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Simple English definitions for legal terms
advance
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A quick definition of advance:
An advance is when someone gives money or goods before they get something in return. Usually, the person who gets the advance has to pay it back later or do something to make up for it. There are two main reasons why someone might ask for an advance: to make sure they get what they paid for, or to make sure they get paid for what they're giving. For example, if you want to buy something but don't have enough money, you might ask for an advance. Or, if you're selling something and want to make sure the buyer will pay you, you might ask for an advance. Advances can also be used to pay for things ahead of time, like a phone plan or insurance.
A more thorough explanation:
An advance is a type of loan or payment where money or goods are given before receiving something in return. The person receiving the advance is expected to repay it later or adjust the basis of the transaction. There are two types of advance payments:
- As security for the delivery of goods or services
- As an early payment of a bill or debt
For example, when you rent an apartment, you may be required to pay a security deposit in advance. This is to cover any damages you may cause to the apartment during your stay. Another example is when you buy a prepaid cell phone plan. You pay in advance for a certain amount of minutes or data to use on your phone.
Advance payments are also used to protect sellers from buyers who may not pay for goods or services. For instance, a seller may ask for an advance payment to cover the cost of producing a product. This way, if the buyer doesn't pay, the seller won't lose money. Companies may also be required to make advance payments for large orders to provide sufficient consideration for the producer.
When an advance payment is accepted before a due date, the debt or bill that is due is adjusted by the payment to reflect a lower balance. For example, if you owe $100 on a bill and you make an advance payment of $50, the amount you owe is reduced to $50.