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How can a severability clause preserve a contract?

On Behalf of | Nov 10, 2021 | B2B Commercial Law, B2B Commercial Litigation |

Drafting a business contract is a task you know not to take lightly. You may want to engage in a partnership or venture with another company and want to protect your arrangement with an airtight agreement. Still, you must consider what might happen if the other business litigates you over unclear or possibly illegal terms in the contract.

This possibility is why some business owners place a severability clause in their contracts. Chron explains how including this clause in your contract may prevent a court from voiding the whole agreement.

Unforeseen problems with a contract

Even if you have legal assistance to examine your contract, it is still possible that there is a law or court precedent that may threaten one or more provisions of your contract. A prevailing interpretation of the U.S. Constitution may also invalidate part of your agreement. As a result, the other party to your contract might challenge your agreement on the grounds that if part of it is unconstitutional or illegal, than all of it should be void.

Using a severability clause

A severability clause states that if a court or jurisdiction finds one part of the contract to be unconstitutional or otherwise illegal, the rest of the contract remains valid. Hence, the contract is “severed” from the offending portions. This means you can preserve your contract minus the parts that are not legal to enforce.

A severability clause is an important consideration for a business contract. Even a single line, if found illegal by a court, could derail the entire document. Still, some severability clauses do not work if a court finds the core purpose of the contract is invalid, so take care that the essential purpose of your contract can pass legal muster.