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Understanding Covered Contractual Payment Entitlement and Its Legal Framework
Definition & Meaning
A covered contractual payment entitlement refers to a financial institution's right to receive payments under specific agreements known as netting contracts. These contracts allow financial institutions to offset their obligations to each other. Additionally, it includes the rights of members of clearing organizations to receive payments from other members under similar agreements related to covered clearing obligations.
Table of content
Legal Use & context
This term is commonly used in the context of financial law and regulations. Covered contractual payment entitlements are significant in areas such as banking, finance, and securities trading. They are essential for managing risk and ensuring the stability of financial transactions. Users may encounter this term when dealing with legal documents related to financial agreements, and they can utilize US Legal Forms templates to create or manage such documents effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A bank enters into a netting contract with another bank, allowing them to offset their mutual debts. This agreement creates a covered contractual payment entitlement for the bank, ensuring they receive the net amount due.
Example 2: A member of a clearing organization has a right to receive payment from another member based on their clearing obligations, which is also considered a covered contractual payment entitlement.
Relevant laws & statutes
Covered contractual payment entitlements are defined under 12 USCS § 4402 (4). This statute outlines the rights of financial institutions and clearing organization members regarding payment entitlements and netting agreements.
Comparison with related terms
Term
Definition
Key Differences
Netting Agreement
A contract that allows parties to offset mutual debts.
Focuses on the contractual agreement rather than the entitlement to payment.
Clearing Obligation
Requirement for a member of a clearing organization to settle trades.
Refers specifically to the duties of clearing members rather than entitlements.
Common misunderstandings
What to do if this term applies to you
If you believe you have a covered contractual payment entitlement, it is essential to review the relevant netting agreements and understand your rights. You may consider using US Legal Forms to access templates that can help you draft or manage the necessary documents. If the situation is complex, seeking professional legal advice is recommended.
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