Plurality of Creditors

From Max-EuP 2012

by Sonja Meier

1. Subject matter and purpose of rules on plurality of creditors

Plurality of creditors can be created by contract if a debtor promises a performance to several parties. It can, however, also be created by law, eg if a creditor dies leaving several heirs, or if co-owners have claims following the withholding or damaging of their property. Most national legal systems in Europe have fundamentally similar rules on plurality of creditors, based on the common historical tradition of the ius commune. They primarily regulate the relationship between the creditors and their common debtor—mainly as to whom the debtor has to render performance—and whether and to what extent an individual creditor has the right to collect the debt (action, giving of notice, suspension or renewal of prescription) and to dispose of it (eg through release or assignment). Furthermore, there is the question of to whom the claim is allocated in rem.

2. Divided (separate) claims

Granting each individual creditor the right to receive the entire performance, or to dispose of the entire claim, can be dangerous for the other creditors. For the standard case of plurality of creditors, where there are no special provisions or agreements, there must be rules which guarantee that each creditor can participate in the reception of the performance. The easiest way to effect this is to divide up the debt between the creditors, so that the debtor owes each creditor only a particular share. The ius commune and, following its lead, most European legal systems (such as France, Italy, Spain, Austria, Germany and the Netherlands, as well as the Draft Common Frame of Reference) provide that the claims of co-creditors (whether contractual or non-contractual) are, in case of doubt, divided. This results in parallel individual claims which, however, can be interconnected to some extent if they are based on a common contract.

3. Communal claims/claims for indivisible performances

A division of the claim is impossible where the creditors require specific performance but the object of the performance is not divisible (eg services, or the transfer of an indivisible right). Both the ius commune and the majority of European legal systems, therefore, have a form of plurality of creditors that secures the participation of all creditors without dividing the object of the performance. It is called Mitgläubigerschaft in German law, ‘communal claim’ in the Principles of European Contract Law (PECL) (Art 10:201 (3)) and ‘joint right to performance’ in the DCFR (Art III.-4:202 (3)). The main question is who can bring a claim for specific performance. Some legal systems allow each creditor to sue for and receive the whole performance singlehandedly; however, that solution endangers the remaining creditors in case of insolvency or embezzlement. Another possibility is a rule under which all creditors are forced to sue for, and receive, the performance together. However, such a rule can make enforcing rights difficult if even just a single creditor refuses to join the action. This difficulty is avoided by a third solution, adopted also by the PECL and the DCFR, namely to give each individual creditor the right to demand that the debtor renders performance to all creditors. In case one creditor refuses to take part in the collective reception of the performance, the debtor can be asked to, or is at least allowed to, discharge his obligation by depositing the property with a third party. In contrast to claims for specific performance, damages claims arising from a breach of such an ‘indivisible obligation’ are divisible and therefore usually divided up among the creditors.

There are usually very few rules on what other rights each individual creditor has with respect to the collective claim (eg what effect a release granted by one of the creditors has); the PECL and the DCFR are also silent on this matter. If an individual creditor does not have the right to demand that the performance be handed over to him alone, he also will not have the right to dispose of the entire claim through release or assignment. Some legal systems provide that where one of the communal creditors grants a release, another creditor may still demand performance, but only against payment of an amount equal to the share of the releasing creditor—a rule that has proven largely impracticable. This only leaves a solution according to which one creditor’s release has no effect on the others’ claims at all. On the other hand, a creditor who has the right to demand performance in favour of all creditors should also have the right to give notice or (by legal proceedings) to renew prescription with respect to all creditors. A particular problem is the effect of a judgment dismissing an action instituted by one of the creditors. If the judgment were to discharge also the debtor in relation to the remaining creditors, the latter would be bound by a lawsuit that their fellow creditor may have pursued without their authority. If, instead, the judgment had no effect on them, there would be a danger, if the factual or legal situation is unclear, that the debtor may be exposed to successive lawsuits from all of his creditors, who would all win if just one of them managed to bring a successful action.

The basic rule that each creditor has the right to demand performance to all creditors has proven to be workable even in cases where the object of performance is divisible, ie cases in which divided claims are possible or even presumed. If co-owners let out their house, they will usually prefer the rent payments to be rendered to all the creditors together, so that the common costs and liabilities can be dealt with before the individual creditors’ shares are paid out. The same applies if the common property is unlawfully damaged: the damages should not be divided up but paid to the co-owners together in one sum to be used for repairs. However, rent and damages payments are divisible, and, due to the ius commune tradition, the institution of communal claims is usually restricted to indivisible performances. To overcome this impediment, some legal systems work with the notion of indivisibility by agreement or by law. Other legal systems have a special form of plurality of creditors for cases where there is a communio between the creditors (ie where they are co-owners or share another real right). The PECL’s ‘communal claim’ and the DCFR’s ‘joint right’ do not face these difficulties as they are not restricted to indivisible performances. The PECL (unlike the DCFR) also do not have a presumption of divided claims, so that everything turns on the interpretation of the parties’ intentions, or of the legal provision on which the claim is based.

Finally, some legal systems have the institution of Gesamthand, concerning claims of partnerships, co-heirs (succession law) and matrimonial property communities (matrimonial property law). This was different under the ius commune where the ordinary rules on plurality of creditors were applied: if the object of performance was divisible, the partners, heirs or spouses had divided claims; otherwise, they were communal creditors. In contrast, under the German legal tradition these claims form part of a special fund called Gesamthandsvermögen which belongs to the partners, heirs or spouses jointly, meaning that no individual can dispose of the fund, or any part of it. The rights to pursue claims, receive the performance and dispose of these claims are not subject to the rules on plurality of creditors, but to the rules applicable to the special fund as a whole; the decisive factor is thus primarily the right of management and representation of the collective. If the collective is considered capable of holding rights (eg commercial partnerships and, increasingly, even non-commercial partnerships), then the collective itself is regarded as the (sole) creditor.

4. Solidary claims

Sometimes creditors may have an interest in giving each other wide-ranging powers with respect to their claim, especially the right to collect and receive the performance from the debtor. This occurs when the creditors create the claim by a common contract, trust each other and wish to simplify the management and collection of the claim. To this end, Roman law instituted the notion of solidary creditorship, which was adopted by the ius commune and found its way into the majority of European legal systems (eg France, Italy, Spain, Germany, Austria, Greece, and Switzerland). The PECL (Art 10:201 (1)) refer to ‘solidary claims’, the DCFR (Art III.-4:202 (1)) to a ‘solidary right’.

Solidary claims are usually subject to more extensive and detailed rules than communal claims; they are often (wrongly) seen as the counterpart to solidary obligations. Every creditor is entitled to demand and receive the entire performance from the debtor. However, according to Roman law, the ius commune, and the majority of today’s legal systems, if one creditor institutes legal proceedings against the debtor, the other creditors can no longer demand performance from him, and the debtor may no longer perform for them. This protects the claiming creditor from interferences by other creditors, while the debtor is protected against parallel lawsuits from several creditors. The rule has, however, not been adopted by German law, nor by the PECL or the DCFR. Most legal systems allow a solidary creditor to bring a lawsuit if the action of another solidary creditor has been dismissed. As in communal claims, this leads to the debtor being placed in an unfortunate position if the legal or factual situation is unclear as he can only be secure when he has won all of the cases against the creditors.

If one creditor has received the performance, an apportionment is to be effected among the creditors. Because solidary claims, as a rule, arise from contract, there is usually an internal (contractual) relationship between the creditors regulating the distribution of the performance. While Roman law and the ius commune, as well as some legal systems today, leave the question of apportionment entirely to the internal relationship, other legal systems (eg Germany, Greece, Italy and also the PECL and the DCFR) also recognize statutory claims between the solidary creditors for apportionment.

The question of whether an individual solidary creditor has more rights than simply collecting the performance has found different answers throughout Europe. Under Roman law, an individual creditor’s powers were almost unlimited: he could not only release the debtor from the entire liability, but also dispose of the entire claim in other ways, such as by novation. Nowadays, solidary creditors’ rights are usually more restricted. The effect of a release granted by one of the creditors is regulated differently throughout Europe. In some countries the debtor is discharged completely, in others the other creditors’ rights remain unaffected, and in a third group of countries, the other creditors’ claims are reduced by the internal share of the releasing creditor. The effects of a novation agreed with an individual creditor and the suspension or renewal of prescription by an individual creditor’s act are also different throughout Europe. This diversity can be traced back to different attitudes towards the nature of solidary claims. While Roman law used solidary creditorship to effect wide-ranging powers for each creditor, the modern German law regards solidary claims as a functional equivalent to a simple power of collection, empowering an individual creditor to sue the debtor and to receive the performance, but not empowering him to effect other dispositions. According to the French interpretation, solidary claims consist of connected partial claims, where each creditor can dispose of his share but not of the shares of others. Under the PECL and the DCFR, in contrast, dispositions and other acts effected by one solidary creditor have no effect at all on the other creditors.

The diversity of rules and underlying concepts can probably be explained by widespread uncertainty as to the function of solidary creditorship and its area of application. Roman law conceived of the obligation as a personal bond between the creditor and the debtor. For that reason it did not allow representation, assignment, or contracts in favour of a third party. Solidary creditorship was thus the only way to allow several persons to participate, on an equal footing, in the collection and management of a common claim. However, under modern law, if several persons wish to have a common claim where each creditor is to have specific rights of collection, management or disposition, they can leave the claim in the hands of one creditor, or create a communal claim as described above, and then grant each other powers of disposal, or authority to act as an agent for the others. The question whether solidary creditorship is no more than a communal claim with certain rights of representation and/or disposal, or whether it really represents a different institution has not yet been answered in a satisfactory way. Nor is there certainty about whether and in what cases solidary claims arise. Usually, only the joint account is mentioned, ie a bank account set up by married couples or business partners where each holder can make withdrawals acting alone. However, even here the exact extent of each creditor’s rights is regulated by the banking contract and the bank’s standard contract terms, not by the rules on solidary claims. As a result, it is not clear what types of cases the (rather detailed) rules on solidary claims in the PECL and the DCFR are intended for.

5. To whom does the claim belong?

In case one of the creditors becomes insolvent and is pursued by his own creditors, it has to be established to whom the claim or claims are attributed in rem. This is not difficult in cases concerning divided claims (each creditor ‘owns’ his part-claim), but it is a major problem in cases concerning communal and solidary claims. It is controversial whether—legally—there is a single claim shared by the creditors or several claims. On one hand, each creditor has his own right to sue the debtor. On the other hand, at least in an economic sense there is only one claim, and parallels can be drawn to co-ownership or other cases where a right in rem is shared by several persons. This uncertainty is also explained by the fact that the ius commune did not recognize a communio relating to claims. In contrast, the case of communal creditors is today increasingly regarded as involving just one common claim, held by the creditors in form of a communio similar to co-ownership. This view is reflected by the PECL and the DCFR, which refer to just one communal claim/joint right. Applying the rules of communio or co-ownership would lead to clear solutions in cases where one of the creditors becomes insolvent: only his notional share in the common claim could be seized, or form part of the insolvency assets.

In case of solidary creditors, some legal systems (and also the PECL) speak of several ‘solidary claims’, while others (including the DCFR) refer to one single claim or right. If one follows the model of several claims concerning the entire debt, it is not clear to whom the claim belongs in an economic sense. This creates problems as can be seen, for example, in German law. If A and B are solidary creditors for €100, each one is regarded as having a claim of €100. A’s creditor can seize A’s claim of €100, but his attempts to collect the debt from the debtor will fail if B (or his creditor) has already collected the debt. This approach, therefore, leads to an undesirable race amongst the creditors. The main question is whether communal and solidary creditorship are two different institutions or rather subcategories of a unitary institution of ‘shared claim’, differentiated only by the extent of the rights of the individual creditors. This approach has been adopted by Dutch law which replaced solidary and communal claims by the institution of a communio relating to a claim, under which the creditors can have different individual rights.

6. Unification projects

Part III of the Principles of European Contract Law (PECL) contains a section on plurality of creditors, which was adopted, with some minor modifications, by the DCFR (Common Frame of Reference (DCFR)). A UNIDROIT working group is currently working on a corresponding set of regulations. A rule on plurality of creditors can also be found in Art 88 of the Code Européen des Contrats (Avant-projet).


Andreas Riedler, ‘Plurality of Creditors in the Austrian, French, Swiss and German law’ (1999) 7 ERPL 349; Antoni Vaquer (ed), La tercera parte de los principios de derecho contractual europeoThe Principles of European Contract Law, Part III (2005); Danny Busch, ‘Plurality of Creditors’ in Danny Busch, Ewoud Hondius, Hugo van Kooten and Harriët Schelhaas (eds), The Principles of European Contract Law (Part III) and Dutch Law, vol II (2006) 54; Sonja Meier, ‘§§ 420–432 II. Mehrheit von Gläubigern’ in Mathias Schmoeckel, Joachim Rückert and Reinhard Zimmermann (eds), Historisch-kritischer Kommentar zum BGB, vol II/2 (2007).

Retrieved from Plurality of Creditors – Max-EuP 2012 on 27 May 2022.

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