Lender’s Warranties - Pledge GMSLA Provision
2018 Global Master Securities Lending Agreement (Pledge Version)
Clause 13 in a Nutshell™
Use at your own risk, campers!
Full text of Clause 13
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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.
- ↑ But not practically, unless you are some kind of super spod. See ouur disquisition on the differences in the representations and warranties section.