Severability Contract Provisions
Hello Entrepreneurs!
In a contract negotiation, there's a fine line between aggressively negotiating contract provisions that serve your interests, and stepping over legal limits. This is especially true when negotiating certain types of provisions that courts have historically very closely scrutinized - for example, contract provisions dealing with non-competition, choice of law and exclusivity.
One way contract parties have tried to work around this issue is to include a severability provision (sometimes called a seperability provision) in their business contracts, which allows a court to "sever" offending (that is, unenforcable) provisions in order to salvage the rest of the contract. Depending on the jurisdiction and the situation, not to mention the kind of severability provision in the contract, a court may employ several approaches to "right" the situation. Some courts sever (that is, drop) the entire offending provision and enforce the rest of the contract. Some courts try to salvage the provision by removing/replacing the offending words or phrases without changing the provision's sentence structure (blue pencil approach). Other courts save the provision by making relatively extensive changes to right the offending provision (rule of reasonableness approach).
In the next few columns, we’ll dig a little deeper into how severability provisions work.
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