Entire Agreement - ISDA Provision

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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™

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[[{{{1}}} - 1992 ISDA Provision|This provision in the 1992]]

Resources Wikitext | Nutshell wikitext | 1992 ISDA wikitext | 2002 vs 1992 Showdown | 2006 ISDA Definitions | 2008 ISDA | JC’s ISDA code project
Navigation Preamble | 1(a) (b) (c) | 2(a) (b) (c) (d) | 3(a) (b) (c) (d) (e) (f) (g) | 4(a) (b) (c) (d) (e) | 55(a) 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 5(b) 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 (c) (d) (e) | 6(a) (b) (c) (d) (e) (f) | 7 | 8(a) (b) (c) (d) | 9(a) (b) (c) (d) (e) (f) (g) (h) | 10 | 11 | 12(a) (b) | 13(a) (b) (c) (d) | 14 |

Index: Click to expand:

Section 9(a) in a Nutshell

Use at your own risk, campers!
9(a) Entire Agreement. This Agreement is the entire agreement between the parties on its subject matter. Neither party has relied on any representation (except the actual Representations) when entering into it and each party therefore waives all rights it might otherwise have to claim it has. That said, nothing will limit either party’s liability for fraud.

Full text of Section 9(a)

9(a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter. Each of the parties acknowledges that in entering into this Agreement it has not relied on any oral or written representation, warranty or other assurance (except as provided for or referred to in this Agreement) and waives all rights and remedies which might otherwise be available to it in respect thereof, except that nothing in this Agreement will limit or exclude any liability of a party for fraud.

Related agreements and comparisons

Click here for the text of Section 9(a) in the 1992 ISDA
Click to compare this section in the 1992 ISDA and 2002 ISDA.

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Content and comparisons

The first sentence is more or less the same in each version. Then the 2002 ISDA adds a lengthy disclaimer of any pre-contractual representations — presumably, not counting the express ones patiently documented in Section 3.

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Summary

What you see is what you get, folks: if it ain’t written down in the ISDA Master Agreement, it don’t count, so no sneaky oral representations. But, anus matronae parvae malas leges faciunt, as we Latin freaks say: good luck in enforcing that if your counterparty is a little old lady.

Note also that liability for a fraudulent warranty or misrepresentation won’t be excluded. So if your oral representation or warranty is a bare-faced lie, the innocent party can maybe still rely on it in entering the agreement, even if it isn’t written down, though good luck parsing the universe of possible scenarios to figure out when that qualification might bite.

Smart-arse point: A warranty is a contractual assurance, made as part of a concluded contract, and cannot, logically, be relied on by the other party when entering into the contract. An assurance on which one relies when deciding to enter into a contract is a representation.

Confirmations

“This Agreement”, courtesy of how it is defined in Section 1(c), includes the ISDA Master pre-printed form, Schedule and each Confirmation entered into under it.

The entire agreement clause is legal boilerplate to nix any unwanted application of the parol evidence rule — to make sure one only cares for the four corners of the written agreement, and no extra-documentational squirrelling is allowed. Which might be a problem because the time-honoured understanding between all right-thinking derivatives trading folk is that the oral agreement, between the traders is the binding legal agreement, and not the subsequent confirmation, hammered out between middle office and operations folk after the trade is done. Hasten to Section 9(e)(ii) — the Confirmation is only evidence of the binding agreement. Could that be it?

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See also

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References