Legal Definitions - lapsus bonis

Lapsus bonis is a Latin term used in Scots law to describe a situation where an individual or entity experiences a temporary reduction in their financial well-being or worldly circumstances. It refers specifically to short-term financial difficulties or a temporary decline in one's economic standing, rather than a state of long-term insolvency or bankruptcy.

Here are some examples to illustrate this concept:

• Imagine a self-employed architect who typically has a steady stream of projects. Due to an unexpected economic downturn, several planned projects are postponed or cancelled over a six-month period. While the architect is not bankrupt and still owns assets, their income has significantly decreased, making it challenging to cover regular business expenses and personal living costs without dipping into savings. This period of reduced income and financial strain, which is expected to be temporary as the market recovers, would be considered a state of lapsus bonis.

• Consider a small, family-owned restaurant located in a seasonal tourist area. During the peak season, the restaurant thrives, but in the quieter winter months, revenue drops considerably. The owners might find themselves with significantly less disposable income and tighter cash flow during this off-season, potentially needing to defer non-essential maintenance or personal expenditures. This predictable, temporary dip in their financial circumstances, before the return of the busy season, exemplifies lapsus bonis.

• A professional with a stable job faces a sudden, substantial, and uninsured medical expense for a family member. To cover this unexpected cost, they must temporarily reduce their discretionary spending, postpone a planned home renovation, and rely more heavily on their emergency fund for a few months. Although their employment and overall financial health remain sound, this period of financial constraint and reduced liquidity due to an unforeseen event represents a temporary reduction in their worldly circumstances, fitting the description of lapsus bonis.