Three Benefits of Including a Severability Clause in Your Commercial Contract in the UK

When drafting a commercial contract, you should strongly consider including a severability clause. A severability clause helps protect the commercial agreement if parts of the contract are unenforceable and need to be removed. Ideally, your business should have valid, enforceable and clear contractual terms. If there is an error in drafting, a severability clause will be a safety net. This article will explain the purpose and benefits of a severability clause and why your company should include them in your commercial contracts.     

What is a Severability Clause?

Severability clauses (or ‘severance clauses’) protect a contract if part of it is unenforceable. Generally, an unenforceable clause may jeopardise the entire contract. However, the severability clause allows you to remove the ineffective term allowing the rest of the written agreement to survive.

Additionally, it is technically possible for a court to ‘sever a clause’ without a severability clause in the contract. However, this is unusual and not something that judges do very often.

1. Certainty

Businesses enter commercial agreements to have confidence that the parties will abide by all of the terms within the deal. This is because companies tend to obey contractual provisions as failure to do so may lead to legal repercussions. Since severability clauses try to save the remaining provisions of a contract, they can promote certainty. Thus a court may apply the fundamental terms of the written agreement unless it is contrary to each party’s intentions.

2. Good Faith

A severability clause confirms that your company and the other party intend the contract to survive any erroneous wording. Your company can use these clauses to save the remaining terms of a commercial agreement instead of terminating the entire contract because of one unenforceable term. Thereby, the parties show good faith in agreeing to a contract provision that asks a future court to save the deal.

3. Protect the Purpose of the Deal

Severability provisions are not entirely far-reaching. They only work if the remaining portion of the contract makes sense following the deletion of the invalid wording. Therefore, if the commercial contract aims to transfer specific shares from one business to another but a judge holds that the clause detailing the shares is unlawful, the written agreement cannot survive. However, suppose your business agrees to pay an IT business £400 per month for computer services. A court could interpret the agreement differently if the contract incorrectly states £400 per hour rather than £400 per month, and the parties are clear that this was a genuine error.  

Key Takeaways

A severability clause (or severance clause) is a mechanism you can include in your contracts to allow an unenforceable term to be removed without invalidating the entire contract. However, if the use of the clause would result in an absurd or highly unreasonable outcome, a judge will likely refuse it. Including a severability clause may aid your commercial deals by ensuring certainty and good faith. Furthermore, you can protect the purpose of your commercial contract.

If you need help with the use of severability clauses, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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