Sum Certain
What Is Sum Certain?
A sum certain depicts the foreordained settlement price for a contract or negotiable instrument. It alludes to a fixed or specific amount of money, with no room for ambiguity.
A negotiable instrument can't be negotiated except if it specifies a sum certain. For instance, on the off chance that a borrower goes into a mortgage contract with a lender for $400,000, and that amount is obviously stated in the mortgage note, then, at that point, that figure is the sum certain. Sum certain is otherwise called "sum payable."
Understanding Sum Certain
Sum certain is a legal phrase alluding to a specific amount (typically an amount of money) that is straightforwardly stated in a contract or negotiable instrument, (for example, a mortgage or promissory note) at the time the document is written, and which isn't not entirely clear or misinterpretation. Sum certain is accordingly utilized for a wide range of contracts including financial instruments, yet in addition employment agreements, contracts for purchase, and contracts for lease.
A contract between two gatherings that explains a sum certain disposes of any room for misconception or misinterpretation in terms of what amount is owed or due. A sum certain doesn't need future calculation or the anticipating of future happenings.
Negotiable Securities and Sum Certain
Since a sum certain value is known in advance, entertainers can better hedge or guarantee against the stated value than if the amount were available to flexibility, or one which differs based on some contingency (for instance the shifting price of a call option that moves with its underlying security).
A negotiable instrument is a marked document that guarantees a sum certain amount of payment to a predefined person or the assignee. As such, it is a formalized type of IOU: A transferable, marked document that vows to pay the bearer a sum of money sometime not too far off or on-request. The payee, who is the person getting the payment, must be named or generally indicated on the instrument.
Since they are transferable and assignable, numerous negotiable instruments might trade on a secondary market.
Illustration of Sum Certain
Take for instance a contract that specifies, "Alice will pay Bob $8,000 for painting her home, including all costs." The amount owed to Bob is a sum certain. Compare this with, "Alice will pay Bob for his time (at the rate of $60 60 minutes) and costs of materials for the painting of Alice's home." The amount owed to Bob isn't specifically stated.
A contract that determines a sum certain of $8,000 for work carried out is in this way clearer than an unconditional contract that determines payment at a rate of $50 each hour, subject to a maximum of 200 hours. A representative's salary, whenever illuminated in a contract, would be a sum certain while their performance-based bonus wouldn't be.
Features
- Numerous financial instruments are sum certain, making them exchangeable and transferrable (negotiable) starting with one party then onto the next.
- Sum certain alludes to a contract or other agreement where the value or amount due is specific and known in advance.
- Having a sum certain eliminates vagueness or uncertainty from the value of a contract or security.
