84-2a-109. (1) A term providing that one party or such party's successor in interest may accelerate payment of performance or require collateral or additional collateral "at will" or "when such party deems such party's self insecure" or in words of similar import must be construed to mean that such party has power to do so only if such party in good faith believes that the prospect of payment or performance is impaired.
(2) With respect to a consumer lease, the burden of establishing good faith under subsection (1) is on the party who exercised the power; otherwise, the burden of establishing lack of good faith is on the party against whom the power has been exercised.
History: L. 1991, ch. 295, ยง 9; February 1, 1992.
KANSAS COMMENT, 1996
1. Leases, and in particular finance leases, frequently will contain acceleration clauses that make all payments due in the event of default. This section addresses the effect of a clause that permits acceleration "at will" or when one party "deems itself insecure." Subsection (1) states that such a clause is to be construed as meaning that the party may accelerate payment "only if such party in good faith believes that the prospect of payment or performance is impaired." This subsection is virtually identical to the first sentence of section 84-1-208; presumably it is included in Article 2A to remove any question whether the heightened standard of good faith for merchants applies.
2. Subsection (2) changes the second sentence of section 84-1-208 by excepting consumer leases from the general rule that the party against whom the power to accelerate was exercised has the burden of establishing a lack of good faith. In cases involving consumer leases, Article 2A provides that the party exercising the power bears the burden of establishing good faith. Under the Uniform Consumer Credit Code, K.S.A. 16a-1-101 et seq., however, a consumer lease may define insecurity as a ground for default by the consumer only if "the prospect of payment, performance, or realization of collateral is significantly impaired." K.S.A. 16a-5-109(2). This effectively prohibits, in consumer leases in Kansas, insecurity clauses of the type addressed by this section. See 1995 Kansas Comment 3 to K.S.A. 16a-5-109.
CASE ANNOTATIONS
1. Provisions for accelerated rent payments constituted unenforceable penalty. IPC Retail Properties v. Oriental Gardens, 32 Kan. App. 2d 554, 86 P.3d 543 (2004).
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