Scope of the ISDA Master Agreement—Section 5 (Events of Default and Termination Events)
Scope of the ISDA Master Agreement—Section 5 (Events of Default and Termination Events)

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Scope of the ISDA Master Agreement—Section 5 (Events of Default and Termination Events)
  • ISDA documents
  • What are Events of Default and Termination Events?
  • Overview of Events of Default in Section 5(a)
  • Failure to Pay or Deliver
  • Breach or repudiation of Agreement
  • Credit Support Default
  • Misrepresentation
  • Default under a Specified Transaction
  • Cross Default
  • More...

ISDA documents

The 1992 and 2002 ISDA Master Agreements (the Master Agreement) are standard form documents produced by the International Swaps and Derivatives Association (ISDA).

In this Practice Note, references to Sections of a Master Agreement and Parts of a Schedule are references to the 2002 ISDA Master Agreement and Schedule unless otherwise stated.

For general information about negotiating ISDA Master Agreements, see: Introduction to negotiating ISDA documents.

What are Events of Default and Termination Events?

Section 5 (Events of Default and Termination Events) of the Master Agreement, is divided into two sections:

  1. Section 5(a) (Events of Default) sets out the Events of Default, and

  2. Section 5(b) (Termination Events) sets out the Termination Events

Events of Default are events which give one party the right to terminate any outstanding Transactions under an ISDA Master Agreement.

A decision to declare an event an Event of Default will result in all Transactions between the parties being terminated, not just a Transaction to which a particular default might relate. As a result of such serious consequences, it is no small decision for a Non-defaulting Party to declare an Event of Default.

Termination Events also allow the parties to close out Transactions prior to their intended maturity date on the occurrence of an adverse event. However, there are key differences between Termination Events and Events of Default:

  1. Termination Events reflect a change in circumstances of

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