Legal Definitions - wash

A "wash" refers to a situation where two opposing actions, effects, or financial figures completely cancel each other out, resulting in a neutral outcome or no net change. It means that despite activity, the overall position or balance remains the same as it was before the actions occurred.

Here are some examples to illustrate this concept:

• Business Transaction: Imagine a small consulting firm that provides services to a client, invoicing them for $10,000. However, due to a prior agreement for a discount on future services, the firm also owes the client a $10,000 credit from a previous overpayment.
  • How it illustrates "wash": The $10,000 the client owes for the new services is directly offset by the $10,000 credit the firm owes the client. When these two amounts are reconciled, no money changes hands, and the net financial impact is zero. This is considered a "wash" in their accounts.
• Legal Settlement: In a minor dispute between two neighbors over property line encroachments, Neighbor A claims $500 in damages for a fence built on their land, while Neighbor B counter-claims $500 for damage to their landscaping caused by Neighbor A's tree roots.
  • How it illustrates "wash": If both parties agree to drop their respective claims because the monetary value of each claim is identical and they cancel each other out, the dispute results in a "wash." Neither neighbor pays the other, and the legal claims are effectively neutralized.
• Investment Activity: An individual buys 50 shares of a particular company's stock for $100 per share. A few months later, they sell those same 50 shares for exactly $100 per share, with all brokerage fees and commissions also canceling out any minor price fluctuations.
  • How it illustrates "wash": Despite the act of buying and selling, the investor neither gained nor lost money on the transaction. The purchase price was entirely offset by the selling price (after accounting for all costs), leading to a financial "wash" on that specific investment.