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

deed A deed is a legal document that is signed and delivered, especially concerning the ownership of property or legal rights. Specifically, in common law, a deed is any legal instrument in writing which passes, affirms or confirms an interest, right ...

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 (legal system), civil law jurisdictions 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 t ...

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

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

technique where a corporate bond issue is repaid through an irrevocable trust, which allows the corporation to remove liabilities from its balance sheet; notably used by

Exxon Exxon Mobil Corporation ( ) is an American multinational oil and gas corporation headquartered in Spring, Texas, a suburb of Houston. Founded as the largest direct successor of John D. Rockefeller's Standard Oil, the modern company was form ...

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 ...

as are interested in the deed to which it is collateral. 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 coercion). Beneficiaries (technically referents) of security may be persons and social groups, objects and institutions, ecosystems, or any other entity or ...

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 jurisdict ...

. 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