First, what is an acceleration clause? Acceleration clause allows the lender to demand payment of what is left of the loan for various reasons. The most common reason for accelerating a loan is if the borrower defaults on the loan, or transfers the title to another individual, without informing the lender. For example, there was a contract for the Buyer to purchase a business from the Seller for $200,000, to be paid in 5 monthly installments of $40,000. If the Buyer makes the first two payments, but can’t make the third payment, that is where acceleration clause would require that the Buyer must immediately pay the Seller the entire balance of $160,000, or the Buyer will lose the rights to purchase the business (without getting a refund of $80,000).
Secondly, what is the right first refusal? The right of first refusal is a provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others. For example, there is a Property Owner who owns a house that he/she plans to sell to Louis for $150,000. However, John holds a right of first refusal to purchase the house. Therefore, before the Property Owner can sell the house to Louis, he/she must first offer it to John for $150,00. If John accepts, he buys the house instead of Louis. If John declines, Louis may now buy the house at the proposed $150,000 price.
