## Facts

- General Equities of Iowa, Ltd. executed two identical promissory notes to W. A. Dunn and Lola Dunn in 1974, each for $121,170 at 7% interest, payable in annual installments due on or before March 31 for ten years.
- Each note contained an acceleration clause allowing the holder, “without notice,” to declare the entire unpaid balance immediately due upon default in any interest or principal installment.
- General Equities paid late in 1975, 1976 (including a split payment extending into June), and 1977; the Dunns accepted those late payments and did not demand strict punctuality going forward.
- General Equities paid timely in 1978.
- In 1979, General Equities again paid late (April 10). The Dunns returned the check and demanded the full unpaid balance plus interest under the acceleration clause.
- General Equities refused, asserting the Dunns’ prior acceptance of late payments waived the right to accelerate based on tardiness.
- After a bench trial, the trial court found waiver and entered judgment for General Equities; the Dunns appealed.

## Issues

1. Whether a note holder may waive the right to enforce an acceleration clause through a course of dealing that includes accepting late payments.
2. Whether substantial evidence supported the trial court’s finding that the Dunns waived their right to accelerate based on the 1979 late installment.

## Decision

- The Iowa Supreme Court affirmed.
- The court held acceleration clauses are subject to ordinary contract principles, including waiver by conduct.
- The court held repeated acceptance of late payments may constitute waiver of the right to accelerate for later late payments.
- Substantial evidence supported the trial court’s finding that the Dunns’ pattern of accepting late installments without objection waived acceleration based on the 1979 tardiness.

## Legal Principles

- An acceleration clause is a contractual maturity-advancement term, construed under the same rules as other contract provisions, not as a penalty.
- Contractual rights, including the right to accelerate, may be waived by intentional relinquishment inferred from conduct inconsistent with strict enforcement.
- A course of dealing involving repeated acceptance of late payments, without objection, can support a factfinder’s inference that the holder waived strict punctuality as a basis for acceleration.
- After waiver by acceptance of late payments, the holder generally must provide reasonable notice of an intent to require strict performance before accelerating based on a late payment.

## Conclusion

Because the Dunns repeatedly accepted late installments without objection or notice that they would insist on strict March 31 payment, the trial court could find waiver, and the Dunns could not accelerate the notes based solely on the 1979 late payment.


Dunn v. Gen. Equities of Iowa, Ltd., 319 N.W.2d 515 (Iowa 1982)