The blue pencil doctrine is the common law principle allowing Australian courts to sever (strike out) the unreasonable or unenforceable parts of a restraint of trade clause while enforcing the remainder, provided the severance does not require rewriting the clause or changing its meaning. The doctrine applies to grammatically severable provisions, not to the substance of unreasonable terms.
In NSW, the Restraints of Trade Act 1976 extends the court’s power beyond mere severance, allowing the court to read down or modify an unenforceable restraint to make it reasonable. This NSW-specific power is unique within Australia.