invariably construed contra
proferentem rule against the person who has drafted the same.”
d. “Where there is an ambiguity or doubt in
the contract of insurance, it has to be construed contra proferentem against
the Insurance Company.”
e. Similarly, an interpretation “favourable
to the insurers will prevail if the insured has created any ambiguity”
while filling up the Insurance Proposal or Application.
f. “It is a Rule for resolving ambiguity and
it cannot be invoked with a view to creating a doubt.”
g. “The words should receive their ordinary
and natural meaning unless that is displaced by a real ambiguity.”
Thus, I hope that the meaning and the nature of the
Doctrine of Contra Proferentem is clear by now.
Dictionary Referred To: Black's Law Dictionary, Eighth Edition.
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