Post-Petition Enforcement Against the Seller of Contracts for the Sale of Goods

Generally speaking, after a bankruptcy filing, executory contracts are not enforceable against a debtor that has not yet assumed the contract. <i>N.L.R.B. v. Bildisco and Bildisco</i>, 465 U.S. 513, 531 (1984). However, the reverse is not true. During the pre-assumption period the non-debtor party to the contract is presumed to be obligated to perform in accordance with a contract. Howard C. Buschman III, <i>Benefits and Burdens: Post-Petition Performance of Unassumed Executory Contracts</i>, 5 Bankr. Dev. J. 341, 346, 359 (1988); <i>Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.)</i>, 973 F.2d 1065, 1075 (3d Cir. 1992); <i>McLean Indus., Inc. v. Med. Lab. Automation, Inc. (In re McLean Indus., Inc.)</i>, 96 B.R. 440, 449 (Bankr. S.D.N.Y. 1989). Of course, a debtor who elects to receive the benefits of a contract while deciding whether to assume or reject the contract is expected to pay for the value of the goods and services received in accordance with the contract. As the Supreme Court noted in <i>Bildisco</i>, 465 U.S. at 531, 'If the debtor-in-possession elects to continue to receive benefits from the other party to an executory contract pending a decision to reject or assume the contract, the debtor-in-possession is obligated to pay for the reasonable value of those services ... ' <i>See also Schokbeton Indus., Inc. v. Schokbeton Prods. Corp. (In re Schokbeton Indus., Inc.)</i>, 466 F.2d 171, 175 (5th Cir. 1972).

24 minute readJuly 28, 2006 at 11:35 AM

By

Grant T. Stein

Jennifer M. Meyerowitz