M+A: Joint & several vs several liability

Joint obligations

A joint promise by two or more persons creates a single obligation upon both or all.

The theory of a joint and several promise is that it creates both a joint obligation incumbent upon all and a number of several obligations respectively incumbent upon each one; but the several obligations are non cumulative, so that (as with purely joint obligations) performance by any one will discharge all.  To express the concept another way it would look like this: An obligation such as a warranty given  by two or more vendors, jointly and severally, is of the form, V1 and V2 together promise P, and V1 separately promises P, and V2 separately promises P, regarding the truth of certain facts. The promise by V1 and V2 together being the joint promise and the two separate promises, one by V1 and one by V2, being the several promises.

The presumption is that a contract made by two or more persons is joint unless the express words of the contract  make it joint and several.

The fact that an obligation is joint does not mean that the two vendors in this example are each  only partly liable for a breach of warranty. They are liable to pay the full amount of the proven claim. However, whilst a successful plaintiff is entitled to enter judgment for the full amount of its proven claim against one of the vendors it is not entitled to double recovery. A payment by one Vendor effects a reduction in the amount of the liability of each defendant.

Several liability

The above example shows that if two or more contracting parties give a joint promise that it creates a single obligation.  This means that each person is exposed to a breach of that single obligation (in this case relating to the correctness of a warranty) by their co-promisors, notwithstanding that they did not participate in the breach.

Alternative

A contract such as a sale contract could provide as follows:

The obligations and liabilities of the Vendors are several, and neither joint nor joint and several. A Vendor shall not be liable for a breach of this document committed by one or more of the other Vendors.

In this instance the provision states that each vendor owes an independent obligation to the promisee (the other contracting party). In this sense the promises are cumulative, but each promise is separate. This means that if a breach of the contract occurs, and one of the vendors is not involved (which may be unlikely in the case of a breach of warranty but not impossible), it will not be held liable for the loss that arises from the breach because it was not a breach of its promise to the other contracting party.   Another way of dealing with the problem and arriving at the same legal result (ie ensuring that each vendor is only liable for a breach of promise that it commits) is for each vendor to make a separate sale agreement with the intending purchaser. It will be advantageous if the various sale agreements do not make reference to one another, and do not require a vendor to answer for the acts and omissions of its fellow vendors.