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Notice of default
Also called default notice, demand letter.
The creditor's written statement that a specified default has occurred and what follows from it - and, where the agreement provides a cure period, often the event that starts the clock.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A typical notice identifies the agreement, states the event relied on, states the amount claimed, and sets out what the creditor intends to do: accelerate, enforce collateral, debit a guarantor, file suit, or all of them.
Whether one is required at all is a contract question. A great many commercial agreements state that default occurs automatically upon the event, that notice is waived, and that the creditor may accelerate immediately. Others require notice for covenant defaults but not for payment defaults. Some require notice only as a condition of exercising particular remedies.
The delivery clause matters as much as the notice. Agreements commonly deem notice given on dispatch to the last address on file, or on transmission to an email address, whether or not anyone read it. A merchant who changed premises and never updated the funder can be several weeks into an acceleration before learning of it.
Some secured transactions and some state statutes impose their own notice requirements independent of the contract, and those vary by state and by collateral type.
Where this one catches people
Where a cure period exists, read whether it runs from the event or from the notice. If it runs from the event, a creditor who waits ten days to send the letter can hand you a document whose cure window has already closed - which is not a drafting accident.
Read next
Notice of default — common questions
What does notice of default mean?
The creditor's written statement that a specified default has occurred and what follows from it - and, where the agreement provides a cure period, often the event that starts the clock.
Where does notice of default catch people out?
Where a cure period exists, read whether it runs from the event or from the notice. If it runs from the event, a creditor who waits ten days to send the letter can hand you a document whose cure window has already closed - which is not a drafting accident.
Is notice of default the same as an interest rate?
Notice of default is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does notice of default apply to?
It is not specific to one product — it appears across the market.
Is there a worked example of notice of default?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside notice of default?
Acceleration clause, Confession of judgment, Event of default, Material adverse change, NSF fee.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.