Acceleration clause
Encyclopedia
An acceleration clause, in the law
of contracts, is a term that fully matures the performance due from a party upon a breach of the contract. 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).
A sample acceleration clause reads like this:
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
of contracts, is a term that fully matures the performance due from a party upon a breach of the contract. Such clauses are most prevalent in mortgages and similar contracts to purchase real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
in installments.
Suppose, for example, the contract was for A to purchase Blackacre
Blackacre
Blackacre, Whiteacre, Greenacre, Brownacre, and variations are the placeholder names used for fictitious estates in land.The names are used by professors of law in common law jurisdictions, particularly in the area of real property and occasionally in contracts, to discuss the rights of various...
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).
A sample acceleration clause reads like this:
- In the event of default in the payment of any of the said installments or said interest when due as herein provided, time being of the essence hereof, the holder of this note may, without notice or demand, declare the entire principal sum then unpaid immediately due and payable.