Agreement Default

A delay occurs when a party fails to meet its contractual obligations — also known as an infringement. Contracts are documents signed „for a fee.“ This means that no one can enter into a contract in which only one party is an obligation of the contract, so that if one party refuses with a contract, it will affect the actions of the other party. In addition to the violation of the payment clause and the violation of the financial agreement, a more general delay event is often introduced to stop any violation of all other obligations of the borrower under the loan agreement, such as. B offences committed against companies. The borrower may attempt to limit the delay event to „substantial“ offences and/or negotiate an additional period in which the infringement can be corrected before the delay occurs. It is therefore important that the borrower carefully refrain from all obligations under the loan agreement, including any restrictions on the borrower`s ability to manage the property (. B for example, leasing, divestment and development) and borrowing from third parties. The various representations, guarantees and obligations must therefore be modified to ensure that they do not interfere with the borrower`s activities or hinder his intentions for the property. In the event of a substantial breach of contractual obligations, the party who does not violate the contract has the option of terminating the contract. This is done by written notification of the termination of the contract, which indicates the acts of violation committed by the other party. A standard clause may be subject to what is called a right of healing. This means that the party that is in a breach has the right to defend its actions. If a borrower does not pay an amount when it matures in accordance with the loan agreement, this is a delay event.

Lenders are very unlikely to negotiate. It may be possible for the borrower to request a reasonable additional period of time in which the amount owed must be paid before the offence becomes a delay event. Normally, such an additional delay would not be more than a few working days. This default event is almost always displayed in a loan agreement in any form. Depending on how it was designed, a delay event is triggered when an insolvency situation (regardless of the definition of the loan contract) has arisen for the borrower. Sometimes the threat of insolvency proceedings against the borrower may be enough to trigger this default event. Therefore, this provision can be negotiated quite strongly, since the borrower wishes to limit as much as possible the importance of an insolvency event, while the lender will likely have the opportunity to trigger a default event and demand immediate repayment of the loan, the borrower being at the first indication that the borrower is in financial difficulty.

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