Joint Liability in Law of Contract

Introduction:

After the formation of a contract, the next stage is reached, the fulfillment of the object the parties had in mind. When an object is fulfilled, the liability of either party under the contract comes to an end. The contract is then said to be discharged.  Performance of joint promises is one of the ways in which a contract can be discharged which includes joint liability, several liability and joint and several liabilities.  It is used in the cases where there are more than two parties to a contract.

Section 42, 43 and 44 of the Indian Contract Act, 1872, deal with the question of liability of the joint promisors.

What is Joint Liability?

According to English law, if one of the several joint promisors dies, the rights and liabilities under the contract devolve upon the surviving joint promisors. The representatives of the deceased promisor neither obtain any rights nor assume any liability, unless they are the representatives of the last surviving promisor. This rule may sometimes cause injustice, inasmuch As the creditor loses the security of the solvency of a promisor. Section 42 of the Contract Act, therefore, lay down a different rule:

Devolution of joint liabilities: When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representatives jointly with the survivor or survivors, And, after the death of the last survivor, the representatives of all jointly, must fulfill the promise.^[1]

According to this section joint promisors must, during their joint lives, fulfill the promise. And if any of them dies, his representatives must, jointly with the surviving promisors, fulfill the promise and so on. On the death of the last survivor, the representatives of all of them must fulfill the promise. But this is subject to any private arrangement between the parties. They may expressly or impliedly prescribe a different rule.[2]

Another important aspect of joint promises is codified in Section 43.

Joint And Several

Section 43: Any one of joint promisors may be compelled to perform: When two or more persons make a joint promise, the promise may, in the absence of express agreement to the contrary, compel any (one or more) of such joint promisors to perform the whole of the promise.[3]

1. Each promisor may compel contribution: Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.
2. Sharing of loss by default in contribution: If any one of the two or more joint promisors makes default in such contribution, the remaining joint promisors have to bear the loss emerged from such default in equal shares.

Explanation: Nothing in this section shall prevent a surety from recovering, from his principal, payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal.

It depends on the discretion of the promisee as to which of the promisors are to be made liable for the whole of the promise. If one of the promisors is sued to meet the whole of the claim, he cannot say that as between different promisors, his liability is for a part of the promise only.    

Section 43 is not merely joint, but joint and several and, therefore, an action against one of the joint promisors should not put an end to the cause of action. Subsequent actions against different promisors are not against the scheme of the Act. Basically, at a time if action is taken against a promisor does not prohibit the promisee to take action against other promisers. The promisee is still authorized to take action against others too.

This section lays down three rules:

1. Any one compellable to perform: Firstly, when a joint promise is made, and there is no express agreement to the contrary, the promise may compel any one or more of the joint promisors to perform the whole of the promise.
2. Right of contribution: Secondly, a joint promisor who has been compelled to perform the whole of the promise may require the other joint promisors to make an equal contribution to the performance of the promise, unless a different intention appears from the agreement.
3. Sharing of deficiency: Thirdly, if any one of the promisors makes default in such contributions; the remaining joint promisors have to bear the deficiency in equal shares.

Release of One Joint Promisor/ Discharge of Joint Promisors

The creditor is also given the right to release anyone of the joint promisors from his liability and this does not discharge the others from their liability. According to Section 44 of Indian Contract Act, 1872, is as follows:

Effect of release of one joint promisor- Where two or more persons have made a joint promise, a release of one such joint promisor by the promise does not discharge the other joint promisor or joint promisors; neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors.

This also marks a reference from the English Common Law, according to which a discharge of one joint promisor amounts to a discharge of all, unless the creditor expressly preserves his rights against them.

Likewise, on the death of any promisors his legal representative is further liable to act on behalf of the deceased with other promisors. Similarly, if eventually or gradually all the promisors die then their representatives will act on behalf of them. This rule is subject to an agreement to the contrary. If we analyze in England in such a situation i.e. on the death of a promisor the liability further devolves on the survivors rather than putting the legal representative of the deceased to act on behalf of him. And if the last surviving partner dies too then the liability devolves on his legal representative.

Illustrations

(a)    A, B and C jointly promise to pay D 3000 rupees. D may compel either A or B or C to pay him 3000 rupees.

(b)   A, B and C jointly promise to pay D the sum of 3000 rupees. C is compelled to pay the whole. A is insolvent, but his Assets are sufficient to pay one-half of his debts. C is entitled to receive 500 rupees from A’s estate, and 1250 rupees from B.

Cases

In the case, Shanti Devi v Bhojpur Rohtas Gramin Bank[5], the savings account was originally opened by the husband and wife on either or survivor basis. Subsequently this mandate of either or survivor was withdrawn because of strained relations. The husband died. The bank did not allow the wife to operate the account without a succession certificate. The court said that there was no illegality in it. If the legal heirs consented on an affidavit to permit their mother to withdraw the amount, the bank should allow it. Banks are supposed to have a human face and also adopt a consumer friendly approach.

In another case, Muhammad Askari v. Radhe Ram Singh[6], Chief Justice Sir Arthur Strachey has held that since Section 43 of the Indian Contract Act permits an action against anyone of the joint promisors, and debars him from pleading that the other joint promisors should be joined in the suit, it follows that there is no bar to second suit against the joint promisors, if the first one does not satisfy the claim. The promise can file another suit and can file it against either one promisor or all the promisors at a time.

Conclusion

Overall if we summarize the topic of joint liability we can sum up it in few words, joint liability is a contract between two or more promisors in which they made a joint promise that in their joint lives they will fulfill the promise as per the contract and further in case if any of them or all of them die eventually then their legal heir or representatives will fulfill the promise jointly, until and unless there is another contract to the contrary. Further the promise which is to be fulfilled can be fulfilled by any one of them or by jointly all of them. And further promisee has the right to release anyone of the joint promisor from his liability and the notable point is that this does not discharge the other promisors; they will carry on their obligation as it is.

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References:

[1] The Indian Contract Act, 1872, S 42, p.23, 2019.

[2] Gannmani Anasuya v Parvatini Amarchand Chowdhary, AIR 2007 SC.

[3] The Indian Contract Act, 1872, S 43, p. 23 2019.

[4] The Indian Contract Act, 1872, S 44, p. 23, 2019.

[5] AIR 2007 DOC 102

 [6]ILR (1900) 22 All, 307.