Also known as contingent liability. An obligation that is not presently fixed and absolute, but which will become so on the happening of some future and uncertain event.

A guarantee obligation is an example of a contingent obligation. Under the terms of the guarantee, the guarantor assumes liability for all guaranteed obligations, but its liability to make payments is conditional. In a guarantee, the contingency is typically the failure of the party that is primarily responsible for the payment obligations to make payment. If this occurs, the guarantor's payment obligation is no longer contingent.