Irrevocable: Definition, Example and Related Terms
What does it mean when something is Irrevocable ?
For example, if a seller makes an irrevocable offer to sell a piece of property at a specified price, they cannot retract this offer once it has been made. The buyer has the assurance that the offer will remain available under the stipulated terms.
Understanding the concept of irrevocability is crucial for anyone drafting or entering into contracts. It ensures all parties understand the permanent nature of their commitments and obligations. This can be particularly important in high-stakes or long-term agreements where a change of mind by one party could have significant implications for the other.
An irrevocable term can provide a sense of security and reliability, as it guarantees that a party cannot back out of their commitments without facing legal consequences. It's essential to carefully consider the implications of agreeing to any irrevocable terms within a contract.
Example(s)
Scenario Description Real Estate Offer A real estate buyer makes an irrevocable offer to purchase a property. This means the buyer cannot retract their offer and the seller can rely on this commitment for a specific period. Irrevocable Trust An individual sets up an irrevocable trust, transferring assets into it with terms that cannot be altered. Once the trust is established, the creator cannot modify the terms or reclaim the assets. Financing Agreement A company enters into an irrevocable financing agreement with a lender. This means the lender is committed to providing the agreed funds, and the company cannot use another financing option without breaching the contract.