Arizona Contract Law: What is a Severability Clause?

In our new series of articles on Arizona contract law, we will be focusing each article on a single, prevalent contract clause, its purpose, and real world meaning.

Severability clauses tell a court that even if the contract has unenforceable terms, the parties intend that the remaining agreement should stay in effect. If there are mistakes such as typos, omissions, illegal or otherwise unenforceable provisions, the court can strike that section and still enforce the rest. Without such a clause, where there is an unenforceable term, the court might nullify the entire contract.

Typical language for such a clause is:

Severability. Every provision of this Agreement is intended to be severable.  If any term or provision is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement.

The power of a severability clause was recently illustrated in Rizzio v. Surpass Senior Living LLC, 2020 WL 479342.

In the Rizzio case, Deborah Georgianni signed a contract with a senior care center on behalf of her mother, Concetta Rizzio. Rizzio was later hospitalized after a fellow resident had allegedly attacked her, and Georgianni sued the care center on her mother’s behalf.

The care center moved to compel arbitration based on their contract. Georgianni challenged. She said she was not even aware of the contract’s existence. When she had signed the document packet they provided, she had been “hyper-focused” on her mother’s care, and the care center’s representatives never mentioned it to her. Like so many of us, she simply signed whatever was put in front of her and trusted it was in her mother’s best interest.

In fact, the arbitration clause required residents to not only arbitrate, but also to pay for any arbitration, including the facility’s attorneys’ fees and costs, whether the resident won or lost.

Based on the totality of the circumstances, the Superior Court found the contract unconscionable, and denied the care center’s motion to compel arbitration.

However, on appeal, the Appellate Court reversed the Superior Court’s decision, holding that the agreement was not unconscionable. The Court said Arizona law does not require a party to verbally explain a contract, and a signer’s later regret for signing a contract without reading it does not make it unconscionable. Instead, the Court said, the cost-shifting portion of the agreement was the only unconscionable piece because it was essentially a prospective penalty for residents.

Because the contract had a severability clause, the Appellate Court severed the unconscionable cost-shifting provision and left the rest of the contract in place.

“Blue pencil” rule:

Unlike some states, Arizona courts do not rewrite flawed contract provisions. Wording is therefore paramount: if a contract section cannot simply be struck (i.e. “blue-penciled”) but would have to be rewritten (i.e. “red-penciled”) to be enforceable, a court will not enforce the contract.

This is best understood as an interpretive policy meant to discourage those with greater bargaining power from drafting contracts that are unilaterally advantageous, because then drafters could simply rely on the promise that a court would rewrite those terms, as needed, if the contract were ever challenged. Because most contracts do go unchallenged, this practice would tacitly encourage potential abuse of the rule. Valley Medical Specialists v. Farber, 982 P.2d 1277, 1286 (Ariz. 1999).

Contract law is complex and ever-changing. It is always good to have an attorney review any contract before you sign it, if possible. Even after signing, an attorney can clarify your rights under the contract and prevailing law. Our Tucson attorneys can help you at any stage, from drafting to enforcement. For more information, call us at 520-297-4411 or click on the CONTACT US link.

June 2020. Please note: this article is not intended to, nor does it, constitute legal advice, and is for informational purposes only. To obtain legal advice, please consult a qualified attorney.

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