Contingent liabilities
In one sentencePossible obligations whose existence depends on uncertain future events, or obligations that cannot be measured reliably enough; they are disclosed and not recorded in the books.
Simply put
If an outflow of money is probable and can be estimated, it is a provision that is recorded. If it is only possible or cannot be estimated, it is a contingent liability mentioned in the notes without an entry (under IAS 37).
And if the chance of an outflow is very remote, not even disclosure is required.
Example
A customer filed a lawsuit against a contracting business claiming compensation, and its legal adviser believes a loss is possible but not likely. The business records no entry, and discloses the lawsuit and the amount claimed in the notes.
Don't confuse it with
ProvisionsA provision is an obligation that is probable and can be estimated, so it is recorded, while a contingent liability is only disclosed.