Thursday, November 29, 2012

Bankruptcy Law, The Law of Debtors and Creditors Problem Set Answers, Warren Westbrook Sixth Edition - Problem Set 26

Problem Set 26, p.523
  • We breach the contract and sell the oil for the new higher price. We can reject the contract under §365. Now the counterparty to the contract has allowed damages of a normal breach, but they are treated as an unsecured creditor.
  • Jameson can make the choice after the agency reveals the census; and then Jameson can assume or reject the K.
  • (d)(2) gives the trustee or DIP enough time to make the choice to assume or reject until the confirmation of the plan, unless the court specified a period of time.
  • §541(c)(1) makes the “no assignment” clause and “bankruptcy termination” clause unenforceable; the K is till the property of the estate.
  • 365(e): Bankruptcy termination clause will be void How about the no assignment clause? Unenforceable; void as well
  • §365(c) is the exception to §365(a), the trustee cannot assume or reject the K if
    1. Applicable law excuses a party from accepting performance from and rendering performance to an entity other than the debtor or DIP, and such party does not consent to such assumption or assignment.
    2. Such K is a K to make a loan, or extend other debt financing or financial accommodations, to or for the benefit of the debtor, or to issue a security of the debtor
    3. Such lease is of nonresidential real property and has been terminated under applicable non-bankruptcy law prior to the order for relief.
  • In conclusion, Farr is fine.
  • Assume it and assign it to the third party
  • If the TIB assume the K and breach it, then the creditor’s claim gets the administrative expense priority; if the TIB rejects it, the creditor only gets the general unsecured claims against the estate.
  • §365(c) protects the creditor under the non-bankruptcy applicable law; it may make the TIB not able to assume or assign a K.
  • (f) is a sword for the debtor. (f)(1): Invalidate the anti-assignment clause; Except in (b) and (c), the TIB can assume or reject the K even if the applicable law and K provisions prohibit, restrict or condition the assignment.
  • (f)(3): Even if the K or applicable allow parties to terminate or modify the Ks on account of an assignment, the K may not be terminated or modified because of assumption or assignment by the TIB.
  • How about the Union K? Is it different from regular Ks? Collective bargaining see §1113 rejection of collective bargaining agreements: TIB can reject and assume the K only with the provisions of this article.
  • §365(c)(2). No financial accommodation can be assumed.
  • Can you assume part of K? A Latin legal term says that you cannot assume part of K; so possibly the entire K cannot be assumed?
  • Pottow: from the common sense, only the financial part cannot be assumed, but you can argue it.

Problem Sets: Table of Contents

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