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preferred label
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composition contracts
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alternative label
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compositions
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definition
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An agreement among the creditors of an insolvent debtor to accept an amount less than they are owed, or in a different format, in order to receive immediate payment. When it appears that a debtor will not be able to satisfy all or even any of his creditors, the latter will often agree to accept equal proportions of what they are owed—for example, 25 cents on the dollar. At this point the initial claims are liquidated. If the debtor does not fulfill the agreement, then the creditors may demand only what is due them under it, rather than the full amount.
Legal Documents
contracts