Executory contract

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, "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.

Many installment contracts are commonly executors such as installment credit loans, period loan payments, mortgages, and paychecks.

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