Gina buys a sewing machine from Acme Store through a retail installment contract. She agrees to pay $20 a month to Acme for a year. Gina makes her payments on time each month for four months. During the fourth month, the manager of Acme finds out that Gina has lost her job, and he becomes worried that she will not be able make payments. Acme tells Gina that she must pay the remaining amount owing on the sewing machine in full or it will repossess the sewing machine. Acme points out that there is a clause in the agreement that states that it can do this. Gina protests that she has not been late on any payments.
How should the judge rule?
- A. For Acme, because the clause allows them to demand payment in full.
- ANSWER "A" IS NOT CORRECT. Please try again.
- B. For Gina, because she has not defaulted on the agreement.
- ANSWER "B" IS CORRECT. Under the Retail Installment Sales Act, Acme is not allowed to have a contract provision that attempts to allow it to demand payment in full when the buyer has not defaulted. Gina has not defaulted on her obligation and therefore the court should not support Acme’s demands.