Pub. (b)(1)(A). Subsec. that assumption or assignment of such lease will not disrupt any tenant mix or balance in such shopping center. Restrictions with respect to assignment of an executory contract or unexpired lease are superfluous since the debtor may assign an executory contract or unexpired lease of the debtor only if such contract is first assumed under section 364(f)(2)(A) of the House amendment. (4) read as follows: “Notwithstanding paragraphs (1) and (2), in a case under any chapter of this title, if the trustee does not assume or reject an unexpired lease of nonresidential real property under which the debtor is the lessee within 60 days after the date of the order for relief, or within such additional time as the court, for cause, within such 60-day period, fixes, then such lease is deemed rejected, and the trustee shall immediately surrender such nonresidential real property to the lessor.”. L. 100–506 added subsec. This subsection does not limit the application of an ipso facto or bankruptcy clause if a new insolvency or receivership occurs after the bankruptcy case is closed. An executory contract not assumed is deemed rejected. the date of the entry of an order confirming a plan. not interfere with the rights of the licensee as provided in such contract, or any agreement supplementary to such contract, to such intellectual property (including such embodiment), including any right to obtain such intellectual property (or such embodiment) from another entity. Subsec. If a personal service contract is rejected, it is considered breached under § 365(g) as of the date immediately preceding the date the bankruptcy petition was filed. (c)(1)(A). Section 363(h) of the House amendment represents a modification of section 365(h) of the Senate amendment. If the trustee rejects an executory contract of the debtor for the sale of real property or for the sale of a timeshare interest under a timeshare plan, under which the purchaser is in possession, such purchaser may treat such contract as terminated, or, in the alternative, may remain in possession of such real property or timeshare interest. In any case, the court can grant more time, if necessary. L. 98–353, § 402, amended par. L. 103–394, set out as a note under section 101 of this title. The remainder of the subsection specifies different times for cases that are converted from one chapter to another. Timing for Assumption or Rejection: The Bankruptcy Code permits the Chapter 11 debtor-in-possession to assume or reject an executory contract at any time before confirmation of a … Many insolvent companies choose not to file a petition for bankruptcy under federal law but rather to avail themselves of state or foreign insolvency laws and proc… Except for commercial real property leases (which are treated differently — stay tuned for another post on that topic), executory contracts must be assumed or rejected within 60 days of the filing of the bankruptcy petition in a Chapter 7 liquidation case and prior to the time a plan of reorganization is confirmed in a Chapter 11 case. (p) was repealed by Pub. (2) reference to residential real property or personal property of the debtor, and adding pars. Amendment by Pub. L. 103–394, § 501(d)(10)(E). Subsection (e) invalidates ipso facto or bankruptcy clauses. Rejection of an executory contract is essentially the debtor's declaration that it will not perform its remaining obligations under a contract under which performance remains due from each party. Subsection (f) partially invalidates restrictions on assignment of contracts or leases by the trustee to a third party. L. 103–394, § 501(d)(10)(B), substituted “1208, or 1307” for “1307, or 1208”. Subsection (i) gives a purchaser of real property under a land installment sales contract similar protection. (h) read as follows: “(h)(1) If the trustee rejects an unexpired lease of real property of the debtor under which the debtor is the lessor, or a timeshare interest under a timeshare plan under which the debtor is the timeshare interest seller, the lessee or timeshare interest purchaser under such lease or timeshare plan may treat such lease or timeshare plan as terminated by such rejection, where the disaffirmance by the trustee amounts to such a breach as would entitle the lessee or timeshare interest purchaser to treat such lease or timeshare plan as terminated by virtue of its own terms, applicable nonbankruptcy law, or other agreements the lessee or timeshare interest purchaser has made with other parties; or, in the alternative, the lessee or timeshare interest purchaser may remain in possession of the leasehold or timeshare interest under any lease or timeshare plan the term of which has commenced for the balance of such term and for any renewal or extension of such term that is enforceable by such lessee or timeshare interest purchaser under applicable nonbankruptcy law. chapter 11 case no. This is not, however, the only path available for a company that has reached a point of insolvency and seeks protection from creditors. The ability to assume (and retain) or to reject (and be freed from) executory contracts is a key restructuring power of a Chapter 11 debtor.1 2 The Code does not define "executory contract"; nor has the Supreme Court delineated the precise contours of the term, although in a 1984 case the Court recognized the core concept of "mutuality of obligations" in stating that an executory contract is a contract "on … This frequently hampers rehabilitation efforts. Subsec. A trustee or debtor-in-possession has a right to assume or reject executory contracts under § 365 within the time frames set forth in § 365(d), but the agreement remains in effect pending the actual act of assumption or rejection. Assignment by the trustee to an entity of a contract or lease assumed under this section relieves the trustee and the estate from any liability for any breach of such contract or lease occurring after such assignment. Contributed by Victoria Vron In the December 22, 2010 post on the Taylor-Wharton decision, I noted that it was not clear why the debtor in Taylor-Wharton was so adamant about using the Philadelphia Newspapers case to show that the assumed liabilities were ongoing obligations that were subject to rejection. L. 99–554, § 283(e)(2), inserted “or timeshare plan” after “to treat such lease”. L. 109–8, set out as a note under section 101 of this title. Debtors filing under Chapter 7 must abide by (p). This case, however, presented a very different situation in which the Chapter 11 debtor did not take any action during the Chapter 11 case to assume or reject the executory contract (here a license agreement permitting the non-debtor party to manufacture, promote, and sell a horizontal grinder on an exclusive basis for five years). If the timeshare interest purchaser retains its rights under subparagraph (A), such timeshare interest purchaser may offset against the moneys due for such timeshare interest for the balance of the term after the date of the rejection of such timeshare interest, and the term of any renewal or extension of such timeshare interest, the value of any damage caused by the nonperformance after the date of such rejection, of any obligation of the debtor under such timeshare plan, but the timeshare interest purchaser shall not have any right against the estate or the debtor on account of any damage occurring after such date caused by such nonperformance. Under these agreements, the tenant mix in a shopping center may be as important to the lessor as the actual promised rental payments, because certain mixes will attract higher patronage of the stores in the center, and thus a higher rental for the landlord from those stores that are subject to a percentage of gross receipts rental agreement. Amendment by Pub. See 11 U.S.C. (o). (c)(3). Sections 365(e)(1) and (2)(A) restate section 365(e) of H.R. Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. Pub. Standards for Rejection of a Contract. U.S.C. contracts, An executory contract under § 365 is not specifically defined, but the term … Subsection (b)(5) provides that in lease situations common to shopping centers, protections must be provided for the lessor if the trustee assumes the lease, including protection against decline in percentage rents, breach of agreements with other tenants, and preservation of the tenant mix. L. 102–365, § 19(b), added pars. § 1322(b)(7). Background A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a "reorganization" bankruptcy. 8200 as passed by the House and the Senate amendment. Contrary to popular belief, rejection of an executory contract or an unexpired lease pursuant to section 365 of the Bankruptcy Code does not rescind or undo such contract or lease. L. 100–506, set out as a note under section 101 of this title. Subsec. If not assumed, the contract or lease is deemed rejected. The Supreme Court’s Ruling In overturning the First Circuit’s decision, the Supreme Court focused not on section 365(n) of the Bankruptcy Code but instead on section 365(g). (i)(1). Subsec. executory, The provisions of this subsection are not a substantive authorization to breach or reject an assumed contract. This prohibition applies only in the situation in which applicable law excuses the other party from performance independent of any restrictive language in the contract or lease itself. The trustee is required to deliver title, but is relieved of all other obligations to perform. provides adequate assurance of future performance under such contract or lease. L. 109–8, § 404(a), amended par. L. 98–353, § 362(a), amended subsec. 1301)” did not appear in text. Subsection (g) defines the time as of which a rejection of an executory contract or unexpired lease constitutes a breach of the contract or lease. the insolvency or financial condition of the debtor at any time before the closing of the case; the commencement of a case under this title; the appointment of or taking possession by a trustee in a case under this title or a custodian before such commencement; or. applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to the trustee or to an assignee of such contract or lease, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties; and. The consent of the non-debtor is not necessary. L. 102–365, § 19(e), added subsec. The purpose of this subsection, at least in part, is to prevent the trustee from requiring new advances of money or other property. 2005). Subsec. if the term of such timeshare interest has commenced, then the timeshare interest purchaser may retain its rights in such timeshare interest for the balance of such term and for any term of renewal or extension of such timeshare interest to the extent that such rights are enforceable under applicable nonbankruptcy law. Pub. Fifth Circuit Holds Executory Contract Not Listed on Bankruptcy Schedules Is Automatically Rejected Upon Expiration of 60-Day Period in Chapter 7 and Not Capable of Being Sold (4) generally. L. 109–8, § 328(a)(2), struck out par. L. 109–8, § 404(b), substituted “provided in subsections (b) and” for “provided in subsection”. Counsel for the seller, Jones Day, was kind enough to explain its understanding … (3)(C) substituting “that assumption or assignment of such lease is subject to all the provisions thereof, including (but not limited to) provisions such as a radius, location, use, or exclusivity provision, and will not breach any such provision contained in any other lease, financing agreement, or master agreement relating to such shopping center” for “that assumption or assignment of such lease will not breach substantially any provision, such as a radius, location, use, or exclusivity provision, in any other lease, financing agreement, or master agreement relating to such shopping center”. (p) by substituting “section 40102(a) of title 49” for “section 101(3) of the Federal Aviation Act of 1958”, could not be executed because subsec. (h). Pub. Prior to amendment, par. Pub. L. 101–647 added subsec. 1992—Subsec. Section 365(b)(3) represents a compromise between H.R. (d)(10). 1984—Subsec. Because of the volatile nature of the commodities markets and the special provisions governing commodity broker liquidations in subchapter IV of chapter 7, the provisions governing distribution in section 765(a) will govern if any conflict between those provisions and the provisions of this section arise. The House amendment makes clear that in the case of a bankrupt lessor, a lessee may remain in possession for the balance of the term of a lease and any renewal or extension of the term only to the extent that such renewal or extension may be obtained by the lessee without the permission of the landlord or some third party under applicable non-bankruptcy law. The subsection permits the lessee to remain in possession of the leased property or to treat the lease as terminated by the rejection. (4). Pub. 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