A liability (financial obligation) that arises from an entity’s actions and the others’ expectations built on such actions where the entity has indicated to other parties its readiness to accept or discharge specific responsibilities that would result in a future financial obligation (usually by a pattern of past practices, officially released and communicated policies, or a present statement, etc.). A legal liability is created by observing an entity’s actions. For example, an entity may have a policy of covering all defective products (by recalling such products and refunding affected customers). This will indicate that the entity is ready to accept responsibility for defective products, and as a result the market would have a valid expectation of a rebate for all faulty products that were actually sold by the entity.

It is also known as a legal obligation, a constructive obligation, or a constructive liability.