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Simple English definitions for legal terms
fail
Read a random definition: net valuation premium
A quick definition of fail:
Term: FAIL
Definition: Fail is when two people who trade stocks or other investments don't complete the trade on the day they agreed to. This can happen when one person doesn't give the investment they promised to, or when the other person doesn't pay for it. It's like not finishing your homework on time. Fail can also mean when a business or bank can't pay its debts and goes out of business.
A more thorough explanation:
Fail is a term used in the world of securities brokers. It refers to a situation where the delivery and payment of securities do not happen on the agreed-upon settlement date. This is also known as a fail contract. There are two types of fails:
- Fail to deliver: This is when the selling broker fails to deliver the securities to the buying broker by the settlement date.
- Fail to receive: This is when the buying broker fails to receive the securities from the selling broker by the settlement date.
Fail can also be used as a verb with three different meanings:
- To be unsuccessful or fall short of expectations. For example, "The company failed to meet its sales targets."
- To become bankrupt or insolvent. For example, "The business failed due to poor financial management."
- To lapse or become invalid. For example, "The contract failed because one of the parties did not fulfill their obligations."
Example 1: A broker agrees to sell 100 shares of a company to another broker for $10,000. The settlement date is set for two days later. However, on the settlement date, the selling broker fails to deliver the shares to the buying broker. This is an example of a fail to deliver.
Example 2: A broker agrees to buy 100 shares of a company from another broker for $10,000. The settlement date is set for two days later. However, on the settlement date, the buying broker fails to receive the shares from the selling broker. This is an example of a fail to receive.
Example 3: A company signs a contract with a supplier to deliver goods within a month. However, the supplier fails to deliver the goods within the agreed-upon time. This is an example of a fail to fulfill obligations.
These examples illustrate how a fail can occur in the world of securities brokers and how it can also refer to other situations where there is a failure to fulfill obligations.