obligor

noun ob·li·gor \ ˌä-blə-ˈgȯr , -ˈjȯr \
Updated on: 13 Oct 2017

Definition of obligor

:one who is bound by a legal obligation

First Known Use of obligor

1541


Financial Definition of OBLIGOR

obligor

What It Is

An obligor is a person or entity legally required to provide a payment, service, or other benefit to another person or entity (the obligee).

How It Works

Companies that issue bonds are perhaps the most well-known obligors. They must provide their bondholders with set interest and principal payments on specified dates, and in some cases, must be willing to convert that debt into equity at specified ratios or repay the debt early if certain events occur.

In certain cases, obligors might also be required to perform particular tasks or even refrain from performing certain actions. If an obligor fails to meet its obligations, the obligor is sometimes considered to be in default.

Obligors can also be called borrowers or debtors in contracts.

Why It Matters

Obligors are subject to contractual obligations. As such, if they do not fulfill their obligations, the obligees usually have the right to seek recourse in court. A significant amount of reputational damage can also occur when an entity, especially a public company, fails to meet its obligations. In some cases, even the speculation that an obligor might not fulfill its obligations can cause its stock price to go down and make it very difficult to obtain financing or other help later.


Law Dictionary

obligor

noun ob·li·gor \ ˌä-blə-ˈgȯr, -ˈjȯr \

legal Definition of obligor

:one who is bound by an obligation to another
  • an obligation extinguished by performance of the obligor
— compare creditor, debtor, obligee, promisor, surety

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