(d) Severability (effect of invalid or unenforceable provisions)

The quick drafter will often try to avoid a situation whereby if a contract clause appears to be null or ‘void’, for whatever reason, the remainder of the contract remains unaffected. Often, the contract clause addressing such nullity is redundant because a context leading to such null or void agreement is exceptional. Moreover, such an attempt may well overlook the actual consequences and the fact that, typically, European laws provide a much more refined solution.

Legal Framework. The root cause of a contract provision being null or void typically relates to fundamental matters of competition law or regulations on safety, health or environment. If solving the nullity affects the pricing or other essentials of the contract, it impacts the entire contract, and the parties may prefer to be able to renegotiate or terminate their arrangement. If a nullity applies to only one jurisdiction, this will not necessarily affect applicability in another jurisdiction. For example, refer to the Unidroit Principles Article 3.3.1 (Contracts infringing mandatory rules) and also the severability clause below:

Severability. If any provision of this Agreement is found to be invalid or unenforceable in any jurisdiction:

(a)      the validity or enforceability of such provision shall not in any way be affected in respect of any other jurisdiction and the validity and enforceability of the remaining provisions shall not be affected, unless this Agreement reasonably fails in its essential purpose; and

(b)      the Parties shall replace such provision by one or more valid and enforceable provisions approximating the original provision as closely as possible.

However, there are two significant elements that are unlikely to be addressed under national law. First, a cross-border element may be present in a contract but typically not in a national civil code. Second, it is helpful to provide for an active obligation to negotiate a proper replacement clause.

Arbitration clause. If the entire contract ‘falls away’ because a key provision becomes null or void, all modern arbitration laws will deem an arbitration provision to be ‘several’ (valid and enforceable) anyway. Hence, no need for specific stipulations in that respect.