Risk Allocation
/ˈrɪsk ˌæləˈkeɪʃən/
Definitions
- (n.) The process of assigning responsibility for potential losses or adverse events between parties in a contract or legal arrangement.
The contract's risk allocation clause specifies which party bears liability for environmental damages.
- (n.) The legal and financial method of dividing potential risks among parties to minimize overall liability exposure.
Effective risk allocation can prevent protracted litigation and financial loss.
Related terms
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Commentary
Risk allocation clauses are critical in contracts to clarify responsibility and avoid disputes; precise drafting is essential to ensure enforceability.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.