A more thorough explanation:

Definition: The blue-pencil test is a legal standard used to determine whether to invalidate an entire contract or just the offending words. If it is possible to remove the offending words by simply crossing them out with a blue pencil, then only those words will be invalidated. However, if changing, adding, or rearranging words is necessary, then the entire contract may be invalidated.

Example: Imagine a contract between two parties that includes a clause stating that one party will receive $10,000 for their services. However, this clause is found to be illegal or unenforceable. If the rest of the contract can still be upheld without this clause, then the blue-pencil test would be applied. If the clause can be removed by simply crossing it out with a blue pencil, then the rest of the contract can still be enforced. However, if removing the clause would fundamentally change the nature of the contract, then the entire contract may be invalidated.

Another example: A contract between a landlord and a tenant includes a clause stating that the tenant must pay a late fee of $50 for every day that rent is late. This clause is found to be illegal or unenforceable. If the rest of the contract can still be upheld without this clause, then the blue-pencil test would be applied. If the clause can be removed by simply crossing it out with a blue pencil, then the rest of the contract can still be enforced. However, if removing the clause would fundamentally change the nature of the contract, then the entire contract may be invalidated.

These examples illustrate how the blue-pencil test is used to determine whether a contract can still be enforced even if certain clauses are found to be illegal or unenforceable. If the offending words can be easily removed without changing the nature of the contract, then only those words will be invalidated. However, if removing the offending words would fundamentally alter the contract, then the entire contract may be invalidated.