Everything You Need to Know About Severability Clauses in a Construction Contract

adminMechanics Lien

severability clause

To err is human, says the old adage and, arguably, few other proverbs capture the essence of human nature with equal accuracy and precision. Of course, some errors are more consequential than others. As a contractor in the construction industry, you might have already learned the hard way that an error in a construction agreement may spell terrible consequences for you and your business. That’s why contracts often contain wording that provides a way to amend mistakes made when the contract was drafted. This way out is called a severability clause also known as a saving clause. In this article, you will learn what severability clauses are, what protections they can offer, and whether there are circumstances in which you may want to avoid a standard severability.

Severability Clauses Explained

Negotiating the terms and provisions of a construction contract is a time-consuming yet important step towards successful resolution of a project. Imagine, however, that a contract that has taken many days or even weeks to negotiate and draft is suddenly found to contain one or more provisions that are invalid – but only after you and the project owner have already signed the agreement!

Sometimes the controversial clause may go directly against an established state or federal laws; other times, the proverbial devil may be in the smallest details such as a spelling error, a misplaced punctuation mark, or a grammatical mistake that entirely change the meaning of the clause in question. In any case, a contract containing an invalid provision runs the risk of rendering the entire agreement null and void. This, in turn, may result in a loss of money, time, and resources with serious consequences to both parties that are inconvenient at best and utterly disastrous at worst.

Severability clauses are added to contracts to prevent such a scenario from occurring. Their main purpose is to protect the validity of a contract, so that it may remain in force as a whole even if one or more of its provisions are found to be invalid. A typical severability clause will contain saving language – or in other words, a statement affirming and preserving the validity of the rest of the contract even if one or more clauses are found to be invalid. A severability clause, for example, may state that the invalid part of the contract should be rejected and deleted altogether. However, it may also provide for ways to amend the error. This will allow the previously invalid clause to stay in the contract – but in a different form.

 

Why You Should Be Cautious of Severability Clauses

Caution is advised and must be exercised when a severability clause is included in a construction contract, as the application of such clauses in their most basic form can bring undesirable results. Let’s consider one example.

A provision of the contract detailing fees and compensation for the contractor’s labor costs is found to be invalid. The contract contains a standard severability clause which states that any unlawful or invalid term of the contract shall be deleted, but the rest of the contract shall be preserved as is. This may potentially lead to a situation where the contractor is still bound by their contractual obligations to perform the work as agreed while no longer being entitled to payment. This is a position no one wants to find themselves in.

While the example mentioned above may seem extreme, it does highlight the need to avoid standard severability clauses that appear in most typical construction contracts. Disadvantageous situations can be avoided by introducing modifications to the wording of the severability clause in order to better adjust the clause to the specific needs of any given project. For example, a severability clause may identify provisions of the contract that are deemed essential to the purpose of the agreement, that their invalidation would automatically invalidate the entire contract as well.

What Can You Do?

In order to avoid negative consequences of badly written severability clauses and take full advantage of their legal potential, you may need to ask a lawyer for professional advice and consultation on a contract you’re about to sign. Our attorneys at National Lien & Bond will be able to review your contract and advise on any potential disadvantageous result or risks its provisions may entail. Contact us today to schedule your free consultation.

NLB Gets You Paid and Back To Work

This blog is for educational purposes only and not intended for legal advice.