An acceleration clause is commonly found in mortgages and other purchases that are made using multiple installment payments. The clause allows for a party to demand the full amount due in the event that the other party fails to live up to the terms of the contract, such as failure to make payments.
David agrees to buy Rosa’s home for three separate payments of $20,000. If David fails to make one of these payments, Rosa can demand that David pay her the balance of the total cost. If he does not pay, he can lose both the home he purchased and any prior payments he made to Rosa.
Sample – Automobile Dealer Loan Agreement:
Upon the occurrence and during the continuance of one or more Events of Default, the Lender may immediately declare the principal amount of the Loan and the Notes to be immediately due and payable, together with all interest thereon and fees and out of pocket expenses accruing under this Loan Agreement; provided that upon the occurrence of an Event of Default referred to in Section 10, such amounts shall immediately and automatically become due and payable without any further action by the Lender. Upon such declaration or such automatic acceleration, the balance then outstanding of the Loan shall become immediately due and payable, without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower and each other Loan Party and the Lender may thereupon exercise any remedies available to it at law and pursuant to the Loan Documents, including, but not limited to, the liquidation of the Collateral.