Cut it out: the beauty of a severance clause.

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It is said that the law is the fabric of society, without it we would have nothing but unruly human beasts roaming the earth’s surface. However in business, sometimes the law actually gets in the way. Yes you read that right. English law believes in freedom of contract, however there is always a risk that a contractual clause may be invalid or illegal – e.g. it offends against public policy or competition law – often this is the case with non-compete clauses and restrictive covenants (clauses that tell a party what they cannot do). This is why clever lawyers make use of “severance clauses” when drafting contracts.

A severance clause (or severability clause) tries to mitigate the damage that may be caused by the interference of the law in a contract. How does it do this? It ensures that a contract will continue to be enforceable even if one of its terms is found to be illegal, invalid or unenforceable. Severance clauses assist in helping a contract to SURVIVE. Pretty cool right? For example, if a contract for the sale and purchase of various vegetables is suddenly subject to a new law stating that no one can sell or purchase carrots (ridiculous but it’s an example), why should the contract die just because the sale and purchase of carrots is illegal? A severance clause would carve out or sever the ILLEGAL part of the contract and require the parties to continue to perform the remaining LEGAL part of the contract i.e. the selling and purchasing of courgettes (zucchinis), potatoes, aubergines (eggplants), peas and so forth. In other words, business shouldn’t stop if it doesn’t have to stop. This is why a severance clause is simply beautiful.

Let’s look at an example of a basic severance clause:

If a Clause of this Agreement is determined by any court or other competent authority to be unlawful and/or unenforceable, the other Clauses of this Agreement will continue in effect.

The above clause severs the illegal part of the contract. BETTER versions of a severance clause will try to sever as little of the illegal clause as possible. Here is an example:

If any unlawful and/or unenforceable Clause would be lawful or enforceable if part of it were deleted, that part will be deemed to be deleted, and the rest of the Clause will continue in effect (unless that would contradict the clear intention of the parties, in which case the entirety of the relevant Clause will be deemed to be deleted).

Even BETTER severance clauses will give the parties the option to modify or correct the would be severed clause, in order to make it legal. Here is an example:

If any provision or part-provision of this agreement is or becomes invalid, illegal or unenforceable, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision shall be deemed deleted. Any modification to or deletion of a provision or part-provision under this clause shall not affect the validity and enforceability of the rest of this agreement.

If  any provision or part-provision of this agreement is invalid, illegal or unenforceable, the parties shall negotiate in good faith to amend such provision so that, as amended, it is legal, valid and enforceable, and, to the greatest extent possible, achieves the intended commercial result of the original provision.

Severance clauses are usually included in any contract as a boilerplate (standard) clause – however don’t take that for granted. Go check your contracts and flag this magical clause with your lawyer. Get your lawyer to advise you – could your severance clause be better? Do not rely/use the examples in this post, they are EXAMPLES. Your lawyer will draft a robust severance clause tailored to YOU.

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How your business can help the world.

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Ok so what does business facilitate unintentionally, every day that can assist in breaking down barriers, prejudices, discrimination etc in one swift swoop…they bring PEOPLE, all kinds of crazy, different people together! Admittedly the intention isn’t initially to get everyone to hold hands and appreciate their various differences but it certainly ends up that way. You see in our common quest to make money, we end up fostering relationships with everyone and anyone because money doesn’t care about gender, sexual orientation, faith or race and that’s THAT. Anyone can make it.

Manufacturers and suppliers are all over the world, we drop an email to China, New York or London with a click. If there is a big event in our industry, we doll ourselves up and go and meet the cool kids with eager hand shakes and smiles of “give me your business“. In business, we don’t care whether your hand is black or white, if you are paying we will shake it and if you are talented we will hold it. Take McDonalds for example, there is a restaurant in pretty much every country with an airport. I’ll never forget the joy of seeing those golden arches after almost 3 months of eating spicy food (delicious as it was) for breakfast, lunch and dinner in beautiful India. I ate three McChicken sandwiches in one go at a familiar table, in a familiar decor and with a familiar service, nevertheless they also had masala fries and tandoori nuggets; amazing. McDonalds know that DIVERSITY and CULTURE is good for business.

Even the legal industry in the UK has recognised this. Traditionally pale, stale and male with degrees from Oxbridge only, the English legal profession is now more diverse than ever. In fact, globally, major law firms are continuously expanding all over the world, recruiting from oversees and right round the corner. Just go on to the website of Clifford Chance, Norton Rose Fulbright or Linklaters and have fun clicking on the sites of their many global offices. Even the ordinary pop star knows that culture and diversity pay, if you ever meet Beyonce, ask her where she HASN’T performed or Justin Bieber how many endorsements he has done in Japan! Ok you get it, but how does this HELP?

You see, in recognising that diversity and cultural awareness is good for business you help the world to stay connected and to integrate. Entrepreneurs, businesses and startups are key tools in building a community of human beings and not a community of “us and them” which politicians love to exploit. Imagine how much more we can achieve if we actively encouraged diversity and it wasn’t just a by product money making. If you own a restaurant and your beef suppliers are a farm in Scotland, a work trip to Scotland could really encourage relationships and mutual understanding. Or if you manufacture your clothes in China, going over and seeing with your own eyes, the place where your stock begins could encourage your Chinese team and also enlighten you to improving conditions for workers over there (this is an issue for another post on another blog). I’m sure this can all be put more elegantly but you get the gist right. I did a post on Corporate Responsibility which touched upon this BUT this post isn’t about your branding or your promotion its about YOU consciously making your company an educator to its employees and a friend to its customers; that’s how your business can help the world.

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