What is it?
Available funds is a contractual financial clause that governs the pool of cash a party may use to meet its payment duties.
available funds
UCC / CommercialLegal glossary term
Definitions
What is available funds?
Legal Definition
When a contract mentions available funds, it points to the cash or liquid assets the obligor can draw on to satisfy payment obligations. If the specified amount proves insufficient, the payee may claim breach and seek damages under the agreement. Courts often qualify the term by excluding amounts subject to liens or set‑offs.
Plain-English Translation
Imagine a kid’s lunch ticket that shows exactly how much money they have to buy food; if the ticket runs out, they can’t buy lunch.
Contract relevance
Why available funds matters in contracts
Misjudging available funds can trigger a breach of contract claim, leaving the obligor liable for damages. The obligor bears the risk.
Visual model
Understand available funds fast
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01
Landlord requires the tenant to maintain $5,000 of available funds in a escrow account before rent due dates, ensuring rent can be paid.
02
Borrower certifies $200,000 of available funds prior to each drawdown under a construction loan, allowing the lender to release funds.
03
Franchisor demands the franchisee hold $10,000 of available funds to cover royalty payments each quarter.
Document context
How available funds shows up in legal documents
Why does it matter?
Misjudging available funds can trigger a breach of contract claim, leaving the obligor liable for damages. The obligor bears the risk.
When does it matter?
When the payment due date arrives and the obligor must draw from its available funds to perform.
Where is it usually seen?
Standard purchase agreements, construction contracts, and loan agreements often contain an available funds provision.
Who is affected?
Lender gains assurance of repayment capacity; borrower risks default if funds fall short.
How does it work?
First, the contract defines the measurement date for available funds. Then the obligor calculates cash, marketable securities, and cash equivalents on that date. Within the payment period, the obligor must demonstrate that the calculated amount meets or exceeds the required sum.
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Wikipedia
External reference for available funds
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Where available funds connects to real contract work
This layer links the term to nearby glossary entries, document use cases, and contract-risk guides so readers can move from definition to context without dead ends.
Glossary
Use Cases
Mortgage Agreement
Real Estate Contracts: Your mortgage is likely the largest contract you will ever sign. Read it.
Lease Agreement
Legal & Corporate: Your lease is a 12-month financial commitment — read every line.
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Source & disclosure
This page is an AI-assisted plain-English explanation based on LexPredict Legal Dictionary context and contract-review patterns. It is not legal advice. Meaning may vary by jurisdiction, industry, and exact clause wording.
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