Defeasance Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Defeasance, written in plain English, along with examples of how it is used.

What is Defeasance?

n. In the case of some event occurring, the document that terminates the effect of an existing writing such as a contract, deed, or bond. It is an antiquated word.

History and Meaning of Defeasance

Defeasance is a legal term that refers to the process of terminating the effect of a document such as a contract, bond or deed in the event of a specific occurrence. The term's origins can be traced back to medieval England, where it was used to describe the termination of a feudal estate. The process involved transferring the land back to the landlord and could be initiated if certain conditions set out in the initial agreement were not met.

Examples of Defeasance

  1. Defeasance is commonly used in finance to refer to the process of establishing a trust or escrow account for a bond issuer to provide for the payment of principal and interest at the bond's maturity date.
  2. In the context of real estate, a defeasance clause in a mortgage agreement allows the borrower to terminate the mortgage by paying off the outstanding debt and providing collateral for any additional payments.
  3. In the world of law, defeasance can be used to nullify the enforceability of a judgment or other legal decisions, such as a deed that has been fraudulently obtained.

Legal Terms Similar to Defeasance

  1. Termination Clause: A clause that sets out the specific circumstances under which a contract or other legal agreement may be terminated.
  2. Rescission: A legal process whereby a contract is cancelled and the parties involved are returned to their prior positions as if the contract had never existed.
  3. Repudiation: A legal term used to describe the refusal to perform a contract or obligation.