Event of default

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Sometimes known as an enforcement event, an event of default is an action a counterparty takes which justifies the innocent party from terminating the contract, closing out open transactions, and raining down fiery hell on the wronger and its affiliates, directors, officers, employees, agents and delegates.

Under the master trading agreements

There is specific idiosyncratic lore attaching to the events of default under differing market standard master agreements, so go with alacrity to:

• ISDA Master Agreement: Event of Default
• 2010 GMSLA: Event of Default
• Global Master Repurchase Agreement: Event of Default

Not to be, although easily, confused with Termination Events under the ISDA Master Agreement. These are (in the main) kinder and gentler than Events of Default, arise from factors outside the parties control (Force Majeure, Tax Events, Credit Event Upon Mergers, Illegality and so on), and in many cases relate to some only and not all of the Transactions under the ISDA Master Agreement. They justify termination but at less punitive mid market terms. There are some Termination Events which are more like Events of Default, though: most of these are the tailored ones the parties agree as Additional Termination Events.

See also

• Cross default
• Termination Event: a special type of half-arsed Event of Default arising under the ISDA Master Agreement.
• Events of Default and Termination Events generally under the ISDA Master Agreement.