Template:Isda 9(c) summ: Difference between revisions
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In which {{icds}} grapple with the existential question: if I [[close out]] all my {{{{{1}}}|Transaction}}s because the other guy fundamentally [[Breach of contract|breached the contract]], can I still rely on the contract to manage my risk position and enforce my bargain? | In which {{icds}} grapple with the existential question: if I [[close out]] all my {{{{{1}}}|Transaction}}s because the other guy fundamentally [[Breach of contract|breached the contract]], can I still rely on the contract to manage my risk position and enforce my bargain? | ||
Here is where the nuances of the {{isdama}} come into play. We are deep into [[Ontology|ontological]] territory here, fellows. For while the same thing might be an {{{{{1}}}|Event of Default}} ''and'' a [[Fundamental breach|fundamental breach of contract]] — almost certainly will be, in fact — treating that event as an {{{{{1}}}|Event of Default}} is to see it as “infra-contractual action”<ref>I just made that expression up, by the way</ref>being a circumstance contemplated by and provided for within the four corners of your compact; while if you see it as a [[fundamental breach]] you cast your contract on the fire — what good are the promises in it, after all, if the other fellow won’t keep them? — and | Here is where the nuances of the {{isdama}} come into play. We are deep into [[Ontology|ontological]] territory here, fellows. For while the same thing might be an {{{{{1}}}|Event of Default}} ''and'' a [[Fundamental breach|fundamental breach of contract]] — almost certainly will be, in fact — treating that event as an {{{{{1}}}|Event of Default}} is to see it as “infra-contractual action”<ref>I just made that expression up, by the way</ref> being a circumstance contemplated by and provided for within the four corners of your compact; while if you see it as a [[fundamental breach]] you thereby cast your contract on the fire — what good are the promises in it, after all, if the other fellow won’t keep them? — and prostrate yourself at the feet of the [[Queen’s Bench Division]] for redress from among the golden threads developed by the [[common law]]. But these [[common law]] principles are ''about'' the contract, they are not rules ''of'' the contract. The [[contract]] itself it a smoldering husk. | ||
Why does this matter here? Well, because ''[[netting]]''. [[Close-out netting]] — as we all know a clever if somewhat artificial concept — is not something that just happens by operation of the common law ([[set-off]] is a narrower and less reliable thing), but relies on the patient midwifery of {{icds}}, and the sophisticated contrivances they popped into the {{isdama}} itself; especially the parts that say all {{{{{{1}}}|Transactions}} form a {{{{{{1}}}|Single Agreement}}, and those long and dusty passages in Section {{{{{1}}}|6}} which painfully recount how one closes out and nets down all those exposures should things go tits up. | Why does this matter here? Well, because ''[[netting]]''. [[Close-out netting]] — as we all know a clever if somewhat artificial concept — is not something that just happens by operation of the common law ([[set-off]] is a narrower and less reliable thing), but relies on the patient midwifery of {{icds}}, and the sophisticated contrivances they popped into the {{isdama}} itself; especially the parts that say all {{{{{{1}}}|Transactions}} form a {{{{{{1}}}|Single Agreement}}, and those long and dusty passages in Section {{{{{1}}}|6}} which painfully recount how one closes out and nets down all those exposures should things go tits up. | ||
Now, it really wouldn’t do if one were found to have thrown those clever legal artifacts on the fire before seeking the [[common law]]’s help to manage your way out of a portfolio with a busted counterparty. | Now, it really wouldn’t do if one were found to have thrown those clever legal artifacts on the fire before seeking the [[common law]]’s help to manage your way out of a portfolio with a busted counterparty. | ||
Revision as of 11:09, 20 April 2020
In which ISDA’s crack drafting squad™ grapple with the existential question: if I close out all my {{{{{1}}}|Transaction}}s because the other guy fundamentally breached the contract, can I still rely on the contract to manage my risk position and enforce my bargain?
Here is where the nuances of the ISDA Master Agreement come into play. We are deep into ontological territory here, fellows. For while the same thing might be an {{{{{1}}}|Event of Default}} and a fundamental breach of contract — almost certainly will be, in fact — treating that event as an {{{{{1}}}|Event of Default}} is to see it as “infra-contractual action”[1] being a circumstance contemplated by and provided for within the four corners of your compact; while if you see it as a fundamental breach you thereby cast your contract on the fire — what good are the promises in it, after all, if the other fellow won’t keep them? — and prostrate yourself at the feet of the Queen’s Bench Division for redress from among the golden threads developed by the common law. But these common law principles are about the contract, they are not rules of the contract. The contract itself it a smoldering husk.
Why does this matter here? Well, because netting. Close-out netting — as we all know a clever if somewhat artificial concept — is not something that just happens by operation of the common law (set-off is a narrower and less reliable thing), but relies on the patient midwifery of ISDA’s crack drafting squad™, and the sophisticated contrivances they popped into the ISDA Master Agreement itself; especially the parts that say all {{{{{{1}}}|Transactions}} form a {{{{{{1}}}|Single Agreement}}, and those long and dusty passages in Section {{{{{1}}}|6}} which painfully recount how one closes out and nets down all those exposures should things go tits up.
Now, it really wouldn’t do if one were found to have thrown those clever legal artifacts on the fire before seeking the common law’s help to manage your way out of a portfolio with a busted counterparty.
- ↑ I just made that expression up, by the way