Obligation

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DEFINITION of 'Obligation'

The legal responsibility to meet the terms of a contract. If the obligation is not met there is often recourse for the other party to the contract.

INVESTOPEDIA EXPLAINS 'Obligation'

In the financial world, obligation refers to an outstanding debt that a party must still repay - and if they do not pay, they default on the debt. For example, when the U.S. government issues Treasury bonds it has the obligation to pay back the principal to the debt holders.

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