Template:M summ 2002 ISDA 5(a)(ii)

A failure to perform any agreement, if not cured within 30 days, is an Event of Default, except for:

(i) those failures which already have their own special Event of Default (i.e., Failure to Pay or Deliver under Section 5(a)(i)) or

(ii) those that relate to tax, and which mean the party not complying will just get clipped for tax it rather would not.

These are the boring breaches of agreement: those of a not immediately existential consequence to a derivative relationship (like Failure to Pay or Deliver, or a party’s outright Bankruptcy) but which, if not promptly sorted out, justify shutting things down with extreme prejudice.

All rendered in ISDA’s crack drafting squad™’s lovingly tortured prose, of course: note a double negative extragvaganza in 5(a)(ii)(1): not complying with an obligation that is not (inter alia) a payment obligation if not remedied within a month. High five, team ISDA.

Hierarchy of Events

Note that a normal Section 5(a)(ii)(1) Breach of Agreement that also comprises a Section 5(b)(i) Illegality or a Section 5(b)(ii) Force Majeure Termination Event will, courtesy of section 5(c), be treated as the latter, but a repudiatory Breach of Agreement under section 5(a)(ii)(2) willl not enjoy the same leniency. If you have repudiated your contract, the fact that there happens to be a concurrent Illegality — it is hard to see how a repudiatory breach could be an Illegality in itself — will not save you from the full enormity of section 5(a)(ii) Event of Default style close out.