Michigan Collections Manager License Practice Test

In what situation can an installment sales contract only be terminated?

1. Upon buyer's request

2. If repossession occurs

3. With mutual consent of both parties

4. Upon written notice from the seller

The correct answer is: With mutual consent of both parties

An installment sales contract represents an agreement where a buyer purchases goods or services through a series of scheduled payments rather than a single lump sum. The termination of such a contract typically involves the mutual agreement of both parties, meaning that either side must agree to end the arrangement. In most legal situations, a contract can only be legally terminated under conditions that respect the rights and obligations of both parties. When both the buyer and seller consent to ending the contract, it ensures that both parties have considered the implications and liabilities associated with the termination. This is a standard practice in contract law to promote fairness and clarity in the transactions involved. While other situations such as repossession or buyer's request may occur, they often entail specific legal standards and actions that need to be followed, which may not provide a straightforward or mutually agreeable termination of the contract. Therefore, mutual consent serves as the most legitimate and straightforward avenue for concluding the terms of an installment sales contract, protecting the interests of both parties involved.