When multiple people enter into a contract as one party, it is important to understand the entitlement and liabilities of each of the people involved. Everyone should be clear about the benefits that they would get to enjoy and the liability they will have to bear along with the extent to which they shall have to bear that liability.
When more than one person undertakes to serve an obligation or fulfil a debt they are said to be under a joint liability. However, when the contract states that the other party can choose to use either all or any of them to recover the debt, in case they fail to fulfil their obligation, it is said to be ‘joint and several liabilities.’
It denotes that all the persons who agreed to serve the obligation are jointly and severally liable. So if all of them fulfil their obligation, the burden is equally shared amongst all. But in case either of the people defaults in their obligation, the rest of the persons to the contract shall have to bear the burden of such default as well.
If you are thinking of leasing a real property with your business partner or planning to raise a home loan with one of your family members, then make sure to discuss your liabilities beforehand. It not only helps you get a clearer understanding of your obligation but also allows you to plan your finances accordingly. Some of the key features to better understand joint and several liability are:
One most common example of joint and several liability is husband and wife raising a home loan together. If in the future one of the spouses dies, the full responsibility to repay the entire loan shall fall on the other person who is still alive.
All the parties to a contract of joint and several liability are fully responsible to fulfil the obligation promised.
In case of a suit, the plaintiff may choose to sue just one or selected parties to recover their debt. In this case, the parties sued shall be liable to pay the entire debt on behalf of everyone involved. However, they are still entitled to recover the amount from the remaining parties.
If it turns out that all the parties liable turn out to be bankrupt or cannot fulfil their obligation anymore, the plaintiff shall not be able to recover anything.
