What do you understand by contingent liabilities?

The contingent liabilities are potential obligations that may or may not become an actual liability. As this liability is not sure, it may or may not be incurred by an entity, according to the result of an uncertain future event.

For example, if a company’s ex-employee sues it for gender discrimination for any particular sum, the company has a contingent liability. If the company is found guilty, it will have a liability, and if it is not found guilty, the company will not have an actual liability.