Looking for UCC 1-309?
What does the option to accelerate at will mean?
Why is it important?
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Let me explain to you what Uniform Commercial Code 1 309 entails and why it’s so important!
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What Is UCC 1-309
UCC 1-309 refers to Section 1-309 of the Uniform Commercial Code titled “Option to Accelerate at Will”.
Under UCC Section 1-309, the notion of option to accelerate at will means that a party may accelerate the payment, demand performance, require collateral, or ask for additional collateral at will when the party deems itself insecure and believes that getting paid or the possibility of receiving performance under the contract is impaired.
Section 1-309 UCC states that the option to accelerate at will is:
A term providing that one party or that party’s successor in interest may accelerate payment or performance or require collateral or additional collateral “at will” or when the party “deems itself insecure,” or words of similar import, means that the party has power to do so only if that party in good faith believes that the prospect of payment or performance is impaired.
Provision 1-309 replaces the old Section 1-208 of the Uniform Commercial Code.
UCC 1-309 Legal Meaning
The option to accelerate at will is used in many types of contracts governed by the Uniform Commercial Code.
You’ll commonly see the acceleration clause in:
- Sale of goods on credit
- Notes payable
- Secured transactions
The objective is to allow a contracting party (a lender for example) to accelerate payment or performance of the contract if, in good faith, it considers that the prospect of receiving payment or performance is impaired.
When the right to accelerate payment at will is exercised in good faith and in a reasonable manner, it will be enforceable.
However, if a contracting party accelerates payment unreasonably, or the contract language is too broad, the enforcement of an acceleration clause can be challenged in court.
UCC 1 309 Takeaways
So there you have it folks!
What is the legal meaning of UCC § 1-309.
In essence, under Section 1 309 UCC, a contracting party can have an option to accelerate payment or performance of contract “at will” when that party feels insecure or when the other party defaults on the terms of the contract.
There are many types of contracts where acceleration clauses are used (or options to accelerated at will) allowing a contracting party to demand the performance of all of the other party’s contractual obligations or receive full payment.
I hope I was able to explain to you what UCC 1-309 is and why it’s important.
If you need particular legal advice on UCC 1-309, be sure to consult a qualified attorney to evaluate the circumstances of your case.
This article is intended to give you a general idea relating to how UCC 1-309 works.
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Understanding UCC 1-309
If you enjoyed this article on UCC 1-309, I recommend you look into the following terms and concepts. Enjoy!
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