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Definition and Examples of Obligation

An obligation is a person who owes a benefit or payment to another person, such as child support or alimony or a loan payment. The individual who benefits from the obligation is known as the obligee, and they benefit from the terms of the contract. An obligation can also be an entity, such as a company legally bound to meet specified performance requirements.

How Obligation Works

You may find yourself acting as an obligation whether in a business or personal environment. For example, if you take out a financial loan, you may have acted as the obligation to your lender. You are legally required to pay all principal installments and interest on the loan.

If you miss payments or default, the lender can file a lawsuit to collect the amount owed. In this case, the obligation is sometimes referred to as a debtor.

In a personal context, this often happens when one spouse pays alimony or child support to the other spouse. For instance, a working spouse may be required to pay monthly alimony to the non-working spouse, or a court may issue an order for the non-custodial parent to pay child support for the custodial parent. The obligation must petition the court if they wish to change the payment obligation. Otherwise, the obligee may sue them in court for non-payment.

A good example of this occurs in family law when the court awards the custodial parent child support. This means that the non-custodial parent is the “obligation of child support” and is responsible for paying expenses to the custodial parent. If they default on payments or stop paying altogether, the obligation may be deemed in contempt of court and may face fines or even jail time.

In the corporate environment, obligation refers not only to payment agreements but also to positive covenants. A positive covenant is a contract that requires the obligation to repay debts or adhere to certain conditions, including specific performance indicators.

Obligation vs. Obligee

There are two common legal terms you will hear regarding this concept: obligation and obligee. Although the words are similar, their definitions are quite different in a legal context.

Obligation: has a legal duty to the obligee.

Obligee: benefits from the obligation specified in the agreement.

While the obligation is legally bound to meet the terms of the contract or agreement, the obligee benefits from those terms. If the obligation fails to meet its obligation, the obligee can resort to legal actions. For example, if the obligee receives child support and the obligation’s payment is late or does not arrive, they may take legal action.

Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editing process to learn more about how we verify facts and keep our content accurate, reliable, and trustworthy.

American Family Law Center. “Obligation.” Accessed September 14, 2021.

William Walchin, PhD. “Defaulting on Child Support and Contempt Charges.” Accessed September 14, 2021.

Legal Institute. “Covenant Running with the Land.” Accessed September 14, 2021.

Surety Bond Producers Association. “What is a Surety Bond?” Accessed September 14, 2021.

Nelson Law Group, PC. “Obligation vs. Obligee – Which One Are You?” Accessed September 14, 2021.

New York State Department of Financial Services. “What if I Default?” Accessed September 14, 2021.

Source: https://www.thebalancemoney.com/what-is-an-obligor-5201299