Events of default clause: Copy, customize, and use instantly
Introduction
An events of default clause outlines specific situations where one party fails to meet their obligations under a contract. These "events of default" often include missed payments, failure to perform agreed tasks, or insolvency.
When an event of default happens, the other party can take action, such as ending the contract or seeking legal remedies. This clause is especially important in contracts involving ongoing obligations or financial commitments because it clearly defines what counts as a serious breach.
Below are events of default clause templates for different scenarios. Pick the one that fits your needs, customise it, and add it to your contract.
Standard events of default clause
This clause outlines general triggers for default.
The following events constitute default under this agreement: (i) failure to perform or fulfill any material obligation under this agreement, (ii) insolvency or bankruptcy proceedings involving either party, (iii) misrepresentation of any material fact, or (iv) any unauthorized assignment of rights or obligations under this agreement.
Financial default clause
This clause focuses on financial triggers for default.
An event of default occurs if either party (i) fails to make payments due under this agreement within [insert time period] of the due date, (ii) becomes insolvent or bankrupt, or (iii) breaches any financial covenants outlined in this agreement.
Performance-specific default clause
This clause emphasizes failure to meet performance requirements.
An event of default occurs if either party (i) fails to meet the performance milestones outlined in [specific section], (ii) ceases operations for more than [insert time period], or (iii) fails to remedy a performance deficiency within [insert time period] after receiving written notice.
Cross-default clause
This clause ties default under one agreement to another.
An event of default occurs if either party is in default under any other agreement between the parties or with any third party, where such default materially affects the performance of obligations under this agreement.
Cure period default clause
This clause includes a timeframe for remedying defaults.
An event of default under this agreement will occur if a party fails to cure a breach within [insert time period] after receiving written notice from the non-breaching party.
Material adverse change clause
This clause triggers default for significant negative changes.
An event of default occurs if a material adverse change impacts the ability of either party to fulfill their obligations under this agreement, as reasonably determined by the non-affected party.
Fraud-specific default clause
This clause addresses fraudulent behavior as an event of default.
An event of default occurs immediately if either party engages in fraud, intentional misrepresentation, or other deceptive practices in connection with this agreement.
Technical default clause
This clause applies to breaches of procedural or technical requirements.
An event of default occurs if either party fails to comply with the procedural or technical requirements outlined in [specific section], provided such failure is not remedied within [insert time period].
Bankruptcy-triggered default clause
This clause focuses on bankruptcy or insolvency events.
An event of default occurs if either party (i) files for bankruptcy, (ii) becomes the subject of involuntary bankruptcy proceedings not dismissed within [insert time period], or (iii) makes an assignment for the benefit of creditors.
Notification failure default clause
This clause defines default based on failure to provide required notifications.
An event of default occurs if either party fails to provide timely notice as required under [specific section] of this agreement, where such failure materially impacts the non-breaching party.
Standard non-performance default clause
This clause triggers default for failure to meet key obligations.
An event of default occurs if either party (i) fails to perform any material obligation under this agreement and (ii) does not remedy the failure within [insert time period] after receiving written notice from the other party.
Insolvency-specific default clause
This clause focuses exclusively on financial insolvency.
An event of default occurs if either party (i) becomes insolvent, (ii) files for bankruptcy, or (iii) is placed under receivership or similar proceedings.
Default for breach of representations clause
This clause triggers default for misrepresentation.
An event of default occurs if either party makes a false or misleading representation or warranty that materially affects the other party’s rights under this agreement.
Regulatory compliance default clause
This clause addresses non-compliance with legal or regulatory requirements.
An event of default occurs if either party fails to comply with applicable laws, regulations, or government orders that directly affect the performance of this agreement.
Cross-contract default clause
This clause links default to breaches in other contracts.
An event of default occurs if either party defaults on any other agreement that materially impacts their ability to perform obligations under this agreement.
Force majeure default clause
This clause accounts for defaults caused by extended force majeure events.
An event of default occurs if a force majeure event prevents either party from performing their obligations under this agreement for more than [insert time period], and no reasonable alternatives can be implemented.
Key personnel default clause
This clause applies when specific personnel are critical to the contract.
An event of default occurs if the key personnel identified in [specific section] are no longer available, and the affected party fails to provide a suitable replacement within [insert time period].
Late payment default clause
This clause triggers default specifically for payment delays.
An event of default occurs if either party fails to make a payment due under this agreement within [insert time period] after the due date and does not cure the failure after receiving written notice.
Third-party interference default clause
This clause addresses external interference that affects performance.
An event of default occurs if a third party’s actions, known or reasonably controlled by either party, prevent or substantially impair the performance of obligations under this agreement.
Persistent breach clause
This clause triggers default for repeated minor breaches.
An event of default occurs if either party repeatedly fails to comply with the terms of this agreement, even if the individual breaches are minor, and fails to implement corrective measures after written notice from the other party.
Governance failure default clause
This clause applies when there is a failure in corporate governance.
An event of default occurs if either party experiences a failure in governance, such as fraud, embezzlement, or gross negligence by officers or directors, that materially impacts the performance of this agreement.
Environmental compliance default clause
This clause focuses on sustainability and environmental obligations.
An event of default occurs if either party fails to meet the environmental standards or requirements outlined in [specific section] and does not remedy the failure within [insert time period].
Liquidation-triggered default clause
This clause addresses liquidation events.
An event of default occurs if either party initiates or becomes subject to liquidation proceedings, whether voluntary or involuntary.
Default due to loss of license clause
This clause applies to contracts dependent on licensed activities.
An event of default occurs if either party loses a license or permit required for the performance of this agreement and does not remedy the issue within [insert time period].
Operational default clause
This clause triggers default for business disruptions affecting performance.
An event of default occurs if either party ceases operations, enters into receivership, or otherwise discontinues substantial business activities required to perform obligations under this agreement.
Intellectual property default clause
This clause focuses on breaches related to intellectual property use.
An event of default occurs if either party (i) infringes on intellectual property rights of the other party or (ii) misuses proprietary information in violation of the terms of this agreement.
Early termination breach clause
This clause addresses wrongful termination of the contract.
An event of default occurs if either party terminates this agreement without cause or fails to provide the required notice period as outlined in [specific section].
Default for failure to insure clause
This clause applies to non-compliance with insurance obligations.
An event of default occurs if either party fails to maintain the insurance coverage required under this agreement and does not remedy the issue within [insert time period] after written notice.
Breach of confidentiality default clause
This clause triggers default for unauthorized disclosure of confidential information.
An event of default occurs if either party discloses or uses confidential information in violation of the terms outlined in [specific section] and fails to mitigate or resolve the breach within [insert time period].
Default for regulatory disqualification clause
This clause applies to parties disqualified by regulatory actions.
An event of default occurs if either party becomes disqualified or barred from conducting the activities required under this agreement due to regulatory enforcement or penalties.
Reputation harm default clause
This clause addresses actions that damage the other party’s reputation.
An event of default occurs if either party engages in conduct that materially damages the reputation, goodwill, or public image of the other party, as reasonably determined by the non-breaching party.
Failure to provide deliverables clause
This clause addresses missed deadlines for required deliverables.
An event of default occurs if either party fails to deliver the goods, services, or other obligations specified in [specific section] within [insert time period] of the agreed deadline.
Cross-default with affiliates clause
This clause applies to defaults by affiliated entities.
An event of default occurs if an affiliate of either party commits a material breach under a related agreement that adversely affects this agreement’s performance or enforceability.
Anti-bribery and corruption default clause
This clause focuses on compliance with anti-corruption standards.
An event of default occurs if either party violates applicable anti-bribery or corruption laws in connection with this agreement, and the violation materially impacts the non-breaching party.
Failure to maintain permits clause
This clause applies to agreements requiring permits or licenses.
An event of default occurs if either party fails to obtain, renew, or maintain the permits or licenses required for fulfilling their obligations under this agreement.
Extended non-performance clause
This clause triggers default for extended periods of non-performance.
An event of default occurs if either party fails to perform their obligations under this agreement for a continuous period of [insert time period], regardless of whether written notice is provided.
Partnership disruption default clause
This clause applies to partnerships or joint ventures.
An event of default occurs if either party (i) withdraws from the partnership or joint venture, (ii) materially disrupts its operations, or (iii) fails to fulfill the agreed contributions under this agreement.
Default due to material misstatement clause
This clause addresses inaccuracies in representations or warranties.
An event of default occurs if any representation or warranty made by either party is found to be materially inaccurate or false, and the issue is not resolved within [insert time period].
Long-term incapacity default clause
This clause applies to situations where a party is incapacitated for an extended period.
Default occurs if either party is unable to perform their obligations due to incapacity, including but not limited to health-related or operational reasons, for more than [insert time period] without implementing alternative arrangements.
Technology failure default clause
This clause addresses defaults caused by critical technology or system failures.
An event of default occurs if either party’s failure to maintain or update essential technology or systems materially affects their ability to meet the terms of this agreement.
Disputed performance default clause
This clause focuses on unresolved disputes about meeting obligations.
Default occurs if a party contests their obligation to perform under this agreement and fails to take corrective action or engage in dispute resolution within [insert time period] after written notice.
Default for breach of exclusivity clause
This clause applies to agreements with exclusivity requirements.
An event of default occurs if either party violates the exclusivity terms outlined in [specific section], including entering into agreements with competitors or failing to uphold exclusivity rights.
Default due to key asset sale clause
This clause applies to situations where essential assets are sold.
Default occurs if either party sells or transfers key assets critical to fulfilling their obligations under this agreement without prior written consent from the other party.
Force majeure non-notification default clause
This clause triggers default if proper notice of a force majeure event is not provided.
An event of default occurs if either party fails to notify the other party of a force majeure event within [insert time period] of its occurrence, as required under this agreement.
Political risk default clause
This clause focuses on defaults caused by political instability or actions.
Default occurs if either party is unable to perform their obligations due to political risks, such as government sanctions, civil unrest, or regulatory changes, that persist for more than [insert time period].
Environmental damage default clause
This clause applies to agreements with environmental responsibilities.
An event of default occurs if either party causes environmental harm that violates applicable laws or regulations, and fails to remediate the damage within [insert time period].
Failure to cooperate default clause
This clause applies when collaboration between parties is essential.
Default occurs if either party fails to provide reasonable cooperation, access, or information necessary for the other party to perform their obligations under this agreement.
Failure to secure funding clause
This clause addresses defaults due to insufficient financing.
An event of default occurs if either party fails to secure the funding necessary to meet their financial obligations under this agreement within [insert time period].
Data protection breach default clause
This clause applies to agreements involving sensitive or personal data.
Default occurs if either party breaches applicable data protection laws or fails to implement required safeguards for the processing or storage of sensitive information.
Default for delayed approvals clause
This clause focuses on delays in obtaining necessary approvals or consents.
An event of default occurs if either party fails to obtain or provide required approvals, consents, or authorizations outlined in [specific section], resulting in material delays to performance.
Default due to adverse audit findings clause
This clause applies to agreements subject to audits.
Default occurs if an audit reveals material non-compliance or discrepancies with the obligations of this agreement, and the issues are not rectified within [insert time period].
Third-party dependency default clause
This clause addresses reliance on third parties for performance.
An event of default occurs if either party’s reliance on a third-party provider results in a failure to meet obligations under this agreement, and no suitable alternatives are implemented within [insert time period].
Breach of security obligations default clause
This clause focuses on failures to maintain required security standards.
An event of default occurs if either party fails to implement or maintain the security measures outlined in [specific section], resulting in unauthorized access, data breaches, or other security incidents.
Failure to renew agreement default clause
This clause applies to defaults related to contract renewal terms.
An event of default occurs if either party fails to execute a required renewal of this agreement or provide notice of non-renewal within the timeframe specified in [specific section].
Subcontractor failure default clause
This clause addresses issues caused by subcontractors.
An event of default occurs if either party’s subcontractor fails to meet performance or compliance requirements, and the responsible party does not remedy the failure within [insert time period].
Withdrawal of key investor default clause
This clause applies to agreements tied to investor funding.
An event of default occurs if a key investor or financial backer withdraws support, resulting in the inability of either party to meet obligations under this agreement.
Failure to provide warranties clause
This clause focuses on defaults related to warranties or guarantees.
An event of default occurs if either party fails to provide or honor warranties, certifications, or guarantees as outlined in this agreement within [insert time period].
Statutory compliance default clause
This clause triggers default for failure to comply with specific laws.
An event of default occurs if either party breaches statutory obligations relevant to the performance of this agreement, and such breach is not remedied within [insert time period].
Unapproved structural changes default clause
This clause applies to organizational changes affecting performance.
An event of default occurs if either party undergoes a merger, acquisition, or other structural change without obtaining prior written approval from the other party, as required under this agreement.
Anti-competition violation default clause
This clause addresses breaches of non-compete or anti-competition terms.
An event of default occurs if either party violates the non-compete or anti-competition provisions outlined in [specific section], materially impacting the other party’s interests.
Failure to replace defective goods clause
This clause applies to contracts involving goods or products.
An event of default occurs if either party fails to replace defective goods or products within [insert time period], as required under the terms of this agreement.
Non-delivery of essential documentation clause
This clause triggers default for failure to provide critical documents.
An event of default occurs if either party fails to deliver essential documents, certifications, or licenses specified in [specific section], resulting in an inability to perform obligations under this agreement.
Employee misconduct default clause
This clause applies to contracts dependent on the behavior of specific employees.
An event of default occurs if an employee of either party, identified as key personnel in this agreement, engages in misconduct that materially affects the performance of this agreement.
Repeated force majeure event clause
This clause triggers default for recurring force majeure events.
An event of default occurs if either party is unable to perform their obligations due to force majeure events occurring more than [insert number] times within a [insert time period].
Default due to adverse public reporting clause
This clause applies to reputational damage caused by public reporting.
An event of default occurs if either party is subject to adverse public reporting or legal action that significantly impairs their ability to fulfill obligations under this agreement.
Failure to meet ethical standards clause
This clause focuses on violations of agreed ethical guidelines.
An event of default occurs if either party fails to adhere to the ethical standards outlined in [specific section], resulting in material harm to the other party’s interests or reputation.
Default for non-disclosure violation clause
This clause triggers default for failing to meet non-disclosure obligations.
An event of default occurs if either party discloses confidential or proprietary information in violation of the non-disclosure provisions outlined in this agreement, and such disclosure is not remedied or mitigated within [insert time period].
Loss of accreditation default clause
This clause applies to industries requiring accreditation.
An event of default occurs if either party loses a required accreditation, certification, or membership critical to the performance of obligations under this agreement and fails to rectify the issue within [insert time period].
Failure to meet safety standards clause
This clause addresses non-compliance with agreed safety protocols.
An event of default occurs if either party fails to implement or adhere to the safety standards specified in [specific section], resulting in material risks to personnel, property, or operations.
Default due to failure to escrow funds clause
This clause applies to agreements with escrow requirements.
An event of default occurs if either party fails to deposit funds into the escrow account as required under this agreement, or if escrowed funds are withdrawn without proper authorization.
Default for breach of intellectual property use clause
This clause focuses on misuse of licensed intellectual property.
An event of default occurs if either party uses licensed intellectual property beyond the scope permitted under this agreement or fails to address a violation within [insert time period] after receiving written notice.
Non-payment of third-party fees clause
This clause applies to obligations involving third-party payments.
An event of default occurs if either party fails to pay third-party fees, royalties, or costs required under this agreement, causing delays or interruptions to performance.
Default for failure to secure approvals clause
This clause triggers default for not obtaining necessary regulatory or stakeholder approvals.
An event of default occurs if either party fails to obtain the approvals required for the performance of this agreement within the timeframes specified in [specific section].
Breach of indemnification obligations clause
This clause addresses failure to meet indemnity obligations.
An event of default occurs if either party fails to indemnify the other party as required under the terms of this agreement and does not rectify the breach within [insert time period].
Default due to adverse ownership changes clause
This clause applies to ownership transitions that disrupt contract performance.
An event of default occurs if either party undergoes a significant change in ownership or control that materially impacts their ability to meet obligations under this agreement.
Data retention non-compliance clause
This clause addresses failure to meet data retention obligations.
An event of default occurs if either party fails to retain, archive, or provide access to records and data as required under this agreement, resulting in harm or delays to the other party.
Default for failure to implement corrective measures clause
This clause applies to recurring or unresolved performance issues.
An event of default occurs if either party repeatedly fails to implement corrective measures for identified issues within [insert time period] after receiving written notice.
Default due to unlawful activities clause
This clause focuses on illegal actions affecting the contract.
An event of default occurs if either party engages in unlawful activities that directly or indirectly affect their ability to perform obligations under this agreement.
Termination of key vendor relationship clause
This clause applies to reliance on third-party vendors.
An event of default occurs if either party’s key vendor relationship is terminated and no alternative solution is provided within [insert time period], materially impacting the agreement’s performance.
Non-compliance with reporting requirements clause
This clause triggers default for failure to provide required reports.
An event of default occurs if either party fails to submit the reports outlined in [specific section] within the agreed timeframe, impacting the performance or monitoring of this agreement.
Default for breach of exclusivity with subcontractors clause
This clause applies to agreements involving exclusive subcontractor arrangements.
An event of default occurs if either party violates exclusivity agreements with subcontractors critical to fulfilling their obligations under this agreement.
Failure to comply with audit obligations clause
This clause addresses non-compliance with agreed audit rights.
Default occurs if either party refuses to allow an audit, fails to provide requested documentation, or obstructs an audit process required under this agreement within [insert time period].
Default due to mismanagement of funds clause
This clause applies to financial mismanagement impacting performance.
An event of default occurs if either party mismanages allocated funds, such as improper use, diversion, or failure to account for expenditures as required under this agreement.
Breach of strategic alliance terms clause
This clause focuses on failure to uphold alliance or partnership commitments.
Default occurs if either party breaches obligations under a strategic alliance outlined in [specific section], resulting in material harm to the partnership.
Default due to regulatory revocation clause
This clause applies to contracts dependent on regulatory permissions.
An event of default occurs if either party has a license, permit, or regulatory approval revoked, preventing fulfillment of their obligations under this agreement.
Loss of key contract clause
This clause applies to dependencies on external agreements.
Default occurs if either party loses or fails to renew a third-party contract that is critical to performing their obligations under this agreement, and no alternative is secured within [insert time period].
Default for failure to train personnel clause
This clause applies to contracts requiring trained staff.
An event of default occurs if either party fails to train personnel as required in [specific section], resulting in significant performance delays or non-compliance.
Overuse of resources clause
This clause focuses on exceeding agreed resource allocations.
Default occurs if either party exceeds the use of allocated resources, such as materials, bandwidth, or access rights, without prior approval and fails to address the issue within [insert time period].
Default due to falsification of records clause
This clause applies to fraudulent documentation.
An event of default occurs if either party falsifies records, certifications, or other required documentation under this agreement, materially affecting the other party’s rights or obligations.
Default for failure to notify of critical changes clause
This clause emphasizes the importance of timely notifications.
Default occurs if either party fails to notify the other party of critical changes, such as operational disruptions or changes in circumstances, within [insert time period], resulting in harm to the other party.
Violation of corporate governance clause
This clause focuses on governance failures within organizations.
An event of default occurs if either party violates corporate governance principles, such as non-compliance with board resolutions or stakeholder requirements, materially impacting the performance of this agreement.
Failure to meet project milestones clause
This clause triggers default for missed key deliverables.
Default occurs if either party fails to meet project milestones outlined in [specific section] and does not implement corrective measures within [insert time period].
Default due to illegal subcontracting clause
This clause addresses unauthorized subcontracting practices.
An event of default occurs if either party engages an unapproved or unlicensed subcontractor to perform obligations under this agreement, and such subcontracting results in non-compliance or performance issues.
Default for breach of ethical sourcing clause
This clause applies to contracts with sustainability requirements.
Default occurs if either party violates the ethical sourcing requirements specified in [specific section], including the use of prohibited suppliers or materials.
Default due to loss of exclusive territory rights clause
This clause applies to agreements tied to specific territories.
An event of default occurs if either party loses exclusive rights to a territory critical to fulfilling their obligations under this agreement and fails to address the impact within [insert time period].
Default for failure to provide risk mitigation plans clause
This clause focuses on proactive risk management.
Default occurs if either party fails to submit or implement a risk mitigation plan required under this agreement within [insert time period] after receiving a written request.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.