1. The legal obligation to make some payment. This includes payment of compensation to employees injured at work, or to customers injured by defective products such as unsafe cars, or paying other people’s debts if one has guaranteed them and they default. See also contingent liability; employer’s liability; product liability.

2. The legal obligation to pay debts. Unlimited liability means that the individual or company concerned must make the payment if their assets permit; if not, they can be made bankrupt or liquidated. Unlimited liability typically applies to individuals, and firms trading as sole traders or partnerships. Limited liability, which applies only to companies, means that their shareholders are liable for the company’s debts only to the extent of losing the money originally put into a business, plus any unpaid portion of the par value of shares purchased.