Contract Drafting Series: Five -- Severability

Contract Drafting Series: Severability.

Hey! It’s Shaunt of the Oozoonian Law Corporation with the fifth article in this series to discuss severability clauses in contracts. When drafting, reviewing or interpreting contracts, it is usually extremely beneficial to include a severability clause. 

Here’s an example of a severability clause: 

“If any provision of this Agreement is held to be illegal, invalid, or unenforceable, such provision shall be struck from this Agreement and the remaining provisions shall remain in full force and effect.”

A severability clause essentially acts to “save” the contract if any portion of the contract is illegal or otherwise cannot be enforced by one of the parties against another party. 

Oftentimes, it’s difficult to anticipate a future change in law when drafting a contract today. It’s also possible that you’ve reviewed applicable statutes to your transaction and determined the legality of your contractual provisions, but that a case or law exists elsewhere that would otherwise render such provision invalid or illegal. The severability clause is the tool that’s utilized to avoid these problems. 

Imagine an employment agreement between an employer and an employee that requires the employee to sign a non-compete clause (in other words, the employee is forbidden by the terms of the contract to compete against the company if the employee decides to leave the company). Non-compete clauses are disfavored in California and courts in California will, most likely, rule that such clauses are enforceable. If the contract between the employer and the employee does not contain a severability clause, then the entire contract is no longer enforceable between the parties. However, if the contract does have a severability clause, the court will sever, or cut-off, the illegal provision and continue to enforce the remaining terms of the contract between the contracts. In other words, the severability clause will save the terms and provisions of the rest of the contract and allow the parties to continue to enforce their rights under the agreement. 

Severability clauses are very important to include (or not) in contracts. In negotiating most contracts, if you are the party with a lot of leverage, you should seek to include a severability clause. On the other hand, if you are in a weaker position, you should refrain from including a severability clause. 

Artificial intelligence (A.I.) might be able to draft a contract for you but it cannot negotiate a contract for you. 

Shaunt Oozoonian

Oozoonian Law Corporation