Priority of agreements: Overview, definition, and example
What is the priority of agreements?
Priority of agreements refers to a provision in a contract that establishes the order of precedence or hierarchy between multiple agreements or provisions. This clause specifies which agreement, contract, or provision takes precedence if there is any conflict or inconsistency between them. The priority of agreements clause is crucial when a party is involved in multiple agreements with overlapping terms or when there are multiple documents that govern the same subject matter.
The priority of agreements clause helps avoid confusion by clarifying which terms will control in case of contradictions, ensuring that the parties are aligned and understand which document or provision takes precedence over others. For example, if a company has signed both a master agreement and an addendum to that agreement, the priority of agreements clause will determine whether the terms of the addendum override the master agreement or vice versa.
Why is the priority of agreements important?
The priority of agreements is important because it provides clarity and prevents disputes over conflicting terms. Without a clear priority structure, different provisions in multiple contracts could create confusion, legal ambiguity, or even litigation. By setting out the priority of various documents, businesses ensure that they can execute their obligations effectively without worrying about contradictions or conflicting obligations.
This clause is particularly significant when contracts are amended, supplemented, or when new agreements are created during the life of an existing contract. It gives the parties a roadmap for resolving inconsistencies and provides assurance that there is a clear framework for interpretation.
Understanding priority of agreements through an example
Imagine a company enters into a master agreement with a supplier that covers the sale of goods. Later, the company and the supplier agree to a purchase order as an addendum to the master agreement. The purchase order includes different terms regarding delivery timelines and payment conditions than those outlined in the master agreement.
Without a priority of agreements clause, the parties might face uncertainty about which document’s terms should prevail in case of a conflict. A priority of agreements clause would specify which agreement governs in case of any discrepancies, ensuring that both parties understand the hierarchy of terms.
In another example, a business signs a confidentiality agreement (NDA) with a vendor. Later, the parties execute a service agreement with more detailed terms regarding the protection of confidential information. The priority of agreements clause in the service agreement would clarify whether the service agreement overrides the NDA or whether both agreements work together.
An example of a priority of agreements clause
Here’s how a priority of agreements clause might look in a contract:
“In the event of any conflict or inconsistency between the provisions of this Agreement and any other agreement or document between the parties, the following order of precedence shall apply: (i) this Agreement; (ii) the Addendum dated [Insert Date]; and (iii) any Purchase Order or Supplementary Agreement executed subsequently. The terms of the Agreement shall govern over any conflicting provisions in the Addendum or any other documents.”
Conclusion
The priority of agreements clause is essential for establishing clarity and resolving any conflicts that may arise between multiple contracts or documents. By explicitly stating which agreement takes precedence, this clause ensures that the parties involved understand their rights and obligations in the event of a conflict. This provision helps streamline business operations, prevents misunderstandings, and supports effective contract enforcement by eliminating ambiguity regarding conflicting terms.
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.