Severability clauses generally. The quick drafter will try to avoid that if a contract clause appears to be null or ‘void’ for whatever reason the remainder of the contract remains unaffected. Such attempt may well overlook the actual consequences and the fact that, typically, European member state laws will provide a much more thoughtful solution.
The law on nullities. The actual consequences may well be that the contract becomes unattractive or even loss generating. A thoughtful solution would address the reverse side. See for example the Draft Common Frame of Reference (DCFR), extensively providing that (a) the nullity of a contract must be reduced to the very minimum of what is absolutely necessary to give effect to the infringed statutory principle; and (b) the effects of such nullity must be minimised, with the power granted to the court to impose a remedy that is an appropriate and proportional response to the infringement, having regard to all relevant circumstances (see DCFR Art. II.7:301 ff.).
Section 3: Infringement of fundamental principles or mandatory rules
II. – 7:301: Contracts infringing fundamental principles
A contract is void to the extent that:
(a) it infringes a principle recognised as fundamental in the laws of the Member States of the European Union; and
(b) nullity is required to give effect to that principle.II. – 7:302: Contracts infringing mandatory rules
(1) Where a contract is not void under the preceding Article but infringes a mandatory rule of law, the effects of that infringement on the validity of the contract are the effects, if any, expressly prescribed by that mandatory rule.
(2) Where the mandatory rule does not expressly prescribe the effects of an infringement on the validity of a contract, a court may;
(a) declare the contract to be valid;
(b) avoid the contract, with retrospective effect, in whole or in part; or
(c) modify the contract or its effects.
(3) A decision reached under paragraph (2) should be an appropriate and proportional response to the infringement, having regard to all relevant circumstances, including:
(a) the purpose of the rule which has been infringed;
(b) the category of persons for whose protection the rule exists;
(c) any sanction that may be imposed under the rule infringed;
(d) the seriousness of the infringement;
(e) whether the infringement was intentional; and
(f) the closeness of the relationship between the infringement and the contract.II. – 7:303: Effects of nullity or avoidance
(1) The question whether either party has a right to the return of whatever has been transferred or supplied under a contract, or part of a contract, which is void or has been avoided under this Section, or a monetary equivalent, is regulated by the rules on unjustified enrichment.
(2) The effect of nullity or avoidance under this Section on the ownership of property which has been transferred under the void or avoided contract, or part of a contract, is governed by the rules on the transfer of property.
(3) This Article is subject to the powers of the court to modify the contract or its effects.
The root cause of a contract provision being null or void typically relates to fundamental matters of a regulatory nature such as competition law or matters of quality, 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 well prefer to be able to renegotiate or terminate their arrangement. If a nullity applies to only one jurisdiction, this will not necessarily affect the applicability in another jurisdiction. Look at the following example of a severability provision:
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.
You will probably note two significant elements that are not necessarily addressed under a national law. First, there is a cross-border element that 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 an appropriate and proportional replacement clause. For more observations on severability clauses see Drafting International Contracts by Marcel Fontaine and Filip De Ly[1].
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) anyhow. Hence, no need for specific stipulations in that respect.
[1] Marcel Fontaine and Filip De Ly, Drafting International Contracts – An analysis of contract clauses, p. 167 ff., reflecting the work of the Groupe de travail contrats internationaux (an international Working group on international contracts).
