Secondary Liability Law and Legal Definition
Secondary liability refers to the responsibility of a person or entity that arises when the party directly liable fails to perform a duty. Secondary liability often targets two types of persons: 1) those who induce others to break the law, and 2) those who control others who break the law.
It is a term commonly used in connection to those who guarantee a debt. In that context, it refers to a contingent requirement to pay a negotiable instrument upon dishonor or the failure to pay or accept by the party(-ies) primarily liable for the instrument.
Only drawers and indorsers are subject to secondary liability; and then, only if:
- the instrument is properly and timely presented;
- the instrument is dishonored or rejected; and
- timely notice of dishonor or rejection is given to the secondarily liable party.