contingent obligation
Definition
A contingent obligation is a duty or debt that only kicks in if a specific event happens in the future. Right now it does not exist as a real obligation, but it could become one depending on how things play out.
Example
If you personally guarantee a business loan, you only have to pay it back if your business defaults, making that guarantee a contingent obligation until the default actually occurs.
Watch Out
These obligations need to show up on your financial disclosures and business records even though you do not owe anything yet, because lenders and investors will want to know about potential future liabilities before doing business with you.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.