#33: Conflicting Contract Clauses
Contracts are prepared by human beings, and human beings are imperfect; therefore, contracts are sometimes imperfect too. One kind of imperfection is a conflict between two different contractual provisions. It happens more often than you might think. When it does, the question of which provision governs must be resolved.
Some contracts actually plan for the possibility of a conflict, and include an “order of precedence” clause to resolve conflicts among different documents or classes of documents comprising the contract. These can be simple, such as Federal Acquisition Regulation 52.236-21 incorporated into government prime contracts (“In the case of difference between drawings and specifications, the specifications shall govern”), or exhaustive, such as the AIA A503 Guide for Supplementary Conditions (2007) suggested model language:
§ 184.108.40.206 In the event of conflicts or discrepancies among the Contract Documents, interpretations will be based on the following priorities:
2. The Agreement.
3. Addenda, with those of later date having precedence over those of earlier date.
4. The Supplementary Conditions.
5. The General Conditions of the Contract for Construction.
6. Division 1 of the Specifications.
7. Drawings and Divisions 2–49 of the Specifications.
8. Other documents specifically enumerated in the Agreement as part of the Contract
For situations in which the conflict appears within a single document or in documents of the same class, one sometimes sees a provision to the effect that the more burdensome one shall be deemed controlling. An example is Steele Foundations, Inc. v. Clark Const. Group, Inc., 937 A.2d 148, 155 (D.C. 2007) (“in the event of a conflict between or among the terms of this Subcontract, the higher standard or greater requirement for Subcontractor shall prevail; and in the event of a conflict between or among the terms of the Contract Documents, the higher standard or greater requirement for Subcontractor shall prevail.”).
If there is no tie-breaking language in the contract, the matter can get dicey, particularly given that in New Hampshire (unlike many other states), conflicts and ambiguities in a contract are generally not resolved against the drafter. Centronics Data Computer Corp. v. Salzman, 129 N.H. 692, 696 (1987) (“This court has applied the rule of construction that interprets ambiguous contract language strictly against its writer only in the context of insurance contracts.”). On the flip side, there is no New Hampshire case law construing an ambiguous provision against a party who failed to request clarification. The closest we have come is Summit Electric, Inc. v. Pepin Bros. Const., Inc., 121 N.H. 203, 207 (1981), which declined to address a lower court’s suggestion that failure to request clarification at bid time barred a claim for an extra (“We need not discuss, therefore, the correctness of the master’s finding that a general contractor must resolve any contract ambiguities prior to bidding”).
Courts apply various rules of contract construction in an effort to resolve ambiguities. One common rule of contract interpretation is that if specific and general terms in a contract are in conflict, “a special clause qualifies a general one,” Shelby Mut. Plate Glass & Cas. Co. v. Lynch, 89 N.H. 510, 512 (1938). See also Restatement (Second) of Contracts § 203(c) (1981) (“specific terms and exact terms are given greater weight than general language.”). Another is that the court will place the same construction on a disputed provision that the parties, by their conduct, appear to have placed. Auclair v. Bancroft, 121 N.H. 393, 395 (1981) (“In determining the parties’ intention, the court may properly consider their actions after the contract was executed.”). This can have unintended consequences for a contractor who performs minor work he considers outside his scope without seeking an extra, and then finds that the minor work has mushroomed into major work.
The smart course is for contractors and subcontractors to scrutinize proposed contract language, including notes on plans, as carefully as time will permit before picking up a pen. If an inconsistency is spotted, seek clarification or modification. Even in a pre-bid meeting where concerns about educating one’s competitors loom large, speaking up will end up the wisest choice more often than not.