The distinction between joint, several, and joint and several liability or entitlement is sometimes overlooked, yet commercially significant when drafting contracts with multiple parties. When drafting a contract with multiple parties, it is important to establish the default position and consider whether it needs to be changed.
The general presumption is that co-debtors are jointly liable, in equal shares, unless the contract provides otherwise. An example of an exception to this presumption is the liability of partners, who are jointly and severally liable.
If the contract clearly, by express words or necessary implication, imposes liability in solidum on co-parties, they are jointly and severally liable, in other words the creditor can choose who to claim the full amount from. A joint and several debtor who has been obliged to pay the full debt, or more than their proportionate share, has a claim against the other debtors for their proportionate share of the debt.
Several liability occurs when, in effect, a number of contracts between different parties are combined in one contract. For example, a number of different parties subscribe for shares in a company and this is captured in a single document, but each subscription is a distinct contract.
Keep this quick reference guide to hand when drafting or reviewing your next multi-party contract:
|
Term |
Meaning |
Jointly liable | Each debtor is liable for its share of the one debt (ordinarily the default position) |
Jointly and severally liable (in solidum) | Each debtor is liable for the full amount of the same debt |
Severally liable | Each debtor is liable for a separate debt |
Jointly entitled | Each creditor can claim its share of the one debt (ordinarily the default position) |
Jointly and severally entitled (in solidum) | Each creditor but not all creditors can claim full payment of the same debt |
Severally entitled | Each creditor has a claim for a separate debt |
This content is provided for general information only and does not constitute legal or other professional advice. While we have taken reasonable steps to ensure it is accurate as of the date of publication, the legal position may be subject to change. Webber Wentzel accepts no liability or responsibility, to the extent allowed by law, if any information is, for any reason, incorrect or corrupted; or for any loss or damage that may arise from reliance on information in this document.
The application of legal principles depends on the specific facts and circumstances of each matter. For advice on your specific situation, please contact your usual Webber Wentzel contact.
