Legal Definitions - futures

The term "futures" has a few distinct meanings, primarily in finance and in the context of legal claims.

1. In finance, "futures" refers to standardized agreements to buy or sell an asset at a predetermined price on a specific future date.

• These agreements are called futures contracts. They involve assets like commodities (e.g., oil, gold, agricultural products), financial instruments (e.g., stocks, bonds, interest rates), or foreign currencies. The purpose is often to manage risk by locking in a price today for a transaction that will occur later, or to speculate on future price movements.
• Example 1 (Commodity): A large bakery chain wants to ensure a stable cost for its flour. To do this, it enters into a futures contract to buy a specific quantity of wheat in six months at a price agreed upon today. This protects the bakery from potential increases in wheat prices before their next harvest.
• Explanation: The bakery is using a futures contract to secure a future supply of wheat at a known price, illustrating the use of futures for managing commodity price risk.
• Example 2 (Financial Instrument): An investor believes that the stock market, represented by a major index, will significantly increase over the next three months. Instead of buying individual stocks, they purchase a futures contract tied to that stock index. If the index rises as predicted, the investor profits from the difference between the contract price and the market price at settlement.
• Explanation: This example shows futures being used for speculation on the future direction of a financial market index, rather than for hedging.
• Example 3 (Foreign Currency): A technology company in the United States expects to receive a large payment in Japanese Yen from a client in Japan in four months. To avoid the risk of the Yen weakening against the US Dollar before the payment arrives, the company sells a Yen futures contract. This locks in an exchange rate today for the Yen they will receive in the future.
• Explanation: Here, futures are used to hedge against currency exchange rate fluctuations, ensuring the company knows the dollar value of its future Yen income.

2. In legal contexts, particularly class action lawsuits, "futures" can refer to individuals who are expected to suffer harm in the future due to a defendant's actions, even if they haven't experienced that harm yet.

• These individuals are often included as potential members of a class of plaintiffs in a lawsuit, anticipating future injury or damages.
• Example 1 (Environmental Harm): Residents living near a factory that has been illegally discharging pollutants into the local water supply are part of a class action lawsuit. While some residents have already developed health issues, others, who have not yet shown symptoms but have been exposed to the contaminated water, are considered "futures" or future claimants.
• Explanation: These individuals are included in the lawsuit because their exposure to the pollution makes future health problems a strong possibility, even if they are currently asymptomatic.
• Example 2 (Defective Product): A pharmaceutical company sells a new drug that is later found to have a rare but serious long-term side effect that may not manifest for several years after use. Patients who have taken the drug but have not yet developed the side effect are considered future claimants in a class action against the drug manufacturer.
• Explanation: The potential for future harm due to the defective product qualifies these individuals as future claimants, allowing them to be part of the class action.
• Example 3 (Data Breach): Following a major data breach at a financial institution, a class action lawsuit is filed. While some customers have already experienced identity theft or fraudulent charges, others whose personal information was exposed but who haven't yet suffered direct financial harm are included as future claimants, given the ongoing risk of future fraud.
• Explanation: The exposure of sensitive data creates a future risk of harm, making these individuals eligible to be considered future claimants in the lawsuit.