Definition
Contingent liabilities are possible obligations that a company may have to pay in the future, depending on the outcome of a certain event. They are not confirmed yet, but may become actual liabilities if specific conditions are met.
Example
If a company is involved in a court case, it may have to pay money if it loses the case. This possible payment is considered a contingent liability until the final decision is made.
Caution
Contingent liabilities are uncertain and may or may not occur. However, they can impact a company’s financial position in the future, so investors should pay attention to them.