Template:M summ 2002 ISDA 9(d)

The common law, as we know, has done a fine job of shaping and polishing a set of remedies for breach of contract over the centuries — remedies which are, broadly, agnostic to what the contract happens to say. By the time we come to ask the question that intellectual construct, after all, is broken: in tatters. Fruity expectations of a healthy, long and fecund forward relationship lie suffocated on the desiccating salted earth. The contract is an ex parrot: no longer a reliable guide to the parties’ expectations. It is the court to draw upon its centuries of analogy to put the aggrieved persons in the best shape it can.

Thus, the common law provides a framework of causation, contribution, foreseeability, proximity and determinacy of loss that it can apply to a wronged party to work out a juridical compensation for its loss of bargain.

It’s all there: that is the antique furniture the laws of England bestow. It seems, also, counterproductive — passive aggressive, almost — for the parties to negotiate, in detail, what should happen between them if they don’t do what they promise to do. Odd, right? Bloody-minded. Indicative of a total lack of trust, you might say.

Yet, that is exactly what the ISDA Master Agreement spends its crucial central passages doing. Finance contracts tend to be far more categorical about how innocent parties can detonate defaulters than anything else: there is not much to be said on the happy dimensions of lending money, after all: I give it to you, you give it back, you pay me some interest in the meantime.

So, legislating for defaults, potential defaults, terminations, close out, and exercise of drastic rights. We are amongst financiers; we should expect paranoia.

There is one last paranoia. It is a sort of meta-paranoia. It is this: What happens if, in carefully writing down all my rights upon your Event of Default, I inadvertently undo some better right that I might have at common law? Does my right to send a Section 6(a) and kick off that infernal close-out process cut off some better, quicker remedy I might access just by declaring a repudiation of the contract and suing for damages?

Most of the time, you would think, it should not, but if it does, Section 9(d) is your chosen slug of boilerplate. This vouches safe your common law rights notwithstanding anything explicit in the contract.