An Update of the Law Governing Prepayment Clauses

This Comment examines the validity of the prepayment clause, in light of the Wellenkamp v. Bank of America decision. The author reviews the common judicial development of the prepayment and due-on-sale provisions and highlights the inconsistencies in the law governing the two loan terms as created by the Wellenkamp decision. The author concludes by suggesting that the prepayment penalty is an unreasonable restraint on alienation and should be conformed to the rationale set forth in Wellenkamp.