A joint and several obligor against whom a claim is made by the obligee may assert all the defences and rights of set-off that are personal to it or that are common to all the co-obligors, but may not assert defences or rights of set-off that are personal to one or several of the other co-obligors.
This Article deals with the possibilities for a joint and several obligor to assert different defences and rights of set-off. It distinguishes between, on one side, defences and rights of set-off that are personal to one of the obligors or common to all of them, and, on the other side, defences and rights of set-off which are personal to one or several of the other co-obligors.
1. Together, companies A, B and C have purchased machinery from manufacturer X, to be used in their respective plants for a common project. Part of the purchase price has to be paid at a future date, the outstanding amount being jointly and severally due. A has obtained a separate undertaking from X that the machinery would meet a certain performance level. If X requires A to pay the outstanding amount of the price, A may assert the fact that the machinery does not meet the guaranteed level of performance. On the other hand, if X claims payment from B and C, the latter may not assert that the level of performance is insufficient, since the defence is personal to A.
2. Companies A and B jointly and severally have undertaken to purchase a certain quantity of steel from seller X. Government authorities in the buyers’ country declare an embargo on all trade with the seller’s country, which renders performance of the contract unlawful. This is a common defence which each of the co-obligors may assert against X.
3. Bank X has lent EUR 2,000,000 to joint and several obligors A and B. As a result of the selling of shares belonging to A on the stock market, X becomes A’s obligor for an amount of EUR 500,000. A may exercise its right of set-off against X, with the effects provided for in Article 11.1.5. On the contrary, B may not assert this right, which is personal to A.