Haris Marine Products
vs.
Export Credit Guarantee Corporation (ECGC) Ltd.
Civil Appeal No. 4139/2020
The Supreme Court delved into the term business common sense to interpret terms of a credit risk insurance policy. The Court relied on the UK Supreme Court’s judgment in Arnold v. Britton [2015] UKSC 36 and observed that the business common sense was a decisive method was suggested to construe the ambiguity of a term used in a commercial contract. On contra proferentem, the Court observed that an ambiguous term in an insurance contract is to be construed harmoniously by reading the contract in its entirety. If after that, no clarity emerges, then the term must be interpreted in favour of the insured, i.e., against the drafter of the policy. The Rule of contra proferentem thus protects the insured from the vagaries of an unfavourable interpretation of an ambiguous term to which it did not agree. Importantly, the Court emphasized the role of contra proferentem in standard form insurance policies, called contract d’ adhesion or boilerplate contracts, in which the insured has little to no countervailing bargaining power. Accordingly, ECGC was held to have incorrectly interpreted an ambiguous term and was directed to pay the claim amount to the insured since the parties had transacted on several previous occasions.
