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Add-on clause

Add-on clause

What does Add-on clause mean in American Law?

The definition of Add-on clause in the law of the United States, as defined by the lexicographer Arthur Leff in his legal dictionary is:

A provision originating in corporate mortgage forms but later extended to consumer financing instruments, pursuant to which all property from time to time procured from the same seller becomes security for payment of the entire aggregate debt until it is fully paid off. Hence, e.g., if a person buys a television set for $500 in 1979 from XYZ store and then, in 1980, when only $100 is still owed, buys a stereo set for $300, if, in 1981, by which time $200 more has been paid, the buyer defaults, the seller may repossess both stereo and television set, even though more than the whole price of the television set was paid by the time of the default. In a majority

of states such clauses are now, with respect to consumer transactions, either prohibited, or modified by law such that the liens on earlier purchases are released as the total price of each is paid.

Meaning of Add-on Clause

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  • Secured Transactions
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