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{{a|contract|}}{{dpn|/ˌlaɪəˈbɪlɪti/|n|}} | |||
The ''[[value]]'' of one’s legal [[obligation]]. In [[financial services]] — indeed, generally in the arithmetic reckoning of the [[common law]], which reduces the world to a kind of eternal ledger of debits and credits, that duty ''is articulated as a sum of [[money]] payable''. Now, I am making this up as I go along, readers — no change there — but financial services practitioners have a notoriously loose grip of the English language, so hang it, call it a ''financial poet’s licence'' to be exact, even if that might be exactly ''wrong''. We monetary bards<ref>I say this in the plural, but I am yet to meet another one; it is a rather singular occupation.</ref> like to wield vocabulary with the deftness of a sturgeon. So let’s. | |||
In the narrowest sense, a “liability” is a term of accounting art: everything that an “[[asset]]” is not, only rendered in those monochromatic, monetary terms — accountants are colour-blind: they ''only'' understand the world in dollars and cents; they perceive only the decimal code underlying the multi-hued panorama that confronts the rest of us — but this is, in its way, a useful concept to hold onto when drafting a legal contract. It distinguishes a ''liability'' from an ''[[obligation]]'': your ''obligation'' is to provide a [[carbolic smoke-ball]] of merchantable quality; your ''liability'' is to pay £100 to a purchaser should it not work.<ref>Huh. I wonder if they would work for [[Covid]].</ref> | |||
We are close to the netherworld of jurisprudence by which we ask what ''is'' [[money]]. But let’s save that for another day. | |||
A company’s [[shares]], by way of illustration, are ''not'' [[liabilities]], but rather represent an ''ownership'' interest in the issuing company. | |||
===Payment of liabilities out of own funds=== | |||
You may occasionally see a covenant from an [[repackaging]] [[espievie]] to its [[security trustee]] as follows: | |||
{{quote|'''[[Payment of liabilities]]''': The issuer must, [[at all times]], pay its liabilities out of its own funds or [[Procure|procure]] payment of such liabilities by other persons out of moneys owing to it.}} | |||
This seems to be as close to canonical as anything on Planet Repack, but it hardly stands up to close scrutiny. What does it even mean? Is it a simply covenant to its trustee perform its contractual obligations to others? {{security trustees as vogons}} | |||
On what planet would one be animated enough to take upon itself the job of enforcing some one else’s entitlement, if the someone else in question was not inclined to do so herself? And for what? Or is it meant to ''constrain'' how the issuer discharges its liabilities to others; to proscribe the manner in which it discharges its debts? In which case, how else could it meet its liabilities other than from funds it holds or which are owed to it, without committing aggravated robbery? | |||
{{sa}} | |||
*[[Degrees of liability]] | |||
*[[Obligation]] | |||
*[[Indebtedness]] | |||
*[[Money]] | |||
*[[Borrowed money]] | |||
{{ref}} | |||
{{c|Repackaging}} | |||
Latest revision as of 08:41, 22 September 2023
Liability
/ˌlaɪəˈbɪlɪti/ (n.)
The value of one’s legal obligation. In financial services — indeed, generally in the arithmetic reckoning of the common law, which reduces the world to a kind of eternal ledger of debits and credits, that duty is articulated as a sum of money payable. Now, I am making this up as I go along, readers — no change there — but financial services practitioners have a notoriously loose grip of the English language, so hang it, call it a financial poet’s licence to be exact, even if that might be exactly wrong. We monetary bards[1] like to wield vocabulary with the deftness of a sturgeon. So let’s.
In the narrowest sense, a “liability” is a term of accounting art: everything that an “asset” is not, only rendered in those monochromatic, monetary terms — accountants are colour-blind: they only understand the world in dollars and cents; they perceive only the decimal code underlying the multi-hued panorama that confronts the rest of us — but this is, in its way, a useful concept to hold onto when drafting a legal contract. It distinguishes a liability from an obligation: your obligation is to provide a carbolic smoke-ball of merchantable quality; your liability is to pay £100 to a purchaser should it not work.[2]
We are close to the netherworld of jurisprudence by which we ask what is money. But let’s save that for another day.
A company’s shares, by way of illustration, are not liabilities, but rather represent an ownership interest in the issuing company.
Payment of liabilities out of own funds
You may occasionally see a covenant from an repackaging espievie to its security trustee as follows:
Payment of liabilities: The issuer must, at all times, pay its liabilities out of its own funds or procure payment of such liabilities by other persons out of moneys owing to it.
This seems to be as close to canonical as anything on Planet Repack, but it hardly stands up to close scrutiny. What does it even mean? Is it a simply covenant to its trustee perform its contractual obligations to others? Security trustees are inert bodies at the best of times, but are especially so when it comes to repackagings. They are like Vogons. They would not, as Douglas Adams once put it (about Vogons)
“... even lift a finger to save their own grandmothers from the Ravenous Bugblatter Beast of Traal without orders signed in triplicate, sent in, sent back, queried, lost, found, subjected to public inquiry, lost again, and finally buried in soft peat for three months and recycled as firelighters.”
On what planet would one be animated enough to take upon itself the job of enforcing some one else’s entitlement, if the someone else in question was not inclined to do so herself? And for what? Or is it meant to constrain how the issuer discharges its liabilities to others; to proscribe the manner in which it discharges its debts? In which case, how else could it meet its liabilities other than from funds it holds or which are owed to it, without committing aggravated robbery?