Contract Clauses
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Severability Clause Defined
Severability clauses, also known as salvatorious clauses or severability and survival clauses, inform courts a contract is not invalid if one provision is found unenforceable. If a severability clause is not in place, a judge or jury has the right to void the agreement. Otherwise, they enforce the remainder.
Here is Wikipedia’s definition of Severability.
Severability Clause Explained
Severability clauses keep contracts intact. Instead of ending an agreement based on single actions, parties continue to meet the terms outlined in the enforceable sections.
For example, consider severability in real estate and severability in insurance.
Severability in Real Estate
Severability in real estate allows parties to ensure that a contract is enforceable when buying or selling property. Real estate lawyers can help you review or draft severability clauses.
Severability in Insurance
Severability in insurance is also known as the separation of insureds or severability of interests. Insurers, like ACA providers, will continue separately in a claim if their insured is getting sued by another party. Insurance lawyers can help you navigate subrogation claims.
Purpose of Severability Clause
The purpose of a severability clause is to preserve the remaining, valid parts of a contract. Doing so reinforces the seriousness of entering into a written agreement while ensuring that other parties are not damaged when dealing with a severability issue.
Severability Clause Examples
Examples of severability clause use include:
- Example 1: Handling excessive interest rates in a finance agreement
- Example 2: Allowing a business to operate even if a partner committed fraud
- Example 3: Getting pay rates incorrect in employment agreements
- Example 4: Finding business associated didn’t comply with HIPAA
- Example 5: Preventing insurers from not paying claims due to client errors
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Severability Clause Samples
Sample 1 – Sale and Purchase Agreement:
Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.
Reference:
Security Exchange Commission - Edgar Database, EX-10.(I) 4 d230919dex10i.htm SALE AND PURCHASE AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/16040/000119312511324512/d230919dex10i.htm >.
Sample 2 – Asset Purchase Agreement:
Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
Reference:
Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.
Sample 3 – Share Purchase Agreement:
Severability. If any provision hereof is found invalid, illegal or unenforceable pursuant to any Governmental Order, the remainder of this Agreement shall remain valid, legal and enforceable according to its terms, and such invalid, illegal or unenforceable provision shall be replaced with a provision that approximates the substance and spirit of the invalid, illegal or unenforceable provision as closely as possible without being invalid, illegal or unenforceable.
Reference:
Security Exchange Commission - Edgar Database, EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.
Sample 4 – Search and Advertising Services and Sales Agreement:
Severability. If the application of any provision or provisions of this Agreement to any particular facts or circumstances is held to be illegal, invalid or unenforceable by any arbitrator, arbitration panel or court of competent jurisdiction, the validity and enforceability of such provision or provisions as applied to any other particular facts or circumstances and the validity of other provisions of this Agreement will not in any way be affected or impaired thereby, and the parties agree that the arbitrator, arbitration panel or court of competent jurisdiction making such determination will have the power to modify the provision in a manner consistent with its objectives such that it is enforceable.
Reference:
Security Exchange Commission - Edgar Database, EX-10.18(B) 13 dex1018b.htm SEARCH AND ADVERTISING SERVICES AND SALES AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1011006/000119312510043149/dex1018b.htm >.
Sample 5 – Employment Agreement:
Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
Reference:
Security Exchange Commission - Edgar Database, EX-10.281 4 d226725dex10281.htm EMPLOYMENT AGREEMENT, Viewed April 5, 2021, < https://www.sec.gov/Archives/edgar/data/1003124/000119312511292827/d226725dex10281.htm >.
Common Contracts with Severability Clauses
Common contracts with severability clauses include:
- Settlement agreements
- Insurance policies
- Employment agreements
- Sales agreements
- Business associate agreements
Severability Clause FAQs
Severability clause legislation is constantly evolving. Below, please find the answers to some common severability clause FAQs:
What is severability principle?
The severability principle is a legal doctrine that holds a contract intact, even if a specific provision is unenforceable. Severability principles support the basic concept that contracts should not lead to inseverability for the rest of the agreement.
How do you write a severability clause?
There are boilerplate severability clause provisions you can find online. However, it’s highly advised that you speak with contract lawyers to avoid making legal mistakes that can negatively impact your future.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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