Contract Glossary
Cross-Default
Definition
A clause that says defaulting on one agreement automatically counts as a default on a different agreement with the same party. One domino falls, and the rest go with it.
In Practice
You have two contracts with the same supplier: one for raw materials and one for finished goods. A cross-default clause means that if you miss a payment on the raw materials contract, you're also in default on the finished goods contract, even if you're current on those payments. Lenders use cross-default clauses heavily: default on one loan, and all your other loans with that bank come due.
Common in these contract types
Related terms
Related contract clauses
Frequently asked questions
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