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Can you understand the rationale for this representation: Sure. Does it make any practical sense? It does not. A [[No event of default or potential event of default - Representation|No EOD rep]] is a classic [[loo paper rep]]: soft, durable, comfy, absorbent — super cute when a wee Labrador pub grabs one end of the streamer and charges round your Italian sunken garden with it — but as a [[credit mitigant]] or a genuine contractual protection, only good for wiping your behind on. | Can you understand the rationale for this representation: Sure. Does it make any practical sense? It does not. A [[No event of default or potential event of default - Representation|No EOD rep]] is a classic [[loo paper rep]]: soft, durable, comfy, absorbent — super cute when a wee Labrador pub grabs one end of the streamer and charges round your Italian sunken garden with it — but as a [[credit mitigant]] or a genuine contractual protection, only good for wiping your behind on. | ||
Beaqr in mind you are asking someone — on pain of them being found in [[Fundamental breach|fundamental breach of contract]] — to swear to you they are not already in [[fundamental breach]] of {{t|contract}}. Now, how much comfort can you genuinely draw from such promise? Wouldn't it be better if your [[credit]] team did some cursory [[due diligence]] to establish whether there are any grounds to suppose your counterparty might be in [[fundamental breach]] of {{t|contract}}? | |||
Presuming that no such information is available — folks tend not to publicise their own defaults on private contracts, after all — the real question here is “Should I trust my counterparty?” And to that question, any answer provided by exactly the person whose trustworthiness your enquiry is designed to test, carries exactly no informational value. | |||
So let’s say it turns out your counterparty ''was'' lying; there was an extant or pending private [[event of default]] that it knew about and you didn’t. Now what are you going to do? Righteously detonate your contract on account of something of which ''by definition you are ignorant''? | |||
Have fun, counselor. | |||
===“... or would occur as a result of entering into this agreement”=== | ===“... or would occur as a result of entering into this agreement”=== |