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An executory contract is a contract which has not yet been fully performed, that is to say, fully executed. To put it another way, it's a contract under which both sides still have important performance remaining. However, an obligation to pay money, although such obligation is material, does not usually make a contract executory. An obligation is material if a breach of contract would result from the failure to satisfy the obligation.[1] A contract that has been fully performed by one party but not by the other party is not classified as an executory contract.
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[edit] In bankruptcy law
The term executory contract assumes a specialized meaning in some areas of law. In bankruptcy law, an executory contract is a contract in which continuing obligations exist on both sides of the contract. In this context, a trustee may assume or reject any executory contract or unexpired lease subject to court approval. [1] See e.g. 11 U.S.C. § 365.
[edit] Installment contracts
Many installment contracts are commonly executory, for example, installment credit loans, period loan payments, mortgages, paychecks, and similar contracts.
[edit] References
- ^ a b Bob Eisenbach (July 18, 2006). "Executory Contracts -- What Are They And Why Do They Matter In Bankruptcy?". In the (Red). http://bankruptcy.cooley.com/2006/07/articles/business-bankruptcy-issues/executory-contracts-what-are-they-and-why-do-they-matter-in-bankruptcy/. Retrieved 2007-12-21.
[edit] See also
- Bankruptcy in the United States
- Chapter 11, Title 11, United States Code
- Charging order
- Executory interest
- Future interest
- Rule against perpetuities
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