BROWSE

Joint Liability

Definition

Where two or more persons are liable in respect of the same liability, in most common law legal systems they may either be...

What is 'Joint Liability'

An obligation, including an obligation to repay a debt between two or more parties. A joint liability allows parties to share the risks associated with taking on additional debt, and to protect themselves in the event of legal litigation and lawsuits.

Explaining 'Joint Liability'

A joint liability for a debt is the result of two or more parties applying jointly for credit as co-borrowers, which is implied in a general partnership. Under the regulations of a general partnership, any partner entering into a contract with or without the knowledge of other partners automatically binds all partners to that contract.

A co-signer of a loan or another debt obligation also has joint liability for a debt; however, this is contingent upon default by the borrower.


Further Reading


Joint liability lending and the peer selection effect
academic.oup.com [PDF]
We develop a simple model of group-lending based on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects …

The impacts of microfinance: Evidence from joint-liability lending in MongoliaThe impacts of microfinance: Evidence from joint-liability lending in Mongolia
www.aeaweb.org [PDF]
We develop a simple model of group-lending based on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects …

Using repayment data to test across models of joint liability lendingUsing repayment data to test across models of joint liability lending
academic.oup.com [PDF]
We develop a simple model of group-lending based on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects …

Financing long-distance trade: the joint liability rule and bills of exchange in eighteenth-century FranceFinancing long-distance trade: the joint liability rule and bills of exchange in eighteenth-century France
www.cambridge.org [PDF]
We develop a simple model of group-lending based on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects …

Joint liability and peer monitoring under group lendingJoint liability and peer monitoring under group lending
www.degruyter.com [PDF]
We develop a simple model of group-lending based on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects …



Q&A About Joint Liability


Is there anything else that can cause joint liability besides being a partner in a business or signing someone else's loan application?

No, those are the only ways that I know of at this time.

Can you have multiple types of joint liabilities at once?

Yes, you can be responsible for several different debts simultaneously if you sign up for them individually (as long as they aren't from the same lender). You can also be held responsible if your spouse signs up for something and then defaults on it (even though you didn't sign up yourself). If your spouse has signed up separately from you then both of your names will appear on each account statement so it will not look like there are multiple accounts open under just one name unless your spouse makes payments late enough that they get sent to collections before making payments late enough that they get sent to collections before

What does joint liability allow parties to do?

Joint liability allows parties to share the risks associated with taking on additional debt, and protects them in the event of legal litigation and lawsuits.

Are all partners bound by contracts entered into by other partners without their knowledge?

Yes, under general partnership regulations any partner entering into a contract with or without the knowledge of other partners automatically binds all partners to that contract.

Can you be liable for someone else's debt if they default on it?

Yes, but only contingent upon default by borrower.

What is joint liability?

Joint liability is an obligation including an obligation to repay a debt between two or more parties.

Who are the parties involved in a joint liability?

Two or more parties.

How does one become liable for another's debt?

By applying jointly for credit as co-borrowers, which is implied by general partnership regulations.