In the case of credit agreements, a clause which operates by automatically defaulting a borrower under Agreement A when it defaults under Agreement B. A cross-default provision effectively gives the lender under Agreement A the benefit of the default provisions in Agreement B. Cross-default provisions therefore have a domino effect.

In contrast to a cross-default, a cross-acceleration clause in Agreement A causes an event of default under Agreement A when the borrower defaults under Agreement B, only if the lender under Agreement B accelerates repayment.

For more information, see Standard Clause, Loan Agreement: Cross-Default Event of Default.

In the commercial context, cross-default is a provision used in complex commercial transactions where an uncured breach under one agreement permits the non-defaulting party to terminate the agreement as well as one or multiple associated agreements. For example, an uncured breach under a local agreement for one region may also constitute an uncured breach under another local agreement for a different region. In situations where a cross-default is not desired, parties may include contract language expressly clarifying that an uncured breach under one agreement does not impact other associated agreements.

For more information, see Standard Document, Sale of Goods Agreement (Pro-Seller): Drafting Note: Termination for Breach of Other Buyer Contracts.