Acceleration clause

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An acceleration clause —or acceleration covenant— in the law of contracts, is a term that fully matures the performance due from a party upon a breach of the contract. [1] Such clauses are most prevalent in mortgages and similar contracts to purchase real estate in installments.

Suppose, for example, the contract was for A to purchase Blackacre from B for $100,000, to be paid in 5 monthly installments of $20,000. If A makes the first two payments, but fails to make the third payment, an acceleration clause would require that A must immediately pay B the entire balance of $60,000, or lose his right to purchase Blackacre (without getting a refund of his $40,000).

An example of an acceleration clause is examined in the 1971 Rhode Island Supreme Court case of Scullian v. Petrucci:[2] There, the clause stated: "In the event Purchaser defaults on any payment or fails to comply with any condition of this contract [...] the full amount shall be immediately due and payable[...]". The court in that case found that the language of the clause required that default on the payment triggered the statute of limitations for the clause to be enforced.

References[edit]

  1. ^ https://www.law.cornell.edu/wex/acceleration_clause
  2. ^ Scullian v. Petrucci, 276 A.2d 277, 108 R.I. 406 (R.I., 1971).

External links[edit]