Severability Clause is an Essential Part of Every Legal Agreement
In a perfect world, the written contract will match the intentions of both consenting parties in different scenarios and locations. However, there are instances wherein certain clauses become inappropriate or unenforceable, thanks to changes in laws, statutes, and circumstances.
The concept of severability becomes essential, especially for online businesses or websites that want to protect their interests.
Small businesses and start-ups should resist the impulse of copying basic severability clauses from other websites. Every part of your legal agreements should be written to be appropriate to your interests and circumstances to avoid issues and surprises later on.
In this article, we’ll learn more about the severability clauses are and why you need them in your legal agreements.
What is a severability clause?
A severability clause, or salvatorius in Latin, is a contractual provision that describes the effect that an unenforceable or invalid part of a contract will have on the rest of the agreement. In simpler terms, a severability clause “severs” provisions which must be modified away from the rest of the contract.
If a severability clause appears in a piece of legislation or agreement, it essentially states that the remainder of the document or agreement’s terms will remain effective even if one or more clauses or terms are found to be unenforceable by the court, or even illegal or contrary to state or federal laws.
This contractual provision helps preserves the original intentions of the consenting parties, especially in the event of an unforeseen voiding of certain clauses.
Severability clauses appear in most contracts and pieces of legislation. In the online business world, severability clauses may be found anywhere from the contractual agreements between service providers and the sales or shipment of equipment to other parties.
They are convenient, especially for state and federal laws, because they allow the amendment or continued implementation of a law even if some parts are stricken off. In many cases, legal provisions or applications are removed because they are unconstitutional or contrary to existing law.
In some cases, a severability clause may specify that there are certain provisions within an agreement that are too essential to the purpose of the agreement and which, therefore, cannot be rewritten or removed without affecting everything else. These provisions cannot be divorced from the agreement.
As such, these essential clauses cannot be severed or treated differently from there rest of the contract. They will otherwise change the nature of the agreement in favor of one party over the other. Rewriting or removing these so-called vital provisions will cause the whole deal to be modified, invalid or unenforceable.
Conversely, a severability clause may simply state that clauses or provisions may be rewritten or removed only if they do not address an essential purpose that may change the nature of the contract. These clauses usually do not tip the balance in favor of one party only. In general, it helps both contracting parties to be clear about which provisions must be left intact.
Because of severability, contracting parties are expected to comply with enforceable clauses even if one clause is found to be void or unfair. The severability clause prevents parties from refusing to honor the spirit of an agreement on the basis of breach of one of the separate clauses.
Furthermore, breaching one of the said provisions is also not a reason to deny the other parts of the contract which have not been breached.
A severability clause generally features two parts:
- Savings language — states that the rest of an agreement or contract is preserved and enforceable, even if a particular provision or part is deemed unenforceable or invalid by a court. Because of this element, severability clauses are also sometimes known as savings clauses, because they save the essence of a contract.
- Reformation language — states how contracting parties will respond to the illegal or unenforceable parts as deemed by the court, whether by modifying the provisions or removing them entirely.
The two parts of a severability clause reflect its purpose in divorcing or separating provisions from each other and in outlining what must be done to ensure fairness and overall enforceability.
Before signing or agreeing to a document, contracting parties should take care of reviewing the so-called miscellaneous clauses near the end, which usually includes the severability clause. How does the contract address invalid provisions? Will voided clauses be treated as separate?
Ideally, a severability clause should have provisions for removal or modification. Specifically, the severability clause must discuss terms of evaluating the relevance of provisions to the essence of the contract.
It should also be clear as to who can make the modifications. The contracting parties may come to a shared modification, or a court can decide on it.
Lastly, some agreements may also include a separate "inseverability clause". This clause outlines which provisions are so crucial to the nature of the agreement that changing or breaching them will invalidate the entire contract.
Why do you need a severability clause?
A severability clause identifies which parts of a contract are essential to determining the nature of the agreement. These vital clauses or provisions cannot be deleted without changing the purpose of the contract itself.
These essential provisions may define the balance of interests between the contracting parties. If they are modified or removed in any way, the entire contract can be declared invalid.
Because the severability clause defines and identifies clauses that are vital to the contract, it can be said that the severability clause is crucial as well. Here are several reasons why you would need a severability clause.
Changing dynamics and circumstances
Contracts do not exist in a vacuum. The compliance and interests of contracting parties may vary depending on the circumstances.
Laws may change throughout the years, causing specific provisions to be invalid or even illegal. Invalidating the entire agreement may not be reasonable in these circumstances.
Furthermore, contracting parties may move states or change their activity. For example, a contract of sale between a buyer and a seller may include a non-compete clause.
However, it may be unreasonable to expect the seller to comply with that clause if they are moving to a different state with a non-overlapping market.
On the other hand, it is entirely reasonable to expect companies and former coworkers to have a non-compete if they are staying in the same geographical area.
Most parties write contracts thinking that all provisions are enforceable. Unfortunately, even the best legal teams can be blindsided by unenforceable provisions. These changes may be due to a statute or court decision. Some states also have different rates and standards.
In a scenario without a severability clause, any change or default in one provision would cause the entire contract to be deemed unenforceable. This would be true even if the modification is so minor as to be almost irrelevant to the rest of the agreement.
As such, it is a logistical nightmare for all types of contracts. Having a severability clause gives the different consenting parties the ability to be more flexible when it comes to retaining overall enforceability.
Identifying important clauses
Severability clauses help delineate which provisions are essential to the purpose of a contract, and therefore contractual relationship, and which are not as crucial.
Provisions that are important to the nature of the agreement will cause the entire contract to be voided if said provisions are found to be illegal or unenforceable.
Aligning original intentions with the court
There are many reasons why a clause within an agreement may lead to a ruling of invalidity, illegality, or unenforceability. When a clause or term in a contract is deemed invalid, the next step is either to delete that clause or to modify it constructively.
Most contracting parties usually rewrite the involved clause by aligning the contract’s original purpose and the requirements of the court. Such edits are made under the rule of reason and practicality.
Preserve the integrity of the agreement
When a clause, provision, section, or other parts of the contract is found invalid, unenforceable, or even illegal, the rest of the agreement may also be put in doubt. The finding of the court in terms of validity or enforceability may cast an offensive shadow over the rest of the law or contract.
A severability clause is a clear indication that one part of the contract does not affect or undermine the validity of the other parts.
If a court invalidates a particular provision within a contract, the two consenting parties may still find it unfair. If they were able to prepare for different scenarios through a severability clause, there should be no problem in ensuring fairness.
The severability clause helps parties determine and then address the needs of all parties in different likely scenarios.
For example, the non-compete clause of a contract of sale of a business may be invalidated by a court. The seller may find this unfair such that they won't be able to establish their business or grow customer relationships if the buyer returns to the market.
The non-compete clause may also be essential to the nature of the transaction. To protect the interests of the buyer and seller, the severability clause may state that voiding of that particular clause can void the entire agreement.
Is the severability clause enforceable?
Yes, they are. As part of a shared agreement, either party is expected to comply with the severability clause. However, the extent of enforceability is still largely influenced by local and state laws and the significance of the provisions to the contract.
There is more assured enforceability in contracts which state that a court may modify an unenforceable provision. In these cases, the court will modify said clauses to show the original intentions of the contracting parties.
The scope of enforceability depends on the severability clause. A single unenforceable provision in a long contract may cause the entire agreement to be unenforceable, or it may demand revisions. Either scenario is valid as long as the representation is fair to both parties.
Sample severability clause
Severability clauses may come as a type of provision that can easily be transplanted from one agreement to another. They may be ready-made clauses that state a particular purpose. However, there are still many different ways to write a severability clause.
A severability clause may be written briefly, or it may be specific to the nature of the contract. In the first scenario, such clauses are good for generic sales or long-standing agreements. The clause may be more specific, or it may also include how a provision may be modified, whether by the original contracting parties or by the state.
Here is a short sample severity clause which reflects the commonly written parts of the clause:
"Unenforceability or invalidity of any one or more clauses in this Agreement shall not have any impact on the enforceability or validity of any other clause in this Agreement. If it is possible, any unenforceable or invalid clause in this Agreement shall be modified to reflect the original intention of the parties. If it cannot be modified to show the original intention of the parties, any unenforceable or invalid clause in this Agreement shall be regarded as removed to the extent of its unenforceability and invalidity and be stricken while the remainder of this Agreement shall continue to be in full effect."
Simply copying and pasting a template severability clause without understanding its significance may do your online business more harm than good. It can, later on, defeat the purpose of consistently representing the intentions of the contracting parties in cases of changing circumstances.
It is better to know the rationale and scope of the different elements in a business contract.
A severability clause states that the unenforceability or breach of one clause does not mean the unenforceability of an entire agreement.
The clause or provision involved may be removed or modified to meet the needs of the contracting parties. It is one of the most understated yet powerful tools in ensuring enforceability and fairness of agreements regardless of the changing laws or settings.
- October 21, 2019