Section 3 Implied Duty of Good Faith for Insecurity Clauses

• Library: Secured Transactions 2005

Most security agreements and debt instruments will include, in addition to expected requirements that pertain to timely payment of the debt obligation, provisions that relate to the possible insecurity of the secured creditor. The insecurity provision of a debt obligation or security agreement generally states that the secured creditor can accelerate the debt obligation, making the entire indebtedness immediately due, and exercise remedies upon events that result in the secured creditor feeling insecure about the likelihood of timely repayment of the debtor’s obligations. The insecurity clauses in secured lending transactions often will state that the secured creditor is allowed to take remedial action at any time the secured creditor feels insecure. See Sackett v. Hall, 478 S.W.2d 381, 384 (Mo. 1972) (“The mortgage involved provided the

mortgagee could take possession...