No, it works that way when using your own points. in terms of choosing contract...never how many of each...just which contract to use first. But for transferred points, they never showed up online as a choice. That the part that is new and the OP mentioned getting transferred points.
The key is that once a trip is booked, there is no updating of points in reservations unless the owner does it. People have made that mistake when they banked points after they made a reservation, assuming the system would move those into a reservation automatically, only to find out later, after the trip, it did not.