What Happens If Part of a Contract Is Unenforceable

A court finds that one provision in your contract is unenforceable. Perhaps the liquidated damages clause is deemed a penalty. Maybe a non-compete is too broad. Possibly a limitation of liability violates public policy. What happens to the rest of the agreement? Does an unenforceable provision void the entire contract, or can the remaining terms survive? Understanding severability helps you predict outcomes and draft more resilient agreements.

The answer depends on how the contract is drafted, what type of provision is unenforceable, and the applicable governing law. In most cases, one invalid provision does not destroy the entire contract. But the details matter, and understanding the doctrine of severability helps you protect your interests when problems arise.

The Doctrine of Severability

Basic Principles

Severability allows courts to remove unenforceable provisions while leaving the rest of the contract intact. The unenforceable term is severed, or cut out, and the remaining provisions continue to bind the parties. This approach preserves the overall agreement rather than throwing out the entire contract because of one problematic term.

Courts generally favor severability because it respects party autonomy. The parties intended to make a binding agreement. If most of that agreement is valid, enforcing the valid portions honors the parties' intent better than voiding everything. Severability serves the goals of freedom of contract and commercial stability.

When Severability Applies

Severability applies when the unenforceable provision is not essential to the contract's overall purpose. The question is whether the parties would have entered into the agreement without the invalid provision. If the remaining terms make sense and can function independently, severability typically applies.

Conversely, if the unenforceable provision is so central that the parties would not have agreed to the contract without it, the entire agreement may fail. A contract where the core obligation is unenforceable cannot be saved by severing that core. But peripheral provisions, even important ones, can usually be removed while preserving the agreement.

Divisibility

Related to severability is the concept of divisibility. A contract may be divisible if it can be separated into distinct parts that correspond to separate exchanges of consideration. If one divisible portion is unenforceable, the other portions may still be performed and enforced independently.

Divisibility analysis considers whether the contract's components can stand alone. If payment terms for one service are unenforceable, but the contract covers multiple independent services, the portions involving other services may survive. The key is whether the parts are truly independent or fundamentally interconnected.

Severability Clauses

Express Severability Provisions

Most well-drafted contracts include express severability clauses. A typical provision reads: If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall continue in full force and effect. This language tells courts that the parties intended the contract to survive partial invalidity.

Express severability clauses are generally enforceable and guide courts toward severing rather than voiding. While courts retain discretion about how to handle unenforceability, a clear severability clause creates a strong presumption that the parties wanted the agreement to survive loss of individual provisions.

Savings Clauses

Some contracts include savings clauses that go beyond simple severability. These provisions may authorize courts to modify unenforceable terms to the minimum extent necessary to make them enforceable. Instead of simply removing the invalid provision, the court rewrites it.

The liability clause in agreement provisions might include a savings clause providing that if any limitation is found unenforceable, it shall be modified to the minimum extent necessary for enforceability. This approach preserves some limitation effect rather than eliminating the protection entirely.

Limitations on Severability Clauses

Severability clauses are not absolute. Courts will not enforce them if the result would be unconscionable or contrary to public policy. If severing a provision would leave an agreement so one-sided that enforcement would be unjust, courts may decline to sever.

Courts also consider whether severability would rewrite the contract in ways the parties never contemplated. If removing one provision fundamentally changes the deal's economics or risk allocation, severability may be inappropriate even with an express clause. The goal is to preserve the parties' intent, not to create a new agreement.

Types of Unenforceable Provisions

Liquidated Damages

Liquidated damages provisions are unenforceable if they constitute penalties rather than reasonable estimates of anticipated damages. When courts strike down liquidated damages clauses, the remainder of the contract typically survives. The parties can still enforce their substantive rights, though they must prove actual damages rather than relying on the predetermined amount.

Losing a liquidated damages clause changes the contract's risk profile. The certainty of predetermined damages is replaced with the uncertainty of proving actual harm. But the underlying obligations remain enforceable, and the party can pursue actual damages for any breach.

Limits of Liabilities

Courts sometimes refuse to enforce limits of liabilities that attempt to immunize parties for gross negligence, intentional misconduct, or violations of public policy. When a liability limitation falls, the question becomes what exposure remains for the party who thought they were protected.

Severability typically allows the rest of the contract, including substantive obligations, to remain in force. The party who lost liability protection must perform as agreed but now faces greater exposure for failure. The other party's rights are enhanced, not eliminated, by the limitation's failure.

Non-Compete Agreements

Non-competition clauses are frequently challenged as unreasonable in scope, duration, or geographic coverage. Some states allow courts to blue pencil or reform overly broad non-competes to reasonable terms. Others strike the entire provision if any part is unreasonable.

The approach varies significantly by governing law. In states that reform non-competes, the restriction survives in modified form. In states that do not permit reformation, the entire non-compete may be unenforceable even if it would be valid with modest modifications. Knowing which approach applies is critical.

Arbitration Clauses

When arbitration provisions are found unconscionable or otherwise unenforceable, the underlying contract typically survives but disputes proceed in court rather than arbitration. The parties' substantive rights remain intact; only the procedural framework changes.

However, if the parties fundamentally bargained for arbitration as essential to the deal, losing the arbitration clause might justify voiding the entire agreement. This is relatively rare, as most courts treat arbitration as a procedural choice that can be severed without destroying the substantive bargain.

Forum Selection

Unenforceable forum selection clauses leave parties to litigate wherever courts have jurisdiction under general principles. The substantive terms of the contract remain binding, though disputes may be heard in forums neither party anticipated.

The governing law provision typically survives even if forum selection fails. Courts apply the chosen substantive law while using their own procedural rules. This separation preserves most of what the governing law clause was intended to accomplish.

Effects of Severance

On the Severed Provision

The severed provision is simply gone. It has no effect on either party. Any rights or protections it would have provided disappear. Any obligations it would have imposed are eliminated. The parties proceed as if the provision never existed.

This can work for or against either party depending on what the provision did. A customer loses the protection of a favorable warranty that is severed for some reason. A vendor loses the protection of a liability clause in agreement that is deemed unconscionable. Severance is neutral; it simply removes the provision from the contract.

On Remaining Provisions

The remaining provisions continue in full force and effect. They are interpreted and enforced just as they would have been had the severed provision never existed. The parties must perform all valid obligations and can enforce all valid rights.

However, courts consider whether remaining provisions still make sense without the severed term. If removing one provision changes how other provisions should be interpreted, courts may adjust their reading. The goal is to effectuate the parties' likely intent given the severance.

On Contract Balance

Severance can change the contract's overall balance. If a liability limitation is severed, the risk allocation shifts. If a remedy is removed, the enforcement framework changes. The contract that remains may be quite different economically from what the parties originally agreed to.

This change in balance is why severability is not automatic. Courts consider whether the resulting agreement is still fair and sensible. Extreme imbalance may prevent severance. The doctrine aims to preserve workable agreements, not to create one-sided outcomes that neither party intended.

Drafting for Severability

Include Express Clauses

Always include an express severability clause. This basic provision costs nothing and provides significant protection. It makes clear that the parties want the agreement to survive partial invalidity and guides courts toward preserving rather than destroying the contract.

Consider Savings Language

For provisions that might face enforcement challenges, consider savings language that authorizes modification rather than complete removal. Non-competes, liquidated damages provisions, and liability limitations can all include language requesting reformation to the minimum enforceable scope.

Savings clauses are not universally enforceable, and some courts decline to reform provisions even when asked. But including this language at least expresses the parties' intent and may influence courts toward preservation rather than elimination.

Identify Essential Terms

Consider which provisions are truly essential to the deal. If a provision is so central that you would not have agreed to the contract without it, make that clear. Language like the liability clause in agreement is a material inducement to this contract signals that the provision is not just preferred but essential.

Conversely, make clear which provisions are independent and severable. The more the contract demonstrates that individual terms can be removed without destroying the overall bargain, the more likely courts are to sever rather than void.

Address Governing Law Carefully

The governing law provision determines which state's severability rules apply. Different states have different approaches to severability, reformation, and blue penciling. Choose governing law with an eye toward how courts in that jurisdiction handle partial unenforceability.

States with more flexible approaches to reformation may be preferable when including provisions that might be challenged. States with more rigid approaches might be better when you want certainty that provisions will either be fully enforced or completely eliminated.

Strategic Considerations

For the Drafter

Draft provisions that can survive without each other. Avoid structures where one provision's validity depends on another's. Make explicit which terms are essential and which are merely preferred. Include severability and savings clauses that express your intent.

Consider including alternative provisions that take effect if primary provisions are unenforceable. If the liquidated damages clause fails, an alternative clause might provide for actual damages up to a specified cap. These fallback provisions provide some protection even when primary provisions fail.

For the Challenging Party

When challenging a provision, consider what happens if you win. Severability may mean the contract continues without the challenged term. Before spending resources on the challenge, assess whether the result actually improves your position.

Sometimes challenging a provision backfires. Removing a liability limitation might expose both parties to greater risk. Striking an arbitration clause might move disputes to less favorable forums. Think through the consequences before seeking to invalidate provisions.

For Both Parties

Understand that litigation over severability is expensive and uncertain. Courts have significant discretion in how they handle unenforceability. Predicting whether a provision will be severed or whether the entire contract will fail is difficult. Settlement often makes more sense than fighting over severability.

If a provision is found unenforceable, consider renegotiating the contract rather than litigating severability. The parties may be able to agree on a replacement provision that addresses both sides' concerns and avoids continued uncertainty.

Conclusion

Partial unenforceability does not necessarily doom an entire contract. The doctrine of severability allows courts to remove invalid provisions while preserving the rest of the agreement. This approach respects party autonomy by enforcing what can be enforced and maintaining the overall bargain.

Liquidated damages provisions, limits of liabilities, non-competes, and other commonly challenged terms can typically be severed without destroying contracts. The remaining obligations survive, though the contract's risk profile may change. Understanding these dynamics helps you assess your position when enforceability issues arise.

Express severability clauses and savings provisions improve the chances of preserving your agreement if provisions fail. The governing law affects how courts approach severability. Thoughtful drafting anticipates partial invalidity and structures contracts to survive the loss of individual terms.

The liability clause in agreement provisions and other protective terms may not survive every challenge. But proper drafting ensures that losing one protection does not mean losing the entire contract. Severability is a safety net that preserves the core bargain even when individual provisions fail.