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You are here: Home / Articles / Dictionary / Legal to English Dictionary: Pari Passu

Legal to English Dictionary: Pari Passu

On the weekends, it only seems appropriate to feature some of the more interesting of the legal words. I can assure you there are many. These are words that are no longer in use in the English language (or, in some cases, never were), or words that are only used in contracts. Most of these words are even being phased out of use in contracts.

This way, we can have little legal fun on the weekends. These words are for fun. Now, you will know what they mean if someone uses it in conversation.

Latin

By equal step.

Legal

Proportionally, at an equal pace; without preference.

English

This is a term used when speaking about a class of people with financial rights that will be treated equally. It can be used in the business context to describe business owners that will be treated equally in how they receive money or invest money. It is also used with lenders to describe those that are ranked equally with each other in terms of how they will be repaid.

An example helps explain:

You borrow money from four people to start your business. The first three people will be treated pari passu and the third will be junior to the first three. Imagine something happens in your business and it fails. When your entity fails you still owe $25,000 each. After you have sold all of your furniture and the rest of your inventory, you only have $25,000 remaining. The three creditors that are treated pari passu will split the $25,000 equally. The fourth guy is out of luck because you have limited liability.

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