This clause says that if you break *any other contract* you have (with a bank, landlord, or supplier), the other party can automatically terminate *this* contract too, even though they weren't directly harmed. For example, if you default on a bank loan, your software vendor could immediately cancel your service agreement under a cross-default clause. This is high-risk because one financial problem cascades into multiple contract terminations. Courts in both the UK and US enforce these clauses, but they're controversial because they can create a domino effect of business collapse.
Push back hard on this clause—try to remove it entirely, or at minimum narrow it to only "material defaults" on contracts above a certain value (e.g., over £50,000). Also add a requirement that the other party must give you written notice and a cure period before terminating, rather than automatic termination. If the other side won't budge, at least exclude defaults on consumer contracts or minor supplier agreements. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause says that if you break *any other contract* you have (with a bank, landlord, or supplier), the other party can automatically terminate *this* contract too, even though they weren't directly harmed.
Why should I care about this clause?
For example, if you default on a bank loan, your software vendor could immediately cancel your service agreement under a cross-default clause.
What are my options?
This is high-risk because one financial problem cascades into multiple contract terminations.
How does this affect small businesses?
Courts in both the UK and US enforce these clauses, but they're controversial because they can create a domino effect of business collapse.