The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:
Section 6 (Early Termination) of the ISDA Master Agreement sets out the consequences of the occurrence of an Event of Default or a Termination Event as described in Section 5 (Events of Default and Termination Event) of the ISDA Master Agreement. In short, the difference between an event of default and termination event is that in an event of default there is a party that can be blamed, whereas generally in a termination event, the event just happened or was outside a party's control.
Section 6 also sets out how the close-out netting mechanism operates following the occurrence of an Event of Default or Termination Event.
For more information, see Practice Notes: Terminating derivatives entered into under an ISDA Master Agreement, Scope of the ISDA Master Agreement part 4—Section 5 (Events of Default and Termination Events) and Scope of the ISDA Master Agreement part 5—Section 6 (Early Termination).
Note that event of defaults do not require notice to be given unless parties want to call an Event of Default in order to terminate a transaction, whereas if a Termination Event occurs (except a Force Majeure event), the Affected Party must 'promptly upon becoming aware of it' notify the other party.
If an ISDA contract is going to be terminated, it is important to ensure that
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