Solidary Liability: Definition, Example and Related Terms
What is Solidary Liability ?
For example, in a loan contract where three co-borrowers are jointly and severally liable, if one co-borrower fails to make the payment, the lender can recover the full amount from any of the other co-borrowers. So, even if one party is not directly responsible for the default, they are still legally bound to cover the entire obligation.
The concept of solidary liability is particularly important in commercial contracts, as it provides an assurance to creditors or other involved parties, ensuring that the obligation will be met. It also serves as a caution for obligors to ensure they are not entering into an agreement lightly, as they are responsible for the totality of the obligation, not merely their proportional share.
In practice, solidary liability requires each party to take responsibility not only for their own actions but also for the combined actions of the other obligors. It's essential for those entering into such agreements to understand who else is involved and to assess the risk that they may be required to fulfill obligations beyond their initial expectations.
Example(s)
Scenario Description A construction firm enters a contract to build a shopping mall, with each partner in the joint venture having solidary liability. If one partner does not contribute its agreed portion of work or funds, the remaining partners can be held liable for completing the entire project. They would need to manage the shortfall and potentially recover the costs from the non-performing partner later. Three friends co-sign a lease agreement for an apartment, agreeing to solidary liability. If one friend decides to move out and stops paying rent, the landlord can seek the entire rent amount from the remaining co-signers, regardless of whether they only occupied a part of the apartment.