What Is Jointly and Severally?
Let me explain what 'jointly and severally' means—it's a legal term that describes a partnership or group where each individual shares responsibility equally.
For instance, if a judge finds several people jointly and severally liable for a plaintiff's injuries, you could go after any one of them for the full judgment amount.
The 'severally' part suggests that some agreements might limit liability proportionally—for example, a partner with a 10% stake in a business would only be liable for 10% of the total.
People often call this joint and several liability.
Key Takeaways
You need to know that 'jointly and severally' means all parties are equally on the hook for the full agreement terms.
In a personal liability scenario, any named party could be chased for the entire judgment repayment.
That said, some contracts divide financial responsibility proportionally.
In underwriting, all involved firms share responsibility for unsold shares equally.
Other liability types exist, like severally, where partners aren't liable for each other's obligations.
Understanding Jointly and Severally
In a binding legal document, 'jointly and severally' spells out the shared responsibility for each party.
It boils down to this: all named parties must perform every required action under the agreement.
Take a bank loan of $100,000 to two people jointly and severally—both are equally responsible for repaying the full amount, and the bank can pursue either one for everything if it defaults.
The one who pays up can seek recourse from the other, but only after the bank gets its full repayment.
This applies in legal contexts too, like employers being liable for employee injuries on the job—if a construction worker gets hurt, all firm owners could be on the line.
Remember, a solid partnership agreement details everyone's responsibilities to avoid confusion when liabilities pop up.
Jointly and Severally in the Securities Industry
You'll see 'jointly and severally' a lot in securities, especially in underwriting agreements for new bond or stock issues.
Here, a firm agreeing to sell part of the issue is responsible for that portion plus a share of any unsold securities.
So, if you commit to a 30% stake jointly and severally, you must cover 30% of whatever remains unsold.
Each syndicate member handles leftover shares based on their stake size.
What Does Severally But Not Jointly Mean in an Underwriting?
In underwriting, 'severally but not jointly' means group members agree to buy a specific share portion without joint liability—they're not on the hook for others' unsold shares.
What Are the Disadvantages of Jointly and Severally?
One downside is it can be unfair—a partner with minimal involvement might end up carrying a huge damage burden from others' actions.
What Is Severally Liability?
Severally liability means each partner handles their own obligations—if one can't, it doesn't fall to the others.
The Bottom Line
To wrap this up, jointly and severally is about partners sharing equal responsibility for all business liabilities and actions, and creditors can pursue any partner for outstanding debts.
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