Contingent liability definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Contingent liability can be defined as: Obligation to make a future payment if, and only if, an uncertain future event occurs. Contingent liability is a liability but is one that is contingent on a future event. Contingent liability can be a confusing concept because a liability is a future cost for something that happened in the past. A contingent liability, therefore, generally has a past component and a future component, the past component causing the potential liability, the future component determining whether the liability will materialize. A lawsuit is an example of a contingent liability. The act that cause the lawsuit happened in the past but the outcome of the case happens in the future. The continent liability happened in the past but we do not know if it will materialize until the future.
