Acceleration of Demand Notes

    The Twentieth Judicial Circuit examined a debtor's assertion that the note's "detailed enumeration of events consisting default was inconsistent with a demand note", and that since the note was not a demand note, the creditor must demonstrate "good faith" in accelerating repayment of the note.  The case was NationsBank of Virginia, N.A. v Barnes.  The Court examined Virginia Code §8.3A - 108(a), which states that a note is payable "on demand" if it says it is payable on demand or states no time for payment.  The Court found that the note in this case was a form with a box "on demand" checked, with no time set for repayment, only a provision requiring monthly payments of interest.  The Court ruled that the note was unambiguous and clearly a demand note, and that no showing of "good faith" was required before requesting payment on the note.

    Despite the favorable result for the creditor, great care should always be taken to clearly identify payment demand terms.