Priority Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Priority, written in plain English, along with examples of how it is used.
What is Priority?
Advantage in right to be ahead or going before the others in the claims.For eg. the oldest of the creditors has the right to claims ahead of newer creditors.
History and Meaning of Priority
Priority refers to the right of one creditor to receive payment or satisfaction of their claim before other creditors. The concept of priority has been a part of legal systems for centuries, originally arising in the context of secured transactions in property. As trade and commerce grew more complex, the need for clear rules regarding priority of claims became more pressing, leading to the development of various legal doctrines and rules.
In modern legal systems, priority is often determined by the timing of various claims. The first-in-time rule, also known as the "priority rule," holds that the first creditor to obtain a valid security interest in a debtor's property has priority over all subsequent creditors. However, there are exceptions to this rule, such as the "perfecting rule," which holds that a creditor's priority may depend on when they perfected their security interest.
Examples of Priority
A bank that holds a first mortgage on a property may have priority over any subsequent mortgage holders if the property goes into foreclosure.
In bankruptcy proceedings, priority creditors such as employees owed back wages, taxes, or child support may have priority over other unsecured creditors.
In contract law, parties may agree to prioritize certain terms of a contract over others, such as a provision stating that payment will be made to one party before any other contractors.
In intellectual property law, trademark owners may have priority over subsequent users of similar marks if they can prove that they were the first to use the mark in commerce.
Legal Terms Similar to Priority
Subordination - The act of voluntarily giving up priority in favor of another creditor.
Lien - A legal claim on property that may give the creditor priority in the event of the debtor's default.
Secured Transaction - A transaction that involves a creditor securing their interest in a debtor's property in exchange for extending credit.