ALL COMMERCIAL LAWYERS are familiar with the standard (or boilerplate) clause in commercial agreements that, in English, is called a ‘severability’, ‘severance’ or ‘invalidity’ clause and, in Chinese, is called ‘可分割性条款’.
Such a clause confirms the intention of the parties that if a provision in the contract is held to be invalid or unenforceable for any reason, it may be severed (or separated) from the contract and the remaining provisions in the contract will continue to be valid.
The concept that a provision – or a part of a provision – may be severed without affecting the validity of the rest of the contract is relevant in a broad range of circumstances, many of which have been discussed by earlier columns of Lexicon: non-complete clauses (see China Business Law Journal volume 6 issue 3: ‘Non-compete clauses’); exclusion clauses (see China Business Law Journal volume 6 issue 10: ‘Exclusion clauses’) and jurisdiction clauses (see China Business Law Journal volume 5 issue 9: ‘One-sided jurisdiction clauses’).
A number of interesting questions arise in respect of severability clauses, including the following: what is the impact of not including such a clause in a contract? How do courts determine whether an invalid provision can be severed from the rest of the contract? Can a court modify the terms of a contract itself? This column considers and compares the nature and effect of severability clauses in common law jurisdictions and under Chinese law.
COMMON LAW JURISDICTIONS
A typical severability clause in a contract governed by English law appears below:
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com.