Severance: Overview, definition and example
What is severance?
Severance in the context of contracts refers to the legal principle that allows a part of a contract to be declared invalid or unenforceable without affecting the validity of the remaining provisions. A severance clause is typically included in contracts to ensure that if one part of the agreement is found to be unlawful, unenforceable, or void, the rest of the contract will still remain in force. Severance ensures that a contract does not become entirely invalid due to one problematic provision.
For example, if a non-compete clause in an employment contract is found to be too broad or restrictive, a severance clause allows that part to be removed, while the rest of the contract, such as confidentiality agreements or other obligations, can remain valid.
Why is severance important?
Severance is important because it provides flexibility and protection for contracts that may need to be adjusted due to the legal invalidity of certain provisions. Without a severance clause, the unenforceability of one part of a contract could render the entire agreement void, potentially causing significant disruption. Severance ensures that the core objectives of the contract can still be achieved, even if some parts need to be modified or removed.
Including a severance clause helps parties to avoid the risks of a contract being entirely invalidated and ensures that the agreement remains enforceable in part.
Understanding severance through an example
A company signs an agreement with an employee that includes a non-solicitation clause. The court later finds that the non-solicitation provision is too restrictive and unenforceable. However, because the contract includes a severance clause, only the non-solicitation provision is removed, and the rest of the contract, including the confidentiality provisions, remains in force.
An example of a severance clause
Here’s how a severance clause might appear in a contract:
“If any provision of this Agreement is found to be invalid, illegal, or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall remain in full force and effect. The invalid provision shall be severed from this Agreement, and the Parties agree to negotiate in good faith to replace it with a valid provision that most closely reflects the original intent of the severed provision.”
Conclusion
Severance ensures that a contract can continue to function even if one or more provisions are found to be unenforceable. By allowing problematic clauses to be removed without invalidating the entire contract, a severance clause provides legal certainty and helps maintain the contract's integrity. This clause is particularly useful when dealing with complex agreements that may have multiple provisions, ensuring that the contract remains valid and enforceable in part, even if some parts need to be modified or excised.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.