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Event of default: Difference between revisions
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Sometimes known as an [[enforcement event]], an [[event of default]] is an action a counterparty takes which justifies the innocent party | {{a|glossary| | ||
[[File:Default in our Stars.png|450px|thumb|center|Look, ''you'' try illustrating the idea of default.]] | |||
}}Sometimes known as an [[enforcement event]],<ref>Usually where [[security]] is involved.</ref> an [[event of default]] is an action a counterparty takes which justifies the innocent party terminating the contract ''under its terms'', [[close out|closing out]] open transactions, and raining down fiery hell on the wronger and its affiliates, directors, officers, employees, agents and delegates. | |||
It has a different consequence to a [[repudiatory breach|repudiatory, or fundamental, breach]] of contract, even though the two are largely the same, and a “repudiation of contract” may even be characterised as an [[event of default]]. | |||
{{Event of default vs fundamental breach}} | |||
===Under the [[master agreements|master trading agreements]]=== | |||
There is specific idiosyncratic lore attaching to the events of default under differing market standard master agreements, so go with alacrity to: | There is specific idiosyncratic lore attaching to the events of default under differing market standard master agreements, so go with alacrity to: | ||
*{{isdaprov|Event of Default}} | *'''{{isdama}}''': {{isdaprov|Event of Default}} | ||
*'''{{gmsla}}''': {{gmslaprov|Event of Default}} | |||
*'''{{gmra}}''': {{gmraprov|Event of Default}} | |||
Not to be, although easily, confused with | Not to be, although easily, confused with {{isdaprov|Termination Events}} under the {{isdama}}. These are (in the main) kinder and gentler than {{isdaprov|Events of Default}}, arise from factors outside the parties control ({{isdaprov|Force Majeure}}, {{isdaprov|Tax Event}}s, {{isdaprov|Credit Event Upon Merger}}s, {{isdaprov|Illegality}} and so on), and in many cases relate to some only and not all of the {{isdaprov|Transaction}}s under the {{isdama}}. They justify termination but at less punitive [[mid market]] terms. There are some Termination Events which are more like Events of Default, though: most of these are the tailored ones the parties agree as {{isdaprov|Additional Termination Event}}s. | ||
{{sa}} | |||
{{ | *[[Cross default]] | ||
*[[Cross | *{{isdaprov|Termination Event}}: a special type of half-arsed Event of Default arising under the {{isdama}}. | ||
*{{isdaprov|Termination Event}}: a special type of half-arsed | *{{isdaprov|Events of Default and Termination Events}} generally under the {{isdama}}. | ||
{{ref}} | |||