Blue Pencil Provisions in Virginia Contracts
Lawyers come up with some strange names for things. It’s true. We plead. We allege. We say things like Notwithstanding, and aforementioned. We like funny words.
One name I am constantly explaining to clients is the working definition of ‘blue pencil provision.’
In contracts, a blue pencil provision allows the court, as a third party, to re-write terms of the contract should those terms be considered by the court to be unreasonable, over-broad, vague, etc.
So a contract may contain the following language:
Should a court of competent jurisdiction find that the scope or length of the restrictive covenants found in paragraphs I,II and III, agreed to by the parties, are overly broad and therefore unenforceable, the court shall have the authority to re-draft the provision such that it is more reasonable and therefore enforceable and binding on the parties.
When I see these provisions in a Virginia Contract, I cheer. I cheer because our judges don’t like these provisions. They are today, April 25, 2016, not enforceable. Which means, there is not a case in Virginia where a Circuit Court Judge, or Supreme Court Judge has agreed to re-write contractual terms between parties, even in the scope of contested litigation. They just won’t do it. They will not take out their awesome blue judge’s pencils, and re-write your contract, even if you want them to. Why? Because our judges believe as they are not parties to the contract, they can’t create and enforce terms to the contract. That traditionally, only a party to a contract can do that. I tend to agree with them, though side note, most of our neighboring states do allow blue pencil provisions.
So while I really don’t know why we call it blue pencil, and not red pencil or green pencil etc., when someone references a blue pencil provision – it is a reference to the part of the contract that gives a third party (typically a court or judge) the right to amend, change, shape or change your written agreement.
And why do I cheer when I see these? Because I believe that as Virginia Judges are asked to evaluate more restrictive covenants, I believe they will soon be bold enough to say the existence of a blue penciling provision in a Virginia contract is against public policy, and maybe just maybe, the judges will say a contract that violates public policy, is not enforceable. Or at the very least, if a provision is unenforceable because it violates public policy, the sister provision (the restrictive covenant that the court could have re-written had it so desired) is also unenforceable as it too, by association, violates public policy.
And then, on that great day, I can advise literally hundreds of non-compete clients that they may have a ‘get out of jail free card’ should their contract contain such language in the future.
So, I am smiling at the blue pencil provisions. No, our judges will not re-write your contract and maybe just maybe, the existence of such provision will serve as a poisoned pill. At leatst I am hoping.