It will depend on the language of the contract about severability and the clause itself whether the court will void the entire contract, edit the agreement, or merely strike the offending clause if one portion of a contract is unlawful. Sometimes a party will insert an illegal term into a contract to “bluff” the other party into accepting the term.
A party might place an illegal clause into a contract to sabotage the document. A South Carolina business attorney can talk to you and offer guidance in your situation.
What Is Severability?
The term severability refers to a situation in which one part of a contract is improper, and the court strikes that portion of the agreement but keeps the rest of the document. Many contracts contain a severability clause as the standard language. With frequent changes in the law, a perfectly legal contract term could become illegal with little if any notice.
How Important Is the Unlawful Term?
Let’s say that a company had a contract to supply computer chips to a corporation in another country. The agreement was legal when they negotiated and signed the document. Down the road, Congress makes it illegal to sell those chips to businesses in that country. Merely severing clauses from the contract will not be sufficient. The contract now has an illegal purpose and will be void.
Does it Matter Who Wrote the Contract?
One party might insert clauses into a contract, knowing that the terms are unlawful. For example, a large corporation has employment contracts that require the employee to waive the right to worker’s compensation benefits if they get hurt on the job. The employee had no bargaining power, and the employer refused to remove the illegal term.
When the employer finds someone equally qualified who will work for a lower salary, the boss tries to void the contract with the original employee on the grounds of the illegal term. The courts are unlikely to let the employer benefit from its act of writing a contract with unlawful language. Instead, the court might construe the agreement in favor of the non-drafting party; in other words, the party who did not write the contract, the initial employee.
The Judge’s Options
When faced with unlawful language in a contract, the judge generally has three options:
- Sever or strike the unlawful clause from the contract and enforce the rest of the agreement
- Edit the illegal or unenforceable term to something legal and reasonable, or
- Void the entire agreement.
The facts of each situation will determine which option the judge chooses. By way of example, if the judge finds that the terms of a non-compete clause in an employment agreement are unreasonable, the judge could “line through” that language, removing the improper limitations on the employee. Another option is that the judge could rewrite that portion of the contract to something reasonable and enforceable. Also, the judge could decide to void the entire agreement.
A South Carolina business attorney can review your business agreements and draft documents for your company. Call our office today to schedule a consultation