When discovered pre-bid, conflicts can be clarified through addenda. However, conflicts sometimes are not discovered until after the contract is signed and construction commences. To minimize disputes involving conflicting contract terms and specifications, highway departments often include in their standard specifications an order-of-precedence clause. In such cases, if a conflict is discovered, the parties simply determine which of the conflicting terms appears in a document having the highest precedence, and a dispute is avoided.
Dan’s Excavating, Inc. v. Michigan Dept. of Transp., (2013 WL 2319483)(Mich. App. May 28, 2013) involved two separate contracts between a contractor and the Michigan Department of Transportation. Both projects required the construction of cofferdams. However, the bid documents for both projects contained conflicting information regarding the disposition of the cofferdams after construction work was completed. The plans for both projects required the contractor to leave the cofferdams in place, whereas permits from the Michigan Department of Environmental Quality (DEQ), which were included with the bid materials, specified that all cofferdam and temporary sheet pile should be removed in its entirety at the completion of the projects.
When the Michigan DOT learned that the contractor intended to remove the cofferdams, it requested the DEQ to modify the permits to allow for the cofferdams to remain in place. The DEQ granted the request and amended the permits to contain the following language: “All cofferdam and temporary steel sheet pile shall then be removed in its entirety, unless shown to be left in place on the plans.” After the Michigan DOT rejected the contractor’s claim for additional costs associated with leaving the expensive sheet pile material in place, the contractor filed suit in the claims court.
The Michigan DOT filed a motion for summary judgment and argued that it was entitled to dismissal of the contractor’s lawsuit because the plain language of the plans on both projects call for the cofferdams to remain in place. The contractor countered with its own motion seeking judgment against the Michigan DOT on the grounds that an order-of-precedence provision in the contract gave precedence to the DEQ permit language over the language in the drawings. The court of claims agreed and granted judgment for the contractor. The Michigan DOT appealed.
A contract is ambiguous when two provisions irreconcilably conflict with each other or when a term is equally susceptible to more than a single meaning. In the appeal, the parties agreed that each contract incorporated the DEQ permits, which stated that the cofferdams were to be removed in their entirety, and that the drawings stated the cofferdams were to remain. The court thus noted that at first blush, it appears a patent ambiguity exists in the contract and it would be up to the court to resolve the inconsistency by resorting to evidence outside of the contract itself.
However, the court ruled that such an exercise is unnecessary because the inconsistency is resolved by the contract itself, which provides that “[t]he following parts of the contract will prevail over all other parts in the following order:
A. All proposal material except those listed below
B. Special provisions;
C. Supplemental specifications;
D. Project plans and drawings;
E. Standard plans; and
F. Standard specifications.”
In this case, the court noted, the DEQ permits were included in Part A because they are part of the “proposal material” and not included in Parts B–F, while the project’s plans are located in Part D. Therefore, by the plain language of the contract, the terms of the DEQ permits requiring the cofferdams to be removed in their entirety would prevail over any conflicting terms located in the plans. The court held that by virtue of the order-of-precedence clause, there was no “ambiguity,” per se—i.e., the contract provided a means to resolve the conflict. Accordingly, it concluded that the trial court was correct in determining that, as a matter of law, the contracts were unambiguous.
Order-of-precedence clauses are helpful in resolving conflicting contract terms except in those instances where the conflicts appear within the same document (i.e., drawings, special provisions, standard specifications, etc.). R&B