Template:M summ 2002 ISDA 5(c)

In which the JC thinks he might have found a bona fide use for the awful legalism “and/or”. Crikey.

What to do if the same thing counts as an Illegality and/or a Force Majeure Event and an Event of Default and/or a Termination Event.

Why do we need this? Remember, an Event of Default is an apocalyptic disaster scenario which blows your whole agreement up with extreme prejudice; a Termination Event is just “one of those things” which justifies termination, but may relate only to a single Transaction, and even if it affects the whole portfolio, it isn’t something one needs necessarily to hang one’s head about. (It’s hardly your fault if they go and change the law on you, is it?)

A Force Majeure Event is something that is so beyond one’s control or expectation that it shouldn’t count as an Event of Default or even a Termination Event at all — at least until you’ve had a chance to sort yourself out, fashion a canoe paddle with a Swiss Army knife, jury-rig an aerial and get reconnected to the world wide web.

Non-repudiatory Breach of Agreement

Note that the subordination of Events of Default to Illegality and Force Majeure in section 5(c)(i) are specifically excludes a repudiatory Breach of Agreement as contemplated under the newly introduced section 5(a)(ii)(2), and any Credit Support Default other than a direct, and non-repudiatory, default by the Credit Support Provider. Why? Well, firstly this is about unitary Events ofDefault which are directly caused by Illegality or Force Majeure, not simply ones which are coincidental with them, and secondly, if you have actually repudiated the contract — that is to say, point-blank refused to perform its clear terms — and, by lucky hap, your repudiation coincides with an Illegality, then your counterparty should not be obliged to give you the benefit of the doubt and have to close you out via the more genteel route of an Illegality Termination Event.

If you’ve thrown your toys out of the pram, expected to be spanked, that is to say.