In Israel v. Chabra,1 the Court of Appeals rendered a decision which signals a change in how a court will address a situation where a contract contains two clauses that are irreconcilable. The Court’s decision appeared to reject a rule that nearly a century ago had been characterized as a “well-settled principle of construction:”2 where two operative clauses of equal specificity in an agreement are so totally repugnant to each other that they cannot stand together, the first of such clauses will be given effect and the subsequent clause rejected.3
Background
Plaintiffs, father and son, had a business, AMC Computer Corp. (AMC). In connection with a change in control of AMC, plaintiffs, who were key employees of AMC, entered into employment agreements that had a term of three years. In addition, plaintiffs entered into a “Letter of Intent” with AMC Investors LLC (LLC), the party acquiring control, and defendant Surinder S. Chabra. The parties agreed that if LLC made a certain investment in AMC, each plaintiff would receive, over a 36 month period, a $2 million bonus for services that had been rendered and Mr. Chabra would pay the bonus. Mr. Chabra signed the Letter of Intent in both his individual capacity and as a representative of LLC.
