Legal Definitions - joint and several note

A joint and several note is a type of promissory note, which is a written promise to repay a debt. When multiple individuals sign a joint and several note, it means they are both collectively and individually responsible for the entire amount of the debt.

• The "joint" aspect signifies that all signatories together are responsible for the full debt.
• The "several" aspect means that each individual signatory is also independently responsible for the entire debt.

This arrangement provides significant protection for the lender, as they can choose to pursue repayment from all borrowers collectively, or from any single borrower for the full outstanding balance, regardless of any internal agreements among the borrowers about their individual shares.

Examples:

• Business Startup Loan:

  Imagine two business partners, Sarah and Tom, decide to open a new coffee shop. They need a $50,000 loan to cover initial costs and sign a promissory note with the bank that specifies it is a joint and several note. If the coffee shop struggles and defaults on the loan, the bank has the option to demand the entire $50,000 from Sarah alone, or from Tom alone, or from both of them collectively. Even if Sarah and Tom had an agreement between themselves to split the debt equally, the bank is not bound by that and can pursue the full amount from whichever partner has the means to pay.

• Family Home Renovation Loan:

  Consider three siblings, Maria, Alex, and Ben, who co-sign a $75,000 loan to help their parents renovate their family home. The loan agreement is structured as a joint and several note. If their parents encounter financial difficulties and cannot make the payments, the lender can choose to pursue the entire $75,000 from any one of the siblings. For instance, if Alex has significant assets, the lender might demand the full amount from him, even though Maria and Ben also signed the note. Alex would then be responsible for the entire debt to the lender and would have to seek reimbursement from his siblings separately.