Potential Event of Default - ISDA Provision

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2002 ISDA Master Agreement

A Jolly Contrarian owner’s manual™

Potential Event of Default in a Nutshell

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Potential Event of Default in all its glory

Potential Event of Default” means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

Related agreements and comparisons

Click here for the text of Section Potential Event of Default in the 1992 ISDA
Template:Isdadiff Potential Event of Default

Resources and Navigation

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 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14
Events of Default: 5(a)(i) Failure to Pay or Deliver5(a)(ii) Breach of Agreement5(a)(iii) Credit Support Default5(a)(iv) Misrepresentation5(a)(v) Default Under Specified Transaction5(a)(vi) Cross Default5(a)(vii) Bankruptcy5(a)(viii) Merger without Assumption
Termination Events: 5(b)(i) Illegality5(b)(ii) Force Majeure Event5(b)(iii) Tax Event5(b)(iv) Tax Event Upon Merger5(b)(v) Credit Event Upon Merger5(b)(vi) Additional Termination Event

Index: Click to expand:



See especially how the inclusion of Potential Event of Default makes the much talked-about, seldom understood Section 2(a)(iii) condition to payments far more sensitive than it has any right to be.



A Potential Event of Default is a Failure to Pay or Deliver, Breach of Agreement (or other Event of Default) with an unexpired grace period, or where the grace period has expired but the Non-defaulting Party hasn’t (yet) given a notice of default actually accelerating the default into an actual Event of Default.

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  • The JC’s famous Nutshell summary of this clause
  • Grace periods and notice requirements for each Event of Default - timing is everything
  • Why no-one in their right mind would ever close out an ISDA for breach of agreement
  • Grace periods and time being of the essence. Does this introduce a tension? Which gives
  • Notice period convolution: beware of dirty pool from the negotiator community

See also