News & Noteworthy

Authored - NJ Contract Law Update - Finessing Severability
AUGUST 30, 2012 | Windels Marx - Commercial Litigation

Control Screening v. Technological Application, _ F.3d _, 2012 WL 3037842 (3d Cir. 7/26/12), is notable for rulings on several issues, including arbitratability and in personam jurisdiction. This article focuses on one additional aspect of the case: severability.

Contract drafters are faced with at least three options regarding "severability", for contract clauses deemed invalid or unenforceable in later judicial proceedings:

  1. Ignoring the issue in drafting, leaving the parties to the common law;
  2. Declaring that if a clause is deemed invalid or unenforceable, the remainder of the contract should be enforced; or
  3. Stipulating that if a clause is declared invalid or unenforceable, "a lawful provision as closely as possible approximating the stricken one shall be substituted in its stead", or words to that effect.1

In Control Screening, Option #2 seems to have been elected; and the Court was constrained (upon invalidating the clause) to apply controlling provisions of law, rather than (a) attempting to discern the parties' most likely intent, and (b) coming as close to that intent as possible. While the Court's ruling seems to follow the law, its need to do so stems from the parties' apparent decision not to include language under Option #3 above (assuming the Court would have enforced same). The ostensible result of this absence (in Control Screening) was an arbitration forum a continent removed from the parties' probable intent.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

1 See Alpert, Guide to New Jersey Contracts Law (NJICLE 2d Ed. 2011) (CD-ROM Section on "'Boilerplate' Provisions").

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