Legal Definitions - caeteris paribus

Ceteris paribus is a Latin phrase that translates to "all other things being equal" or "holding all other factors constant." In legal and economic analysis, it is used to isolate the effect of one specific variable or condition by assuming that all other relevant variables or conditions remain unchanged. This allows for a clearer understanding of a particular cause-and-effect relationship or the impact of a single factor.

• Example 1: Contractual Price Adjustments

  Imagine a long-term supply contract between a manufacturer and a raw material supplier. The contract might state that the price of the raw material will increase by 3% annually, ceteris paribus. This means the 3% increase is expected to occur assuming all other terms of the agreement—such as the quality of the material, delivery schedules, payment terms, and the overall economic conditions affecting the market—remain the same. If, however, the quality of the raw material significantly declines, or if a new, cheaper alternative material becomes widely available, the "ceteris paribus" condition would no longer hold, potentially leading to a renegotiation or dispute over the price adjustment.

• Example 2: Regulatory Impact Assessment

  A government agency might propose a new environmental regulation requiring factories to install advanced pollution control equipment. When assessing the economic impact, the agency might project that, ceteris paribus, this regulation will increase manufacturing costs by 5%. This projection assumes that other factors influencing manufacturing costs, such as labor wages, energy prices, and demand for the manufactured goods, will remain constant. If, simultaneously, there's a sudden surge in energy prices or a significant drop in consumer demand, those external factors would alter the actual economic impact, meaning the "ceteris paribus" assumption for the regulation's cost increase would be incomplete.

• Example 3: Property Valuation in Legal Disputes

  In a divorce settlement, a court might need to determine the fair market value of a shared property. An appraiser might present a valuation based on comparable sales in the neighborhood, stating that the property is worth $500,000, ceteris paribus. This valuation assumes that other key characteristics of the property (like its condition, size, number of bedrooms, and local amenities) are comparable to the properties used for comparison and that the market conditions (like interest rates and buyer demand) have not drastically changed since the comparable sales occurred. If, for instance, the property in question has significant structural damage not present in the comparable homes, or if a major economic downturn has occurred, the "ceteris paribus" assumption would be challenged, requiring adjustments to the valuation.