General Incorporation or “Flow-Down” Language Cannot Trump Specific Language of the Subcontract

Kegler Brown Construction Law Newsletter

In a case from New Mexico, Centex/Worthgroup, LLC v. Worthgroup Architects, 365 P. 3d 37 (2015), the Court of Appeals wrestled with whether the prime contract, or subcontract language controlled. The subcontract contained a general “flow-down” clause requiring the subcontractor to assume the obligations of the prime under the prime contract. But, an order of precedent clause said the subcontract applied unless the prime contract imposed a higher burden.

The Court of Appeals struggled with these inconsistencies, but ultimately concluded that the order of precedent clause controlled and the terms of the subcontract prevailed. The decision cited cases that have held that if specific provisions of the subcontract conflict with the terms of the prime contract, the terms of the subcontract prevail.

Those preparing, reviewing or negotiating subcontracts need to reconcile the inconsistencies between “flow-down” clauses and the terms of the subcontract with clarity to avoid uncertainties later.