An executory contract is a contract that has not yet been fully performed or fully executed. It is a contract under in which both sides still have important performance remaining. However, an obligation to pay money, even if 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. A contract that has been fully performed by one party but not by the other party is an executory contract.
In US bankruptcy law
In US bankruptcy law, "executory contract" assumes a special meaning, a contract in which continuing obligations exist on both sides of the contract at the time of the bankruptcy petition. It still requires both debtor and counterparty to make further performance. A trustee or debtor in possession may assume any prepetition executory contract or unexpired lease of the debtor, preserving obligations of both the debtor and the counterparts by the bankruptcy process. If he rejects it, there is a breach of contract as of the date of the petition. Affirmation and rejection are subject to court approval. 11 U.S.C. § 365.
- Bankruptcy in the United States
- Chapter 11, Title 11, United States Code
- Charging order
- Executory interest
- Future interest
- Rule against perpetuities
- Bob Eisenbach (July 18, 2006). "Executory Contracts -- What Are They And Why Do They Matter In Bankruptcy?". In the (Red). Retrieved 2007-12-21.
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