The problem was that we both did the right thing. We had our stuff ready to go. Did an update to ensure that we had the latest merged in then both did a commit.
Right, but if the commit then fails with a conflict, resolve it (intelligently, not by just overwriting!). If you just overwrote one file in fact (without checking the semantics of what you did) you could easily break things, since the unconflicted files in the other person's checkin could have en relying on some changes you overwrote.