Search this site

Severability

The severability clause states that the terms of the contract are independent of each another, so that if a term in the contract is deemed unenforceable by a court, the contract as a whole will not be deemed unenforceable. It may contain two parts: (a) savings language to preserve the validity of all other terms in the event that one provision is determined to be unenforceable; and (b) reformation language to scale back overly broad provisions to terms and scope that are enforceable (such as limiting the time and geographic scope of non-compete covenants).

The severability clause is frequently one of the most variable (or inconsistent) clauses in an agreement as lawyers creatively attempt to maximize the scope of restrictive covenants. It is also interesting to note that virtually all executive employments contain savings clause language, but surprisingly few contain reformation language.

Savings Clause Language

Severability. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

Alternative Clause Language

If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule or law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. AGREEMENT AND PLAN OF MERGER Among CGI GROUP INC., CGI FEDERAL INC., CGI FAIRFAX CORPORATION and STANLEY, INC. Dated as of May 6, 2010 (Law Firms: Cravath, Swaine & Moore; Fasken Martineau DuMoulin LLP; Holland & Knight LLP)

Reformation Language ("Blue-Pencil")

Each term and provision of this agreement shall be valid and enforceable to the fullest extent permitted by law and any invalid, illegal or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid, illegal or unenforceable term or provision.

Alternative Clause Language

To the extent that any provision of this Agreement is adjudicated to be invalid or unenforceable because it is overbroad, that provision shall not be void but rather shall be limited only to the extent required by applicable law and enforced as so limited. The parties expressly acknowledge and agree that this Section is reasonable in view of the parties' respective interests.

If the final judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the parties agree to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision. AGREEMENT AND PLAN OF MERGER, DATED AS OF MARCH 2, 2009, BY AND AMONG FIRST SOLAR, INC., FIRST SOLAR ACQUISITION CORP., OPTISOLAR INC. AND OPTISOLAR HOLDINGS, LLC (Law Firms: Cravath, Swaine & Moore; Covington & Burling)

Discussion

Michael R. Greco, a partner with Fisher & Phillips LLP, asserts Caution Required: Severability Clauses in Non-Compete Agreements. He states "The manner in which courts treat overly broad non-compete agreements varies from state to state. Generally speaking, there are three approaches. In some states (e.g., Vermont), if a covenant is overbroad by an inch, it might as well be overbroad by a mile because overly broad covenants will be invalidated. In other states (e.g., Arizona), overly broad covenants will be blue-penciled – meaning that courts will strike through offending language but will stop short of rewriting the agreement. In still other states (e.g. Ohio), courts are free to reform restrictive covenants so that its restrictions are reasonable under the circumstances."

In the case of employment agreements, the uncertainty of scope may serve an employer's in terrorem goal. (See, e.g. Non-Compete Agreements With Step-Down Provisions. Will Arizona Courts Enforce Them?). But it can also promote uncertainty. Gervas W. Wall of Deeth Williams Wall LLP writes. "I do not recommend that parties draft in the alternative to permit the blue pencil of the trier of fact to choose the acceptable alternative. In my view, this promotes a fundamental uncertainty about what the parties have in fact agreed upon, and it creates an undesirable reliance upon litigation to construe the parties’ intentions." The Boilerplate: What does it Accomplish?

Click >> Google scholar Search for case law examples.
Comments