Equity of Exoneration refers to the situation where a person who is unable to repay a debt can be asked by their guarantor or surety to fulfil the payment instead. It serves as a contingency plan when the primary debtor is unable to pay. This concept should not be confused with a scenario where two individuals jointly owe a debt and are required to divide the payment equally.
Equity of exoneration refers to the right of a person who is secondarily liable on a debt to compel the primarily liable party to discharge the debt or reimburse any payment made by the secondarily liable person. This right is applicable when there is successive liability, as opposed to contribution which applies when the parties are equally liable. For example, a surety is someone who agrees to pay a debt if the primary debtor fails to do so. In this scenario, the surety has the right of exoneration, allowing them to demand reimbursement from the principal debtor after they have paid off the debt. To illustrate, if an individual takes out a loan and a friend acts as a surety, the friend can request reimbursement from the borrower if they end up paying off the loan. This example demonstrates equity of exoneration as the surety has the right to seek reimbursement from the primary debtor once they have fulfiled the debt. This right exists because the surety is secondarily liable, and it would be unjust for them to bear the burden of the debt when the primary debtor is responsible for it. Another instance of equity of exoneration occurs when a testator leaves a gift of property burdened by a mortgage or lien. In this case, the doctrine of exoneration operates to satisfy the encumbrance using the general assets of the estate. Consequently, the estate will pay off the mortgage or lien, allowing the beneficiary to receive the property free and clear of any debt. This example exemplifies equity of exoneration as the doctrine removes the burden of the mortgage or lien from the beneficiary. The estate assumes responsibility for paying off the debt, ensuring that the beneficiary receives the property without any encumbrances. This outcome is equitable as it would be unfair for the beneficiary to bear the burden of the debt when they did not create it.
Equity of exoneration is a legal principle that allows a co-debtor who has paid off a joint debt to seek reimbursement from the other co-debtors.
Equity of exoneration can be invoked when two or more individuals are jointly liable for a debt, and one of them pays off the debt using their own funds.
Equity of exoneration differs from contribution in that it allows the co-debtor who paid off the debt to seek full reimbursement from the other co-debtors, rather than just a proportionate share.
The availability and application of equity of exoneration may vary depending on the jurisdiction and the specific laws governing joint liabilities.
Yes, equity of exoneration can be waived if the co-debtors have agreed to waive their rights to seek reimbursement from each other.
Yes, equity of exoneration can still be invoked even if the co-debtor used borrowed funds to pay off the debt, as long as they were personally liable for the debt.
Yes, equity of exoneration can still be invoked even if the co-debtor paid off the debt voluntarily, as long as they were jointly liable for the debt.
Yes, equity of exoneration can still be invoked even if a judgment was entered against the co-debtor, as long as they were jointly liable for the debt.
No, equity of exoneration cannot be invoked if the co-debtor was released from liability by the creditor, as there would be no joint liability remaining.
Yes, equity of exoneration can still be invoked if the co-debtor used jointly owned assets to pay off the debt, as long as they were personally liable for the debt.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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