Remedies Cumulative - ISDA Provision
Overview
This clause is identical in the 1992 ISDA and the 2002 ISDA.
Summary
Over the centuries the common law, as we know, has done a fine job of shaping and polishing a merchant’s remedies for breach of contract: — remedies which are, broadly, indifferent to what the contract happens to say.
The reason for that is simple: by the time a merchant comes to ask about its rights upon breach, the instrument that conferred them is broken.
Fruity expectations of a healthy, long and fecund forward relationship lie suffocating upon the salted earth. The contract is the proverbial “ex parrot”: it is no longer a reliable guide to how one should expect the other to behave. The defaulter is a defaulter and cannot be relied upon to do what she promised to do. So, nor is the aggrieved party be expected to carry on doggedly popping coppers in the slot: the common law asks that she conducts herself reasonably and with good faith in the circumstances; it does not demand a total want of common sense.
The sacred pact having fractured, it is for the court to draw upon its centuries of analogy to put the matters right.
It does that by reference to its own principles, not the contract’s: causation, contribution, foreseeability and determinacy of loss. the court applies these to the deal the suitor thought it had to work out a juridical compensation for its loss of bargain.
That is the magnificent furniture the laws of England bestow upon us. It seems counterproductive — passive aggressive, almost — for a party to insist, in detail, on what should happen its customer does not do it promises to do. Bloody-minded, almost.
Where the contract involves a bank, though — especially one that is lending you money — it is de rigueur. Banks like to rule out doubt, help themselves to extra rights: liens, set-off, netting of liabilities — banking contracts are a kind of research and development department where clever people contrive intricate clockwork escapements governing the grounds on which they deploy capital. Here “ex-parrotness” is the overriding mischief a lender seeks to manage, and legal eagles like to reinforce the ancient customary rules of contract.
It isn’t that the common law is no good; it is just that where you clearly foresee a specific breach, a contract can be better. The law of unintended consequences rules the world of finance, though, and it is not hard to imagine carefully drawn contractual terms working out worse than the general rules relating to fundamental breach. Hence this boilerplate: careful provisions designed to assist a wronged party should not be allowed to get in the way of general law of contract if it would work out to be better, and this slug of boilerplate is meant, to ensure — by means of contractual term — that they do not.
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- The JC’s famous Nutshell™ summary of this clause
- The meta-paranoia of finance contracts: by carefully describing my rights upon an Event of Default, might I inadvertently undo some better right that I would have had at common law had I just been quiet about it?
See also
- Rights cumulative in our general boilerplate anatomy