Editing Counterparty (section)

{{Short description|Legal entity exposed to financial risk}}
{{distinguish|Counterparty (technology)}}
A '''counterparty''' (sometimes '''contraparty''') is a [[Juristic person|legal entity]], [[unincorporated entity]], or collection of entities to which an exposure of [[financial risk]] may exist. The word became widely used in the 1980s, particularly at the time of the [[Basel I]] deliberations in 1988.<ref>{{Cite book |authorlink=Thomas J. Sargent |last1=Sargent |first1=T. J.|last2=Velde |first2=F. R. |title=The Big Problem of Small Change |location=[[Princeton, New Jersey|Princeton]] and [[Oxford]] |publisher=[[Princeton University Press]] |year=2001 |page=}}</ref>{{page number|date=February 2021}}

Well-drafted contracts usually attempt to spell out in explicit detail what each counterparty's rights and obligations are in every conceivable circumstance, though there are limits. There are general provisions for how counterparties are treated under the law, and (at least in [[common law]] legal systems) there are many [[legal precedent]]s that shape the common law.