What does it mean to “jointly and severally”?
The legal word “jointly and severally” refers to a company or any other group of people where each person has an equal share of responsibility. A court might say several people are jointly and severally responsible for an injured plaintiff. Then, any of those people could be sued to pay the total amount of the ruling.
Some contractual deals may say that some parties have proportional responsibility, which is what the word “severally” means. One partner who has a 10% share in a business might be responsible for as much as their 10% investment. Joint and several responsibilities is another name for “jointly and severally.”
Understanding Together and Separately
The phrase “jointly and severally” clarifies that each side of an agreement is responsible for their part of the deal. It says that everyone named is responsible for doing everything that the deal says they must do.
If a bank gives $100,000 to two people jointly and severally, for example, both are responsible for ensuring that the bank gets the total amount of money back. If the loan fails, the bank may choose to go after either of them to get the total loan amount paid back.
In this case, the person who has to repay the loan can sue the other person in the contract, but only after the bank has been fully reimbursed.
If two people borrow $100,000 from the same bank, one might have to pay back the whole amount if the other doesn’t.
The laws also talk about joint and several responsibilities. For example, employers are usually responsible for accidents their workers get on the job. State law says that if a building worker breaks a pipe in a house, the homeowner and the company may be responsible for the damage.
Jointly and Severally in the Stock Market
People working in the securities industry often use the phrase “jointly and severally” in contracts to launch a new bond or stock issue. In this case, the company that agrees to sell a certain amount of the total issue is responsible for both that agreed-upon amount and an equal amount of the securities that haven’t been sold.
So, if two or more underwriters agree, they must sell 30% of any part of a new issue that is still not sold. If there are any extra shares, they belong to each member of the syndicate according to their stake size.
Conclusion
- When someone uses the phrase “jointly and severally,” it means that everyone is equally responsible for following through on the rules of a deal.
- A personal responsibility case, for example, can go after each named party to get the total amount they owe.
- Some contracts, on the other hand, divide up the money equally.
