Opinion ID: 172224
Heading Depth: 1
Heading Rank: 2

Heading: defining an executory contract

Text: The appellants argue that this case hinges on the correct definition of `executory contract' under 11 U.S.C. § 365(d)(1). Section 365(d)(1) specifies that if the trustee of an estate in bankruptcy does not assume an executory contract within sixty days of the order of relief, then that contract is deemed rejected. Accordingly, if we determine that Dr. Baird's policy was an executory contract, then the contract was rejected. We agree that this is a key issue in the case. The first step is to determine the proper definition of executory contract, something that was the subject of much back and forth in the prior proceedings. The bankruptcy court saw a tension between the two definitions offered in the cases it discussed. One  the Countryman definition  seems to count only the remaining material obligations of both parties in determining whether a contract is executory. Thomas American Stone & Building, 142 B.R. at 452-53. The Myers definition, at least on the bankruptcy court's interpretation of it, holds that if there are any remaining obligations on both sides then the contract is executory. In re Myers, 362 F.3d at 673. We do not agree with this interpretation of Myers. To be sure, Myers stated that [a]n executory contract is `a contract that has not as yet been fully completed or performed' and in which future obligations remain.' Myers, 362 F.3d at 673 (quoting Black's Law Dictionary 395 (6th ed.1991)). But the court in Myers went on to hold that the contract in question was executory because material performance remained on both sides. Myers, 362 F.3d at 673. Read in context, the reference to future obligations was confined to future material obligations. If Myers stood for the proposition that any contract was executory that had future obligations left unfulfilled, however immaterial, then the definition would render almost all agreements executory since it is the rare agreement that does not involve unperformed obligations on either side. In re Streets & Beard Farm P'ship, 882 F.2d 233, 235 (7th Cir.1989). Rather, the remaining obligations have to be significant, which, following Countryman and Thomas American Stone & Building, we construe to be obligations which, if either side failed to perform them, would constitute a breach. We therefore take this occasion to formally adopt the Countryman definition, and construe Myers to be consistent with that definition. Other courts have construed § 365's use of executory contract similarly. See Thomas Am. Stone, 142 B.R. at 452 (noting that courts have construed Congress' intent to be in accord with Professor Countryman's definition of executory contracts); In re Evatt, 112 B.R. 417, 419 (W.D.Okla.1990) (collecting cases).