Background
No Waiver and Severability clauses are standard in consumer and commercial loan documents. Lenders added them to reduce ambiguity about enforcement and to limit the risk that a single court ruling will void an entire contract. In my 15 years helping borrowers and small businesses review loan documents, I’ve seen these clauses prevent disputes and preserve negotiated terms when a single clause is challenged.
How these clauses work
-
No Waiver: This clause says that if a lender accepts a late payment, fails to act on a breach, or delays enforcement, those actions do not amount to a permanent waiver of the lender’s rights. It protects the lender’s ability to enforce the contract later. Practically, it means a borrower shouldn’t assume leniency becomes a change to the contract unless there’s a separate written agreement that amends the terms.
-
Severability: This clause instructs a court to sever—or remove—any illegal, invalid, or unenforceable provision from the contract while leaving the remainder in force. The goal is to prevent one problematic clause from voiding the whole agreement.
Real-world examples
-
Payment leniency: A lender lets a borrower skip a payment without charging a fee. A No Waiver clause lets the lender later assess late charges or pursue remedies for subsequent breaches, unless the lender issued a written waiver.
-
Unenforceable penalty: If a court finds a specific penalty or fee unlawful, a Severability clause helps ensure the borrower still owes the remaining obligations—repayments, interest, and other valid covenants—rather than losing the entire loan’s enforceability.
Who is affected
Every borrower signing a loan agreement with these clauses is affected—from credit card holders to small businesses negotiating commercial loans. Commercial borrowers should pay special attention because commercial loan packages often contain many interlocking covenants; see our article on covenants in commercial loans for related issues (Covenants in Commercial Loans: Typical Requirements and Triggers: https://finhelp.io/glossary/covenants-in-commercial-loans-typical-requirements-and-triggers/).
Practical tips
-
Get waivers in writing. If a lender agrees to change enforcement or a deadline, ask for a written amendment or signed waiver. Oral promises rarely alter written contracts.
-
Read the entire agreement. Severability language varies; some clauses include fallback rules (for example, replacing an invalid clause with a materially similar one). Know what remedies remain if a court strikes a provision.
-
Keep records. Save emails or forbearance agreements that show the lender’s promises.
-
Ask for legal review. If a clause looks unusually broad or one-sided, have an attorney or trusted adviser review the language before you sign.
Common mistakes and misconceptions
-
Assuming leniency is a permanent change. Repeated forbearance does not equal a waiver unless the contract is amended or the lender issues a clear written waiver.
-
Believing severability always fixes problems. Some contracts are drafted so tightly that a court might decide a problematic clause goes to the heart of the deal; in those cases, the entire contract could still be voided despite a severability provision.
Related topics
- If you want to understand how loan terms are managed after closing, read our guide to loan servicing (The Borrower’s Guide to Loan Servicing: What Happens After Closing: https://finhelp.io/glossary/the-borrowers-guide-to-loan-servicing-what-happens-after-closing/).
Frequently asked questions
-
Does a No Waiver clause let lenders suddenly apply penalties after years of leniency? Possibly, yes—but courts also consider fairness and the specific conduct between parties. Documented amendments carry the most weight.
-
Are severability clauses enforceable in every state? Generally yes, but outcomes depend on contract language and state law.
Professional insight
In practice, the clearest protection for a borrower is a written amendment that changes contract terms. I’ve guided clients to secure short forbearance letters that explicitly state the lender’s rights are preserved while protecting borrowers from surprise enforcement actions.
Professional disclaimer
This article is educational and does not constitute legal or financial advice. For contract-specific questions, consult a qualified attorney or a licensed financial professional.
Authoritative sources
- Consumer Financial Protection Bureau, “Understanding your loan agreement”: https://www.consumerfinance.gov
- Investopedia, “Loan agreement clauses”: https://www.investopedia.com
Internal links
- Covenants in Commercial Loans: Typical Requirements and Triggers — https://finhelp.io/glossary/covenants-in-commercial-loans-typical-requirements-and-triggers/
- The Borrower’s Guide to Loan Servicing: What Happens After Closing — https://finhelp.io/glossary/the-borrowers-guide-to-loan-servicing-what-happens-after-closing/
By checking these clauses before you sign and getting any changes in writing, you reduce the chance of surprise enforcement or contract invalidation.
