Contract Glossary
Fair Market Value
Definition
The price an asset would sell for in an open market where both buyer and seller are informed, willing, and under no pressure. It's the 'what would a reasonable person pay?' benchmark that contracts, tax authorities, and courts use.
In Practice
You'll see fair market value referenced in buyout clauses, stock option agreements, and insurance contracts. If your partnership agreement says a departing partner's share gets bought at fair market value, you need to agree on how that value is determined, and ideally specify the method (appraisal, formula, third-party valuation) in the contract.
Common in these contract types
Related terms
Related contract clauses
Frequently asked questions
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