If you are a business owner or a budding entrepreneur, you know how important it is to have enforceable contracts governing your every business relationship. Contracts allow all the parties involved in a business deal or transaction to know their obligations and ensure their performance. Some contracts have two or more agreements between the parties. When the agreements are distinct enough from one another, the contract may be severable, but it should include a severability clause.
A severability clause allows the enforceability of one agreement to be independent from the other. Therefore, if one or more of the agreements in the contract are unenforceable or illegal, the remainder of the contract terms remain in force. If a material breach occurs and severability applies, the breaching party may still recover for the partial performance of the contract.
When are agreements unenforceable or illegal
Industry laws and regulations change all the time, but contracts can involve continuous and long-term relationships. A court may consider a contract severable when some of its divisible terms and conditions become unenforceable because they are unconstitutional or violate public policy. The breaching party cannot perform their obligations because it would be illegal. The circumstances may have been different when the parties signed the contract.
Severability applies, and the other provisions of the contract that do not affect public policy remain enforceable. You may be able to rewrite the contentious terms of the contract unless it could alter its original intent.
When severability does not apply
Severability may not apply to situations where the breach is so severe that it changes the nature and purpose of the contract. Again, the severability clause will determine whether a breach voids the entire contract.
You agree to a contract in good faith, but your compliance should not force you to do something illegal or unethical. More than anything, a contract should protect you and your business.
