An obligor is a person who owes another person a benefit or payment, such as child support, alimony, or a loan payment. It is the party receiving the benefit, and they gain from the contract’s provisions. An entity, such as a company, that is contractually required to fulfill specified performance requirements, can also be an obligor.
Definition and Examples of an Obligor
An obligor is a person who is contractually obligated to the obligee in a personal context. They are obligated to carry out the commitments stated in a contract or other legal arrangement. Legal repercussions may befall it if the arrangement is not followed.
- Alternate name: Debtor
How an Obligor Works
You can find yourself taking on the role of an that in a professional or private context. For instance, you have acted as an obligor to your lender if you have ever taken out a loan. You are required by law to repay the loan in full, including principal and interest.
Your lender has the right to take legal action to recover the money you owe if you are in arrears or default on the loan. In this context, the term “obligor” also refers to the debtor.
In a private setting, this frequently manifests itself when one spouse pays alimony or child support to another spouse. For instance, the court may order a working spouse to pay alimony to a non-working spouse on a monthly basis and may order a non-custodial to pay child support to the custodial parent. He or she will have to petition the court if they wish to change the payment obligation. Otherwise, it can take them to court for non-payment.
In family law, the court’s decision to grant child support payments to the custodial parent is a prime illustration of this. It follows that the “child support obligor,” who is the parent who must pay child support to the custodial parent, is the non-custodial parent. He or she may be declared in contempt of court and subject to penalties, including fines and even jail time if they fall behind on payments or cease making them completely.
An obligor in a corporate context includes both payment arrangements and affirmative covenants. An affirmative covenant is a clause in a contract that calls on the debtor to pay back loans or adhere to a set of conditions, such as predetermined performance standards.
Obligor vs. Obligee
This term is frequently used in conjunction with the legal terms obligor and obligee. Despite the terminology being similar, the definitions in a legal context are considerably different.
|Has a legal obligation to the obligee||Benefits from the obligation outlined in the agreement|
|Can face legal repercussions if the obligation isn’t met||Can seek legal help if the obligor doesn’t meet their requirements|
The obligee gains from the provisions of a contract or agreement while he or she is legally required to comply with those terms. Additionally, the obligee has the right to take legal action if the obligor breaks their obligation. For instance, that may file a lawsuit if he or she owes child support but fails to make or is late with payments.