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When Is a Contract Provision Unenforceable in Florida and How Does the Law of Severability Apply to Cases Like This?

Seeking to invalidate an agreement based upon a contract term that is allegedly unenforceable under the law can be tricky. The court may decide that the provision is, in fact, enforceable under Florida law. Alternately, the court may decide that the provision is unenforceable but that it is severable and, as a result, the larger agreement survives. Success, if you are seeking invalidation, lies in proving that the problematic provision was unenforceable and that it was integral to the larger agreement. If you find yourself challenging a commercial contract for this or any other reason, be sure you have representation from experienced South Florida commercial litigation attorneys on your side.

These issues of enforceability and severability were at the center of a recent dispute in South Florida. The agreement was a “subcontract” in which a construction management firm contracted for the subcontractor’s provision of doors in an assisted living facility. The subcontractor allegedly completed all of its obligations under the agreement. However, more than $100,000 remained due and unpaid, according to the door company.

So, the subcontractor sued the contractor and its surety in South Florida. Not wanting to go through a full civil trial, the contractor and the surety asked the judge to compel arbitration. The subcontract contained an arbitration provision that covered any “claim, dispute or other matter in question arising out of or related to this Subcontract Agreement.”

When defendants ask for arbitration, some plaintiffs will fight back by arguing that the arbitration clause does not apply to the situation at hand. In this case, the subcontractor argued that the arbitration clause in its agreement was void and unenforceable in general. Specifically, the subcontractor argued that a portion of the clause conflicted with the Revised Florida Arbitration Code. The argument didn’t succeed and the trial judge ordered the parties to arbitrate the dispute.

The subcontractor appealed and the appeals court partially agreed with its argument. The law of judicial review of arbitration decisions is very specific. Courts may only vacate awards and may only modify in very limited circumstances, which are expressly listed in the statute. The arbitration clause in the subcontract, however, explicitly said that courts had the authority “to address on review any failure by the arbitrator(s) to properly apply Florida la[w] to the dispute.” By including this language, the agreement expanded the courts’ authority beyond that permitted by the statute. Any time that happens, the provision is unenforceable.

That ruling, however, did not automatically trigger a right to proceed in civil court. There is the legal concept of severability. If an unenforceable provision within an agreement is integral to the agreement, then it cannot be severed and the agreement is unenforceable. If it isn’t integral, then it can be severed and only the segment that is contrary to the law is unenforceable, while the remainder of the arbitration agreement remains enforceable. The appeals court sent the case back to the trial court to perform that analysis regarding severability.

Whether you are seeking to invalidate an agreement or enforce an agreement, be sure you have the knowledgeable litigators you need on your side. The skilled South Florida commercial litigation attorneys at Stok Folk + Kon are here to help. Our experienced team has been skillfully helping business clients protect their interests for many years.

Contact us online or by calling (305) 935-4440 to schedule your consultation and find out how this firm can help you.

More blog posts:

The Importance of Clarity and Lack of Ambiguity in the Exculpatory Clause of Your Florida Commercial Lease Agreement, Florida Business Lawyers Blog, Sept. 17, 2018

What Are Your Options When it Comes to Pursuing a Third Party to Collect a Florida Judgment Owed to You?, Florida Business Lawyers Blog, Aug. 17, 2018