What Is An Event Of Default Clause?

What happens to collateral in case of default?

In that case, if you default, you will lose the collateral.

An example of that is a car loan.

If you default on the money a lender gave you to purchase a vehicle, the lender can repossess that vehicle and turn around and sell it at an auction as a way to recover the amount of the loan..

What is cross default threshold?

Specified Indebtedness default is the focus of the Cross Default clause. A Threshold Amount is a money figure or its equivalent above which a Non-defaulting Party may exercise its rights following its counterparty’s debt default to terminate all Transactions under the Master Agreement.

What is a potential event of default?

A Potential Event of Default is a Failure to Pay or Deliver, Breach of Agreement (or other Event of Default) with an unexpired grace period, or where the grace period has expired but the Non-defaulting Party hasn’t (yet) given a notice of default actually accelerating the default into an actual Event of Default.

What is a default clause?

A default clause is a provision in a legal contract that states what will happen if either party in a contract defaults or fails to hold up their end of the agreement. These clauses can be found in any type of contract including loan agreements, lease agreements, and property agreements.

Can you cure a cross default?

For any event of default, it is possible that a cross- default was triggered under the documentation for the borrower’s other indebtedness so some other creditor of that borrower may have a resulting event of default that cannot be cured.

Is an event of default a breach of contract?

In addition to the above, if the event of default also constitutes a breach of contract or a misrepresentation, the Lender may also be able to make a claim against the borrower for any losses it incurs as a result of such breach or misrepresentation.

What is a cross default clause?

Cross-default is basically a provision in a loan agreement that puts the borrower in default if the borrower defaults on another loan. … Thus, cross-default clauses in loan agreements can easily create a domino effect for the borrowers. Default may occur in a loan agreement in several ways.

What is a cross collateral cross default agreement?

A cross-collateralization clause generally provides that the same collateral, often real property, secures multiple loans from the same lender. In the construction loan context, a developer will often take out sequential loans from the same lender to finance particular phases of a project.

What happens after an event of default?

An event of default is a predefined circumstance that allows a lender to demand full repayment of an outstanding balance before it is due. … An event of default enables the lender to seize any collateral that has been pledged and sell it to recoup the loan.

Is default the same as breach?

Default vs. breach is a confusing term related to contract execution. … In contract law, a breach means the failure of a contracting party to perform their obligations according to the terms of the agreement. Default, according to the law of obligations and banking law, means to refuse to pay a debt when due.

What happens if you default on a contract?

If a seller defaults in any way, you, as the buyer, have similar options. You can sue for monetary damages for breach of contract, termination of the contract and return of the deposit (and possible repayment of expenses), and/or specific performance — in other words, forcing the completion of the sale.

What is the difference between cross default and cross acceleration?

In contrast to a cross-acceleration, a cross-default clause in Agreement A causes an automatic event of default under that agreement when the borrower defaults under Agreement B, even if the lender under Agreement B does not accelerate repayment.

What triggers an acceleration clause in a loan agreement?

Overview. An accelerated clause is typically invoked when the borrower materially breaches the loan agreement. For example, mortgages typically have an acceleration clause that is triggered if the borrower misses too many payments. Acceleration clauses most often appear in commercial mortgages and residential mortgages …

How does cross collateralization work?

Cross-collateralization is when one asset serves as collateral for more than one loan. If a borrower is unable to repay any of the loans secured by the asset, the property can be seized and sold even if the borrower is current on the remaining loans.

What is a collateral event?

Event collateral is anything that enhances the experience of the event for delegates, a touch point for them to interact with the event.

What is the difference between default and event of default?

The phrase default or event of default is a fixture of loan agreements. “Default” means any event that with notice or passage of time, or both, would constitute an Event of Default.” …