Wednesday, February 9, 2011

Contract Enforcability and Small Businesses

First, let me state that I am NOT an attorney. However, I've signed many, many contracts. I have written contracts (using past contracts as reference) and had an attorney review and edit them. I've also negotiated quite a few. Why am I saying all of this? Because I received the following question, which I subsequently answered: Will my small business contract would be voided if I did not follow the contract to the letter? For example, if my contract states that the client must pay upfront for service but instead, I wait and take payment from them after I finish the work? Does that void the contract? Here was my response:

You need to add language to your contract that states in essence "No portion of this contract is voided should section X or Y not be followed to the letter or any section or term be declared illegal or unenforceable." This clause or section is called Severability. Here's an actual excerpt from a legal document, courtesy of

"Or, If any provision of this agreement shall be declared by any court of competent jurisdiction to be illegal, void, or unenforceable, the other provisions shall not be affected but shall remain in full force and effect."

It's crucial to include this or a similar Severability clause. Otherwise, if you don't follow the contract EXACTLY as written in the contract OR if some term is deemed unenforceable, the entire contract could be voided exactly as you feared. If you include the Severability clause, the section where you reference payment arrangements or terms could be voided but the remainder of the contract would stand (i.e., be enforceable).

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