Hierarchy of Events - ISDA Provision
2002 ISDA Master Agreement A Jolly Contrarian owner’s manual™ 5(c) in all its glory
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Overview
A simple piddling match between Events of Default and Illegality in the 1992 ISDA makes way for a full-blown hierarchy of competing circumstances justifying closeout of the ISDA Master Agreement in the 2002 ISDA.
Summary
In which the JC thinks he might have found a bona fide use for the awful legalism “and/or”. Crikey.
What to do if the same thing counts as an Illegality and/or a Force Majeure Event and an Event of Default and/or a Termination Event.
Why do we need this? Remember, an Event of Default is an apocalyptic disaster scenario which blows your whole agreement up with extreme prejudice; a Termination Event is just “one of those things” which justifies termination, but may relate only to a single Transaction, and even if it affects the whole portfolio, it isn’t something one needs necessarily to hang one’s head about. (It’s hardly your fault if they go and change the law on you, is it?)
A Force Majeure Event is something that is so beyond one’s control or expectation that it shouldn’t count as an Event of Default or even a Termination Event at all — at least until you’ve had a chance to sort yourself out, fashion a canoe paddle with a Swiss Army knife, jury-rig an aerial and get reconnected to the world wide web.
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- The JC’s famous Nutshell™ summary of this clause
See also
- Force majeure (including the JC’s ultimate force majeure clause)
- Event of default
- Termination event