Legal Definitions - divisible contract

A divisible contract (also known as a severable contract) is an agreement where the performance of the contract can be broken down into separate, independent parts, and the payment or consideration for each part is also distinct and apportioned to that specific part. This means that if one part of the contract cannot be performed or is breached, the remaining parts can still be performed and enforced independently.

The key characteristic is that the parties intend for the contract to be treated as a series of smaller, separate agreements, rather than a single, indivisible whole. This allows for partial performance and payment, and can limit the impact of a breach to only the affected portion of the agreement.

• Example 1: Home Renovation Project

  A homeowner hires a contractor to perform several distinct renovation tasks: first, to remodel the kitchen for $20,000; second, to paint the entire interior of the house for $8,000; and third, to build a new deck for $12,000. The contract specifies separate payment schedules for each phase upon completion and approval of that specific task.

  How it illustrates the term: This is a divisible contract because each renovation task (kitchen, painting, deck) is a distinct unit of work with a separate price. If the contractor successfully remodels the kitchen and is paid, but then fails to complete the painting, the homeowner can still enforce the kitchen portion of the contract and seek remedies only for the uncompleted painting work, rather than having the entire contract invalidated.

• Example 2: Software Development Agreement

  A small business contracts with a software company to develop a new custom application. The agreement outlines three distinct modules: Module A (customer database) for $15,000, Module B (inventory management) for $25,000, and Module C (sales reporting) for $10,000. The contract states that payment for each module is due upon its successful completion and testing.

  How it illustrates the term: This contract is divisible because the software development is broken into separate, functional modules, each with its own price. If the software company delivers and receives payment for Module A and Module B, but then encounters insurmountable technical difficulties with Module C, the business still retains and has paid for the functional parts of the application, and the dispute would only pertain to Module C.

• Example 3: Professional Training Services

  A company engages a corporate trainer to conduct a series of workshops for its employees. The contract specifies separate fees for each workshop: a "Leadership Skills" workshop for $3,000, a "Team Collaboration" workshop for $2,500, and a "Conflict Resolution" workshop for $2,000. The company agrees to pay for each workshop immediately after its successful completion.

  How it illustrates the term: This arrangement constitutes a divisible contract because each workshop is a distinct service with a separate, allocated fee. If the trainer successfully delivers the "Leadership Skills" workshop and is paid, but then becomes unavailable to conduct the "Conflict Resolution" workshop, the company has still received and paid for the first service, and the contract's enforceability for the other parts remains intact.