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===[[Consequential loss]]=== | ===[[Consequential loss]]=== | ||
====In general==== | |||
[[10.4 - GMSLA Provision|There]]’s a lovely long essay about [[consequential loss]], at the [[consequential loss]] page. [[Consequential loss]]es — in a nutshell, one’s lost opportunity to profit elsewhere because one is tethered into this dud contract and is faithfully abstaining from the fleshy pleasures to be had in fruitier parts of the commercial plane — are not generally available as a measure of [[damages]] under a {{t|contract}} (historically they were excluded as a rule; nowadays the [[common law]] regard it as a simple question of whether the [[loss]] was properly [[Causation|caused]] and [[reasonably foreseeable]]; losses that are consequential in nature may be forseeable, but it will only be in unusual circumstances. | [[10.4 - GMSLA Provision|There]]’s a lovely long essay about [[consequential loss]], at the [[consequential loss]] page. [[Consequential loss]]es — in a nutshell, one’s lost opportunity to profit elsewhere because one is tethered into this dud contract and is faithfully abstaining from the fleshy pleasures to be had in fruitier parts of the commercial plane — are not generally available as a measure of [[damages]] under a {{t|contract}} (historically they were excluded as a rule; nowadays the [[common law]] regard it as a simple question of whether the [[loss]] was properly [[Causation|caused]] and [[reasonably foreseeable]]; losses that are consequential in nature may be forseeable, but it will only be in unusual circumstances. | ||
====Specifically for stock lending==== | |||
That is the general position. | That is the general position. Under the GMSLA, [[consequential loss]]es are specifically excluded because they are, by nature, speculative, indeterminate and not [[reasonably foreseeable]] in the context of a stock lending arrangement. It is commonly understood that parties to a [[stock loan]] do not have in mind the potential profits each other could make with the securities or collateral transferred under the loan: | ||
*'''No expectations''': No {{{{{1}}}|Lender}} expects to underwrite the value of the {{{{{1}}}|Borrower}}’s lost opportunity to [[Short sell|short]] if it fails to settle a {{{{{1}}}|Loan}}. | |||
*'''They’re callable''': Each {{{{{1}}}|Loan}} is designed to be easily cancelled at will by either party. | |||
*'''Self-help remedies are available''': There are specific self-help remedies for settlement failures (e.g., {{{{{1}}}|Buy-In}}s). It is hard to see how there could be any expectation that [[consequential loss]]es would be available for breach, and it helps for the agreement to make that explicit. It reflects the industry expectation, and takes away the temptation — sore one, for many an [[legal eagle|underoccupied lawyer]] — to argue that for some special reason that [[consequential loss]] might be appropriate in some cases — and here one should never underestimate the boundless imagination (or paranoia) of an underoccupied lawyer, particularly during the contract [[negotiation]] phase, to confabulate hypothetical special reasons. | |||
We have seen it argued that a counterparty’s “fraud or wilful misconduct” is such a reason. But why? For what reason would ''why'' a contract is breached matter to the measure of damages for breach? And, besides, how ''could'' you be fraudulent or badly behaved in a stock-lending agreement anyway? | We have seen it argued that a counterparty’s “fraud or wilful misconduct” is such a reason. But why? For what reason would ''why'' a contract is breached matter to the measure of damages for breach? And, besides, how ''could'' you be fraudulent or badly behaved in a stock-lending agreement anyway? | ||
===“Subject to Paragraphs {{{{{1}}}|9}} and {{{{{1}}}|11}}”=== | ===“Subject to Paragraphs {{{{{1}}}|9}} and {{{{{1}}}|11}}”=== | ||
But what of the cagey [[caveat]] about Paragraph {{{{{1}}}|9}} (''{{{{{1}}}|Failure to Deliver}}'') and Paragraph {{{{{1}}}|11}} (''{{{{{1}}}|Consequences of an Event of Default}}'')? Search me. There is no obvious exception to the ban on [[consequential loss]] in paragraph {{{{{1}}}|9}}, which talks about {{{{{1}}}|Buy-In}}s and other self-help remedies which militate pretty hard ''against'' consequential damages. Likewise, Paragraph {{{{{1}}}|11}} goes to some lengths to articulate and itemise the termination amount calculations, all of which are focused on actually incurred expenses, and there is nothing in there that talks about loss of opportunities — see Paragraph {{{{{1}}}|11.3}} in particular. | But what of the cagey [[caveat]] about Paragraph {{{{{1}}}|9}} (''{{{{{1}}}|Failure to Deliver}}'') and Paragraph {{{{{1}}}|11}} (''{{{{{1}}}|Consequences of an Event of Default}}'')? Search me. There is no obvious exception to the ban on [[consequential loss]] in paragraph {{{{{1}}}|9}}, which talks about {{{{{1}}}|Buy-In}}s and other self-help remedies which militate pretty hard ''against'' consequential damages. Likewise, Paragraph {{{{{1}}}|11}} goes to some lengths to articulate and itemise the termination amount calculations, all of which are focused on actually incurred expenses, and there is nothing in there that talks about loss of opportunities — see Paragraph {{{{{1}}}|11.3}} in particular. If you see anything looking like [[consequential loss]] in here (this is the JC’s nutshell summary by the way) you have better eyesight than me. | ||
{{subtable|{{Nutshell GMSLA 11.3}}}} | |||