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due diligence

noun

Definition of due diligence

  1. 1 :  the care that a reasonable person exercises to avoid harm to other persons or their property

  2. 2 :  research and analysis of a company or organization done in preparation for a business transaction (as a corporate merger or purchase of securities)



Doing Your Due diligence

Due diligence has been used since at least the mid-fifteenth century in the literal sense “requisite effort.” Centuries later, the phrase developed a legal meaning, namely, “the care that a reasonable person takes to avoid harm to other persons or their property”; in this sense, it is synonymous with another legal term, ordinary care. More recently, due diligence has extended its reach into business contexts, signifying the research a company performs before engaging in a financial transaction. This meaning may also apply to individuals: people are often advised to perform their due diligence before buying a house, signing a loan, or making any important purchase.

1877

First Known Use of due diligence

1877


Law Dictionary

due diligence

noun

Legal Definition of due diligence

  1. 1 :  such diligence as a reasonable person under the same circumstances would use :  use of reasonable but not necessarily exhaustive efforts —called also reasonable diligence Editor's note: Due diligence is used most often in connection with the performance of a professional or fiduciary duty, or with regard to proceeding with a court action. Due care is used more often in connection with general tort actions.

  2. 2a :  the care that a prudent person might be expected to exercise in the examination and evaluation of risks affecting a business transaction b :  the process of investigation carried on usually by a disinterested third party (as an accounting or law firm) on behalf of a party contemplating a business transaction (as a corporate acquisition or merger, loan of finances, or especially purchase of securities) for the purpose of providing information with which to evaluate the advantages and risks involved <the greatest exposure…for failure to conduct adequate due diligence arises in the context of public offerings of securities — G. M. Lawrence> c :  the defense (as to a lawsuit) that due diligence was conducted




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