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. The burden of establishing lack of good faith is on the party against which the power has been exercised.

History: 1953 Comp., § 50A-1-208, enacted by Laws 1961, ch. 96, § 1-208; 1978 Comp. §55-1-208; recompiled by compiler as 1978 Comp. § 55-1-309; Laws 2005, ch. 144, § 23.

OFFICIAL COMMENTS

UCC Official Comments by ALI & the NCCUSL. Reproduced with permission of the PEB for the UCC. All rights reserved.

Source. — Former Section 1-208 [55-1-208 NMSA 1978].

Changes from former law. — Except for minor stylistic changes, this section is identical to former Section 1-208.

The common use of acceleration clauses in many transactions governed by the Uniform Commercial Code, including sales of goods on credit, notes payable at a definite time, and secured transactions, raises an issue as to the effect to be given to a clause that seemingly grants the power to accelerate at the whim and caprice of one party. This section is intended to make clear that despite language that might be so construed and which further might be held to make the agreement void as against public policy or to make the contract illusory or too indefinite for enforcement, the option is to be exercised only in the good faith belief that the prospect of payment or performance is impaired.

Obviously this section has no application to demand instruments or obligations whose very nature permits call at any time with or without reason. This section applies only to an obligation of payment or performance which in the first instance is due at a future date.

Compiler's notes. — Laws 2005, ch. 144, § 23, effective January 1, 2006, enacted a new 55-1-309 NMSA 1978 relating to option to accelerate at will. With minor revisions, this new section is the same as former 55-1-208 NMSA 1978, relating to option to accelerate at will. See 12-2A-14 NMSA 1978 for repeal and reenactment of a law that is not a new enactment. For provisions of former 55-1-208 NMSA 1978, see the 2004 NMSA 1978 on NMOneSource.com.