Joint and Several Liability

It arises in four situations Nigerians meet regularly.

Partnerships. Partners are jointly and severally liable for the debts and obligations of the firm, which is one of the strongest arguments for incorporating instead.

Guarantees. Where several directors guarantee a company facility, the guarantee is normally expressed as joint and several, so the bank pursues whichever director has assets.

Co-defendants in tort. Where two or more parties cause the same damage, each may be liable for the whole of it, and the claimant can recover in full from either.

Co-tenants and co-borrowers. Two people who take a facility or a tenancy together are commonly jointly and severally liable, so one flatmate leaving does not halve the other's exposure.

The practical question when signing anything with somebody else is always the same: am I liable for my share or for all of it, and what happens if the other person disappears.

Partnership is where this catches people hardest, because it is rarely explained at the outset.

A Nigerian partnership is not a separate legal person, so partnership debts are the partners' debts and each partner is liable for the whole. A partner who contributed twenty percent of the capital and took twenty percent of the profits can be pursued for one hundred percent of a debt, and their personal assets are exposed. The internal profit sharing arrangement is irrelevant to the creditor.

Director guarantees are the second. Nigerian banks lending to small companies routinely take guarantees from all the directors, expressed as joint and several. In practice the bank pursues the director with the house, and the others may contribute nothing.

Contribution is the remedy, and it is only as good as the co-obligor's means. A director who pays a guarantee in full has a claim against the others, and that claim is worthless if they have nothing.

The practical protections are limited but real. Where you have bargaining power, ask for several liability, or for a cap on your exposure, or for a stated proportion. Where you do not, understand that a joint and several obligation means you may end up paying all of it, and price that into the decision.

A contribution agreement between co-guarantors, signed at the outset, at least documents the shares and makes recovery from the others easier later.

Three ways multiple obligors can be liable, with different consequences for the creditor and for them.

Several liability means each is liable only for their own share. The creditor must pursue each separately and bears the risk that some cannot pay. Best for the obligors.

Joint liability means the obligation is a single one owed by all of them together. Historically the creditor had to sue them all together, and a release of one could release the others.

Joint and several liability combines both. The creditor may sue them all together or any one of them alone, and may recover the whole from any one. It is the strongest position for the creditor and the standard in commercial documents.

When you sign anything alongside somebody else, look for which of the three applies. It is usually one line in the document and it decides whether you are exposed for a share or for everything.

Contribution is the only balancing mechanism, and it depends entirely on the other obligors having assets.

A creditor also has no obligation to spread the burden fairly. It can pursue the easiest target, and it usually does.

The paying party bears the cost and delay of recovering from the others, which is a second piece of litigation after the first.

And a release of one obligor can affect the position of the others depending on how it is drafted, which is why settlement with one co-defendant needs care.