An installment contract is a single contract that is completed by a series of performances–such as payments, performances of a service, or delivery of goods–rather than being performed all at one time. Installment contracts can provide that installments are to be performed by either one or both parties. For example, a contract could provide that a buyer would pay a lump sum for goods that would be delivered over a period of time, that a seller would deliver products but receive payment over a period of time, or that a seller would deliver products over a period of time and receive payment after each delivery.
Installment contracts can be used in the sale of goods, and are provided for in the Uniform Commercial Code (UCC) § 2-612. In this context, even if a contract contained a clause that “each delivery is a separate contract,” a single agreement for successive deliveries would still be considered an installment contract. The statute also provides that buyers can reject non-conforming installments in some circumstances. Further, a non-conforming installment that impacts the value of the whole contract can constitute a breach of the whole contract.
Installment contracts can also be used in the sale or lease of real estate as an alternative to a mortgage. As explained in the Pennsylvania case of Stillwater Lakes Civic Ass’n, Inc. v. Krawitz, in this scenario a buyer would pay a seller the agreed upon price of a tract of land over a set period of time. The buyer would take immediate possession and have the right to use the property but would not gain legal title until making the final payment to the seller.
[Last updated in June of 2020 by the Wex Definitions Team]