Default and Settlement Clause Samples
The Default and Settlement clause defines the procedures and consequences that apply when one party fails to fulfill its contractual obligations. Typically, this clause outlines what constitutes a default, the steps the non-defaulting party may take—such as demanding payment, suspending services, or initiating legal action—and the methods for settling outstanding obligations, which may include set-off rights or liquidation of positions. Its core practical function is to provide a clear framework for resolving breaches, thereby minimizing uncertainty and ensuring that both parties understand the remedies and processes available in the event of default.
Default and Settlement. 1. The events of default. Any of following situations can be considered as the default of the Borrower:
(1) The notices, authorizations, approvals, consents, certificates and other documents provided by the Borrower under this contract are or are proved in fault or misstatement, or expired, revoked or no legal effect.
(2) The Borrower has violated the Part One of this contract "Other Covenants" (if any) or any items on the provisions of Article 8 of Part Two.
(3) Significant cross defaults, including but not limited to any covenants which violated any other loan contracts or agreements have been signed; or the Borrower failed to pay off the matured debt under other loan contracts or agreements,
(4) The Borrower's investors withdrawn funds, transfer assets or the unauthorized transfer equity.
(5) Guarantor has been or will be lost the guarantee ability for the loan, or violates the signed guarantee documents.
(6) The Borrower has been closed, shut down, suspended operations, restructuring, liquidation, receivership or trusteeship, settlement or cancellation of business license revoked or bankruptcy.
(7) The Borrower or guarantor enters into worse financial condition, difficult operation, or happens matters or conditions adversely affected the normal business, financial condition or solvency.
(8) The Borrower or its controlling shareholders, actual controllers or their associates involved in actions, arbitration or significant assets to be seized, seizure, freezing, enforcement or other measures, or legal representative / principals, directors, supervisors or senior management staff involved in litigation, arbitration or other enforcement measures have led to the repayment ability of borrowers adversely affected.
(9) Failed to use loan or payment on the provisions of this contract.
(10) Documents for loan application are fault, misstatement.
(11) Does not meet or exceed the financial indicators.
(12) The capital in the general settlement accounts / capital recovery account is abnormal.
(13) The Borrower has other defaults sufficient to prevent normal performance of this contract acts, or other prejudices to effect the legitimate interests of the Lender.
Default and Settlement. In the event of any one of the following acts of Party B, Party A and Party D are entitled to require Party B to rectify the default within a specific time limit, provide a new mortgage, increase according mortgage, compensate the loss and dispose of the collateral mortgage in advance.
1. conceal of the situation of the collateral mortgage of co-ownership, dispute, sealing-up, seizure, leasing or having been mortgaged;
2. failure to provide complete materials or true documents about the collateral mortgage as required by Party A and Party D;
3. disposal of the collateral mortgage without authorization of Party A and Party D;
4. any actions or inactions impeding realization of the creditor’s rights and mortgage rights by Party A and Party D;
5. invalid mortgage caused by Party B;
6. Party B or Party C’s breach of the articles of relevant contracts.