npm peer dependencies not being enforced - node.js

Question

I am trying to understand peer dependencies in npm, and could not understand the behavior below.
I have the following versions of node and npm :
$ npm -v
8.15.0
$ node -v
v16.17.0
The following directory structure:
peer-dep-test$ tree -I "node_modules"
.
├── library
│ ├── package-lock.json
│ └── package.json
└── project
├── package-lock.json
└── package.json
Library contains the following imports (#altostra/type-validations is used as an example small package here):
{
"name": "library",
"version": "1.0.0",
"description": "",
"main": "index.js",
"scripts": {
"test": "echo \"Error: no test specified\" && exit 1"
},
"keywords": [],
"author": "",
"license": "ISC",
"peerDependencies": {
"#altostra/type-validations": "2.6.5"
}
}
and project contains the following:
{
"name": "project",
"version": "1.0.0",
"main": "index.js",
"devDependencies": {},
"scripts": {
"test": "echo \"Error: no test specified\" && exit 1"
},
"keywords": [],
"author": "",
"license": "ISC",
"description": "",
"dependencies": {
"#altostra/type-validations": "1.0.2",
"library": "file:../library"
}
}
The project project has a version of #altostra/type-validations which should be incompatible with library - but I get no error on doing npm install. npm list gives the following output:
peer-dep-test/project$ npm list --all
project#1.0.0 peer-dep-test/project
├─┬ #altostra/type-validations#1.0.2
│ └─┬ #reactivex/ix-es2015-cjs#3.0.2
│ ├── #types/node#13.13.52
│ └── tslib#1.14.1
└─┬ library#1.0.0 -> ./../library
└─┬ #altostra/type-validations#2.6.5
└─┬ #reactivex/ix-es2015-cjs#3.0.2
├── #types/node#13.13.52
└── tslib#1.14.1
As per my understanding of peer dependencies,
library should expect #altostra/type-validations#2.6.5 to be installed directly in project
#altostra/type-validations#1.0.2 should conflict with the peerDependency of library, and either warn or error.
Am I missing something here?