[Updated 16 September 2020: See this February 2017 post for a new version of this provision.]
[Updated April 23, 2013: See this October 2012 post for a revised version of this language.]
[Updated 2:30 p.m. EST, March 7, 2011: To tweak the language, as discussed in the comments.]
One exciting part of working on Koncision’s confidentiality agreement is that I’ve been forced to give serious thought to some topics I’ve studiously avoided.
One example is severability provisions. I’ve previously found them vaguely annoying, but I’ve never gotten around to figuring out why. And I’ve certainly never gotten around to devising alternative language—until this weekend.
After chewing over my no-hiring and no-soliciting language, Chris Lemens and I traded drafts of the severability provision of our dreams. Chris is a stalwart member of Koncision’s confidentiality agreement editorial board; thanks to his input, the provision is much clearer than it would have been otherwise.
Here’s what we came up with:
Severability. If any provision of this agreement is held to be unenforceable, then that provision is to be construed either by modifying it to the minimum extent necessary to make it enforceable (if permitted by law) or disregarding it (if not). [But if modifying or disregarding the unenforceable provision would result in failure of an essential purpose of this agreement, the entire agreement is to be held unenforceable. The parties acknowledge that enforcement of section Y as written is an essential purpose of this agreement.] If an unenforceable provision is modified or disregarded in accordance with this section X, the rest of the agreement is to remain in effect as written, and the unenforceable provision is to remain as written in any circumstances other than those in which the provision is held to be unenforceable.
And here’s what prompted this language:
- Basic severability provisions usually just says that if any provision is held invalid, the remainder will remain enforceable. It signals to a court the intent of the parties. But the standard provision tells only part of the story, in that it doesn’t address what happens to the unenforceable provision. That’s addressed in the first sentence of the new provision, which works whether you’re in a “blue pencil” jurisdiction (where courts delete the offending provision) or a “rule of reasonableness” jurisdiction (where courts might be willing to “rewrite” it).
- You see versions of the second sentence quite often. But automatically including it in a severability provision seems counterproductive. Instead, you should first consider whether any provision that’s at risk of being held unenforceable is so important that if it’s found unenforceable, you’d want to pull the plug on the entire contract. If you decide that no such provision is that important—for example, it’s hard to imagine anyone feeling that strongly about a no-soliciting provision—it would make sense to omit the second sentence. If you decide that one or more such provisions are that important, it would probably be a good idea to point them out by including the third sentence.
- The first half of the fourth sentence articulates what’s in basic severability provisions, but it makes it clearer what the context is. The second half isn’t essential, but I think it’s helpful, if only to make things clear to the parties.
- I couldn’t be bothered to add language saying that if any provision is held unenforceable the parties must negotiate in good faith to modify that provision. For one thing, an obligation to negotiate in good faith would seem to add little to the implied obligation be behave in good faith. But more practically, if a provision is held to be unenforceable, it’s because the parties have litigated their dispute. By then, it would be a little late for such negotiations.
- Remember, a severability provision makes sense only if one or more provisions are at risk of being held unenforceable. If a contract doesn’t contain any noncompetition, liquidated-damages, or other hot-button provisions, including a severability provision would just clog up the works.
In event event, that’s the prototype of Koncision’s severability provision. It think it’s hot stuff, but I’m ready to improve it.
18 thoughts on “Feast Your Eyes on Koncision’s New Severability Provision”
I am amazed at how many lawyers do not modify the severability provisions of subordination and non-disturance agreements. Why should a tenant whose leasehold would otherwise prime a later mortgage agree that the lease remains subordinate even if the tenant cannot enforce the mortgagee’s promise to recognize the lease? This is particularly dangerous if the lender is ever taken over by a federal agency or receiver.
Is “adjusted the minimum necessary” grammatically correct? I tripped over that wording. Although slightly wordier, “adjusted to the minimum extent necessary” sounds preferable to me.
Adrian: Yes, my zeal for concision got the better of me. Your version is better; I’ve revised it accordingly. Ken
I have to say that I was very surprised to see the phrase “adjusted the minimum necessary” used in an example of elegant contract drafting. I’d put a big red circle around that phrase if it was presented to me by a junior lawyer. Surely you can come up with something better than that. I’m not even sure what it means. For the same reason I’m also uneasy about the phrase “or striken”, but I could live with that as it’s clear what it means.
RMCR: Such high dudgeon! You might be happy to know that I’ve replaced “stricken” in the first sentence (and “striking” in the second sentence) with “disregard” (and “disregarding”). After all, a court wouldn’t actually go about deleting the provision in question; instead, they’d ignore it. Ken
I’m still not 100% sure what “adjusted” means in this context. I assume it doesn’t mean that the parties will come together to work out the terms of a revised clause but rather that the offending clause will be read or interpreted in a manner which will give sufficient meaning to the parties’ intentions. If that’s the case, is “adjusted” the right word? I’m merely a disciple of your teachings, so I’m happy to defer to your better understanding of these things.
RMCR: Your comment made me wonder whether some readers might think that the provision refers to having the parties negotiate. (You’re correct that that’s not what I intended.) So I added as an experiment, in brackets, “then in construing this agreement.” What do you think?
I’d rather not use the active voice, with “court” as the subject. For one thing, I’d like this provision to apply in the context of arbitration too without the need for adjustments. And using “is to be” allows you to avoid the awkwardness of seeming to impose an obligation on a court; see MSCD 2.81.
As regards “adjusted,” it’s gone! Your comment prompted me to revisit the alternatives, and I opted for “modified” (and “modifying”) as being a more conventional choice in this context.
Stick around my blog long enough and you’ll see that whatever understanding I gain comes after sporadic screwups and is achieved with the aid of readers such as yourself.
Adjusted and modified mean the same thing to me. If we’re going for simplicity in drafting, I would choose “changed.” If we are going for something legally recognizable to lawyers, I would go for “reformed.”
Chris: I ended up going with “modified,” simply because it’s more usual than “adjusted” and is otherwise unobjectionable. (Stylistic variation isn’t a virtue in drafting!) “Reformed” is more of a doctrinal word. And “changed” perhaps has more of a this-is-a-consumer-document vibe to it. Ken
I like this clause. My only suggestions would be:
(i) The phrase “essential purpose” seems open to argument. While I can’t think of a better phrase, it might be preferable in some cases for the agreement to be rendered fully unenforceable only if the specified clauses are, instead of the specified clauses being merely examples of essential purposes. (This would probably not work for more complex agreements.)
(ii) Rather than the “construing” phrase, I would probably add “deemed to be” before “modified” to make the same point – I think it gets closer to what is required to be done. Either way seems to work, though.
(iii) I would add “as written” after the first “unenforceable”, because the provision as a whole will not be held to be unenforceable where a modification is made.
(iv) Some minor suggestions towards standard English: would replace “constitutes” with “is” and “After” with “If”; and there are four instances of “is to”, which could probably be replaced by “will” or “shall” (depending on your preference – I believe you prefer the former in such cases).
I would also want to be sure what the governing law and jurisdiction of the agreement was before finalising a standard clause. If a jurisdiction has settled and sensible rules, I wouldn’t want to usurp them with something that is more open to the whims of judges, unless I knew what the reason was for doing so.
W: Thanks for chiming in. Regarding your first point, “essential purpose” is something of a standard phrase. Because it seems unobjectionable, and because I haven’t been able to come up with a better phrase, I’m willing to stick with it. As regards limiting any essential purpose to the provisions cited, you can accomplish that by saying “the essential purpose” rather than “an essential purpose.” But I wonder whether that nuance adds more complication than it’s worth.
Regarding your second point, I don’t think I’d want to use “deemed,” as it’s something for a court to decide.
Regarding your third point, I don’t see any risk in leaving it as is.
Regarding your fourth point, it prompted me to nuke “constitutes” and “After”. The latter in particular was a lame choice on my part. As regards “is to be,” I’m afraid that’s part of my “categories of contract language” scheme; see MSCD 2.81. I want to convey a meaning different from that conveyed by “will” and “shall” in my scheme, so it’s best that I use a different verb structure.
The phrase “in construing this agreement” is a dangling modifier. Of course, it’s obvious that the provision itself cannot be doing the construing, and we can figure out who you mean to be doing the construing. But it’s still a dangling modifier. One way to fix it is:
If any provision of this agreement is held to be unenforceable, then that provision is to be construed either by modifying it to the minimum extent necessary to make it enforceable (if permitted by law) or disregarding it (if not).
Paul: Accepted! I had noticed the dangling modifier but didn’t have the wit to think of your alternative. Ken
1. Instead of referring to a provision being held to be unenforceable, why not simly say, “If any provision of this agreement is unenforceable…”?
2. If the provision is unenforceable, I don’t know that construing it will save it. Construing a section does not change it; it only provides an understanding of what it says. I would prefer to say, “If any provision of this agreement is unenforceable, then, by virtue of this section, that provision is modified to the minimum extent necessary to make the provision enforceable (if permitted by law) ….” I haven’t fiddled with the language to address the disregarding alternative, but that can easily be done.
Richard: Regarding your first comment, your version would certainly work, but I have a slight preference for acknowledging that a provision becomes unenforceable when a court says it’s unenforceable.
Regarding your second comment, I’m not crazy about deeming the provision modified, as it’s the court that will be doing the modifying. And one of the meanings of “construe” is to determine the legal effect of something; I think that works here. Because the proposed language refers to modification, I don’t think there’s any scope for confusion. But I’ll mull it over.
Re your first comment in reply, I operate on the basis that the courts merely declare what is or isn’t enforceable, and therefore, the clause does not become unenforceable because a court says it is. It always was unenforceable.
Re your second comment in reply, I am not suggesting that it be “deemed” modified. I am suggesting that the text say that the provision is modified by operation of the provision. Thus, there is a two step approach: the parties want the agreement enforced as written, but if the court declares a portion of the agreement unenforceable, then here is how the parties (not the court, the parties) deal with the contingency.
It’s not the job of courts to rewrite (modify) agreements, and many judges will refuse to do so, even if the agreement authorizes (and even begs) them to do so. By saying that the provision is modified to the minimum extent necessary to make the provision enforceable, the parties themselves are agreeing on the modification, and they are not asking the court to make it for them. They are simply leaving it to the court to figure out what the minimum change is. This is a subtle difference, I grant you, but sometimes, a subtle difference in wording does make a difference.