Representations - ISDA Provision
Each party makes the representations below (with Section 3(g) representations only if specified in the Schedule) and repeats them on the date it enters into each Transaction and, for Section 3(f) representations, at all times until they terminate this Agreement). Any “Additional Representations” will be made and repeated as specified.
3(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event is in existence for that party or would happen if it entered or performed this Agreement or any Credit Support Document.
Resources: 2002 ISDA (wikitext) | 1992 ISDA (wikitext) | 2002 vs 1992 Showdown | 2006 ISDA Definitions | 2008 ISDA | J.C.’s Nutshell ISDA |
The representations set out in Section 3 are, of course, the boring ones. The Additional Representations that are pulled in here and have the same effect on the Events of Default as do these boring ones — over which the parties will tortuously argue during the negotiation process, are lot more interesting — literary, really — reflecting as they do the dark paranoia lurking deep in the heart of your favourite credit officer.
And what of this idea that one not only represents and warrants as of the moment one inks the paper, but also is deemed to repeat itself an the execution of each trade, on any day, or whenever a butterfly flaps its wings on Fitzcarraldo’s steamer? Do we think it works? Do we? Given how practically useless even explicit representations are, does it really matter?
And, having given it, how are you supposed to stop a continuing representation once it has marched off into the unknowable future, like one of those conjured brooms from the Sorcerer’s Apprentice? If you don’t stop it, what then? This may seem fanciful to you, but what are buyside lawyers if not creatures of unlimited, gruesome imagination? Are their dreams not full with flights of just this sort of fancy? Rest assured that, as you do, they will be chewing their nails to the quick in insomniac fever about this precise contingency.
For which reason — it being a faintly pointless representation in the first place and everything — it might be best just to concede this point when it arises, as inevitably it will.
On representations and warranties generally
A representation is a statement of present fact made by one person which induces another to enter a contract. By its nature, a representation is therefore not a term of the contract itself — it cannot be; it was made before the contract came about; it is an egg to the contract’s chicken — although that won’t stop attorneys gleefully adding representations into the contract afterward, co-branding them as warranties, for good measure. For, if your counsel is diligent enough, you may have your cake and eat it, too. Non-contractual representations may provide relief: a false representation may entitle the party induced into the contract in reliance on it to claim under the Misrepresentation Act 1967 and rescind the contract altogether, or claim damages for negligent misstatement in tort.
A warranty is a statement of a current fact made as a term of a contract. If a warrantor breaches its warranty the injured party might claim damages for the breach of contract and sue for damages, but cannot rescind it altogether. For that you would need a breach of representation.
3(a) Basic Representations
3(b) Absence of certain events
3(c) Absence of litigation
3(d) Accuracy of Specified Information
3(e) Payer Tax Representations
3(f) Payee Tax Representations
3(g) No Agency (2002 ISDA only)
- Or whatever. WHATEVER DUDE.
- WARNING: CONTRARIAN VIEW COMING UP.