Let’s face it, legal jargon can be … a lot. Case in point: obligor and obligee. If you’ve lived most of your life without ever hearing these words, you aren’t alone. The terms are usually tossed around in courtrooms during family law cases.
But that doesn’t mean you should remain blissfully unaware of them or what they mean. You never know – one day, you could be the obligor or the obligee.
Obligors owe money and obligees receive it. One (admittedly goofy) hack is to use a rhyme: Pour the tea, Gor owes Gee. You might feel silly, but you’ll remember the difference!
What Is an Obligor?
Yes, “what,” not “who.” The obligor is the obligated party (obligated to pay) – but the party isn’t always a person.
Obligors – individuals or companies – have a legal obligation to provide a benefit or payment. And there can be legal consequences if they don’t meet their contractual obligation.
Let’s see who would be the obligor in a custody hearing at family court.
Our fictional couple, Taylor and Dylan, are in court to finalize child custody, and the judge orders Taylor to pay Dylan child support.
As the noncustodial parent who owes child support, Taylor becomes the obligor or obligor parent. And Dylan, the custodial parent, becomes the obligee who will receive monthly child support payments from Taylor.
If Taylor misses any child support payments, they can be found in contempt of court and face fines and even jail time. Depending on the laws in Taylor’s state, the court can order wage garnishment or other income withholding to settle the debt.
What Is an Obligee?
The obligee is the person or entity that benefits from the legal agreement with the obligor. Just like you can’t have a testimony without a test – you can’t have an obligee without an obligor.
In our previous example, Dylan, the custodial parent, is the obligee. Dylan will receive the child support payments.
If Taylor falls behind on child support, they’ll go into arrears (read: owe money they should have paid earlier). And as the obligee, Dylan might want to seek legal advice to collect back child support payments.
Where Else Are Obligee and Obligor Used?
While the terms are commonly used in family court, they apply to loan agreements and construction contracts, and they are used in corporate settings.
Let’s take a closer look at these situations:
- Loan agreements: If you’ve ever taken out a loan, you were the obligor, and your lender was the obligee.
- Construction contracts: Bid bonds are the most common types of construction bonds They are debts secured by a bidder for a construction job or other bid-based selection process. Bid bonds are a commitment from a contractor (aka the obligor) to a project manager (aka the obligee) to honor the terms of the bid in time and cost.
- Corporate settings: In corporate settings, obligors are contractually obligated to meet commitments also known as covenants.
Who Owes Whom?
Obligors are legally obligated to make payments and/or keep promises to the obligee, and obligees receive payments and benefit from any promises. If telling the two apart requires more mental gymnastics than you’re willing to engage in, our short explainer will always be here for you!