Template:M summ 1992 ISDA Force Majeure Event

Force majeure in the 1992 ISDA

There is no equivalent to the 2002 ISDA’s Force Majeure Event in the 1992 ISDA. You could, and many old-timers do, write an Impossibility clause was into the Schedule, which endeavoured to do the same thing. One can incorporate the 2002 ISDA’s Force Majeure Event into the 1992 ISDA as long as you carry the concept through to its logical conclusion i.e.:

• Include a “Hierachy of Events” to be clear what happens where the same event is both a Event of Default and a Force Majeure Event;
• Consider the impact of a deferral on the Early Termination Amount etc.

The concept also impacts the basis of close-out because the 2002 ISDA requires true mids for valuation i.e, not simply the average of each party’s view of the bid/offer where a Force Majeure Event (or Illegality) occurs, which is effectively what you get under the 1992 ISDA with a “Two Affected Parties” option.