Breach of Agreement - ISDA Provision

2002 ISDA Master Agreement A Jolly Contrarian owner’s manual™ 5(a)(ii) in a Nutshell™ The JC’s Nutshell™ summaries are moving to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get them here. Sign up at Substack. 5(a)(ii) in all its glory 5(a)(ii) Breach of Agreement; Repudiation of Agreement. (1) Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 9(h)(i)(2) or (4) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied within 30 days after notice of such failure is given to the party; or (2) the party disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, this Master Agreement, any Confirmation executed and delivered by that party or any Transaction evidenced by such a Confirmation (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); edit Related agreements and comparisons Click here for the text of Section 5(a)(ii) in the 1992 ISDA Click to compare this section in the 1992 ISDA and 2002 ISDA. Resources and Navigation Resources Wikitext | Nutshell wikitext | 1992 ISDA wikitext | 2002 vs 1992 Showdown | 2006 ISDA Definitions | 2008 ISDA | JC’s ISDA code project Navigation Preamble | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 Events of Default: 5(a)(i) Failure to Pay or Deliver • 5(a)(ii) Breach of Agreement • 5(a)(iii) Credit Support Default • 5(a)(iv) Misrepresentation • 5(a)(v) Default Under Specified Transaction • 5(a)(vi) Cross Default • 5(a)(vii) Bankruptcy • 5(a)(viii) Merger without Assumption • Termination Events: 5(b)(i) Illegality • 5(b)(ii) Force Majeure Event • 5(b)(iii) Tax Event • 5(b)(iv) Tax Event Upon Merger • 5(b)(v) Credit Event Upon Merger • 5(b)(vi) Additional Termination Event Index: Click ᐅ to expand: 2002 ISDA - Premium 1992 ISDA Essays Premium version of this page

Overview

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Note the addition of Repudiation of Agreement to the 2002 ISDA. Common law purists like the JC will grumble that you don’t really need to set out repudiation as a breach justifying termination of a contract, because that’s what it is by definition but stating the bleeding obvious has never stopped ISDA’s crack drafting squad™ before.

Summary

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A failure to perform any agreement, if not cured within 30 days, is an Event of Default, except for:

(i) those failures which already have their own special Event of Default (i.e., Failure to Pay or Deliver under Section 5(a)(i)) or

(ii) those that relate to tax, and which mean the party not complying will just get clipped for tax it rather would not.

These are the boring breaches of agreement: those of a not immediately existential consequence to a derivative relationship (like Failure to Pay or Deliver, or a party’s outright Bankruptcy) but which, if not promptly sorted out, justify shutting things down with extreme prejudice.

All rendered in ISDA’s crack drafting squad™’s lovingly tortured prose, of course: note a double negative extragvaganza in 5(a)(ii)(1): not complying with an obligation that is not (inter alia) a payment obligation if not remedied within a month. High five, team ISDA.

Hierarchy of Events

Note that a normal Section 5(a)(ii)(1) Breach of Agreement that also comprises a Section 5(b)(i) Illegality or a Section 5(b)(ii) Force Majeure Termination Event will, courtesy of section 5(c), be treated as the latter, but a repudiatory Breach of Agreement under section 5(a)(ii)(2) willl not enjoy the same leniency. If you have repudiated your contract, the fact that there happens to be a concurrent Illegality — it is hard to see how a repudiatory breach could be an Illegality in itself — will not save you from the full enormity of section 5(a)(ii) Event of Default style close out.

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See also

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• Furnish Specified Information and sub-limb 4(a)(ii) (documents for delivery) but not 4(a)(i) or 4(a)(iii) (which relate to tax documents).
• Section 3(d) representations.