---
title: "Check a close-out netting clause on an insolvency"
url: "https://ailawframework.com/practice/banking-and-finance/check-a-close-out-netting-clause-on-an-insolvency"
type: "task"
site: "AI Law Framework"
id: "A3-OC20261022-10"
practice_area: "Banking & Finance (Lending, Securities, Project Finance)"
tier: "yellow"
lawyer_review: "required"
last_reviewed: "2026-10-22"
---

# Check a close-out netting clause on an insolvency

> From the netting contract and the security, list the section 14 consequences the text provides for termination, the net amount, and enforcement of security over financial property.…

Canonical page: https://ailawframework.com/practice/banking-and-finance/check-a-close-out-netting-clause-on-an-insolvency  
Last reviewed: 2026-10-22

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

| Fact | Value |
| --- | --- |
| Practice area | [Banking & Finance (Lending, Securities, Project Finance)](https://ailawframework.com/practice/banking-and-finance.md) |
| Human involvement | Yellow: Lawyer and AI draft together |
| How AI is used | From the netting contract and the security, list the section 14 consequences the text provides for termination, the net amount, and enforcement of security over financial property. The tool does not decide that the clause is effective. |
| What the lawyer must review | The lawyer decides whether the contract is a close-out netting contract, whether Australian law and constitutional reach are satisfied, and whether section 14A or subsection 14(5) qualifies the result. |
| Written for / versions | 1 jurisdiction versions below |

## Checking plan

**Source-by-source verification**

Trace relied-on content to independent sources and check for relevant material the output has missed.

- What the AI does: From the netting contract and the security, list the section 14 consequences the text provides for termination, the net amount, and enforcement of security over financial property. The tool does not decide that the clause is effective.
- What the lawyer does: The lawyer decides whether the contract is a close-out netting contract, whether Australian law and constitutional reach are satisfied, and whether section 14A or subsection 14(5) qualifies the result.
- Who reviews: Responsible lawyer with competence in the matter
- Basis: Practical workflow informed by the linked primary sources; the traffic light and working checks are editorial guidance, not a court classification.
- Why: The level reflects what the work is, the consequence of an error, and how much of the output the lawyer must independently re-derive.

## Checks the lawyer makes

1. Where Australian law governs the contract and the contract is within Commonwealth constitutional reach, obligations may be terminated, termination values calculated and a net amount made payable, despite a later disposal or encumbrance in breach of a prohibition in the contract.
2. On external administration, where Australian law governs the administration or the contract, terminated obligations are disregarded, a net amount owed by the party is provable, and a net amount owed to the party may be recovered for creditors.
3. Security over financial property may be enforced in accordance with written terms, subject to section 14A. Section 14A was not opened.
4. Section 14(2)(fb) can stop a security interest vesting under section 267, 267A or 588FL where the security would be enforceable under the netting provision. The lawyer reads subsection 14(5) before relying on that result. The definition of a close-out netting contract was not on the section 14 page.

## Notes

- These are suggested working checks. Confirm the required checking with the responsible lawyer before work starts; the checking approach does not establish permission to use AI.

## Sources

- [Payment Systems and Netting Act 1998 section 14](https://classic.austlii.edu.au/au/legis/cth/consol_act/psana1998319/s14.html) (checked 2026-10-22)

## Jurisdiction versions

| Jurisdiction | Level |
| --- | --- |
| [United States](https://ailawframework.com/practice/banking-and-finance/check-a-close-out-netting-clause-on-an-insolvency/united-states.md) | Yellow |

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*