Grace period: Difference between revisions

{{g}}A [[grace period]] — being the difference between an [[event of default]] and a [[potential event of default]] — is the sort of thing that is liable to give a [[credit officer]] hot flushes. Given away years before, in a weak moment in a sterile negotiation, when the sap finally rises and our credit fellow is fumbling in his trousers for his termination triggers, it will flare up and spoil the moment.  

[[Grace period]]s are usually found in buried into [[failure to pay]] or [[bankruptcy]] [[events of default]]. Your counterparty has failed to pay on a due date, or a petition has been presented, but the contract stipulates the counterparty has a period to cure its failure or discharge the petition. Until that period has elapsed you must keep your agitated credit officer under a cold shower. Until then, you have a [[potential event of default]] — a sort of murky netherworld of counterparty turpitude where oxygen is in short supply, skies darken and debtors start to go blue — and this might afford you some comfort (under [[representations]] and [[warranties]]) but it won’t ''yet'' permit your credit guy to pull his trigger.