Question

What is the definition of an "Acceleration Clause"?

A) A clause that slows down a sentence
B) A clause that increases the speed of a contract's obligations
C) A clause that adds more complexity to a legal document
D) A clause that prevents legal action

Answer 1

An acceleration clause is a clause in a contract that allows the lender to demand immediate repayment of the outstanding balance if certain conditions are not met by the borrower.

Step-by-step explanation:

An acceleration clause is a clause in a contract that allows the lender to demand immediate repayment of the outstanding balance if certain conditions are not met by the borrower. It is commonly found in loan agreements and mortgages.

For example, a mortgage agreement may include an acceleration clause that states if the borrower fails to make payments on time, the lender has the right to declare the entire loan amount due and payable.

This clause helps protect the lender's interests by giving them the ability to speed up the repayment process if the borrower defaults on their obligations.