contingent liability

Contingent Liability

1. The possibility of an obligation to pay certain sums dependent on future events.

2. Defined obligations by a company that must be met, but the probability of payment is minimal.

Investopedia Commentary

1. A good example of a contingent liability would be an outstanding lawsuit.

See also: Asset, Balance Sheet, Contingent Asset, Liability

contingent liability

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.