What is Due Diligence?

Legal Definition
Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care.

It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition. The theory behind due diligence holds that performing this type of investigation contributes significantly to informed decision making by enhancing the amount and quality of information available to decision makers and by ensuring that this information is systematically used to deliberate in a reflexive manner on the decision at hand and all its costs, benefits, and risks.
-- Wikipedia
Legal Definition
Such a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent man under the particular circumstances ; not measured by any absolute standard, but depending on the relative facts of the special case. Perry v. Cedar Falls, 87 Iowa, 315, 54 N. W. 225; Dillman v. Nadelhoffer, 160 111. 121, 43 N. E. 378; Hendricks v. W U. Tel. Co... 126 N. C. 304, 35 S. E. 548, 78 Am. St Rep. 658; Highland Ditch Co. v. Mumford, 5 Co.lo. 336
-- Black's Law Dictionary