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Cross default: Difference between revisions
→Introduction
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==Introduction== | ==Introduction== | ||
A cross default provision in an agreement allows a [[non-defaulting party]], on a [[default]] by the other party under any separate contract it may have entered for [[borrowed money]], to [[close out]] the agreement containing the cross default provision. Compare this with a [[cross acceleration]] provision, where the lender of the borrowed money must actually have taken steps to accelerate the borrowed money as a result of the default before the default becomes available as a termination right under the first agreement. | A cross default provision in an agreement allows a [[non-defaulting party]], on a [[default]] by the other party under any separate contract it may have entered for [[borrowed money]], to [[close out]] the agreement containing the cross default provision. Compare this with: | ||
*a [[cross acceleration]] provision, where the lender of the [[borrowed money]] must actually have taken steps to accelerate the [[borrowed money]] as a result of the default before the default becomes available as a termination right under the first agreement; and | |||
* [[default under specified transaction]] which references default under financial contracts which do '''not''' represent indebtedness, but only as between the two counterparties to the present contract. | |||
Cross default is potentially a very damaging clause, as this picture to the right amply illustrates. Or would do, if there were a picture to the right. To the extent it doesn't: | Cross default is potentially a very damaging clause, as this picture to the right amply illustrates. Or would do, if there were a picture to the right. To the extent it doesn't: | ||