«All transactions are concluded on the basis that this master contract and all confirmations form a single agreement between the parties … and the parties would not make transactions otherwise. The ISDA Masteragrement, published by the International Swaps and Derivatives Association, is the most widely used master service contract for otC derivatives transactions internationally. It is part of a documentary framework that aims to provide comprehensive and flexible documentation on OVER-the-counter derivatives. The framework consists of a master contract, a calendar, confirmations, definition brochures and credit support documentation. The most important thing is to remember that the ISDA executive contract is a clearing agreement and that all transactions are interdependent. Therefore, a default in a transaction counts by default among all transactions. Point 1 (c) describes the concept of a single agreement and is of paramount importance as it forms the basis for network closures. When a standard event occurs, all transactions are completed without exception. The concept of out-of-gap clearing prevents a liquidator from making «cherry pickings,» i.e. making payments on profitable transactions for his bankrupt client and refusing to do so in the case of an unprofitable customer. The parties try to limit this responsibility by including «unconfident» representations in their agreements, so that each party does not rely on the other and makes its own independent decisions.
While these submissions are helpful, they would not prevent business practices or other measures if a party`s conduct was inconsistent with that presentation. The framework contract is quite long and the negotiation process can be difficult, but once a framework contract is signed, the documentation of future transactions between parties will be reduced to a brief confirmation of the essential terms of the transaction. The framework contract also helps to reduce litigation by providing significant resources that define its contractual terms and explain the intent of the contract, thus preventing litigation from beginning and providing a neutral resource for interpreting standard contractual terms.