Liability refers to the legal responsibility that an individual or organization has for their actions or omissions. This means that if someone causes harm or damage, they may be required to compensate the affected party. For example, if a driver causes an accident, they could be held liable for the injuries and damages resulting from that incident. In business, liability can also relate to financial obligations, such as loans or debts. Companies must manage their liabilities carefully to ensure they can meet their obligations and avoid bankruptcy. Understanding liability is crucial for both individuals and businesses to protect their interests and make informed decisions.