Introduction
Ever felt like a debt referee attempting to maintain status quo among your loans? Well, there’s a pari passu clause for that! In this enthralling expedition, we’ll dive into the fantastically fair world of pari passu and explore why this covenant is your debt’s BFF (Best Fair Friend).
What is a Pari Passu Clause?
Think of the pari passu clause as the United Nations of your debts—it ensures all the major players get an equal seat at the table. Derived from Latin, meaning “with an equal step,” this clause appears in loan agreements mandating that the current loan enjoys equal ranking with the borrower’s other specified debts.
Don’t worry, we’re not teaching you Latin—but wouldn’t you say pari passu sounds a lot cooler than
### What does *pari passu* mean?
- [x] With equal ranking
- [ ] With extra interest
- [ ] With shiny decorations
- [ ] With first priority
> **Explanation:** *Pari passu* is derived from Latin and means 'with an equal step,' indicating equal ranking.
### Why is a *pari passu* clause useful in loan agreements?
- [x] It ensures equal ranking among specified debts
- [ ] It adds interest to debts
- [ ] It makes debts prettier
- [ ] It allows one debt to outrank others
> **Explanation:** A *pari passu* clause ensures specified debts share the same seniority level, promoting equality.
### Where does the term *pari passu* originate from?
- [ ] Greek Mythology
- [x] Latin
- [ ] Indian Sanskrit
- [ ] Martian Dialects
> **Explanation:** *Pari passu* comes from Latin, meaning 'with an equal step.'
### What is a benefit of having a *pari passu* clause in a loan agreement?
- [x] Ensures fair play among debts
- [ ] Prioritizes one debt over others
- [ ] Takes lesser loans to the second stage
- [ ] Decorates the page without any tangible benefit
> **Explanation:** The clause promotes fairness, ensuring no debt is unduly prioritized over others.
### Which metaphor correctly describes the impact of *pari passu*?
- [ ] A pecking order among chickens
- [ ] A talent show where one act wins
- [x] Siblings receiving the same allowance
- [ ] A car race won by the fastest vehicle
> **Explanation:** *Pari passu* ensures equal treatment, like siblings getting equal allowances.
### Who gets comfort from a *pari passu* clause?
- [x] Lenders
- [ ] Borrowers
- [ ] Debt collectors
- [ ] Charities
> **Explanation:** Lenders like knowing they are treated the same as other lenders without any favoritism.
### Which debt stands ahead with *pari passu*?
- [ ] Debt A
- [ ] Debt B
- [x] All debts stand equally
- [ ] The oldest debt
> **Explanation:** *Pari passu* ensures all debts rank equally, without any special treatment.
### What is the key feature of debts under *pari passu*?
- [ ] They have same interest rate
- [ ] They contain a fair play clause
- [x] They rank equally
- [ ] They sound cooler than other debts
> **Explanation:** The central feature of *pari passu* is that it mandates equal ranking for the involved debts.
