Legal Definitions - debitorem locupletem esse

Debitorem locupletem esse is a Latin legal phrase that translates to "that the debtor is solvent."

Historically, this term referred to the assurance or guarantee that an individual or entity who owes money possesses the financial means and ability to pay their debts. It signifies that the debtor is not facing insolvency or bankruptcy and has sufficient assets or income to meet their financial obligations.

Here are some examples illustrating this concept:

• Business Acquisition: Imagine a large corporation, "Global Holdings," is acquiring a smaller company, "Tech Innovators." As part of the acquisition agreement, Tech Innovators has several outstanding contracts with clients who owe them significant payments. Global Holdings might require Tech Innovators to provide a warranty or representation that these clients (the debtors) are financially stable and capable of fulfilling their payment obligations. This ensures that the debtors are debitorem locupletem esse, meaning Global Holdings can expect to collect the outstanding revenue post-acquisition.

  This example illustrates the term because Global Holdings is seeking assurance that the entities owing money to Tech Innovators are solvent and will be able to pay their debts, thereby preserving the value of the acquired assets.

• Loan Guarantee: Consider a scenario where a parent, Ms. Chen, wants to help her adult child, David, secure a business loan from a bank. The bank is hesitant due to David's limited credit history. Ms. Chen offers to act as a guarantor for the loan, but the bank also requires David to provide detailed financial statements and a business plan demonstrating his projected profitability. The bank is essentially assessing whether David, as the primary debtor, will be debitorem locupletem esse—that is, whether he will have the financial capacity to repay the loan himself, even with his mother's guarantee as a backup.

  This example demonstrates the term by showing the bank's due diligence in verifying the primary borrower's (David's) solvency and ability to meet his debt obligations, even when a guarantor is involved.

• Settlement Agreement: In a legal dispute, "Apex Construction" is ordered by a court to pay a substantial sum to "Green Valley Homeowners Association" for damages caused by faulty construction. As part of the settlement, Apex Construction agrees to a payment plan over several years. Green Valley Homeowners Association's legal team might insist on provisions in the settlement that require Apex Construction to periodically provide financial reports or maintain a certain level of assets to ensure they remain debitorem locupletem esse throughout the payment period. This protects the homeowners by confirming Apex Construction's ongoing ability to fulfill its financial commitment.

  This example illustrates the term by highlighting the need for the creditor (Green Valley Homeowners Association) to ensure the debtor (Apex Construction) maintains its financial solvency to guarantee the long-term enforceability and fulfillment of the settlement terms.