Search

Event of default

Default is the occurrence of an event or circumstance against which a

party to a contract seeks protection.

For example, a contract may state that the recording of a lien against
certain property is a default. If the default is left uncured after notice
and the passage of time, it may ripen into an event of default, which
creates in the non-defaulting party certain rights, such as acceleration
of a debt or the right to exit a contract.

In a revolving credit facility, the occurrence of an event of default

normally also allows the lender to cancel any obligations to make further
loan advances.

There are three types of event of default:

payment default, i.e. the failure to pay principal or interest when it

falls due for payment;

prospective default, when payment is not yet due, but it is clear that it
will not be capable of being paid when it does fall due. For example, a
payment is due in three months' time but the borrower has been put
into liquidation: and

covenant default, when the borrower fails to keep a promise (a

:
 covenant) that it has made in the contract.

This economics-related article is a stub. You can help Wikipedia

by expanding it (https://en.wikipedia.org/w/index.php?title=Event
_of_default&action=edit) .

Retrieved from
"https://en.wikipedia.org/w/index.php?
title=Event_of_default&oldid=9457362
71"

Last edited 3 years ago by JamesLucas

:
: