Event of default

Default is the occurrence of an event or circumstance against which a party to a <a href="/facts/Contract/SkqyGj6S">contract</a> seeks protection. 
For example, a contract may state that the recording of a <a href="/facts/Lien/fWM2v7mo">lien</a> against certain <a href="/facts/Property/F6bGqY2w">property</a> is a <a href="/facts/Default_(finance)/tzRGlN51">default</a>. If the default is left uncured after <a href="/facts/Notice/Wxy9eelC">notice</a> 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 <a href="/facts/Debt/VDKsvv1q">debt</a> or the right to exit a contract. 
In a <a href="/facts/Revolving_credit/Y8kBE0jm">revolving credit</a> facility, the occurrence of an event of default normally also allows the <a href="/facts/Lender/kfEGTSzr">lender</a> to cancel any obligations to make further loan advances.
There are three types of event of default:

<ul><li>payment default, i.e. the failure to pay <a href="/facts/Bond_(finance)/qlmpLj0k">principal</a> or interest when it falls due for payment;</li>
<li>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 <a href="/facts/Borrower/IvaNXumM">borrower</a> has been put into <a href="/facts/Liquidation/a6jzeIfl">liquidation</a>: and</li>
<li>covenant default, when the borrower fails to keep a promise (a covenant) that it has made in the contract.</li></ul>

Event of default open-in-new

Event of default