Defeasance (or defeazance) (french: défaire, to undo), in law, an instrument which defeats the force or operation of some other

deed In common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferring ...

or estate; as distinguished from ''condition'', that which in the same deed is called a condition is a defeasance in another deed. The term is used in several contexts in finance, including:defeasance
AllBusiness.com. * a clause in a

mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any pu ...

granting a borrower exclusive ownership in a property after a debt is repaid, * a

corporate finance Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the Value investing, value of the firm to the shareholders, and the tools and anal ...

technique where a corporate bond issue is repaid through an

irrevocable trust A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the " sett ...

, which allows the corporation to remove liabilities from its balance sheet; notably used by

Exxon ExxonMobil Corporation (commonly shortened to Exxon) is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller's Standard Oil, and was formed on November 30, ...

in 1982 A defeasance should recite the deed to be defeated and its date, and it must be made between the same

parties A party is a gathering of people who have been invited by a host for the purposes of socializing, conversation, recreation, or as part of a festival or other commemoration or celebration of a special occasion. A party will often feature fo ...

as are interested in the deed to which it is

collateral Collateral may refer to: Business and finance * Collateral (finance), a borrower's pledge of specific property to a lender, to secure repayment of a loan * Marketing collateral, in marketing and sales Arts, entertainment, and media * ''Collate ...

. It must be of a thing defensible, and all the conditions must be strictly carried out before the defeasance can be consummated. Defeasance in a

bill of sale A bill of sale is a document that transfers ownership of goods from one person to another. It is used in situations where the former owner transfers possession of the goods to a new owner. Bills of sale may be used in a wide variety of transaction ...

is the putting an end to the

security Security is protection from, or resilience against, potential harm (or other unwanted coercive change) caused by others, by restraining the freedom of others to act. Beneficiaries (technically referents) of security may be of persons and social ...

by realizing the goods for the benefit of the

mortgagee A mortgage is a legal instrument of the common law which is used to create a security interest in real property held by a lender as a security for a debt, usually a mortgage loan. ''Hypothec'' is the corresponding term in civil law jurisdicti ...

. It is not strictly a defeasance, because the stipulation is in the same deed; it is really a condition in the nature.

References

Common law legal terminology {{Law-term-stub