Certain events: Overview, definition and example
What are certain events?
"Certain events" refers to specific occurrences, circumstances, or situations that trigger rights, obligations, or consequences under a contract or agreement. These events are often predefined and can include events like breaches of contract, insolvency, mergers, changes in ownership, regulatory changes, or other material occurrences. The inclusion of "certain events" provisions in contracts ensures clarity on how the parties should respond if these events occur.
These provisions typically outline the consequences of these events, such as termination rights, payment obligations, or adjustments to the terms of the agreement.
Why are certain events important?
The inclusion of "certain events" in contracts is important because it provides a clear framework for addressing specific situations that may affect the agreement’s performance or viability. For businesses, it helps mitigate risks by defining responses to unforeseen or significant occurrences. For individuals or other parties, it ensures predictability and fairness in how such events are handled.
By clearly outlining these events and their consequences, the agreement promotes transparency, reduces ambiguity, and prevents disputes.
Understanding certain events through an example
Imagine a loan agreement specifies certain events that would constitute default, such as the borrower failing to make a payment, filing for bankruptcy, or breaching financial covenants. If one of these events occurs, the lender has the right to accelerate repayment of the loan or take other actions specified in the agreement.
In another example, a supplier agreement includes a provision for "certain events" such as a natural disaster or regulatory change that disrupts the supplier’s ability to fulfill orders. In such cases, the agreement may allow the supplier to delay delivery without penalty or renegotiate terms.
An example of a certain events clause
Here’s how a "certain events" clause might appear in an agreement:
“This Agreement shall be subject to termination or modification upon the occurrence of certain events, including but not limited to: (a) the insolvency or bankruptcy of either Party; (b) a material breach of the terms of this Agreement; (c) the enactment of laws or regulations that materially affect the ability of either Party to perform their obligations under this Agreement; or (d) any force majeure event as defined herein. Upon the occurrence of such events, the affected Party shall provide written notice to the other Party and take reasonable steps to mitigate any adverse impact.”
Conclusion
The "certain events" provision is a crucial part of many contracts, ensuring that parties have a clear understanding of how to handle significant occurrences that may impact the agreement. By defining these events and their consequences, contracts promote accountability, fairness, and stability while reducing the risk of disputes. Including such provisions ensures preparedness and clarity for all parties involved.
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.