Should Severability Clauses Be Standard, Boilerplate Provisions?

• Published date: 30 December 2021
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Construction & Planning
• Law Firm: Cullen and Dykman
• Author: Ms Bonnie Pollack, Amanda A. Tersigni and Samantha Schneider

Introduction

Boilerplate language. We see certain types of standardized terms and provisions contained in almost every document. Severability clauses, also known as savings or invalidity clauses, are almost always considered boilerplate.

There are instances where a court may find a provision to a contract to be unenforceable due to unconscionability, illegality, or because it violates a statute or public policy. The finding of a single unenforceable provision may render a contract or agreement void in its entirety. To avoid this result, parties often incorporate a severability clause to ensure that even despite a ruling that a provision is invalid or otherwise unenforceable, the rest of the contract or agreement will be preserved.

Parties may believe that severability clauses will salvage their agreement and sustain the overall objective of the document. Theoretically, this sounds like a "lifesaving" provision. But is the document really preserved if a bargained for provision is uprooted due to invalidity? In actuality, has the document lost its purpose?

Severability clauses can have consequences parties must consider before reflexively inserting them into a document. There are also dangers lurking behind the way in which severability clauses are drafted and the specific phrasing selected. Maybe it is time to consider a severability clause as a bargained for term, as opposed to pro forma.

What is a Severability Clause?

The purpose of a severability clause is to "sever" an otherwise unenforceable provision from a contract and allow the rest of the contract to remain in effect. Severability clauses appear in a variety of documents, including settlement agreements, real estate contracts, commercial contracts, arbitration agreements, loan agreements, construction contracts, and promissory notes. In a study of 500 commercial contracts conducted in 2019, seventy-one percent (71%) included a severability clause while only twenty-nine percent (29%) did not.¹

There are various ways to draft a severability clause. A typical severability clause reads as follows: Should any provision contained in this Agreement be declared or determined by any court to be illegal, invalid, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions of the Agreement shall not be impaired or affected thereby. The unenforceable provision shall be severed, and the remaining parts, terms, or provisions shall remain operative and binding upon the...