Joint, Several and Joint and Several Liability in Loan Documents

Summary

This practice note provides an overview of the principles of "joint", "several" and "joint and several" liability in loan documents. In particular, it describes the differences between these types of liability, discusses how each typically applies in loan agreements and guarantees, and provides sample clauses. In advising parties to a loan transaction, counsel should be aware of the differences between joint, several and joint and several liability in order to effectively advise the client which is appropriate in the context of the specific loan transaction. Whether joint, several or joint and several liability is appropriate can depend on the size and nature of the loan as well as the parties to the transaction. As such, counsel to each party to a loan transaction must endeavour to negotiate the appropriate level of liability, advise the client of the implications of any liability provisions, and draft any agreed upon limitations as clearly and explicitly as possible to avoid ...