Contractual Risk Definition

When it comes to risk, contracts are essential in two ways: first, they can help identify and allocate risks between parties; and second, they can provide a mechanism for managing or transferring risks if things go wrong.

However, contractual risk is not always easy to define. In general, it can be seen as the possibility that something might happen that could adversely affect the performance of a contractually agreed upon activity. This could be due to an unforeseen event or change in circumstances, or it could be due to one party breaching the terms of the contract.

There are many different types of risks that can fall under the contractual risk umbrella, including financial risk, reputational risk, regulatory risk, and more. It is important for businesses to carefully consider all of these risks when entering into any type of contract so that they can make informed decisions about how to best protect themselves.