obligation
Definition
An obligation is a legal duty that requires you to do something or refrain from doing something, usually because you agreed to it in a contract or because the law requires it. When you sign a lease, take out a loan, or hire an employee, you take on specific obligations that the other party can legally enforce against you if you fail to follow through.
Example
If you sign a contract to deliver 100 units of your product to a retailer by March 1st, that delivery commitment is your legal obligation and the retailer can sue you for damages if you miss it.
Watch Out
Business owners often underestimate how many obligations they take on when signing contracts, so always read the fine print carefully before you put your name on anything.
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.