Overview and Examples in Corporate Debt [Video]

Joint liability denotes the obligation of two or more partners to pay back a debt or be responsible for satisfying a liability. A joint liability allows parties to share the risks associated with taking on debt and to protect themselves in the event of lawsuits. An individual subject to joint liability may be referred to as “jointly liable.”

Joint liability for a debt results from 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. If a court finds that a partnership is at fault in a lawsuit, then every partner is responsible for paying any monetary legal liability or compensation. As such, any partner entering a joint liability agreement should be aware that they too are liable for the actions of …