Legal Definitions - potential

In legal terms, potential refers to something that is capable of coming into existence or likely to occur in the future, even if it does not currently exist or has not yet happened. It describes a future possibility that is considered real enough to be legally recognized or dealt with today.

• Example 1: Future Crop Yield

  A farmer enters into a contract to sell the entire corn harvest from their fields to a food distributor, even though the seeds have not yet been planted. The distributor agrees to pay a certain price for the future crop.

  This illustrates "potential" because the corn itself does not physically exist at the time of the contract. However, the *potential* for the corn to grow and be harvested is real and legally recognized, allowing the farmer to sell it in advance. The contract deals with the future existence of the crop.

• Example 2: Future Royalties from Creative Works

  A budding musician signs an agreement with a record label, assigning a percentage of all *future* royalties from songs they compose over the next five years. At the time of signing, many of these songs have not even been written or recorded.

  Here, the specific songs and the income they will generate (royalties) do not yet exist. However, the *potential* for the musician to create new works and earn royalties from them is recognized. This future income stream, though not yet realized, can be legally assigned or used as collateral based on its potential.

• Example 3: Potential Proceeds from a Legal Claim

  A person injured in a car accident, who has filed a lawsuit but has not yet received a settlement or judgment, assigns a portion of any *potential* future recovery from that lawsuit to a medical provider to cover immediate treatment costs.

  This demonstrates "potential" because, at the time of the assignment, there is no guarantee that the lawsuit will result in a financial recovery, nor is the exact amount known. However, the *potential* for a future financial award exists, and this "potential" asset can be legally transferred or used to secure services.