National Bankruptcy Review Commission's Section 365 Recommendations and the Larger Conceptual Issues
Abstract
In the chapter of the Report of the National Bankruptcy Commission ("Report") entitled "Business Bankruptcy," the National Bankruptcy Review Commission ("Review Commission") makes four recommendations regarding section 365 of the Bankruptcy Code: 2.4.1 Clarifying the Meaning of "Rejection" The concept of "rejection" in section 365 should be replaced with "election to breach." Section 365 should provide that a trustee's ability to elect to breach a contract of the debtor is not an avoiding power. Section 502(g) should be amended to provide that a claim arising from the election to breach shall be allowed or disallowed the same as if such claim had arisen before the date of the filing of the petition. 2.4.2 Clarifying the Option of "Assumption" "Assumption" should be replaced with "election to perform" in section 365. 2.4.3 Interim Protection and Obligations of Nondebtor Parties A court should be authorized to grant an order governing temporary performance and/or providing protection of the interests of the nondebtor party until the court approves a decision to perform or breach a contract. Section 503(b) should include as an administrative expense losses reasonably and unavoidably sustained by a nondebtor party to a contract, a standard based on nonbankruptcy contract principles, pending court approval of an election to perform or breach a contract if such nondebtor party was acting in accordance with a court order governing temporary performance. 2.4.4 Contracts Subject to Section 365; Eliminating the "Executory Requirement Title 11 should be amended to delete all references to "executory" in section 365 and related provisions, and "executoriness" should be eliminated as a prerequisite to the trustee's election to assume or breach a contract. These recommendations and the Report's discussion of the four recommendations address some, but not all, of the larger conceptual issues relating to the bankruptcy treatment of leases and executory contracts.
Document Type
Article
Publication Date
1998
Recommended Citation
David G. Epstein & Steve H. Nickles, National Bankruptcy Review Commission's Section 365 Recommendations and the Larger Conceptual Issues, 102 Dick. L. Rev. 679 (1998).