Your global custom instructions ask for formal writing. Inside one project you have set instructions asking for a casual tone. What happens in that project's chats?

The principle — the narrower setting wins inside its own scope, which is what makes projects useful for work that does not match your default.

Why the key is correct — OpenAI states it explicitly: project instructions only apply inside the respective project and will override your global custom instructions. Outside the project, your formal default is untouched.

Why the others are wrong — the two are not merged, because a blend would make the result unpredictable and there is a stated rule instead. Global does not outrank project, since precedence runs the other way. And nothing is cancelled; both settings remain in force in their own scope.

Remember this — global instructions are your default, project instructions are the exception for one body of work. If a chat is behaving unexpectedly, the first question is whether you are inside a project. It also means a chat moved into a project inherits that project's instructions and file context.

Sources — OpenAI's Projects in ChatGPT article.