Order of precedence: Overview, definition and example
What is an order of precedence?
An order of precedence is a clause in a contract that establishes the hierarchy of documents or terms to be followed when there is a conflict between them. It determines which document or provision takes priority and governs in case of discrepancies, ensuring clarity and avoiding confusion.
Why is an order of precedence important?
An order of precedence is important because it helps resolve conflicts between different documents or terms within an agreement. It provides clear guidance on how to interpret the contract and which provisions should be followed when issues arise. Without this, parties could interpret the contract differently, leading to disputes and potential legal challenges.
Understanding an order of precedence through an example
Imagine a supplier and a retailer enter into a contract that includes a master agreement, a schedule of terms, and an order form. If there’s a conflict between the terms in the master agreement and the order form, the order of precedence clause specifies which document takes priority. For example, the clause may state that in case of a conflict, the master agreement’s terms will override any conflicting terms in the order form.
In another scenario, a business might include an order of precedence clause in its contract with a contractor to ensure that any general terms in the agreement are secondary to the specific project-related terms.
Example of an order of precedence clause
Here’s how an order of precedence clause might look in a contract:
“In the event of any conflict or inconsistency between the terms of this Agreement and the documents incorporated herein by reference, the order of precedence shall be as follows: (1) this Agreement, (2) the Statement of Work, (3) any applicable purchase orders.”
Conclusion
An order of precedence helps ensure that there is no confusion about which terms or documents should apply when conflicts arise. By clearly defining the hierarchy of documents, it reduces the risk of disputes and makes contract interpretation easier. Understanding and including an order of precedence clause can help parties avoid costly disagreements and streamline their contract management process.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.