that a company may have to pay, but only if a certain future event occurs. Usually, a contingent liability refers to the outcome of a lawsuit: that is, the company may have to pay a significant amount of money
if it loses the lawsuit. Contingent liabilities are recorded under accounts payable
; their existence may also affect the share price.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
An obligation that may result, but is not likely to result because the event causing the obligation is improbable. For example, the award from a lawsuit against a firm is a contingent liability of the defendant if there is little likelihood the plaintiff will recover the award.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
contingent liability a liability which may or may not occur depending upon an uncertain event, for example, the outcome of a court case in which damages are being claimed against a firm.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
A liability that is not currently a liability but may become one upon the happening of some future event.If a father guarantees the student housing lease of his son,then the son is liable for the rent but the father may become liable if the son defaults. Other common contingent liabilities are guarantees of the debts of others,potential adverse judgments in litigation,and currently contested tax liabilities or audits. Lenders sometimes request a list of all contingent liabilities when evaluating a borrower's financial strength.
The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.