2010 Global Master Securities Lending Agreement
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Clause 13 in a Nutshell™
Use at your own risk, campers!
Full text of Clause 13
13. Lender’s Warranties
Each Party hereby warrants and undertakes to the other on a continuing basis to the intent that such warranties shall survive the completion of any transaction contemplated herein that, where acting as a Lender:
- (a) it is duly authorised and empowered to perform its duties and obligations under this Agreement;
- (b) it is not restricted under the terms of its constitution or in any other manner from lending Securities in accordance with this Agreement or from otherwise performing its obligations hereunder;
- (c) it is absolutely entitled to pass full legal and beneficial ownership of all Securities provided by it hereunder to Borrower free from all liens, charges and encumbrances; and
- (d) it is acting as principal in respect of this Agreement, other than in respect of an Agency Loan.
Related agreements and comparisons
Content and comparisons
The 2010 GMSLA and 2018 Pledge GMSLA versions are identical.
No Representations in the 2010 GMSLA
Enthusiastic minds might have noticed that, unlike the Global Master Repurchase Agreement and the ISDA Master Agreement, there are no “Representations” as such in the 2010 GMSLA.
But there are Warranties, and these — except in one arcane and theoretically important way — amount to the same thing.
Precis: A representation is a pre-contractual statement which induces your entry into a contract but is not part of the contract. One’s remedy for misrepresentation is thus not damages, but the avoidance of the contract altogether. You are put in the place you would have been in had you never entered the contract at all.
A warranty is a contractual term, the remedy for breach of which is damages under the contract.
The potential value of these two remedies may be different, which is why one sees “representations and warranties”: this gives an innocent party maximum optionality to stick the naughty party with whatever is the worse measure of loss. As to why the 2010 GMSLA did away with this option — who can say? Perhaps the nature of stock lending contracts are such that there is no real difference in remedy.