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Westlaw Journal: Consequences Of Rejecting Contracts

What happens when a business has a continuing contract with a party who goes into bankruptcy?

What happens when that Debtor party uses the provisions of the Bankruptcy Code to reject that contract and cease performance?

What are the parties’ rights and options?

Insolvency attorneys Daniel Eliades and Constance DeSena co-author this Westlaw Journal commentary exploring the rights and remedies available for non-debtor parties whose agreements are rejected by a bankruptcy trustee or debtor-in-possession.

“Rejection does not terminate the agreement or end the parties’ substantive rights thereunder; rather, rejection merely means that the bankruptcy estate itself has breached the agreement, ripening remedies of the non-debtor party.” – Daniel Eliades, attorney

Courts and scholars addressing the issue have characterized this area of law as “psychedelic”.  This article aims to clear up the confusion of how Section 365 of the Bankruptcy Code applies to executory contracts or unexpired and how best to protect your interests, minimizing the disruption to business.

Download the entire Westlaw Journal article here. (PDF)