What is a severability clause?
How important are they in contracts?
What are good examples or sample severability provisions?
In this article, we will break down the notion of the “severability clause” so you know all there is to know about it.
We will look at what is a severability clause, how you define it and what it means, how important it is to have it in a contract, how should you draft them in a contract, what is a non-severability clause, what are some good examples and severability clause samples to better your understanding and more!
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What is a severability clause
The severability clause is a contractual provision whereby the parties express their intention as to what should happen to the contract if certain parts of it are invalidated or held unenforceable.
In other words, should certain terms of the contract be declared unenforceable, invalid, illegal or violate the public policy, the parties intend to maintain the rest of the contract in force and effect.
A typical severability clause may be drafted as follows:
In the event any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of the present Agreement shall not in any way be affected or impaired thereby and shall remain in full force and effect.
There are debates as to whether this provision is essential when drafting contracts or whether it serves little to no purpose.
For instance, if the law invalidates essential aspects of the contract altering the fundamental purpose of the contract, in most cases, the court may void the contract in totality instead of keeping incidental elements enforceable.
If incidental aspects of the contract are invalidated, in most cases, the law will most likely have statutory fallback provisions or the case laws will likely provide guidance to the court as to what rights to grant or obligations to impose on the parties.
No matter what, you are most likely going to see a boilerplate severability clause in most contract templates or commercial contracts and it’s up to you to assess whether they are relevant to your needs or not.
To understand the severability clause meaning, let’s first look at the definition of the term severability.
Severability comes from the Latin term “salvatorius”.
According to the Merriam-Webster dictionary, the term severability is defined as:
“Capable of being severed” or “Capable of being divided into legally independent rights or obligations”
With the severability meaning out of the way, we can now define a severability clause.
Define severability clause
The severability clause definition, according to Cornell Law School’s Legal Information Institute, is:
A contract provision that keeps the remaining portions of the contract in force should a court declare one or more of its provisions unconstitutional, void, or unenforceable.
What is notable with this definition of the severability clause is that it’s a contractual provision where the parties express their desire that the court maintains their contract in effect even though certain provisions of the contract may not be legally enforceable.
Importance of severability clause
A contractual provision is important when it changes or improves the underlying laws to the extent permissible and without violating the public policy.
A contract clause is also important when it clarifies the rights and obligations of the parties.
To this effect, how does the severability clause add to the contract laws or clarify the parties’ rights?
If we look at it from the angle of a contractual clause improving the underlying legal principle, we must acknowledge that in most jurisdictions, the laws are designed in such a way that if a contractual clause is invalidated, another statutory remedy or right may be invoked instead.
A penalty clause in a contract may be deemed abusive and unenforceable.
The court will nonetheless allow the non-breaching party to claim actual damages.
If we look at the angle of “clarification” of the parties’ rights, we may have little benefits in invoking a severability clause.
The severability clause is typically drafted in broad terms indicating that if any part of an agreement is found to be invalid, the parties want to remaining elements of the contract to survive.
This clause serves primarily to govern the consequences of judicial disputes relating to the validity or enforceability of the obligations of the parties.
Only a judge or the court can invalidate a clause in accordance with the law and when that happens, the judge will consider the facts of the case to determine the parties’ rights and remedies.
Seen this way, severability clauses appear to bring minor value to a contract.
Necessity of severability clauses in contracts
Is it absolutely necessary for contracts to have a severability clause?
Let’s look at the enforcement of contractual provisions that are either incidental or essential to the purpose for which the contract was signed.
If a contractual provision, incidental to the overall purpose or object of the contract, is invalidated, the law may provide for a fallback provision to deal with the dispute.
If a party contractually agreed to provide a “repair warranty” for the goods sold and the product cannot be repaired, the law will generally impose alternative warranties to the seller or merchant.
In such a case, the severability clause does not help in resolving the warranty issue.
However, if the law invalidates an essential provision to the contract thereby affecting the entire purpose for which the parties had contracted, the severability may actually become problematic.
If the essential aspects or purpose based on which the parties contracted is invalid, unenforceable or not legally permissible, would the parties want to maintain the contract based on the severability provision?
The answer is most likely not.
In such cases, you must draft your severability clause in such a way where it is clear that if the “fundamentals”, “purpose” or elements “essential” to the consideration of the parties are invalidated, the contract as a whole should be invalidated.
In essence, you have exercise judgment when dealing with the severability clause as it seems that it can either not bring you meaningful value when incidental provisions are held unenforceable and may even be problematic if essential provisions are held unenforceable.
Drafting a severability clause
There are several considerations that you should keep in mind when you draft a severability clause.
The most common type of contract severability clause is composed of two parts:
- The saving language
- The reformation language
The saving language dictates what aspects of the contract should be “saved” if other aspects are unenforceable whereas the reformation language establishes how the parties should deal with the unenforced provision.
Here are a few questions intended to guide you in drafting a severability provision:
- If an essential provision of the contract is held unenforceable, how should this affect the parties’ other contractual obligations?
- If parts of the contract are unenforceable, should the parties have a duty to renegotiate the terms of the contract in good faith to achieve the originally intended purpose?
- What may be the economic impact of the contract should parts of it be held invalid?
In many cases, the severability clause simply only states that in the event certain provisions of the contract are not enforceable, the parties wish to maintain the other enforceable elements of the contract.
What is missing here is that it does not deal with what will happen next.
How should the parties deal with the remaining elements of the contract?
What else should happen if parts of the contract are invalidated?
In most cases, the severability clause is silent on the issue.
As a result, in the event the court holds an element of the contract as unenforceable, the parties may effectively hit a deadlock as they do not have contractual obligations clarifying their rights or obligations going forward if the contract is maintained and, being in litigation, they are unlikely to be able to adequately negotiate a mutually suitable alternative.
It may also be useful to ensure that you state that if essential provisions of the contract are invalidated adversely affecting the purpose or object of the contract, the entire contract should be declared as invalid.
The non-severability clause or inseverability clause is a provision stating that either the entire contract, state or regulation should stand or the entire thing should fall.
In other words, the provisions of a contract or statute cannot be “severed” or “separated” from one another and must be considered as a whole.
Some may attempt to negotiate a non-severable agreement or severability contract such as arbitration agreements (Kec v. Superior Court, 2020).
The validity of such a provision will depend on the applicable law and the nature of the dispute.
The courts will evaluate such a provision and determine whether or not it makes sense to maintain the whole contract or invalidate the entire thing.
Severability clause example
Severability clauses are found in essentially all types of contracts.
You can find a severability provision in:
- Service contract
- License agreement
- Employment contract
- Development contract
- Distribution contract
- Non-disclosure agreement
- Investment agreement
- Promissory note
- Shareholder agreement
There are many severability clause examples and the list goes on and on.
You can have a severability in a settlement agreement following a legal dispute.
Severability provisions can also be found in the law, statutes or regulations.
The law will often state that if the courts find aspects of the law as invalid or unconstitutional, the applicability of the remainder of the statute or regulation should not be affected.
To give you a better perspective of how the severability doctrine manifests itself in contracts, let’s look at a few sample severability clauses to further our understanding.
Severability clause sample 1 – Funding contract
Should any provision of this Funding Contract be invalid, it shall not affect the validity of the remaining provisions of the Funding Contract. The contracting parties undertake to replace an ineffective provision with one that comes closest to the purpose of this Funding Contract.
Severability clause sample 2 – Service agreement
In case any provision in this Service Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.
Severability clause sample 3 – License agreement
Should any term and condition hereof be declared illegal or otherwise unenforceable, it shall be severed from the remainder of this License Agreement without affecting the legality or enforceability of the remaining portions.
Severability clause FAQ
What is severability
The term “severability” comes from the Latin term “salvatorius”.
The severability clause or salvatorius clause is a contractual provision where the parties decide what will happen if parts of the contract are declared invalid or unenforceable.
In some jurisdictions, if the court declares only one segment of the contract as invalid, it may affect the validity of the entire contract.
In most cases, parties to a contract want to keep their contract and will want to include contractual language allowing them to do so.
Is a severability clause necessary
The severability clause is usually perceived as a miscellaneous clause in a contract, something of a boilerplate clause that nobody bothers to consider.
However, it’s important to include contractual provisions in the contract to bring value to the parties rather than to fill up space.
The parties should carefully assess what should happen if essential elements of the contract are declared as unenforceable vs incidental elements.
In the context of the sale of a business, the non-compete clause is critical to ensure that the sellers do not run off and start competing with the purchaser within a reasonable period of time.
If the court considers the non-compete clause to be invalid, this will fundamentally and adversely affect the buyer knowing the seller is legally justified to immediately compete with it.
It’s best that the severability clause is included in the contract and state that if essential elements of the contract are held invalid, the parties will declare the entire contract as invalid.
What is a severability clause and what does it mean
In a contract, when you see a contractual clause stating something like if any part of this contract is unenforceable or if any part of this agreement is found to be invalid, you are most likely dealing with the severability clause.
The severability clause is a contractual provision whereby the parties express their intention as to what should happen to the contract if certain parts of it are invalidated or are unenforceable.
The most common type of contract severability clause is composed of two parts:
- The saving language
- The reformation language
There is no clear unanimity if the severability clause is a “must’ or “necessary” in a contract.
Our reaction to that is that it depends.
We cannot discount it entirely nor can we say that it is entirely a relevant clause all the time.
If the laws applicable to your contract states that even a minor invalidation of the contract can potentially invalidate the entire 100-page contract, the severability clause can be quite important for the parties to preserve the validity of the contract in that case.
However, if the severability clause creates interpretation challenges, is ambiguous, does not clarify rights or add to the underlying and applicable legal principles, then the severability clause may not bring value or be detrimental.
A contract attorney or lawyer should assess whether it is truly essential for the transaction.
At the end of the day, the severability clause should not be “copied and pasted” in a contract without adequate consideration of its legal ramifications.
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