DEFINITION of 'Inchoate'

A state of activity or entitlement that is characterized by partial completion of an intended outcome or status.

The notion of inchoate comes into play most often in a legal sense, as it could refer to an inchoate transaction between two parties, where the tentative terms of an agreement have been discussed and it's plausible that the deal will go through, but no formal agreement has yet been signed.


The notion of inchoate rights or actions is an important distinction to make in certain situations. For example, an individual may have inchoate title to real estate owned by his or her parents, meaning that he or she will have clear title to the property once the parents pass away.

When applying for a bank loan, it would be critical for the bank manager to understand that the individual only had inchoate title to the property, not full title. Thus, if the bank manager issued a loan to the individual under the unclarified assumption that the bank could foreclose on the properties if the loan went into default, he or she would be in for an unpleasant surprise. This is because the individual would not actually have clear title to the properties, so the bank would have no claim against them.

  1. Encumbrance

    A claim against a property by a party that is not the owner. ...
  2. Lien

    The legal right of a creditor to sell the collateral property ...
  3. Title

    The right to the ownership and possession of any item that may ...
  4. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  5. Second Lien Debt

    Debts that are subordinate to the rights of other, more senior ...
  6. Blanket Lien

    A lien that gives the right to seize, in the event of nonpayment, ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Term

    What are Mutually Exclusive Events?

    In statistics, mutually exclusive situations involve the occurrence of one event that does not influence or cause another event.
  3. Entrepreneurship

    Risks Associated With Government Contracts

    Government contracts can be rewarding, but they also come with a variety of risks.
  4. Entrepreneurship

    10 Public Companies That Rely On Govt. Contracts

    We look at 10 of the top public companies whose businesses rely on U.S. government contracts.
  5. Economics

    How Does an Operating Lease Work?

    Operating lease is a term used mostly in accounting to denote a lease that gives the lessee rights to use and operate an asset without ownership.
  6. Entrepreneurship

    Lockheed Martin Is Tight With The US Government

    The relationship between Lockheed Martin and the U.S. government is long-standing and the company's biggest revenue source, but it may be deteriorating.
  7. Home & Auto

    ‘Turnkey’ Properties: A Sensible Investment?

    Turnkey properties can make sense - for people who want a real estate investment without truly being in the real estate business.
  8. Economics

    Understanding Covenants

    A covenant is a term placed in a loan that requires the borrower to either maintain or refrain from certain business activities.
  9. Economics

    What is Earnest Money?

    An earnest money deposit shows the seller that a buyer is serious about purchasing a property.
  10. Retirement

    Time To Hire A Senior Move Manager?

    Watch for these signs that you or an elderly family member may need to downsize and move somewhere easier to manange. A senior move manager can help.
  1. Are my IRAs secure against possible liens?

    Your IRA is protected from bankruptcy up to $1 million. However, in all other cases, state law determines whether any protection ... Read Full Answer >>
  2. When is a takeover bid legally canceled?

    When a firm makes an official bid to take over a target company, a legal offer is created. The firm making the offer becomes ... Read Full Answer >>
  3. My uncle died recently. He designated my mother and father as his beneficiaries in ...

    It depends. If the retirement plan is a qualified plan, then the plan administrator would refer to the plan document to ... Read Full Answer >>
  4. Are waivers of subrogation clauses ever ineffective in preventing a third-party lawsuit?

    Sometimes waiver of subrogation clauses are ineffective at preventing a third-party lawsuits. In determining who is responsible ... Read Full Answer >>
  5. What is an alienation clause?

    Whether used in reference to insurance policies, mortgages or commercial loans, an alienation clause stipulates that should ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  3. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  4. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!