The Demystification of Contracts in Bankruptcy

60 Pages Posted: 5 Feb 2016 Last revised: 2 Nov 2017

See all articles by Jay Lawrence Westbrook

Jay Lawrence Westbrook

University of Texas at Austin School of Law

Kelsi Stayart

University of Texas at Austin, School of Law, Student 2015

Date Written: February 15, 2016

Abstract

A company’s ability to retain favorable contracts while escaping unprofitable ones is central to a successful reorganization in Chapter 11 cases. Yet a strange and elusive doctrine often leads the courts to impose unpredictable and perverse results in contract cases. The doctrine requires that contract have a quality of “executoriness,’ or it must leave the precincts of the Bankruptcy Code for an anarchic limbo where the courts fashion surprising and often unexplained relief. The American Bankruptcy Institute Review Commission ignored the unanimous recommendation of its committee of contract experts, preferring to retain this outdated doctrine with an explanation as unclear as many of the cases attempting to apply it. Based on a reading of all contemporary executoriness cases, this article examines executoriness in each of major categories of contracts where it imposes confusion and loss in reorganization practice and demonstrates the correct solutions to each. It does so by tying them to the fundamental economic and social policies underlying bankruptcy law.

Keywords: Bankruptcy, reorganization, corporations, contracts, executory contracts, ABI review commission, ABI review commission

Suggested Citation

Westbrook, Jay L. and Stayart, Kelsi, The Demystification of Contracts in Bankruptcy (February 15, 2016). U of Texas Law, Public Law Research Paper No. 637. Available at SSRN: https://ssrn.com/abstract=2726880 or http://dx.doi.org/10.2139/ssrn.2726880

Jay L. Westbrook (Contact Author)

University of Texas at Austin School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
(512) 232-1303 (Phone)

HOME PAGE: http://www.law.utexas.edu/webra/faculty/jwestbrook

Kelsi Stayart

University of Texas at Austin, School of Law, Student 2015 ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

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