The phrase “joint and several liability” is often used in contract matters. This type of liability occurs when more than one party is involved in a contract and where both joint liability (that of all the parties to the contract) and several liability (that of each individual party to the contract) promise the action in the contract (ex. payment of the debt). It is important that you understand the additional commitment that you are making when you agree to joint and several liability because you may find yourself solely responsible for payment under the terms of the contract.
If the terms of the contract are not fulfilled, the injured party (i.e. landlord, vendor, or bank) has the ability to seek a legal remedy from all the parties involved (joint) or each individual party (several). If your partners are unable to pay, the injured party can look to you individually for payment of the whole debt. The injured party has the right to collect all of its damages from any one party. Then the party who gets stuck with the bill has the burden of seeking contributions from the other parties to the contract. In other words, if two parties have “joint and several liability,” this means that both of the parties are in essence individually responsible for the entire amount of the contractual obligation.
If you are asked to sign an agreement as one of the parties that will be jointly and severally liable, take steps to protect yourself. Try to negotiate an agreement that does not call for joint and several liability or ask that your individual liability be limited and separately stated. If your only option is to sign the agreement with a joint and several liability provision, make sure that your co-party is responsible and will pay the obligation. Remember, if he or she does not hold up their end of the bargain, you may have to pay the entire bill.
Another option is to prepare a separate written agreement with your co-party defining responsibility for the contractual obligations. With a written agreement, if your co-party defaults and you are forced to pay the entire amount, you will have a better chance of collecting your co-party’s share of the obligation in a lawsuit.
Joint and several liability provisions are very common in many different types of contracts. It provides added protection to the other party that they will be able to collect from someone for the debt owed. Each party that signs a contract should appreciate that “joint and several liability” means that each of the parties are in essence individually responsible for the entire amount of the contractual obligation.
Disclaimer: The information provided in this article is for general information purposes only and should not be construed as specific legal advice. The application of any matter discussed in this article to anyone’s particular situation requires knowledge and analysis of the specific facts involved.
Copyright © 2009, Peak Law Group, LLC
ALL RIGHTS RESERVED
Contact the Portland Attorneys at Peak Law Group for more information.
Like this post? Subscribe to my RSS feed and get loads more!