Lesson 7 of 20 · 6 min
Term seven: notice is a courtesy, not a right
A cure window may be offered, and the agreement typically also permits action with no prior notice.
The seventh term is the one most likely to be misread in the borrower's favour, because the agreement usually contains two clauses that appear to contradict each other and do not.
The first says that once a call is triggered the lender may allow a short window to post collateral or repay. The second says the lender may also act with no prior notice. Both are permissions granted to the lender. Neither is an obligation owed to you. The window is what the lender may extend; the no-notice right is what it may do instead.
This structure is not adversarial drafting for its own sake. In quiet conditions an orderly cure is better for both parties, so a window is usually extended. The no-notice right exists for the case where waiting means watching collateral fall further — which is to say, for exactly the conditions in which a call is most likely to arrive.
The planning consequence is specific. A borrower who intends to meet a call by transferring funds needs to know how long that transfer actually takes: wiring from another institution, liquidating an unpledged account, or drawing on a different facility all have real settlement times, often measured in days. If the available window is short or absent, a cure plan measured in days is not a cure plan.
One further asymmetry. The lender monitors continuously, as Track 1 lesson 19 established, while a borrower may learn of a call by email or by noticing a sale after it happened. The window, where it exists, starts when the lender acts — not when you read the message.
Key terms
- Cure window
- A period in which a borrower may post collateral or repay before a sale. Typically drafted as a permission the lender may extend.
- No-notice right
- The lender's authority to act without prior notification. Frequently coexists with a stated cure window in the same agreement.
- Settlement time
- How long it actually takes to move money or securities. The binding constraint on any plan to cure a call with outside funds.
Worked example
A cure plan against a real clock
A borrower planning to meet any call by wiring funds from another institution and selling an unpledged holding.
- Stated cure window in the agreement
- Up to 3 business days
- Also in the agreement
- Right to act with no prior notice
- Time to sell an unpledged holding and settle
- 1–2 business days
- Time to wire the proceeds
- Same day to 1 business day
- Total time the plan needs
- 2–3 business days
- Time available if the no-notice right is used
- Zero
A permission, not a promise.
The plan fits inside the stated window with nothing to spare, and does not exist at all in the case the no-notice clause was written for.
Check yourself
Your agreement states a three-business-day cure window and also reserves the right to sell without prior notice. Which governs?
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.