acceleration clause

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Acceleration clause

A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments on time.

Acceleration Clause

A clause in a contract, especially a loan or bond, allowing a creditor to call the debt if certain, stated events occur. For example, if a borrower defaults on two or more payments, an acceleration clause may allow a lender to force the borrower to repay the entire amount of the loan immediately. Failure to repay could absolve the lender of all obligations in the contract, including the requirement to refund any money the borrower had previously paid, and render it effectively null and void.

acceleration clause

A provision in a bond indenture that in the event of default allows the trustee or the holders of 25% of the principal amount of the outstanding issue to declare all of the principal and interest immediately. Calling for an acceleration is likely to cause the borrower to cure the default or seek bankruptcy protection.

acceleration clause

The clause in a promissory note or lease that allows immediate demand,upon default,for all sums due over the entire term.

Acceleration Clause

A contractual provision that gives the lender the right to demand repayment of the entire loan balance in the event that the borrower violates one or more clauses in the note.

Such clauses may include sale of the property, failure to make timely payments, or provision of false information.

I have never seen a note that did not have such a clause. Borrowers need not concern themselves with it except where the lender has discretion to exercise it without conditions. This would be referred to as a “demand feature,” and it would be flagged on the Truth in Lending Disclosure Statement. If that statement shows “This loan has a Demand Feature…,” the note should be read with care. See Demand Clause.

References in periodicals archive ?
A tenant could very well go along with such proposal when the owner's concession is more attractive than either paying a buyout or incurring an acceleration clause liability.
Under these circumstances, the owner still holds the lease term and any acceleration clause as a bargaining chip but can afford to be more accommodating in light of the common goal.
However, according to the statement, that agreement shouldn't be cancelable by the lender because of a subjective acceleration clause.
79-3 says if a long-term debt agreement does contain a subjective acceleration clause and acceleration of the due date is remote, neither reclassification to current liabilities nor disclosure of the acceleration clause is required.
This clause reflects a view that acceleration clauses are of dubious enforceability.
Cases suggest, however, that an acceleration clause would be enforced if it provided for an offset for the reasonably anticipated revenues from re-letting.
Although the maturity dates of these obligations extend beyond the end of Waterlink's fiscal year ending September 30, 2003, they have been classified as current liabilities on the balance sheet based on acceleration clauses that could be implemented by senior lenders.