due diligence

noun

1

law : the care that a reasonable person exercises to avoid harm to other persons or their property

failed to exercise due diligence in trying to prevent the accident

2

business : research and analysis of a company or organization done in preparation for a business transaction (such as a corporate merger or purchase of securities)

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Doing Your Due Diligence

Due diligence has been used since at least the mid-fifteenth century in the literal sense “requisite effort.” Centuries later, the phrase developed a legal meaning, namely, “the care that a reasonable person takes to avoid harm to other persons or their property”; in this sense, it is synonymous with another legal term, ordinary care. More recently, due diligence has extended its reach into business contexts, signifying the research a company performs before engaging in a financial transaction. This meaning may also apply to individuals: people are often advised to perform their due diligence before buying a house, signing a loan, or making any important purchase.

Examples of due diligence in a Sentence

Recent Examples on the Web

An automaker hoping to sell luxury vehicles really needs to perform this kind of due diligence to ensure its cars meet the right standard. —James Morris, Forbes, 2 Nov. 2024

The framework—which includes toolkits, due diligence questionnaires, and metrics to track—is freely available online and already being used by investing firms like Calvert Impact. —Jeff Wilser, TIME, 30 Oct. 2024

Kelly hinted that some of the money would be released soon but said the government needs to complete a careful due diligence process. —Russ Wiles, The Arizona Republic, 29 Oct. 2024

Stanford, of PitchBook, said there are many reasons to criticize 2021 funds, including the lack of due diligence performed by GPs, or their activity level that year, or even their strategy drift. —Luisa Beltran, Fortune, 28 Oct. 2024

Word History

First Known Use

1598, in the meaning defined at sense 1

Legal Definition

due diligence

noun

1

: such diligence as a reasonable person under the same circumstances would use : use of reasonable but not necessarily exhaustive efforts

called also reasonable diligence

Note: Due diligence is used most often in connection with the performance of a professional or fiduciary duty, or with regard to proceeding with a court action. Due care is used more often in connection with general tort actions.

2

a

: the care that a prudent person might be expected to exercise in the examination and evaluation of risks affecting a business transaction

b

: the process of investigation carried on usually by a disinterested third party (as an accounting or law firm) on behalf of a party contemplating a business transaction (as a corporate acquisition or merger, loan of finances, or especially purchase of securities) for the purpose of providing information with which to evaluate the advantages and risks involved

the greatest exposure…for failure to conduct adequate due diligence arises in the context of public offerings of securities

—G. M. Lawrence

c

: the defense (as to a lawsuit) that due diligence was conducted