How a Severability Clause Can Protect Your Interests

Are you drafting or entering into a commercial contract? Business owners should know as much as possible about the content of the contract and its enforceability! Enforceability – what does it mean? That the agreement has the required components to compel the parties who signed it to observe the legally binding terms written into the contract. Sometimes contracts have components that are unenforceable, illegal, or even invalid. So, you might ask, “How do I protect myself and my business from any potential unenforceable terms or conditions written in my contract?”

You use what’s called a severability clause. 

The purpose of a severability clause, known also as a savings clause, is as follows. This clause keeps the remainder of the contract valid and enforceable in the event that any part of the agreement is deemed invalid and unenforceable. Business owners need to protect themselves and their interests! A severability clause written into a contract maintains the integrity of the contact’s purpose. It prevents the entire commercial contract from crumbling. 

Why Have a Severability Clause in a Contract?

Why include a severability clause in your commercial contract? So that your entire contract doesn’t get voided when there is an issue with any of the existing provisions! Anyone who has ever signed or drafted a commercial contract knows just how time consuming, expensive, and complicated creating a contract can be in the first place. Without a severability clause, all of your hard work could go to waste! It’s for sure a better idea to have the severability clause included in the contract from the beginning. That way, you won’t open yourself and your business up to suffering an unredeemable loss. Or, getting tangled up in any sort of dispute down the road. 

With the severability clause in place, you’ll have the most well-rounded contractual protection of your interests! If a legal dispute arises, a court could deem any specific provision written in the contract as invalid. As we mentioned, this may be because that provision is unenforceable or in some cases illegal. But, the severability clause acts as a sort of shield against this possibility. It gives the court the option to delete or rework the provision causing the issue. Without impacting any of the other contractual provisions in the agreement. What a great idea! This is one of the main advantages of the severability clause. All of the terms that remain in the contract are absolutely still enforceable. The parties involved are also still legally bound to the terms of the original contract. That is, minus the invalid provision or provisions. 

Savings and Reformatory Language | Components of the Severability Clause

A brief breakdown of a severability clause: 

• Typically, this clause has two parts.
  • One part contains “savings language.” This states how the entire agreement will continue to stay intact and enforceable in the event that a provision is declared invalid. 
  • The second part is “reformatory language.” This addresses how the parties agree to address any invalid provision(s) – to rewrite or delete completely. 

Any contract that doesn’t have a severability clause is liable to be rendered completely invalid. Even if just one provision is deemed unenforceable. This clause further speaks to the parties’ intent to consider amending or revising any given part of the agreement, if necessary, so that the contract can stay valid as a whole. That rewriting to make the unenforceable once again valid is done within the context of the standard of legal reasonableness. 

It is also possible that a severability clause can identify certain elements within a contract as overwhelmingly vital to the agreement itself. Meaning, it can state that if a given provision is deemed unenforceable, then the entire contract likewise becomes unenforceable. 

A Common Example | Standard or Boilerplate Langauge vs. Contract Attorney

The most commonly referred to example severability clause reads as follows: 

“If a provision of this Agreement is or becomes illegal, unenforceable, or invalid in any jurisdiction, it shall not affect (1) the enforceability or validity in that jurisdiction of any other provision of this Agreement, or (2) the enforceability or validity in other jurisdictions of that or any other provision of this Agreement.”

Another advantage of the severability clause is its usefulness when the existing law doesn’t have a default rule that’s applicable to the unenforceable provision. Whenever a contract has failed, the law will typically be able to address the invalid provision, but not always! Moreover, a severability clause is advantageous because it protects any terms that if invalidated would affect the overall purpose of the contract. So, if a major provision is invalidated, with the severability clause, you can already have a plan for how to revise the contract. Or, if the contract is rendered void in its entirety, the clause can also specify how compensation will be paid to the party negatively affected. 

Standard language, as seen in the example above, can definitely be used in drafting a contract. Utilizing the help of a contract attorney will ensure your commercial contract has the appropriate severability clause for your business purposes. For contracts, it’s of the utmost importance that your severability clause works to support the purpose of the agreement should any issues with the provisions arise. Do you require a severability clause for your commercial contract?

Our team at Stockman & Poropat, PLLC can help! Contact us today for a free consultation! We look forward to drafting you a commercial contract that ultimately protects your interests!

Up next we will be discussing Non-Solicitation Agreements.