Amendments - ISDA Provision: Difference between revisions
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 15: | Line 15: | ||
*{{Casenote|Greenclose|National Westminster Bank plc}}, on whether email is an electronic messaging system; | *{{Casenote|Greenclose|National Westminster Bank plc}}, on whether email is an electronic messaging system; | ||
*{{casenote|Rock Advertising Limited|MWB Business Exchange Centres Limited}} on whether one can [[orally]] [[amend]] a contract with a “[[no oral modification]]” clause | *{{casenote|Rock Advertising Limited|MWB Business Exchange Centres Limited}} on whether one can [[orally]] [[amend]] a contract with a “[[no oral modification]]” clause | ||
Revision as of 13:55, 16 March 2020
|
2002 ISDA Master Agreement
Section 9(b) in a Nutshell™ Use at your own risk, campers!
Full text of Section 9(b)
Related agreements and comparisons
|
Content and comparisons
Summary
ISDA’s crack drafting squad™ takes a clause which didn’t really need to be said, and converts it into a monster. If we convert this to symbolic logic it must mean this:
Effective amendment or waiver =In writing AND [EITHER executed by each party OR confirmed by exchange of [EITHER Telex OR electronic message]]
“In writing” means recorded for posterity, in words ingestable by means of the eyes, as opposed to the ears. This is not the OED definition, I grant you — I made it up just now — but it zeroes in on the immutable fact that, whether it is on parchment, paper, cathode ray tube, LED screen or electronic reader, you take in writing by looking at it. Not “orally” — from the mouth — or for that matter, “aurally” — through the ears — nor, in the JC’s favourite example, via semaphore — by a chap waving flags from a distant hill — but in visible sentences, made up of visual words.
Sentences. Words. Mystic runes carved upon the very living rock. Anything else? Could “writing” include memes? GIFs? Emojis? We suppose so — but do you “write” them, as such? — but to the wider question “can communications apprehended visually but of a non-verbal nature be contractually significant?” the answer is undoubtedly yes.
Acceptance, to be legally binding, need not be “in writing”. Nor “orally”. Acceptance just needs to be clear. Whether one has accepted is a matter for the laws of evidence. There is little doubt that one who has signed, sealed and delivered a parchment deed by quill in counterpart has accepted its contents — it is about as good evidence as you could ask for, short of the fellow admitting it in cross-examination — but a merchant need not, and often does not, reach this gold standard when concluding commercial arrangements about town.
Who has not stumbled morosely into the newsagent of a Sunday morning, wordlessly pushed a copper across the counter and left with a copy of The Racing Post, not having exchanged as much as a glance with the proprietor? Do we doubt for an instant that a binding contract was formed during that terse interaction?
There is, in theory, a whole ecosystem of non-verbal communications — winks, nods, wags, shaken heads, facial tics and cocked eyebrows — and nor should we forget, those who stand on distant hills and communicate by smoke signal, Greek heroes who miscommunicate their safe return by sail colour[1] or modern admirals who transmit instructions to the fleet using a flag sequence.
Any of these can, in theory, convey offer, acceptance and consideration as well can a written or oral communication.
Emojis
The King’s Bench of Saskatchewan — not an English court to be sure, but of persuasive value, especially when speaking this much sense — has recently affirmed the JC’s conviction about emojis 😬.
In an argument about whether a merchant was bound to supply a consignment of flax on the back of an exchange of SMS messages.
The plaintiff drew up a contract to purchase SWT 86 metric tonnes of flax from the defendant, wet-signed it, took a photo of the contract and texted the photo to the defendant with the text message: “Please confirm flax contract”.
The defendant texted back “👍”.
The defendant didn’t eventually deliver the flax, and by the time the plaintiff could source alternative flax prices had gone up. The plaintiff claimed damages.
The defendant argued the thumbs-up emoji simply confirmed that he received the Flax contract but was not acceptance of its terms. He claimed he was waiting for the full terms and conditions of the Flax Contract to review and sign. Partly on the basis of a prior course of dealing with deals done on monosyllabic text messages, the court wasn’t having it:
“This court readily acknowledges that a 👍 emoji is a non-traditional means to “sign” a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a “signature” – to identify the signator ... and as I have found above – to convey ... acceptance of the flax contract.
I therefore find that under these circumstances that the provisions of [the Canadian Sale of Goods Act 1978] have been met and the flax contract is therefore enforceable. ”[2]
General discussion
See also
- Greenclose v National Westminster Bank plc, on whether email is an electronic messaging system;
- Rock Advertising Limited v MWB Business Exchange Centres Limited on whether one can orally amend a contract with a “no oral modification” clause
References
Three lookouts here.
One: according to her majesty’s judiciary, email is not included and does not count as an electronic messaging system. Let your klaxons blare. It seems absurd at first glance — some would say it seems absurd having read the whole judgment in Greenclose v National Westminster Bank plc — but there it is: that is the law of the land at the time of writing.
Two: This might not so much matter were it not for another spectacular outing for her majesty's judiciary[3], in which Lord Sumption decided that a “no oral modification” clause means what it says. Hitherto is has been assumed to be an easy give to pedantic lawyers who have nothing more constructive to say. Strictly interpreting a NOM clause probably makes sense if you are contemplating the eternal verities on the hard benches of a law library — or your judicial chambers — but it makes none if your job is to manage the cut and thrust of daily operational contract management.
To be sure, most financial institutions have a military-industrial complex handling the negotiation of ISDA Master Agreements and other trading contracts, so a formal amendment is not likely to pass with copperplate script execution. But where the Agreement contains a manifest error, and the parties perform notwithstanding to the intended commercial bargain - who can say?
And as for waivers — especially when your credit department is in the thrall of setting NAV triggers it doesn’t monitor and isn’t likely to to exercise — by the lights of this clause you must formally confirm them in writing, which is a profound waste of everyone’s time.
Three: Good luck reconciling the above with the Counterparts and Confirmations clause, which says, rightly, that the binding action on a Transaction is the moment the parties first agree it — that is, as likely as not, a phone call or Bloomberg chat, or in volume products, an electronic handshake between booking systems. Since a Transaction is a modification to the ISDA Master Agreement the words above ring a bit hollow.
See also
- Greenclose v National Westminster Bank plc, on whether email is an electronic messaging system;
- Rock Advertising Limited v MWB Business Exchange Centres Limited on whether one can orally amend a contract with a “no oral modification” clause
- ↑ Sail configuration can be tricky especially if you are absent-minded, however, as Theseus’ father-in-law might have told you, had he been around to do so.
- ↑ South West Terminal Ltd. v Achter Land, 2023 SKKB 116
- ↑ Rock Advertising Limited v MWB Business Exchange Centres Limited