No event of default or potential event of default: Difference between revisions

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No event of default or potential event of default (view source)

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Can you understand the rationale for this representation: Sure. Does it make any practical sense? It does not. A [[No event of default or potential event of default - Representation|No EOD rep]] is a classic [[loo paper rep]]: soft, durable, comfy, absorbent — super cute when a wee Labrador pub grabs one end of the streamer and charges round your Italian sunken garden with it — but as a [[credit mitigant]] or a genuine contractual protection, only good for wiping your behind on.
Can you understand the rationale for this representation: Sure. Does it make any practical sense? It does not. A [[No event of default or potential event of default - Representation|No EOD rep]] is a classic [[loo paper rep]]: soft, durable, comfy, absorbent — super cute when a wee Labrador pub grabs one end of the streamer and charges round your Italian sunken garden with it — but as a [[credit mitigant]] or a genuine contractual protection, only good for wiping your behind on.


Firstly, you are asking someone — on pain of them being found in [[Fundamental breach|fundamental breach of contract]] — to swear to you they are not already in fundamental breach of contract. Now how much credibility can you place one someone in that case? How much comfort can you genuinely draw from that specific promise? Wouldn't it be better if your [[credit]] team did some cursory due diligence to establish whether there are any grounds to think your counterparty is in fundamental breach of contract? Presuming that no such information is available — folks tend not to publicise their own defaults on private contracts, after all, the real question here is “Do I trust my counterparty?” And to that question, any answer provided by exactly the person whose trustworthiness your equiry is designed to test, carries exactly no informational value.
Beaqr in mind you are asking someone — on pain of them being found in [[Fundamental breach|fundamental breach of contract]] — to swear to you they are not already in [[fundamental breach]] of {{t|contract}}. Now, how much comfort can you genuinely draw from such promise? Wouldn't it be better if your [[credit]] team did some cursory [[due diligence]] to establish whether there are any grounds to suppose your counterparty might be in [[fundamental breach]] of {{t|contract}}?  


Secondly, let’s say it turns out your Counterparty was lying; there was an extant or pending [[event of default]]. Now what are you going to do? Bleed on him?
Presuming that no such information is available — folks tend not to publicise their own defaults on private contracts, after all — the real question here is “Should I trust my counterparty?” And to that question, any answer provided by exactly the person whose trustworthiness your enquiry is designed to test, carries exactly no informational value.
 
So let’s say it turns out your counterparty ''was'' lying; there was an extant or pending private [[event of default]] that it knew about and you didn’t. Now what are you going to do? Righteously detonate your contract on account of something of which ''by definition you are ignorant''?
 
Have fun, counselor.


===“... or would occur as a result of entering into this agreement”===  
===“... or would occur as a result of entering into this agreement”===  
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