Do security agreements commonly include a 'right to cure' period for default, and what does it entail?

• A. No; such a provision is never included.
• B. Yes; it permits the debtor a defined period to cure specified breaches before enforcement actions can proceed.
• C. Yes; it allows the lender to cure breaches on behalf of the debtor.
• D. No; cures are only allowed after enforcement begins.

Answer: (B)

In secured lending, a right-to-cure provision is a common safeguard that gives the borrower a chance to fix certain breaches before the lender takes enforcement steps. After a default is identified, the agreement typically requires the lender to notify the borrower and then the borrower has a defined period—often a set number of days—to cure the breach. If the borrower cures within that window, the default is avoided or cured for purposes of the loan, and remedies like acceleration aren’t triggered. If the breach isn’t cured in time, the lender may proceed with remedies under the agreement and applicable law.

This approach is used to balance risk and preserve value, recognizing that some defaults are fixable and that immediate harsh actions aren’t always necessary. It doesn’t mean the lender cures the default on the borrower’s behalf, and it isn’t accurate to say cures only occur after enforcement has begun; the cure period is specifically to prevent enforcement if the breach is remedied in time.