due diligence
Definition
Due diligence is the process of thoroughly investigating a business, person, or deal before you commit to it. Think of it as doing your homework to verify that everything is exactly what it appears to be before you sign anything or hand over money.
Example
Before buying a small restaurant, you would conduct due diligence by reviewing its financial records, checking for unpaid taxes, inspecting the equipment, and confirming that all licenses are current and valid.
Watch Out
If you skip due diligence and later discover hidden debts or legal problems, a court will likely hold you responsible because you had the opportunity to investigate and chose not to.
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.