How Courts Handle Conflicting Contract Clauses

You discover that two clauses in your contract say different things. One provision appears to grant a right while another seems to take it away. One section specifies a procedure while another contradicts it. Internal conflicts within contracts are surprisingly common, and when disputes arise, courts must determine which provision controls. Understanding how courts resolve these conflicts helps you interpret ambiguous agreements and draft clearer ones.

Contract conflicts arise from various causes: hasty drafting, cut-and-paste errors, incomplete revisions, multiple drafters working without coordination, and the sheer complexity of modern commercial agreements. Whatever the cause, the consequence is the same: parties disagree about what the contract actually requires. This article explains the principles courts apply when contract provisions conflict.

Why Contracts Contain Conflicts

Drafting Errors

Many conflicts result from simple mistakes. A provision is modified in one place but not updated elsewhere. Standard language from a form is incorporated without checking for consistency with customized terms. A late-stage change creates inconsistency with earlier provisions. These mechanical errors are common even in professionally drafted agreements.

The complexity of modern contracts compounds the problem. A commercial agreement may run dozens or hundreds of pages with numerous schedules, exhibits, and incorporated documents. Maintaining consistency across all these materials is challenging, and errors frequently slip through even careful review.

Deliberate Ambiguity

Sometimes parties create conflicts intentionally, or at least knowingly. When they cannot agree on a specific term, they may accept ambiguous language, each believing the ambiguity favors their interpretation. They may plan to work out the issue later or hope it never arises. This deliberate vagueness often produces conflicts when the issue does materialize.

Evolution Over Time

Contracts modified through amendments, side letters, and course of dealing may develop internal conflicts. A provision that made sense in the original agreement may conflict with modifications made years later. The accumulated changes may never have been reconciled, leaving the current state of the contract unclear.

Incorporation by Reference

Contracts often incorporate other documents by reference, including specifications, policies, standards, and related agreements. These incorporated materials may contain terms that conflict with the main agreement or with each other. The parties may not have carefully reviewed everything being incorporated for consistency.

Principles of Interpretation

Harmonization

Courts first attempt to harmonize apparently conflicting provisions. If the terms can be read together to give effect to both, courts prefer that interpretation over one that nullifies either provision. The goal is to interpret the contract so that every provision has meaning and no term is rendered surplusage.

Harmonization often involves reading provisions at different levels of generality. A general statement may establish a rule while a more specific provision creates an exception. Both can operate without conflict when understood this way. Courts look for interpretations that allow all provisions to function together.

Specific Over General

When harmonization fails, specific provisions generally control over general ones. If a general clause addresses an issue broadly while a specific clause addresses the same issue narrowly, the specific clause typically prevails for matters within its scope. The general clause governs matters not specifically addressed.

This principle reflects the assumption that specific provisions represent more deliberate attention to the particular issue. When parties specifically addressed a matter, their specific treatment should not be undermined by general language that was not focused on that issue.

Later Over Earlier

Provisions appearing later in a document may take precedence over earlier provisions addressing the same subject. The theory is that later language represents the parties' more considered judgment, reflecting refinement of earlier drafts. However, this principle is not universal and may not apply when the structure of the document suggests otherwise.

The later-in-time principle also applies to amendments and modifications. If an amendment conflicts with the original agreement, the amendment typically controls. However, this assumes the amendment was properly executed and intended to override earlier provisions.

Handwritten and Typed Over Printed

Handwritten provisions take precedence over typed provisions, and typed provisions take precedence over printed form language. The theory is that more individualized terms represent more deliberate attention to the specific deal. Standard boilerplate is general while customized language reflects the parties' actual agreement.

In the digital age, this principle translates into giving effect to negotiated terms over standard forms. Language that was specifically negotiated for this transaction should control over language that appears in every contract the drafter uses.

Construction Against the Drafter

Ambiguities are construed against the party who drafted the contract. This principle, called contra proferentem, incentivizes clear drafting and protects parties who had no role in choosing the language. If a conflict creates genuine ambiguity, the drafter bears the consequence of their imprecision.

Courts apply this principle cautiously between sophisticated commercial parties. When both sides contributed to drafting or had equal opportunity to review and modify, neither can claim the other's language should be construed against them. But when one party clearly drafted the agreement, this principle can be decisive.

Order of Precedence Clauses

How They Work

Sophisticated contracts often include order of precedence clauses that specify which documents or provisions control if conflicts arise. For example: In the event of conflict between this Agreement and any Schedule, the Agreement shall control. These provisions provide contractual rules for resolving conflicts without resorting to general interpretation principles.

Order of precedence clauses can establish hierarchies among the main agreement, schedules, exhibits, incorporated documents, and amendments. They can specify that negotiated terms control over standard terms, that later modifications control over earlier ones, or any other hierarchy the parties choose.

Limitations

Order of precedence clauses help but do not eliminate interpretation issues. Courts must still determine whether a genuine conflict exists before applying the precedence hierarchy. Parties may dispute whether particular provisions actually conflict or whether they can be harmonized.

Additionally, the order of precedence clause itself may be unclear or may not address the specific type of conflict at issue. A clause giving precedence to the main agreement over schedules does not resolve conflicts between two provisions within the main agreement. Drafters should consider multiple types of potential conflicts when crafting these provisions.

Drafting Recommendations

When drafting order of precedence provisions, be specific about the hierarchy among all contract documents. Address conflicts between the main agreement and incorporated materials, among different incorporated documents, and within the main agreement itself. Consider whether amendments automatically take precedence or must explicitly state their effect on prior terms.

A well-drafted choice of law clause sample might specify that the governing law provision in the main agreement controls over any different governing law in a contract referenced in exhibits or schedules. Similarly, a jurisdiction clause in agreement provisions should coordinate with any dispute resolution terms in incorporated documents.

Specific Types of Conflicts

Governing Law Conflicts

Conflicts in governing law in a contract provisions are particularly problematic because governing law determines the rules for interpreting all other provisions. If different parts of an agreement specify different governing law, courts must first determine which governing law provision controls before applying that law to interpret other terms.

These conflicts commonly arise when contracts incorporate other agreements with their own governing law provisions. A master agreement governed by Delaware law might incorporate a statement of work governed by California law. The order of precedence provision should address which governing law provision controls.

Dispute Resolution Conflicts

Conflicts between arbitration and litigation provisions, or between different arbitration clauses, create significant procedural uncertainty. If one provision requires arbitration while another permits litigation, parties may fight about the proper forum before addressing the substantive dispute.

Similarly, conflicting jurisdiction clause in agreement provisions may specify different courts or different procedural rules. These conflicts should be resolved through clear drafting that establishes a single, consistent dispute resolution framework.

Termination Rights Conflicts

Conflicts about termination rights are common and consequential. If one provision allows termination for convenience while another requires cause, parties will dispute whether termination was proper. If notice periods or cure rights differ between provisions, the applicable terms may be unclear.

These conflicts often arise when general termination provisions conflict with specific provisions addressing particular circumstances. Understanding the specific-over-general principle helps resolve many of these disputes, but clear drafting would prevent them entirely.

Payment Term Conflicts

Conflicts about payment timing, conditions, or amounts can create immediate practical problems. If one provision requires payment in thirty days while another allows sixty days, when is payment actually due? If one provision conditions payment on approval while another makes payment unconditional, what triggers the obligation?

Payment conflicts require prompt resolution because money is at stake. Parties cannot simply wait for litigation to determine payment obligations. The governing law provision and order of precedence clause help determine which payment terms control.

Practical Consequences

Litigation Risk

Internal contract conflicts increase litigation risk. When parties have colorable arguments for different interpretations, disputes that might otherwise settle become litigation. Each side believes the contract supports their position, making compromise difficult. The cost of resolving conflicts often exceeds the cost of preventing them through careful drafting.

Relationship Damage

Conflicts create opportunities for parties to take positions that damage the business relationship. A party may assert an interpretation that, while arguably supported by the contract language, clearly was not what the other side intended. These disputes generate lasting animosity that affects the ongoing relationship.

Uncertainty

Even when disputes do not result in litigation, conflicts create uncertainty that complicates business planning. If you do not know which provision controls, you cannot reliably predict your rights and obligations. This uncertainty may affect decisions about investment, resource allocation, and strategy.

Preventing Conflicts

Careful Drafting

The best approach is preventing conflicts through careful drafting. After completing a draft, review the entire document for internal consistency. Check that provisions addressing the same subject say the same thing. Verify that amendments update all relevant provisions, not just the obvious ones.

Cross-reference related provisions to ensure consistency. If payment terms appear in multiple places, make sure they match. If termination rights are addressed in various sections, confirm they are compatible. Systematic review catches conflicts that casual reading misses.

Use Defined Terms

Defined terms promote consistency. Rather than describing a concept differently in various provisions, define it once and use the defined term throughout. This approach ensures that the same meaning applies wherever the term appears and makes it obvious when provisions address the same subject.

Centralize Key Terms

Put important terms in a single location rather than scattering them throughout the agreement. If payment terms are all in one section, conflicts among payment provisions become obvious. If payment terms appear in the main agreement, a schedule, and an incorporated exhibit, conflicts are harder to spot.

Include Order of Precedence

Always include an order of precedence clause in complex contracts. Specify the hierarchy among all contract documents. Address what happens when provisions within the same document conflict. Establish clear rules that eliminate ambiguity about which terms control.

Update Consistently

When modifying contracts, update all affected provisions. Amendments should explicitly identify which prior provisions they supersede. Review the entire agreement after amendments to ensure consistency has been maintained. Track changes systematically to avoid creating new conflicts while resolving old ones.

Resolving Discovered Conflicts

Early Identification

When you discover a conflict in an existing contract, address it promptly. Waiting until a dispute arises to resolve the conflict puts you in a worse position. The other party may have developed expectations based on their preferred interpretation. Early clarification is easier than late-stage negotiation.

Mutual Agreement

If both parties recognize the conflict, they can agree on a clarifying amendment. Document clearly which interpretation applies. Address not just the specific conflict identified but also whether similar issues might arise elsewhere in the agreement.

Practical Accommodation

Sometimes parties can avoid formal amendment by simply agreeing on how to proceed. While this approach may not eliminate the conflict for future purposes, it allows the relationship to continue without litigation. Document any practical accommodations in case disputes later arise about what was agreed.

Legal Analysis

Before taking a position on a conflict, analyze which interpretation courts would likely adopt. Understanding the applicable principles helps you assess your position's strength. It also helps you decide whether to pursue formal clarification, accept ambiguity, or prepare for potential dispute.

Conclusion

Contract conflicts are common but manageable. Understanding how courts resolve conflicting provisions helps you interpret ambiguous agreements and predict outcomes when disputes arise. More importantly, understanding these principles helps you draft clearer contracts that avoid conflicts in the first place.

Courts prefer harmonization, giving effect to all provisions when possible. When harmonization fails, specific provisions control over general ones, later provisions may control over earlier ones, and negotiated terms control over form language. Order of precedence clauses provide contractual rules that supplement these general principles.

The governing law in a contract determines which jurisdiction's interpretation rules apply, making this provision critically important when conflicts exist. A well-crafted governing law provision and jurisdiction clause in agreement terms work together with order of precedence provisions to create a coherent interpretive framework.

Prevent conflicts through careful drafting, defined terms, centralized provisions, and consistent updates. When you discover conflicts in existing agreements, address them promptly before disputes develop. The investment in clear, consistent contract language pays dividends in reduced litigation risk, better relationships, and greater certainty about your rights and obligations.