Practical Law

Some forms of contract include a priority of documents clause, others do without them. So what is the correct approach? Should your building contract, sub-contract or professional appointment include a priority of documents clause? Does the recent TCC decision in RWE Npower Renewables v J N Bentley have anything to add?

Why use a priority clause?

Construction and engineering is a complex, technical business. On anything but the smallest project, it is all but impossible to distil all the information relevant to a party’s role into a single document. Against that background, it is easy to see the scope for inconsistency or room for argument between one or more documents.

One way of safeguarding against the danger of an unresolvable argument is by including a priority of documents clause. This is a clause that lists the contract documents in order of precedence. In the case of any inconsistency or ambiguity, the document that is higher on the list carries the day.

…and why not?

The idea of using a priority of documents clause seems rather sensible, but do they always work in practice? For example, in RWE Npower Renewables v J N Bentley, the parties chose to include a priority of documents clause in their NEC3 form of agreement, yet still found themselves in adjudication and litigation over precisely what was included in a particular section of the works.

There are several reasons why you might not include one in your contract:

• Your contract may address the risk of inconsistency in other ways. For example, it may provide that:
  • one party assumes responsibility for checking the documents and takes the risk of any inconsistencies (schedules of amendments to the JCT Design and Build Contract sometimes take, or lean towards, this approach); or
  • a notionally independent third party, such as a project manager, resolves any inconsistency if and when it arises. For example, see clause 17.1 of the NEC3 Engineering and Construction Contract (ECC). Equally, some contracts include a traditional priority of documents clause, with the contract administrator providing an additional line of defence if all else fails (see clause 1.5 of the FIDIC Red Book).
• There are some types of contract where the danger of inconsistency is inherently low. For example, a straightforward professional appointment on a relatively simple project is often viewed in this light.
• One party may be concerned that the priority of documents clause effectively transfers an unfair amount of risk onto it. For example, an employer may give the documents it produced priority over those produced by the contractor.
• The contract documents may have been drafted in such a way that they are mutually explanatory, so giving one priority over the others could lead to unfair and unintended consequences. The Infrastructure Conditions of Contract (ICC) state expressly that they are drafted with this is mind. However, they then go on to provide for the engineer to resolve any “ambiguities or discrepancies”, tacitly acknowledging that inconsistencies are impossible to avoid in all cases (see clause 5 of the ICC Measurement Version, August 2011).
• The parties may be aware that a court (at least in England and Wales) will first rely on common law principles of interpretation. In this context, perhaps the most relevant overriding factor is that the court will consider the contract documents as a whole, and if it can construe them effectively, will do so on that basis (even if there is a priority of documents clause). That’s just what the TCC did in RWE Npower Renewables v J N Bentley. Further:
  • even without a priority of documents clause, one usual rule of construction provides that, all other things being equal, a term specifically drafted for a particular purpose will take precedence over a standard term unless the contract provides otherwise; and
  • written words may be given greater weight than printed provisions because they were clearly chosen by the parties themselves, rather than adopted by them as standard contract wording. (See Homburg Houtimport BV v Agrosin Private Ltd [2003] UKHL 12 (Starsin), Fenice Investments Inc v Jerram Falkus Construction Ltd, paragraph 1-038 of Hudson’s Building and Engineering Contracts (Sweet & Maxwell, 12th edition, 2010) and paragraph 3-030 of Keating on Construction Contracts (Sweet & Maxwell, ninth edition, 2012)).

Drafting a priority clause

Having weighed up the pros and cons, if you decide to include a priority of documents clause, you should consider:

• The need to avoid conflicting priority provisions. The parties should ensure that the contract contains only one priority of documents provision. They should also ensure that it does not conflict with other provisions, such as those that allow a contract manager to resolve inconsistencies in the documents.
• The location of the clause in the contract structure. A priority of documents clause may lead to circular logic if it is included in one of the contract documents. For that reason, the parties often place this type of clause in a form of agreement or a “wrap-around” agreement, so that it stands above other contractual provisions.
• What documents it refers to. Parties often try to list every contract document, so that the hierarchy of documents is complete. However, there may be situations in which the parties are content simply to identify the most important primary document. For example, JCT clause 1.3 emphasises the primacy of the Conditions above all else (in the 2011 editions of both the Standard Building Contract and Design and Build forms), without purporting to set out a comprehensive document hierarchy.

Overall, the decision to include a priority of documents clause needs to be taken on a project by project basis. Inserting a provision into an existing standard form of contract has its own dangers, so parties should resist doing so, unless they have clear objectives. Throwing a priority of documents clause at a problem is no substitute for reviewing the contract and checking for inconsistencies.