Proportional Liability and Its Difference from Joint and Several Liability

Proportional Liability and Its Difference from Joint and Several Liability

In Iranian law, liability refers to the obligations that one person owes to another arising from a contract or other legal agreement. These obligations may also arise outside contractual relationships.

Iranian law generally recognizes two main types of liability: proportional liability and joint and several liability, each with distinct characteristics.

Proportional liability refers to responsibility limited to the extent of one’s own obligations or the damage caused. Joint and several liability, by contrast, extends to the obligations of others, such as partners.

Comparison of Proportional Liability and Joint and Several Liability

The Legal Concept of Liability

According to the Civil Liability Act, every individual is responsible for their own actions. Therefore, if a person causes harm to the life, liberty, property, health, dignity, or commercial reputation of another, they are obligated to compensate for the damage incurred. It should be noted that such responsibility is not limited to civil liability and may, in certain cases, result in criminal liability as well.

The Concept of Proportional Liability

From a legal perspective, the liability individuals bear toward others may arise for various reasons. For example, liability may result from a contractual relationship or a specific legal obligation. However, there are also liabilities arising from acts or omissions that exist outside contractual relations.

In general, proportional liability means that each person is responsible only within the scope of their own prior obligations and is liable to compensate damages caused within that scope. For example, consider a commercial company with four partners, each holding a twenty-five percent share. If the company is dissolved and its assets are insufficient to cover its debts, each partner must assume their share of the debts. Under proportional liability, unlike joint and several liability, each partner is obligated to pay only in proportion to their share in the company, meaning twenty-five percent, and bears no responsibility beyond that share.

Accordingly, in civil liability matters, each partner is responsible in proportion to their contribution. The Commercial Code classifies such entities as proportional liability companies. In some cases, proportional liability is determined based on the extent of damage caused by an act or omission. For instance, in a traffic accident in which two individuals simultaneously collide with another vehicle and cause damage, if one party is responsible for 30% of the damage and the other for 70%, each person is liable only to the extent of the damage they caused.

Joint and Several Liability

One of the most prominent examples of joint and several liability is found in general partnership companies. In such companies, if the company is registered as a general partnership and, upon incurring debts and subsequent dissolution, the company’s assets are insufficient to satisfy its liabilities, the obligation to pay all debts falls upon the partners. For example, if a general partnership becomes bankrupt and its assets are inadequate to settle its debts, any creditor may demand full payment from any one of the partners. Each partner is individually obligated to satisfy the company’s entire debt.

Differences Between Proportional Liability and Joint and Several Liability

Under joint and several liability, unlike proportional liability, individuals are responsible not only for their own obligations but also for those of others. They may be held liable for damages caused by third parties. It should be noted that in this form of liability, the principal obligor also remains responsible. As such, joint and several liability is a form of liability for the acts of others, in which an individual is obligated to compensate for all damages caused by third parties.

Joint and Several Liability in Dishonored Checks

In the case of a check endorsed by a guarantor or endorser, both the issuer of the check and the endorser or guarantor are jointly and severally liable to the holder of the check. Therefore, if the check is dishonored, the holder has the right to pursue payment from any of these parties. Each of them is responsible for paying the check amount to the holder. However, if the guarantor or endorser pays the amount of the check, they retain the right of recourse against the issuer to recover the amount paid.

Frequently Asked Questions About Proportional Liability and Its Difference from Joint and Several Liability