Legal risk is risks that counterparty are not legally able to enter into a contract. Another legal risk relates to regulatory risk, i.e., that a transaction could conflict with a regulator's policy or, more generally, that legislation might change during the life of a financial contract.

The Risk Principle

The Risk Principle is an area of law closely tied to legal causation

Causation in English law

Causation in English law concerns the legal tests of remoteness, causation and foreseeability in the tort of negligence. It is also relevant for English criminal law and English contract law....

 in negligence

Negligence

Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...

. It provides limits on negligence for harm caused unforeseeably.