Provision

DEFINITION of 'Provision'

A legal clause or condition contained within a contract that requires or prevents either one or both parties to perform a particular requirement by some specified time. Specified requirements can include, but are not limited to, sunset, soft call, anti-dilution, and anti-greenmail provisions.

BREAKING DOWN 'Provision'

Provisions were created to protect the interests of one or both parties named in a contract or legal document. For example, the anti-greenmail provision contained within some companies' charters protects shareholders from the board wanting to pass stock buybacks. Although stock buybacks can be a good thing for shareholders, some buybacks allow board members to sell their stock to the company at inflated premiums.

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