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LSDefine
Simple English definitions for legal terms
financial contract
Read a random definition: CBOE
A quick definition of financial contract:
A financial contract is an agreement between two or more parties that creates obligations that can be enforced by law. It can be a written document that sets out the terms of the agreement, but the term "contract" usually refers to the legal relations resulting from the agreement. This means that the parties involved have certain rights and duties that they must fulfill. A contract can be thought of as a promise that, if broken, can be remedied by the law.
A more thorough explanation:
A financial contract is a type of contract that creates enforceable obligations between two or more parties. A contract is an agreement between parties that is recognized by law.
For example, when you take out a loan from a bank, you sign a financial contract that outlines the terms of the loan. This contract creates an obligation for you to repay the loan and for the bank to provide the funds.
Another example of a financial contract is a futures contract. This type of contract is an agreement to buy or sell a specific asset at a predetermined price and date in the future. Futures contracts are commonly used in commodities trading.
Overall, financial contracts are important because they provide a legal framework for parties to enter into agreements and create enforceable obligations.