Issue link: https://mbozikis.ufcontent.com/i/1422521
98 expounded by Professor Vern Countryman of Harvard Law School in his article, Executory Contracts in Bankruptcy, Part 1, 57 Minn. L. Rev. 439, 460 (1973), is one where "the obligation of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete performance would constitute a material breach excusing the performance of the other." Similarly, the term "unexpired lease" is not defined in the Bankruptcy Code. However, courts have held that a "lease" for purposes of Section 365 refers to a "true lease" and not a disguised security agreement or financing arrangement. See United Airlines, Inc. v. HSBC Bank USA, N.A., 416 F.3d 609 (7th Cir. 2005). Additionally, an unexpired lease must be in effect at the time the petition is filed. See In re Emilio Cavallini, Ltd., 112 B.R. 73, 76 (Bankr. S.D.N.Y. 1990). a. Generally Generally, an executory contract must be assumed or rejected in its entirety; a trustee or debtor-in-possession cannot assume parts of contracts and leases and reject other parts. In re Adelphia Bus. Sols., Inc., 322 B.R. 51, 54 (Bankr. S.D.N.Y. 2005). Furthermore, the assumption or rejection of an executory contract or an unexpired lease is subject to court approval. 11 U.S.C. ยง 365(a). Although, the Bankruptcy Code does not provide a standard for judicial review, most courts have applied a "business judgment" test to the decision to assume or reject contracts or leases, discussed in greater detail in Chapter VI.C.2. See ReGen Capital I, Inc. v. Halperin (In re U.S. Wireless Data), 547 F.3d 484, 488 (2d Cir. 2008). b. Assumption Section 365(b) of the Bankruptcy Code provides the standards and procedures whereby a trustee may assume an executory contract or unexpired lease. Section 365(b) permits a trustee to basically choose which contracts it would like to continue to perform when it emerges from bankruptcy (i.e., the contracts it finds most beneficial to the estate).