Severable Contract

Case Examples

• The intent of the parties governs whether a term is severable: In Stewart Title Guar. Co. v. Old Republic Nat. Title Ins. Co., 83 F.3d 735, 739 (5th Cir. 1996), the plaintiff sued the trustee of a bankruptcy for the rights to specific material under copyright law. The defendant argued that the entire contract was void due to the plaintiff copying materials. However, the court disagreed, stating that the parties intended that “the Use Rights and the Reproduction Rights be distinct and separate items.” Id . Therefore, Plaintiff could still enforce the other sections of the contract. Id.
• The plain language of the contract is used to determine the parties’ intent. In McFarland v. Haby, 589 S.W.2d 521, 523 (Tex. Civ. App. 1979), a beneficiary sued an estate for certain assets; however, the court found that the Will should be interpreted by its plain language to determine the testator’s intent as to disbursing their assets.
• A clause is not severable if it is essential to the parties’ intent at the time of the contract’s formation. In Sheline v. Dun & Bradstreet Corp., 948 F.2d 174, 176 (5th Cir. 1991), a company tried to enforce a separation agreement against a former employee after the noncompete clause was deemed unenforceable. However, the Court found that the noncompete clause was not severable as the employer intended it to be an integral part of the contract at the time of its creation. Therefore, the entire contract was unenforceable. Id.