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Doctrine of Severability in Contracts

The document discusses the doctrine of severability in contract law. It provides an overview of key cases where this doctrine was applied, such as Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd, which established that unreasonable restrictions in non-compete agreements can be severed. The document also outlines rules for severability from Shin Satellite Public Co. Ltd. V. Jain Studios Limited, such as that severance is not possible if it eliminates the main intention of the agreement. Sections 57 and 58 of the Indian Contract Act are provided as examples incorporating the doctrine of severability.

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Parikshit Shukla
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252 views9 pages

Doctrine of Severability in Contracts

The document discusses the doctrine of severability in contract law. It provides an overview of key cases where this doctrine was applied, such as Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd, which established that unreasonable restrictions in non-compete agreements can be severed. The document also outlines rules for severability from Shin Satellite Public Co. Ltd. V. Jain Studios Limited, such as that severance is not possible if it eliminates the main intention of the agreement. Sections 57 and 58 of the Indian Contract Act are provided as examples incorporating the doctrine of severability.

Uploaded by

Parikshit Shukla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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- PARIKSHIT SHUKLA UID- 62

 A contract will rarely be totally illegal.


 In such cases, rendering the whole contract void is not
needed.
 Here, the doctrine of severability comes to use.
 Also called the Doctrine of Blue Pencil.
 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894]
AC 535.
 Nordenfelt, a manufacturer specialising in armaments, sold his
business to Hiram Stevens Maxim. They had agreed that Nordenfelt
would not make guns or ammunition anywhere in the world, and
would not compete with Maxim in any way for a period of 25 years.
 The Court found the latter part of the restriction unreasonable and
severed it to read: “for the next 25 years, would not make guns or
ammunition anywhere in the world.
 The part would not compete with Maxim in any way for a period of 25
years.
 Unreasonable part is cut off.
 This is probably the first case where the Doctrine of severablity was
used in contracts law.
 One of the major cases in which the Doctrine of
Severability was put to use is

Shin Satellite Public Co. Ltd. V. Jain Studios Limited, SC


2006.
 Agreement made for the services for providing the
satellite services by the respondent.
 Clause 23 of the agreement provided for Arbitration
between the parties in case of dispute.
 Clause 20 provided for severability of the invalid
provisions of the agreement.
 CK THAKKER laid down the following rules for the
severability.
 1. Severance is probably not possible where the
objectionable parts of the contract involve illegality and
not mere void promises.
 2. Must be possible to strike out the offending part.
 3. No severability if the severance wipes out the main
intention of the agreement.
 SUBSTANTIAL SEVEREABILITY NOT TEXTUAL
DIVISIBILITY.
 The following two sections of the Indian Contract Act, 1872 are clear
cut examples of Doctrine of Severability.
 SECTION 57 and SECTION 58
 SECTION 57 -Where persons reciprocally promise, firstly to do certain
things which are legal, and secondly, under specified circumstances, to
do certain other things which are illegal, the first set of promises is a
contract, but the second is a void agreement.
 SECTION 58 - In the case of an alternative promise, one branch of
which is legal and the other illegal, the legal branch alone can be
enforced.
 In this case while dealing with the Securities and
shares there was an inconsistencies with the RBI
guidelines.
 There were two parts of the transaction, one was the
ready part and one was the forward leg. From these
two the first part was done rightly and completely but
the second part remained to be executed.
 Neither the object nor the consideration of the ready
leg is illegal, unlawful or prohibited under section 23
of the Contract act. Forward leg is illegal under
Securities Control Regulation, Act.

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