Reasonableness Standard

DEFINITION of 'Reasonableness Standard'

1) A requirement of the Consumer Leasing Act that takes into consideration the individuals' circumstances according to the amount of harm experienced by the lessor if they early terminate, make late payments or cease to make payments. The reasonableness standard looks at delinquency, default or early termination based on the anticipated or actual harm caused by such delinquency, default or early termination; the difficulties in proving the loss; and finally the inconvenience in finding a solution.


2) A benchmark used in court when reviewing the decisions made by a particular party. The reasonableness standard is a test which asks whether the decisions made were legitimate and designed to remedy a certain issue under the circumstances at the time. Courts using this standard look at both the ultimate decision, and the process by which a party went about making that decision.

BREAKING DOWN 'Reasonableness Standard'

1) A good rule to use in evaluating the early termination of any vehicle lease is to compare the blue book value of the car at the time to the total payments made under the lease up to the surrender date. Under the Consumer Leasing Act, you have the right to get an independent appraisal by someone agreed to by you and the leasing company.


2) Along with the business judgment rule, the reasonableness standard makes up the backbone of many business-related court cases. Courts must determine whether or not a particular decision is arbitrarily made, or if it is designed to address a defined issue or risk. One of the major factors influencing a court's decision is whether a party's actions affect "health, happiness and enjoyment of life", and that a party's actions do not disproportionately affect others.

RELATED TERMS
  1. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  2. Consumer Credit Protection Act ...

    Federal legislation that created disclosure requirements that ...
  3. Corporate Action

    Any event that brings material change to a company and affects ...
  4. Business Judgment Rule

    A regulation that helps to make sure a corporation's board of ...
  5. Lease

    A legal document outlining the terms under which one party agrees ...
  6. Excess Judgment Loss

    The amount of additional loss that an insurer is required to ...
Related Articles
  1. Investing Basics

    Understanding Stock Splits

    We explain what they are, the thinking behind them as well as their results.
  2. Mutual Funds & ETFs

    Proxy Voting Gives Fund Shareholders A Say

    You have the right to take part in important company decisions - even if you cannot attend the meetings.
  3. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  4. Personal Finance

    How To Get The Best Price On A New Car

    Find out tips that'll save the haggling and get you the best price on a new car.
  5. Insurance

    The True Cost Of Owning A Car

    Driving is often the most convenient way to get around, but it'll cost you.
  6. Investing News

    Obama Wants to Double Wall Street Regulation

    President Obama wants to double the budgets of the SEC and the CFTC over the next five years.
  7. Taxes

    Why People Renounce Their U.S Citizenship

    This year, the highest number of Americans ever took the irrevocable step of giving up their citizenship. Here's why.
  8. Fundamental Analysis

    The Evolution of Obamacare Since Its Inception

    Find out whether the Patient Protection and Affordable Care Act, also known as Obamacare, has lived up to its lofty projections from 2010.
  9. Economics

    Economist Guide: 3 Lessons Adam Smith Teaches Us

    Learn three critical lessons about economics from 18th century philosopher Adam Smith, considered by many to be the father of economics.
  10. Career Education & Resources

    Laws & Regulations To Know Before Changing the Name of Your Business

    Discover some of the most important steps you need to take after making a decision to change your legally established business name.
RELATED FAQS
  1. Can FHA loans be used for condos?

    A borrower can obtain Federal Housing Administration (FHA) loans to finance the purchase of a condominium as long as the ... Read Full Answer >>
  2. Can I get dental insurance with Medicare?

    Medicare does not offer dental insurance that will cover dental care and medical supplies, such as cleanings, sealants, extractions, ... Read Full Answer >>
  3. Who can make catch-up contributions to a Health Savings Account (HSA)?

    An eligible individual who is 55 years or older at the end of his tax year can make additional catch-up contributions to ... Read Full Answer >>
  4. Do banks offer FHA loans?

    Many major U.S. banks, including Well Fargo & Company, U.S. Bancorp, Bank of America and Flagstar Bancorp, offer Federal ... Read Full Answer >>
  5. What do states do with unclaimed property?

    Unclaimed property refers to personal accounts in financial institutions or companies that have had no activity and whose ... Read Full Answer >>
  6. How can you reclaim escheated, or unclaimed, property?

    The process for reclaiming unclaimed or escheated property varies by state, as the federal government does not have a central ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center