Davis v Smith, [2011] EWCA Civ 1603

Can You Answer This?

Practice with real exam questions

Mark and Suzy entered into a complex partnership agreement to run a chain of fitness centers, including a clause that restricted both parties from managing any rival business for 10 years after leaving the partnership. Shortly after signing, Suzy discovered that the restriction could be legally unenforceable due to its excessive duration and geographic scope. In response, Mark insisted that removing or altering the restriction would defeat the partnership’s main objective of preserving exclusive customer relationships. However, the written agreement included a severability clause indicating that if any term was found invalid, the rest of the contract would remain in effect. In a subsequent dispute, both parties asked the court to determine whether the invalid clause could be struck out without harming the partnership’s essence.


Which statement best reflects how the court would determine if the restrictive clause can be severed under the principles illustrated in Davis v Smith [2011] EWCA Civ 1603?

Introduction

Severance, in contract law, allows the removal of unenforceable terms while keeping the rest of the agreement valid. Davis v Smith [2011] EWCA Civ 1603 explains the rules for severance, showing how to identify the parties’ original goals. The Court of Appeal’s decision states that intentions must be judged based on the contract’s language and context at the time it was made, not later personal opinions. To decide if severance applies, courts must check whether removing the invalid term changes the agreement’s main goal.

The Objective Test of Intention in Davis v Smith

The Court of Appeal in Davis v Smith used an objective method to identify the parties’ intentions about severance. The court ignored arguments about the parties’ views after signing. It focused on what a reasonable person, knowing the facts both parties knew when making the contract, would see as their intentions. This method keeps contract interpretation consistent and limits disputes caused by biased later claims.

The "Blue Pencil" Test and Its Application

The “blue pencil” test lets courts delete unenforceable terms without changing the rest of the text. However, courts cannot add or rearrange words in ways that change the agreement’s main goal. In Davis v Smith, the Court of Appeal used this test strictly, stating that severance fails if removing the invalid term makes the contract useless or changes its core purpose. The case shows why precise drafting matters to avoid severance disputes.

Severance and the Preservation of Contractual Purpose

A major issue in severance is whether removing a term destroys the contract’s main aim. If the invalid term is so important that its removal leaves the rest of the contract without effect, severance is refused. Davis v Smith confirms this rule, showing courts will not alter agreements to save them from unenforceable terms.

Examples of Severance

For example, a business sale contract with an unreasonably wide non-compete clause might allow severance if the invalid area can be removed without destroying the clause’s fair goal. But if the entire non-compete clause is unenforceable and its removal leaves no protection for the buyer, severance would be refused.

The Effect of Davis v Smith on Contract Drafting

Davis v Smith provides lessons for drafting contracts. It emphasizes using clear, exact, and legal terms. Adding a severability clause—stating that the rest of the contract stays valid if a term is unenforceable—can help argue for severance. But such clauses are not final; courts will use the principles from Davis v Smith to decide fairness.

Conclusion

Davis v Smith [2011] EWCA Civ 1603 explains severance rules in English contract law, focusing on objectively judging the parties’ original goals. The case shows the limits of the "blue pencil" test and the need to keep a contract’s main purpose. By pointing out risks in unclear drafting, Davis v Smith strengthens the need for exact terms and severability clauses where suitable. The decision remains a major source for resolving severance issues, showing how individual terms relate to the contract’s overall goals. Using the principles from Davis v Smith helps stop entire agreements from failing due to single unenforceable terms.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of December 2024. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

Practice. Learn. Excel.

Features designed to support your job and test preparation

Question Bank

Access 100,000+ questions that adapt to your performance level and learning style.

Performance Analytics

Track your progress across topics and identify knowledge gaps with comprehensive analytics and insights.

Multi-Assessment Support

Prepare for multiple exams simultaneously, from academic tests to professional certifications.

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal