contract-law
In a severability clause, what effect does limiting an unenforceable term have?
<p>This question is about severability in a contract. Some severability clauses contain a second part stating that if limiting a term would make it enforceable, then the term should be limited as so. Is this valid and does it work? Is an example where this works would be:<br>
-A contract has a severability clause “if limiting an unenforceable term would make it enforceable, the term shall be construed as so limited”<br>
-The contract has a term that charges $50 for some administrative fee<br>
-An applicable law exists that says $20 at most can be charged for   administrative fees<br>
-The severability clause  makes it so that $20 can be charged, without it   the whole fee would be waived</p>

<p>Would the whole fee be waived if the severability clause was worded as “if a term is found to be unenforceable, the remainder shall remain in affect”?
Here is an example of one I found in a real contract</p>

<blockquote>
  <p>If any part or parts of this Lease shall be held unenforceable for any
  reason, the remainder of this Agreement shall continue in full force
  and effect. If any provision of this Lease is deemed invalid or
  unenforceable by any court of competent jurisdiction, and <strong>if limiting
  such provision would make the provision valid, then such provision
  shall be deemed to be construed as so limited</strong>.</p>
  
  <p><a href="https://www.hudexchange.info/resources/documents/ExampleResLeaseWithPurchaseOption.pdf" rel="nofollow">https://www.hudexchange.info/resources/documents/ExampleResLeaseWithPurchaseOption.pdf</a></p>
</blockquote>

<p>Also what’s the difference between unenforceable, illegal and an invalid term? Is this redundant?</p>

<p><strong>TL;DR</strong> what’s the difference between the clauses “if a term is found to be unenforceable, the remainder will remain in affect” and “if limiting an unenforceable term would make it enforceable, the term shall be construed as so limited”. Could you have the second by itself, or does it require the first?</p>

<p>There are two terms going on. Putting them into plainer English (and imagining an argumentative lawyer and a hidebound judge!) will show why they are there.</p>

<p>One says that if a single term of the contract is found to be prohibited and against the law to have in a contract, the rest of the contract is not to be affected (the defective term won't make the whole contract illegal and unenforceable), just that one term is affected. </p>

<p>The other says, if the term only became illegal/unenforceable because of something "going too far", then it won't be struck out at all, it will be replaced with whatever the court considers "as far as it could go and still be valid".</p>

<p>Examples (extreme but should help explain!):</p>

<p>You agree to borrow $500 for rent against a pawned ring, and to repay on the following terms (no idea why but anyhow!):</p>

<ol>
<li>You are charged interest at $200 a day until repaid</li>
<li>If you don't repay me by the due date you have agreed to become my slave, kill the president, and forego any human rights you may have.</li>
</ol>

<p>The court says the 2nd of those terms is illegal - you can't give up human rights or make a legally binding contract to murder even if you tried to agree to do so. But because the clause is "severable", the rest of the contract isn't made illegal just because that one term is, so you still have to repay me, I still have to give you back your pawned ring if you do, etc.</p>

<p>The court also says the 1st of those terms is illegal, because the law in this state prohibits loan interest over 30% p.a. without a doctors certificate of sanity. The judge rules that while  interest is legal, $$200 a day breaks the law and is excessive (unlike the other clause which was illegal and couldn't be fixed by "tweaking" it in this kind of way). The illegally high $200 a day is replaced by the legal (but still high) 30% p.a. rather than just being removed from the contract (which would, unreasonably, leave you without any obligation to pay any interest at all).</p>
