Event of Default and Illegality - 1992 ISDA Provision

1992 ISDA Master Agreement A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — Premium — See also — Wikitext Crosscheck: →’87 equivalent →’92 equivalent →’02 equivalent 5(c) in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here. Original text 5(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA. The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM Early Termination 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Resources and Navigation Index: Click ᐅ to expand: ISDA

Comparisons

A simple piddling match between Events of Default and Illegality in the 1992 ISDA makes way for a full-blown hierarchy of competing circumstances justifying closeout of the ISDA Master Agreement in the 2002 ISDA.

Basics

Compared with its Byzantine equivalent in the 2002 ISDA the 1992 ISDA is a Spartan cause indeed: it is as if ISDA’s crack drafting squad™ assumed all ISDA users would be cold, rational economists who instinctively appreciate the difference between causation and correlation — or hadn’t considered the virtual certainty that they would not be — and therefore did not spell out that where your Event of Default is itself, and of itself, the Illegality, this hierarchy clause will intervene but it will not where your it simply is coincidental with one. I.e., if you were merrily defaulting under the ISDA Master Agreement anyway, and along came an Illegality impacting your ability to perform some other aspect of the Agreement, you can’t dodge the bullet.

In the 2002 ISDA the JC thinks he might have found a bona fide use for the awful legalism “and/or”. What to do if the same thing counts as an Illegality and/or a Force Majeure Event and an Event of Default and/or a Termination Event.

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See also

• Force majeure (including the JC’s ultimate force majeure clause)
• Event of default
• Termination event