The parties try to limit this responsibility by including “unconfident” representations in their agreements, so that each party does not rely on the other and makes its own independent decisions. While these submissions are helpful, they would not prevent business practices or other measures if a party`s conduct was inconsistent with that presentation. The most important thing is to remember that the ISDA executive contract is a clearing agreement and that all transactions are interdependent. Therefore, a default in a transaction counts by default among all transactions. Point 1 (c) describes the concept of a single agreement and is of paramount importance as it forms the basis for network closures. When a standard event occurs, all transactions are completed without exception. The concept of out-of-gap clearing prevents a liquidator from making “cherry pickings,” i.e. making payments on profitable transactions for his bankrupt client and refusing to do so in the case of an unprofitable customer. While a creditor enjoys a certain exemption from bankruptcy by authorizing the suspension of the obligations due and due, the provisions are exempt from the debt on future positions that are not yet due and due. In recognizing this problem, the framework agreement contains provisions allowing a creditor party to terminate and liquidate transactions after bankruptcy or any other default of a consideration under the captain`s contract (acceleration). This uniform approach to the agreement is an integral part of the structure and part of the network-based protection offered by the framework agreement. The fact that all transactions are the sole contract enhances the ability to close these transactions and obtain a one-time net amount payable in the event of default. In both cases, the agreement is divided into 14 sections describing the contractual relationship between the parties.
It contains standard conditions that detail what happens when one of the parties is in default, for example. B bankruptcy and how over-the-counter derivatives transactions are completed or “closed” after a default. There are 8 standard events and 5 standard closing events under the 2002 ISDA Executive Contract that cover different standard situations that could apply to one or both parties.