acceleration clause

An acceleration clause in a contract is typically a provision that brings forward obligations that would otherwise be staged over the life of a contract. They are usually applied in circumstances of staged or periodic payments of a debt. If the contract contains an acceleration clause, it will operate to make all payments due immediately in the event of a default by the debtor.

Although such clauses (without more) may seem to amount to an unenforceable penalty clause, acceleration clauses are not generally characterised as such, as the innocent party does not become entitled to a sum that would be paid over and above what they are contractually entitled to.

Usage: The acceleration clause required payment of the entire sum due under the contract upon default of the payment terms.

Related Words: contract; liquidated damages clause; penalty clause; unliquidated damages; damages.