Final answer:
A lessee or borrower must satisfy specific criteria to capitalize an asset or receive a loan, such as demonstrating income, creditworthiness, providing collateral or a cosigner. The Plain Writing Act of 2010 mandates clear communication to ensure contracts are understandable, reducing potential for disputes.
Step-by-step explanation:
In the context of financial agreements, specifically those concerning leasing or borrowing, a lessee or borrower must often satisfy certain conditions to capitalize an asset or receive a loan. For instance, a lessee may need to meet specific criteria outlined by the lessor, which might include demonstrating a stable source of income, undergoing a credit check, or providing collateral. Collateral refers to property or other assets that a bank can seize if a loan is not repaid. Similarly, the inclusion of a cosigner, an individual or entity legally agreeing to assume the debt if the original borrower defaults, can be a requisite for capitalizing a lease or securing a loan.
These measures are in place to reduce the financial risks for lenders and lessors. They serve as safety nets for situations where the lessee or borrower fails to honour the terms of the agreement. Thus, in financial capital markets, these practices are essential for protecting the interests of the lending institution and ensuring the creditworthiness of the borrower.
As a rule, language in contracts and agreements should be clear and concise, particularly in light of legislation such as the Plain Writing Act of 2010 which was designed to make government communication clearer. Lengthy sentences packed with legal jargon can be intimidating and counterproductive, leading to misinterpretation or breaches of the contract. Simplifying the language enables better comprehension and reduces the potential for disputes arising from complex contractual terms.