K.S.A. § 84-1-208 (2026)

KANSAS COMMENT, 1996

1. This section recognizes the common practice of including acceleration clauses in notes, security agreements, and other contracts. The inclusion of an acceleration clause has no effect on the negotiability of commercial paper under Article 3. See 84-3-108(a). This section is concerned with acceleration of an obligation not for substantive defaults in performance of the contract, but pursuant to a clause permitting acceleration "at will" or an insecurity clause such as "when creditor deems himself insecure." Under this section, the creditor may exercise such a clause only if he in good faith believes that the prospect of receiving payment or performance from the debtor is impaired. This section has no application to demand instruments, which may be called because of the demand feature, and not by any acceleration clause. See Fulton Nat'l Bank v. Willis Denney Ford, Inc., 154 Ga. App. 846, 269 S.E.2d 916 (1980).

2. In Klingbiel v. Commercial Credit Corp., 439 F.2d 1303 (10th Cir. 1971) (applying Kansas law), the court held that an insecurity clause applied only to the right of acceleration under the contract, and did not apply to the creditor's right to repossess the collateral. Thus, the creditor, even under an insecurity clause, must make demand or give notice prior to repossession or be liable for wrongful repossession.

3. The operation of this section is severely limited in consumer cases by the Kansas Uniform Consumer Credit Code at K.S.A. 16a-5-109. Under K.S.A. 16a-5-109(2), an acceleration clause, or any other default clause, may be exercised only when the prospect of payment, performance, or realization of collateral is significantly impaired. The addition of "significantly" goes beyond the requirement of "good faith" in 84-1-208, and establishes an objective standard for measuring the impairment. This standard effectively prohibits insecurity clauses. In addition, K.S.A. 16a-5-109 reverses the burden of proof by providing that the burden of establishing the prospect of significant impairment is on the creditor. Under 84-1-208, the burden is on the party against whom the acceleration clause has been exercised, normally the debtor.

Law Review and Bar Journal References:

1963-65 survey of secured transactions, J. Eugene Balloun, 14 K.L.R. 359, 361 (1965).

Changes in repossession law under the UCCC discussed in "The New Kansas Consumer Legislation," Barkley Clark, 42 J.B.A.K. 147, 197 (1973).

"Commercial Law—Commercially Unreasonable Foreclosure Sales in the Context of a Surety Relationship—United States v. Lattauzio," John S. Clifford, 34 K.L.R. 175, 181 (1985).

"Lender Liability: A Survey of Theories, Thoughts and Trends," Troy H. Gott and William L. Townsley III, 28 W.L.J. 238, 241, 272 (1988).

"Creditor Beware: From Default Through Deficiency Judgment," Wanda M. Temm, 60 J.K.B.A. No. 8, 17 (1991).

CASE ANNOTATIONS

1. Assignee of secured contract, notwithstanding its contrary provisions, must make demand or give notice prior to repossession to avoid liability for unlawful conversion. Klingbiel v. Commercial Credit Corporation, 439 F.2d 1303, 1306, 1308.

2. Acceleration to maturity of bank's setoff against depositor (K.S.A. 9-1206) discussed; good faith required means "honesty in fact" (K.S.A. 84-1-201(19)). Karner v. Willis, 10 Kan. App. 2d 432, 433, 700 P.2d 582 (1985).

3. Test of good faith herein is subjective and requires only honesty in fact (K.S.A. 84-1-201(19)). Karner v. Willis, 238 Kan. 246, 249, 710 P.2d 21 (1985).