Severable contract

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A severable contract is a contract with two or more agreements that are distinct enough to where the unenforceability or breach of one does not nullify the enforceability of the other. 

Generally, a party who fails to fully perform a contract cannot recover for part performance. However, if the contract is severable, then the party may recover for part performance from the severable agreements. For example, in Lowy v. United Pacific Insurance Co., the California Supreme Court held that where a contract with real estate developers required the contractor to perform two kinds of work, excavation and grading work on lots and streets and thereafter, street improvement work; the contract was divisible and the fact that the contractor did not perform street improvement work did not prevent his recovery for work done on grading and grade excavation.

In addition to severable contracts in the context of part performance, courts may also determine whether contracts are severable in the context of finding certain terms of the contract unenforceable as a matter of public policy. For example, in Chun Ping Turng v. Guaranteed Rate, Inc., the Northern District of California, summarizing California law, stated that the presence of a severability clause in a contract makes severance of unconscionable contract provisions more feasible. That is, courts may be more willing to strike down contract provisions that cut against public policy if they can be severed from the contract.

[Last updated in April of 2021 by the Wex Definitions Team]