A Court of Appeal decision concerning the termination and notice provisions in the ISDA 1992 Master Agreement.


Videocon was an Indian manufacturer of electrical equipment for the consumer market. On 9 August and 2 September 2011, it entered into US dollar/Indian rupee cross currency swaps with Goldman Sachs as counterparty under the ISDA 1992 Master Agreement and the 1995 ISDA Credit Support Annex.

Goldman Sachs was entitled to make margin calls in certain circumstances and did so, on several occasions, in November 2011. Videocon failed to deposit the required cash.

The relevant notice provisions were as follows:

  • ‘On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part…and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6 (e)…’ (6 (d)(i))
  • ‘An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective…’(6(d)(ii))

Goldman sent a termination notice designating 2 December 2011 as the Early Termination Date and stating that the amount due from Videocon was approximately USD 4 million. Videocon did not pay; the Bank commenced proceedings in August 2012 and subsequently applied for summary judgment. The Judge deemed the matter should proceed to a full trial, since Goldman had not included ‘reasonable detail’ of its calculations in its notice. At this juncture, in March 2014, the Bank delivered a second notice, this time including full calculation details.

In December 2014, the Bank again pursued summary judgment and this time, successfully. The High Court held that time was not of the essence in relation to delivery of the notice. In order to be valid, the notice had to comply with the contractual requirements as to form and content. However, late service did not render the notice ‘ineffective’, although this was a breach of contract which would enable the other party to claim damages.

Court of Appeal judgment

The Court of Appeal upheld the lower court’s decision:

  • commercial contracts have to be interpreted in the light of their commercial purpose (Re Sigma Finance Corporation [2010] 1 All ER 571 followed)
  • the courts are reluctant to construe contracts so as to invalidate payment provisions
  • the Court did not construe ‘as soon as reasonably practicable’ as making time of the essence (British & Commonwealth Holdings Ltd [1989] QB 842 followed)
  • an analysis that late notice is ineffective, with the result that the sum claimed will never be payable, is ‘commercially absurd’.

‘No reasonable person with the background knowledge available to the parties would have understood the clause to bear that meaning…’

  • a defaulting party, if given tardy notice, may suffer loss. However, its remedy in these circumstances would lie in bringing a claim for damages for breach of contract.

It must surely be best practice for a party serving a termination notice to comply with the relevant contractual requirements. In this case, the inclusion of a detailed and reasoned calculation within the notice may well have avoided protracted litigation.

However, those seeking to enforce payment obligations will derive some comfort from the outcome, which is a victory for common sense. It is clear that the courts will be reluctant to make time of the essence with regards to notice provisions; to find a notice invalid for non-fundamental flaws; or otherwise to allow a defaulting party to wriggle out of a payment obligation.

Videocon Global Limited (1) Videocon Industries Limited (2) v Goldman Sachs International [2016]EWCA Civ 130