Contract Severability Clause: Everything You Need to Know
A contract severability clause outlines what would happen if parts of a contract are deemed unenforceable and should address what to do with it.3 min read
A contract severability clause outlines what would happen if parts of a contract are deemed unenforceable. When writing a contract severability clause, you should write it with the intention to save the agreement and to outline the essential parts of the agreement. Your severability clause should address what to do when there is an unenforceable clause in your contract and what should happen when the provision is essential to the contract's intent.
What is a Contract Severability Clause?
When you have an unenforceable clause, either rewrite the unenforceable clause so that it is valid (Rule of Reasonableness), or revise the invalid clause so that it is enforceable. If the clause addresses the “essential purpose” of the agreement, then the entire contract should be invalid. Your severability clause should address what to do in either situation.
All severability clauses usually contain two parts:
- The first parts, the savings language, address how to preserve the rest of the contract even if the court finds a part unenforceable.
- The second part, the reformation language outlines how the parties will address the unenforceable parts. They will either be modified so that they will be enforceable or deleted.
Although you should include a severability clause in a contract, some courts apply the concept while some may not. Still, if the unenforceable part of the agreement is essential, not even the courts can do anything about it. More than likely, the entire contract is voided.
Drafting a Better Severability Clause
If you do not have a severability clause in your contract, the law usually provides a backup provision when part of the agreement fails. However, if there are no laws that address the term in question and the condition is critical to the agreement, then the court may void the entire agreement. Therefore a severability clause is essential when:
- The law does not have a default rule applicable to the unenforceable clause.
- The invalidated term is central to the contract's purpose.
When you draft the severability clause to modify the contract, It also should address what happens if the entire contract is invalid. If the agreement is unenforceable there should be an economic adjustment clause where the party adversely impacted is compensated to make up for the financial loss. The economic adjustment would not be considered, however, if there were egregious misconduct.
Some Tips in Drafting a Severability Clause
When drafting a severability clause consider the following:
- Include verbiage in the clause that allows the parties to the agreement to adjust the term to make the clause in question enforceable. Furthermore, you can let the judge or arbitrator amend the clause as well.
- Make sure the severability clause communicates the essential terms of the contract and what do do when those terms are unenforceable.
Boilerplate Blunders: A Reminder That “Standard” Contractual Provisions Should Be Used With Care
Boilerplate provisions are often viewed as a legal language that is steadfast, iron-clad and fluid enough to work in any type of agreement. A common standard clause you have in a contract is the following: “Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party without the prior written consent of the other Part.” A boilerplate provision as the one above may contradict or confuse other parts of the agreement. When using standard provisions in your contract severability clause:
- Make sure you don't duplicate the effort or conflict the efforts with other clauses you might want to add.
- Use boilerplate clause for clarification by keeping your intent in mine.
Contract severability clauses are meant to clarify the intent of the agreement and to deal with circumstances that can derail it. Make sure you address how you will deal with a contract with an unenforceable clause as well as when that clause is essential to the agreement. Boilerplate provisions can help you if they are used to clarify and complement other boilerplates in the contract. When used correctly, it helps determine what to when there is an unenforceable statement in your contract. Seek help from your legal counsel to ensure your severability clause support the agreement's intent.
If you need help drafting a severability clause for your contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.