Defeisance

Part of speech: noun

Definitions

1. A legal provision that annuls a deed or estate once a specified condition is met ; the setting aside of funds or securities to pay off a debt in advance
2. A clause in a legal instrument that renders a conveyance void upon fulfilment of a condition ; the practice of placing assets in trust to discharge a company's liabilities
3. The nullifying condition attached to a property deed or bond ; a financial method of retiring borrowed money by reserving assets to service the obligation

Etymology: Defeasance comes from Anglo-French "defeisance," meaning "undoing" or "annulment," which in turn derives from the Old French verb "defaire," to undo. Its ancestry runs back to Latin "disfacere," and the English word's root sense is simply that of unmaking something already made. The legal use is the one that has survived: a defeasance clause is a provision that cancels an earlier grant or conveyance once a stated condition is met. The word therefore describes a deed that carries its own undoing within it. A mortgage is the classic example, with the borrower regaining the property once the debt is repaid. In modern finance the term has taken on a second meaning, the practice of placing assets into a trust so that the proceeds discharge a company's liabilities, often moving debts off the balance sheet.