Executory Agreements

From the point of view of a debtor or agent, a contract of execution should be accepted if it is advantageous to the mass of the bankruptcy. Otherwise, it should be rejected. For example, if the contract requires the manufacture of a component for which the debtor must enter into a project for which he makes a profit, and if the profit is greater than the cost of healing the failure before the petition, the contract should be accepted. If the project suffers a loss, the contract should be refused. The debtor has very little cost to refuse a contract, as any claim for damages is treated like any other unsecured debt prior to the petition. F. Effect of the debtor`s failure to act. An enforcement contract that is not accepted or refused during bankruptcy is not affected by the declaration of insolvency, is transferred to the reorganized debtor and is mandatory. In re Polysat, Inc., 152 B.R. 886, 890 (Bankr. E.D. Pa.

1993); International Union v. Miles Mach. Co., 34 B.R. 683, 687 (E.D. Mich. 1982) (Collective Agreement ignored in the event of bankruptcy, survives confirmation and hires debtor); Matter of Central Watch, Inc., 22 B.R. 561, 565 (Bankr. E.D.

Wis. In accordance with the political considerations underlying section 365, the Tribunal stressed that the power to decide whether an enforcement contract should be accepted or rejected was "that of the debtor alone", regardless of the "incriminating dilemmas" faced by a non-debtor forced to stick to the legal suspension, while the DIP or agent on the matter is found. According to the Second Circuit, "the interests of the debtor are of the utmost importance for control." In the event of bankruptcy, it may be advantageous to have a "performance contract" if your client files a Chapter 11. A contract of execution is a contract that both parties are not yet required to execute under the contract. Although leases are execution contracts, they can also benefit from special protection measures. A liquidator may accept (live) a contract of execution or refuse (violation and termination). In the event of a remedy, the debtor may also accept or refuse a contract of execution as a debtor. Acceptance or refusal in both cases is subject to court approval. Bankruptcy law does not define executory. The legal history of Section 365 refers, with agreement, to the definition of the famous commentator and scholar, Professor Vern Countryman, who in 1973 defined a "performance contract" as a "contract whereby the undertaking of the trustee in bankruptcy and the other contracting party is so unsatisfied that the omission of one of the two performing the performance would constitute a substantial violation that would excuse the performance of the other." Most courts accept this or an essentially similar definition of the term.



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