Notional Severance Law and Legal Definition

Notional Severance is the reading down a contractual provision so as to make it legal and enforceable. It allows a judge to reduce the scope of the offending provision so that it meets the legal norm. For example, reducing an illegal interest rate down to an acceptable level. Under notional severance, courts will be permitted to literally add new words to the parties’ agreement.

Four factors are to be considered when deciding between partial enforcement as opposed to the complete voiding of an offending agreement:

1) whether the purpose of the criminal interest rate offence would be subverted by severance;

2) whether the parties entered into the agreement for an illegal purpose or with an evil intention;

3) whether there was anything troubling about the relative bargaining position or conduct of the parties in reaching the agreement;and

4) whether there is any potential for the debtor to enjoy a windfall.