(Joint and several) liability

(Joint and several) liability

Joint and several liability can arise from the law as well as from a judgment. In this situation, the issue is that multiple debtors can be held liable for the same debt. Joint and several liability means that one can be personally compelled to fulfill the entire obligation.

When you want to hold someone liable for a tort or breach of contract, it means that that person is also guilty of the act committed. It is also possible to hold someone else liable for the damage, but that that person did not cause the damage themselves. This is also known as 'qualitative liability' (strict liability). For example, this could mean that the employer is liable for the damage caused by the employee.

We have extensive experience in contractual and non-contractual dispute resolution through providing advice, conducting negotiations, or litigation. We have an experienced team of lawyers and legal experts in the field of contract law. Please contact us to discuss the possibilities.

When does joint and several liability arise?

Joint and several liability is the exception to the general rule that a debt is divided among debtors. Pursuant to Article 6:6, paragraph 2 of the Dutch Civil Code (BW), debtors are jointly and severally liable when this follows from the law, from custom, or from a legal act, or when the performance is indivisible. If joint and several liability exists, the creditor may, pursuant to Article 6:7 BW, hold each debtor liable for the entire amount; if one pays or performs, the other debtors are discharged vis-à-vis the creditor.

In practice, joint and several liability arises in these situations, among others:

• General partnership (vof) – each partner is jointly and severally liable for the obligations of the firm pursuant to Article 18 of the Commercial Code.
• Joint assignment – ​​if an assignment has been given jointly to two or more persons, they are each liable for the entire amount of a failure pursuant to Article 7:407 paragraph 2 of the Dutch Civil Code.
• Concurrent tort – if multiple parties jointly cause the same damage, they are jointly and severally liable pursuant to Article 6:102 of the Dutch Civil Code; in the case of group conduct, Article 6:166 of the Dutch Civil Code also applies.
• Contractually stipulated joint and several liability – in financing, purchase, and cooperation agreements, joint and several liability is often expressly agreed upon.

Whether it concerns an international group entering into joint financing or the baker on the corner running a general partnership with a partner: the question of whether you are liable for the entire debt or only for your share determines your financial risk. Our contract lawyers and in-house counsel assess this position meticulously.

Recourse: the mutual obligation to bear the burden (Article 6:10 of the Dutch Civil Code)

The fact that you are liable to the creditor for the entire amount does not mean that you have to bear the damage entirely yourself. In the mutual relationship between joint and several debtors, a duty to bear applies pursuant to Article 6:10 paragraph 1 of the Dutch Civil Code: each contributes according to the portion that concerns them. If you have paid more than your share, a right of recourse arises against your co-debtors for the excess (Article 6:10 paragraph 2 of the Dutch Civil Code), including reasonably incurred costs (paragraph 3). In the event of damage resulting from an unlawful act or breach of contract, the internal distribution is in principle determined in proportion to each person's share, with corresponding application of the standard of contributory negligence under Article 6:101 of the Dutch Civil Code.

Moreover, the co-debtor addressed may invoke against the recourse claim the defenses he had against the creditor at the time it arose (Article 6:11 of the Dutch Civil Code), and the paying debtor enters into the rights of the creditor by means of subrogation (Article 6:12 of the Dutch Civil Code). We secure the recourse claim, conduct the negotiations or proceedings, and ensure that the internal distribution is correct.

Joint and several liability or suretyship?

In practice, joint and several liability is often confused with suretyship, even though the consequences differ significantly. With joint and several liability, you are personally the debtor for the entire obligation. With suretyship (Article 7:850 of the Dutch Civil Code and subsequent articles), you commit yourself to the creditor to fulfill the debt of another; the surety enjoys a number of protective provisions, and in the case of a private surety, the spouse's consent requirement often applies (Article 1:88 of the Dutch Civil Code). Anyone signing as a jointly and severally liable co-debtor lacks this protection and can be held immediately liable for the full amount. Because credit and security documentation does not always clearly clarify this distinction, entrepreneurs face significant risks in this regard. We assess the exact wording prior to signing.

Preventing joint and several liability and conducting a defense

Much joint and several liability can be prevented or limited with the right contractual agreements: a clear division of the burden of payment, an indemnity, a limitation to one's own share, or an explicit choice between suretyship and joint and several liability. Should you nevertheless be sued, do not admit liability without legal advice: there is often scope to dispute the basis, the extent of the damage, or your internal share. Our lawyers and legal experts assess whether the joint and several liability has arisen legally, whether the creditor is suing the correct party, and what recourse and defense options are available – just as thoroughly for a sole proprietorship as for a listed group.

Frequently asked questions about (joint and several) liability

What does joint and several liability mean?

Joint and several liability means that the creditor can hold any debtor liable for the entire debt (Article 6:7 of the Dutch Civil Code), even if you are only partially involved. You can recover the overpayment from your co-debtors mutually through recourse (Article 6:10 of the Dutch Civil Code).

Can I get the overpaid amount back?

Yes. If you have paid more than the portion you are liable for in the mutual relationship, you have a right of recourse against the other joint and several debtors for the excess (Article 6:10 paragraph 2 of the Dutch Civil Code).

What is the difference between joint and several liability and suretyship?

With joint and several liability, you are personally liable for the entire amount; with suretyship, you are liable for the debt of another and enjoy additional protection (Article 7:850 et seq. of the Dutch Civil Code). The distinction has significant financial consequences and is not always clearly defined in contracts.

More about the law of obligations

(Joint and several) liability is part of our broader specialization in the Law of Obligations. Whether you are dealing with contractual liability, a breach of contract, or a non-contractual claim for damages: our mixed teams of lawyers and in-house counsel assist both international corporations and small business owners – from advice and negotiation to litigation. Contact us to discuss your situation and the possibilities.