Chapter Nineteen. Executory
Contracts and Leases
 After reading this chapter, you will be able to:
 Define the term “executory contract” as a specialized
form of asset
 Define the term “adequate assurance”
 Describe the procedure that is taken by a party seeking
the assumption or rejection of an executory contract or
unexpired lease
 List the deadlines contained in the Code to assume an
executory contract or unexpired lease
 Describe the conditions when assumption of an
executory contract or unexpired lease may not be
assumed
Executory Contracts
 Contracts for which performance remains due
to some extent on both sides.
 Franchise or license agreements are
common executory contracts.
 Executory contracts are the subject of
Bankruptcy Code Section 365.
 An executory contract may be assumed or
rejected.
License Agreements
 License agreements to operate a business or
to market a product line are executory
contracts.
 The entity issuing the license, the licensor,
has a continuing obligation to allow the
license holder to use the name and sell
products.
 The holder of the license, the licensee, has a
continuing obligation to provide accountings
to the licensor and to pay regular royalties,
called license fees, to the licensor.
Adequate Assurance
 The providing of adequate protection to a nondebtor
party to an executory contract subject to Bankruptcy
Code Section 365.
 A trustee or debtor-in-possession assuming an
executory contract must provide the nondebtor party
to the contract with adequate assurance of future
performance.
 An assignee of an executory contract must also
provide adequate assurance of future performance.
 Providing adequate assurance includes curing
existing defaults and convincing the creditor and the
court that future performance will be rendered by the
debtor.
Residential and Nonresidential
Leases
 A lease of a residential real property most
commonly exists when the debtor resides in
the premises subject to the lease.
 A lease is nonresidential in virtually all other
situations.
Time Limits for Assumption or Rejection of
Executory Contracts or Unexpired Leases
Chapter
Nonresidential Leases Executory Contracts/
Residential Leases
7
120 days
60 days
9
120 days
Before confirmation or prior court
order after motion
11
120 days
Before confirmation or prior court
order after motion
12
120 days
Before confirmation or prior court
order after motion
13
120 days
Before confirmation or prior court
order after motion