Did you know that if a certain type of term of your contract is found to be illegal or void, it might wipe out the entire contract? Fortunately, you may be able to save the agreement by adding a severability clause. A severability clause typically states that the rest of your agreement still remains in full force and effect even though some of the terms are unenforceable.
Severability clauses can come in handy in contracts for any sort of business operation. For example, a severability clause was used to strike a provision that might have invalidated an agreement between a customer and the operator of a zip-line course. The customer sued the company for negligence after suffering severe injuries on a zipline course at a ski area in Vermont. While on a self-guided aerial course, the customer mistook a guy wire (which is used to stabilize the course platforms) as a zipline and slid directly into a tree. Prior to ziplining, participants were required to sign a liability waiver agreement that included an arbitration clause, which required those with claims of over $75,000 to submit to a panel of 3 arbitrators: one chosen by each party and a “neutral arbitrator” from the ziplining industry.
The court determined that requiring that the third arbitrator be from the zip-lining industry would be unfair because it favored the operator of the zip-lining course. As a result of disapproval of the Arbitration clause, suddenly the entire contract was at risk!
Fortunately for the zipline company, the contract included a severability clause, which stated:
“To the extent that any portion of this Agreement is deemed to be invalid under the law of the applicable jurisdiction, the remaining portions of the Agreement shall remain binding and available for use by the Host and its counsel in any proceeding.”
The severability clause authorized the court to modify just the arbitration provisions (such as ensuring the neutrality of the third arbitrator), rather than toss out the entire contract.
Do your key contracts have a severability clause to protect you from having one unacceptable clause in violating the entire contract? One way to find out is to use Contract Wrangler, which automatically highlights key clauses in all your business agreements.