By: Alexander A. Miuccio Gregory J. Spaun Published: December 2018

Court Interprets Conflicting Contract Provisions in Favor of Subcontractor

Cases involving conflicting provisions in a contract are some of the most commonly litigated contract disputes. Where there are competing provisions in a contract, the court must identify the actual intent of the parties to determine which provision is the controlling language. In the case of Matter of Sciame Construction, LLC v Re:Source New Jersey, Inc., the court interpreted a subcontract which contained inconsistent provisions, one in the body of the subcontract and the other in the riders or exhibits to the subcontract.

Background

Sciame Construction, LLC, was the general contractor for a construction project on Laight Street in Manhattan. Sciame entered into a subcontract with Re:Source New Jersey, as a subcontractor, on September 9, 2013. The subcontract signed by the parties was an AIA form prepared with a computer program. Article 6 of the subcontract, under “Mediation and Binding Dispute Resolution” requires the parties to manually check a box in Article 6.2 to indicate how the parties agreed to resolve disputes. There is an option to resolve disputes via arbitration; that box is checked. Likewise, there is an option to resolve disputes through litigation in a court; that box is not checked.

Attached to the subcontract as Exhibits A and B were pre-printed riders that were not negotiated by the parties and were not signed by anyone from Re:Source, nor did the exhibits name or make any reference to Re:Source.  These riders made reference to litigation as the method of dispute resolution, and provided for the dispute to be litigated in the New York State Supreme Court or Federal District Court in Manhattan as the means to resolve disputes.

Re:Source claimed that it was owed payments for work performed at the Laight Street Project, and it initiated mediation and arbitration proceedings with the AAA.  Sciame petitioned the court to permanently stay the arbitration commenced by Re:Source, arguing that the exhibits to the subcontract designate litigation as the exclusive means of dispute resolution. The lower court dismissed Sciame’s petition to stay the arbitration. The court held that the provision in the subcontract, which requires the parties to arbitrate, controls, and the parties must arbitrate their dispute. Sciame appealed.  

Decision

The appellate court affirmed the lower court’s decision, holding that the typewritten terms of the subcontract regarding binding arbitration of disputes “represents an express manifestation of the parties’ actual intentions and take precedence over any inconsistent provisions in the printed form[s]”.  The court pointed out that the conflicting provisions in the exhibits is, by its plain terms, inapplicable to the parties subcontract; “to construe it otherwise would impermissibly rewrite the provision under the guise of contract construction.”

Comment

Parties are free to negotiate and incorporate many different provisions into their contracts, and unless these provisions violate law or public policy they will generally be enforced. An obstacle to enforcement is where there are conflicting provisions in a contract, leaving the courts with the unenviable task of deciding the meaning of the contract.  This decision underscores the importance to contractors and subcontractors of carefully reviewing the proposed contract language and seeking clarification or modification to ensure that the contract reflects the true intent of the parties.  

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