Legal Updates

A later agreement which trumps all prior agreements also cancels an arbitration clause in a prior agreement

June 23, 2024

A conflict arose between two companies that entered into a contractual relationship. The first agreements executed between the parties included an arbitration clause outside of Israel, but a later agreement stated that Israeli law applies to the agreement, and that the parties agreed to be subject to the exclusive jurisdiction of the competent Courts in Tel Aviv. The later agreement also stated that it prevails over any other agreement.
The Court held that the arbitration clause in the prior agreements is cancelled due to the new agreement. A contract is reviewed according to its nature, when there are two main types of contracts: A closed contract between sophisticated parties, in which priority is given to the language of the contract, and an open contract between unsophisticated parties, in which priority is given to the intent of the parties to the contract and the circumstances of its execution. Here, not only the agreement is between sophisticated parties, regarding which the language of the contract must be given great weight, but the agreement itself also includes a provision referring to the case where there is a contradiction between its provisions and provisions in previous documents, which stipulates that in such case the later agreement shall prevail. Therefore, and because the later agreement cancels the arbitration clause, it does not apply to the entire contractual system between the parties.