Legal Definitions - installment contract

An installment contract is a type of agreement where the obligations of one or both parties are fulfilled through a series of actions or payments over a period, rather than in a single, one-time transaction. This means that instead of a lump-sum payment or a single delivery of goods or services, the performance is broken down into smaller, successive parts.

• Example 1: Software Subscription Service

  A small business subscribes to a cloud-based accounting software. The contract states that the software provider will grant access to its services and provide regular updates for a year. In return, the business agrees to pay a monthly subscription fee for twelve consecutive months.

  Explanation: This is an installment contract because the software service is provided continuously over time (access, updates), and the business's payment obligation is also fulfilled through a series of monthly payments, rather than a single upfront payment for the entire year of service.

• Example 2: Home Appliance Purchase

  A homeowner buys a new refrigerator from an appliance store. Instead of paying the full price immediately, they sign an agreement to pay for the refrigerator in 18 equal monthly payments, with the store delivering the appliance upfront.

  Explanation: This scenario illustrates an installment contract because, while the goods (the refrigerator) are delivered at one time, the buyer's financial obligation is spread out and fulfilled through a series of scheduled payments over a defined period.

• Example 3: Construction Project with Staged Payments

  A property developer hires a construction company to build a new commercial building. The contract specifies that the construction company will complete the project over two years, with payments made at the completion of specific construction milestones (e.g., foundation poured, framing completed, roof installed, interior finished). Each payment is contingent upon the successful inspection and approval of that stage of work.

  Explanation: This is an installment contract because the construction company's performance (building the structure) is delivered in stages over time, and the developer's payment obligation is also fulfilled through a series of payments tied to the completion of each stage.