What are General Provisions?

The term “general provisions” is used in several different ways. In the finance and investing community, it refers to budgetary funds set aside in case of defaults or other losses. This term can also refer to contractual terms, and it comes up in the context of appropriations acts passed by legislatures as well. The intended meaning is typically clear from the context of the discussion.

When discussing budgets, general provisions are earmarked funds set aside to cover losses. They are set apart in the budget so that a company has a better picture of its financial situation. These funds are not yet spent and may not ever be spent, but they are secured in the event that they are needed. General provisions are regarded as being somewhat at risk as those funds may be called upon in the event of a loss. The nature of the risk varies depending on what the funds are meant to be covering.

A company that is using general provisions as earmarked funds in case of default on debts might grade the risk high or low after reviewing the risk of loss. Funds set aside more generally to cover unexpected losses might be low risk because the company has not identified any specific potential losses that may trigger a need those funds. On a budget, the general provisions are clearly marked so that people reviewing the material understand how the company's funds are being allocated.

In contract law, general provisions are terms or regulations that apply to all contracts of a particular type, in contrast with special provisions, which are terms applied to specific contracts. General provisions can appear at any point in a law, but are often at the beginning or the end. The law may spell out certain general conditions to provide a clear regulatory framework for writing and enforcing contracts. People who fail to comply with the provisions when entering into contracts can face legal penalties, such as finding that a contract cannot be enforced because it does not meet a legal standard.

Finally, in an appropriations act, general provisions are stipulations that apply to various aspects of the act. Sometimes they apply to the whole act, and at other times to specific sections or individual appropriations. For example, an appropriations act might include general provisions that set out the standards for disbursement of educational funds under the act. An act might also have certain requirements to meet in order to release funds.