Richard Raysman and Peter Brown
Typically used to guard against defaults on loans, an acceleration clause allows a non-breaching party, in the event of default, to require payment of the entire amounts outstanding under the agreement. In the software contracts context, acceleration clauses are regular, including but not limited to, standard licenses, joint venture agreements, development agreements and vendor agreements.
Though drafted to protect the licensor, an election of remedies pursuant to an acceleration clause recently doomed a licensor’s claim for an alleged breach of a software agreement by the successor licensee. See IT Portfolio v. Facsimile Commc’ns Indus., 2019 WL 2498371 (S.D.N.Y. May 31, 2019). The same election also precluded an unjust enrichment claim against the successor. This column focuses on the unintended consequences of accelerating payments under a software license, even if the clause appears to result in more immediate payment from the breaching party.
