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| {{manual|MI|2002|5(c)|Section|0|medium}} | | {{manual|MI|2002|5(c)|Section|0|medium}} |
| In which the [[JC]] thinks he might have found a ''bona fide'' use for the awful legalism “[[and/or]]”. Crikey.
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| What to do if the same thing counts as an {{isdaprov|Illegality}} ''[[and/or]]'' a {{isdaprov|Force Majeure Event}} ''[[and]]'' an {{isdaprov|Event of Default}} ''[[and/or]]'' a {{isdaprov|Termination Event}}.
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| Why do we need this? Remember an {{isdaprov|Event of Default}} is an apocalyptic disaster scenario which blows your whole agreement up with extreme prejudice; a {{isdaprov|Termination Event}} is just “one of those things” which justifies termination, but may relate only to a single transaction: it isn’t something one needs necessarily to hang one’s head about.
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| A {{isdaprov|Force Majeure Event}} is something that is so beyong one’s control or expectation that it shouldn't count as an {{isdaprov|Event of Default}} or even a {{isdaprov|Termination Event}} ''at all''.
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| An Event of Default has more severe consequences for the [[counterparty]]. Well, the whole point about force majeure is that it is meant to give you an excuse not to perform your agreement. and an Illegality is only a Termination Event (one can’t be criticised if they go and change the law on you, can one?), so
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| {{sa}}
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| *[[Force majeure]] (wherein for a giggle you will find a sample ultimate force majeure clause)
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| *[[Event of default]]
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| *[[Termination event]]
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Revision as of 17:47, 26 February 2020
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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
Resources and navigation
Section 5(c) in a Nutshell™
Use at your own risk, campers!
Full text of Section 5(c)
5(c) Hierarchy of Events.
- 5(c)(i) An event or circumstance that constitutes or gives rise to an Illegality or a Force Majeure Event will not, for so long as that is the case, also constitute or give rise to an Event of Default under Section 5(a)(i), 5(a)(ii)(1) or 5(a)(iii)(1) insofar as such event or circumstance relates to the failure to make any payment or delivery or a failure to comply with any other material provision of this Agreement or a Credit Support Document, as the case may be.
- 5(c)(ii) Except in circumstances contemplated by clause 5(c)(i) above, if an event or circumstance which would otherwise constitute or give rise to an Illegality or a Force Majeure Event also constitutes an Event of Default or any other Termination Event, it will be treated as an Event of Default or such other Termination Event, as the case may be, and will not constitute or give rise to an Illegality or a Force Majeure Event.
- 5(c)(iii) If an event or circumstance which would otherwise constitute or give rise to a Force Majeure Event also constitutes an Illegality, it will be treated as an Illegality, except as described in clause 5(c)(ii) above, and not a Force Majeure Event.
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Related agreements and comparisons
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Content and comparisons
A simple piddling match between Events of Default and Illegality in the 1992 ISDA makes way for a full-blown hierarchy of competing circumstances justifying closeout of the ISDA Master Agreement in the 2002 ISDA.
Summary
Compared with its Byzantine equivalent in the 2002 ISDA the 1992 ISDA is a Spartan cause indeed: it is as if ISDA’s crack drafting squad™ assumed all ISDA users would be cold, rational economists who instinctively appreciate the difference between causation and correlation — or hadn’t considered the virtual certainty that they would not be — and therefore did not spell out that where your Event of Default is itself, and of itself, the Illegality, this hierarchy clause will intervene but it will not where your it simply is coincidental with one. I.e., if you were merrily defaulting under the ISDA Master Agreement anyway, and along came an Illegality impacting your ability to perform some other aspect of the Agreement, you can’t dodge the bullet.
In the 2002 ISDA the JC thinks he might have found a bona fide use for the awful legalism “and/or”. What to do if the same thing counts as an Illegality and/or a Force Majeure Event and an Event of Default and/or a Termination Event.
General discussion
Template:M gen 2002 ISDA 5(c)
See also
References