Reasonableness Standard

AAA

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.

INVESTOPEDIA EXPLAINS '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. Consumer Credit Protection Act ...

    Federal legislation that created disclosure requirements that ...
  2. Business Judgment Rule

    A regulation that helps to make sure a corporation's board of ...
  3. Corporate Action

    Any event that brings material change to a company and affects ...
  4. Lease

    A legal document outlining the terms under which one party agrees ...
  5. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  6. Structured Transaction

    A series of transactions that could have been treated as a single ...
RELATED FAQS
  1. How can I obtain an abatement for property taxes?

    Depending on where your property is located, your local city or county government may offer a property tax abatement program. ... Read Full Answer >>
  2. What average annual growth rate is typical for the banking sector?

    The banking sector plays an important intermediary role by channeling available funds for productive uses in the economy ... Read Full Answer >>
  3. What regulations exist to protect infant industries?

    There are far more protections of once-infant and now-dominant industries in the United States than regulations designed ... Read Full Answer >>
  4. How does protectionism affect gross domestic product (GDP?)

    The vast majority of economic literature suggests that protectionist policies reduce the gross domestic product, or GDP, ... Read Full Answer >>
  5. What are the major laws (acts) regulating financial institutions that were created ...

    Presidents George W. Bush and Barack Obama, in conjunction with Congress, signed into law several major legislative responses ... Read Full Answer >>
  6. How did the Dodd-Frank Act change whistleblower protection and processes?

    In 2010, the Dodd-Frank Act strengthened and expanded the existing whistleblower program promulgated by the Sarbanes-Oxley ... Read Full Answer >>
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. Insurance

    Why Is Health Care So Expensive In The Us?

    The U.S. is the world leader in only one area of health care: costs. Why is it so hard to rein in these expenses?
  7. Economics

    Explaining the Reserve Ratio

    Reserve ratio is the amount of cash a bank must keep in its bank vaults or deposit into a central, governing bank.
  8. Insurance

    Is My Health Insurance Good In Another State?

    Under ACA, is health care insurance something you can take with you state to state?
  9. Economics

    Is There Still Social Mobility In America?

    There’s a welfare program for everyone and they all have the goal of closing the inequality gap. That being said, is there still social mobility in America today?
  10. Fundamental Analysis

    Is Baidu a Real Threat to Google?

    Learn why the Google of China - Baidu - has the potential to eat a modest slice of Google's market share.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
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!