Why Your Contracts Might Need a Severability Clause

Let’s say that you have an agreement or contract, but later it turns out that there is a part of that contract that simply cannot be enforced.

Maybe it is confusing, such as being ambiguous or contradictory. Or maybe it’s even illegal as written and thus cannot even be enforced.

But it’s just one part of the contract, maybe even a small part–so is the entire contract null and void and completely unenforceable–or just that one part that cannot be enforced?

The Severability Clause

This largely depends on whether or not your agreement has in it what is known as a severability clause. Many contracts with boilerplate language include such a clause, but many do not.

A severability clause says that where only a part of the agreement cannot be enforced, that part will be “severed” from the rest of the agreement–that is, the parties will pretend that it just didn’t exist, and thus, the remainder of the agreement can continue to be in force and enforceable.

Severability clauses thus give parties to an agreement some security that if there is something in their agreement that gets declared illegal or unenforceable, that the rest of the contract will still be able to be performed. This can be helpful for more complex contracts or agreements that may take a few years to complete, in the event that there is a law change that renders part of the agreement unenforceable.

Is the Contract Saveable?

Putting in a severability clause can help make sure that your agreement is enforced, if only a part is not enforceable–but even if you do have a written severability clause, it is not completely guaranteed that the contract will be enforceable.

That’s because there are often parts of the contract that are too important, too vital, and too essential to the bargain that they simply cannot be severed; without these provisions, the entire purpose and motive for entering into the contract in the first place is defeated.

That means that even with a severability clause, a judge will often have to see if the contract can actually continue to be performed.

Using Reformation Language

Your agreement can also have what is known as reformation language.

This is language that tells the parties how to “save” the contract–essentially rewrite its terms–in the event that a severed provision is so vital to the agreement itself that the agreement could not otherwise be enforced.

It can provide guidelines or even require the parties to go to mediation to help rewrite the potentially unenforceable contract provision, before just throwing the entire agreement out.

Should You Include a Severability Clause?

Of course, at the outset of an agreement when it is being negotiated and executed, you have no idea what parts, if any, of your agreement will ever be deemed unenforceable. So, at the outset, all you can do is weigh the pros and cons of including a severability clause–you can’t really say whether such a clause will be “good or bad” for you.

Call our West Palm Beach commercial litigation attorneys at Pike & Lustig for help with your business agreements.

Sources:

investopedia.com/terms/s/severability.asp

gavel.io/clause-library/severability-clause