Definition
Cancel, in general financial and legal terms, involves the act of voiding a negotiable instrument by either annulling or paying it, or prematurely ending a bond or another contract. In the context of securities trading, to cancel means to void an order to buy or sell.
Examples
- Negotiable Instrument: If a person writes a check and later decides they don’t want the transaction to go through, they can issue a stop payment order to the bank to cancel the check.
- Contract: A company may decide to cancel a supply contract if the supplier consistently fails to meet delivery deadlines.
- Securities Order: An investor might place an order to buy shares which they later cancel due to unfavorable market movements.
Frequently Asked Questions (FAQs)
Q1: Can a canceled contract be reinstated?
A: It depends on the terms of the contract and the agreement between the parties involved. Some contracts have clauses that outline the process for reinstatement, while others may require a new contract altogether.
Q2: How can I cancel a check?
A: To cancel a check, contact your bank to issue a stop payment order. You will need to provide details such as the check number, amount, and the recipient’s name.
Q3: What happens when a securities order is canceled?
A: When a securities order is canceled, the transaction is voided and the order will not be executed. The funds or securities involved remain in the account of the entity that placed the order.
Q4: Can bondholders cancel their bonds?
A: Bondholders cannot typically cancel the bonds they own; however, they can sell them in the secondary market if they choose not to hold them until maturity.
Q5: What is the difference between canceling and terminating a contract?
A: Canceling a contract generally refers to voiding it before it takes effect or before performance begins. Terminating a contract involves ending it after performance has started, often due to a breach or mutual consent.
Related Terms
Good-Till-Canceled Order (GTC):
A GTC order is an order to buy or sell a security that remains active until the investor decides to cancel it or the trade is executed.
Premature Termination:
The act of ending a contract or agreement before its specified termination date.
Stop Payment Order:
An instruction to a bank to not pay a presented check.
Online References
Suggested Books for Further Studies
“Fundamentals of Corporate Finance” by Richard A. Brealey, Stewart C. Myers, and Alan J. Marcus
- Provides an in-depth understanding of financial principles, including concepts related to financial instruments and contracts.
“Business Law: Text and Cases” by Kenneth W. Clarkson, Roger LeRoy Miller, and Frank B. Cross
- A comprehensive guide to understanding the fundamentals of business law, covering topics from contracts to securities regulations.
“Options, Futures, and Other Derivatives” by John C. Hull
- This book offers a detailed exploration of financial instruments and their corresponding legal and financial nuances.
Fundamentals of Cancellation: Finance and Business Law Basics Quiz
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