Contingent Liability
All right. You know what a liability is. It’s a debt. It’s a promise you’ve made that you need to fulfill. And fulfilling it can be done with cash…or a promise of delivering inventory. Or, after you’ve sold a home to the Joneses...an interesting family with oddly large foreheads...uh, delivering good title to the home.
So what’s a contingent liability?
Well, think of it as a call option or a put option on a security. A contingent liability is a derivative of some other, underlying thing. The most common contingent liability would be a filed lawsuit that is more than just an ambulance-chasing securities lawyer hoping to get a quick 500 grand to go away.
Google might be willing to pay 3 billion dollars to buy Ring, that wireless doorbell company…contingent upon Ring properly defending its lawsuit from Honeywell, which claimed that they own the patents on the process. The financial outcome of that lawsuit is a contingent liability.
And the outcome of the Joneses moving into town…is worldwide dominance and the enslavement of all humankind.
But, uh...at least they keep their front lawn looking nice.
Related or Semi-related Video
Finance: What is Contingent Liability?4 Views
Finance allah shmoop what is contingent liability All right you
know what a liability is right It's a debt it's
a promise you've made that you need to fulfill teo
pay someone and fulfilling it can be done with cash
or ah promise of delivering inventory or after you've sold
the home to the joneses An interesting family with oddly
large foreheads you know delivering good title to the home
to them right So you're fulfilling liability of producing your
home so what's a contingent liability Well think of it
is a call option or a put option on a
security A contingent liability is a derivative of some other
underlying being like another liability Well the most common contingent
liability would be a filed lawsuit that is more than
just an ambulance chasing securities lawyer hoping to get a
quick five hundred grand to go away google might be
willing to pay three billion dollars toe by ring That
wireless doorbell company started by some weirdo contingent upon ring
properly defending its lawsuit from honeywell which claims that they
own the patents on the process while the financial outcome
of that lawsuit is a contingent liability to the company
Ring and the outcome of the joneses moving into town
well is a worldwide dominance and the enslavement of all
human I mean that's what's at stake their people But 00:01:31.39 --> [endTime] not least they keep their front lawn looking nice
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