Derivatives · glossary
A company's legal power to make the contract at all. Derivatives lawyers check it because in Hazell v Hammersmith (1992) a council's swaps were held void as beyond its powers. Board resolutions and incumbency certificates are the proof. Clause 3.1 · Chapter 5
Explained in Chapter 5, Representations, Undertakings and the Paper Trail, of Derivatives.
Clause 3.1 says each party has the capacity (the legal power) to make the agreement. Derivatives lawyers never take that on trust, because of one case. In Hazell v Hammersmith (1992), the House of Lords held that interest rate swaps were outside a local council's powers. The council's swaps were void, as if never made, and the banks spent years recovering payments.Read Chapter 5, Representations, Undertakings and the Paper Trail →
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