due diligence

noun

Definition of due diligence

1 law : the care that a reasonable person exercises to avoid harm to other persons or their property failed to exercise due diligence in trying to prevent the accident
2 business : research and analysis of a company or organization done in preparation for a business transaction (such 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.

1598

First Known Use of due diligence

1598

Other Business Terms

amortize, caveat emptor, clearinghouse, divest, emolument, green-collar, marque, overhead, perquisite

Law Dictionary

due diligence

noun

Legal Definition of due diligence

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.
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