Contingent liability

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An obligation which has not come about yet but might, under the terms of a contract (or other obligation) to which one is already bound, and one is powerless to influence whether it does or not.

A tax indemnity is a contingent liability. It depends on the tax amount being levied. If no tax is ever assessed, no liability arises. But if one does, you're liable for it whjether you like it or not.

So is a seller’s obligation an option contract. It depends on the option being in the money (and being exercised).

See also

• Option
• Indemnity