Limitations on Assumption and Assignment of Executory Contracts by 'Applicable Law'

Abstract

11 U.S.C. section 365 considers the treatment of executory contracts in bankruptcy proceedings. Subsection 365(c)(1) prohibits the assumption or assignment of executory contracts when a contractual or legal provision would applicable law excuses a party from accepting third-party performance, while subsection 365(f) allows assignment of an executory contract under certain circumstances regardless of legal or contractual prohibitions on the assignment. This article considers the balance between these sometimes-contradictory subsections of the Bankruptcy Code, and concludes that Congress intended to allow the assumption of executory contracts even if they are not assignable in order to further the objections of reorganization bankruptcy proceedings.

Keywords: executory contracts, bankruptcy, assumption of executory contracts, assignment of executory contracts

JEL Classification: K10, K30, K39