Research On Executory Contracts Processing Rules In Bankruptcy Law

The most common way in which modern companies conduct their day-to-day business is by entering into contracts to establish rights and obligations to ensure smooth transactions.Therefore,when a company enters bankruptcy,its business activities are suspended,and inevitably,many outstanding contracts come to a standstill.For such contracts,domestic scholars refer to them as "executory contract",taking into account overseas legal experience.The possible profit and loss arising from the future execution of the executory contract is related to the value of the bankruptcy estate,and on the other hand,it is also related to the income of the other party to the contract,and the balance between the interests of both parties is very complicated in practice.According to Article 18 of the Enterprise Bankruptcy Law of the People’s Republic of China,the bankruptcy administrator has the unilateral right to choose whether to discharge or continue the performance of the contract to be performed.In terms of the legislative purpose of this rule,the treatment of executory contracts is included in the general liquidation system of the enterprise bankruptcy law,which is conducive to the realization of the interests of bankruptcy creditors.Generally speaking,the first step in dealing with a executory contract is to determine the nature of the contract,and to confirm whether it is a executory contract through several characteristics of the contract,and then the insolvency administrator will measure the value of the contract and choose whether to discharge the contract or continue to perform it.On the one hand,there are no clear criteria to measure whether the contract should be discharged,and on the other hand,in the case that the administrator chooses to discharge the contract,in the process of dealing with the executory contract,the legal effect of the discharge is understood by the "direct effect theory",which is the current general theory of civil law in China.There is a greater risk of impairment of the bankruptcy consortium,which may actually be contrary to the goal of maximizing the interests of creditors under the bankruptcy law.In the course of bankruptcy proceedings,the "compromise" theory is a more suitable solution to deal with the executory contract,which maintains the status quo of the transaction already formed,and makes the discharge of the executory contract only take effect in the future,avoiding the direct impairment of the bankruptcy estate caused by the return of the original property.If the insolvency administrator chooses to continue to perform the contract,on the one hand,it means the possibility of achieving a win-win situation for both the bankrupt enterprise and the counterparty,but also means that the counterparty loses the right to choose freely and is forced to bear the risk of continuing to deal with the enterprise in debt crisis.Therefore,the system of recognition and guarantee of joint interest claims is the institutional guarantee for contractual counterparties in the current rules for handling executory contract in China.Compared with the traditional theory that the calculation is based on the unfulfilled portion of the bankrupt enterprise,the recognition of the common interest debt,calculated on the basis of the unfulfilled portion of the counterparty,is more in line with the nature of the common interest debt and more conducive to fairness.Secondly,forcing the bankrupt enterprise to provide guarantee for continued performance is a necessary means to enhance the confidence of the contractual counterparty and motivate it to actively perform the contract.The current rules for handling executory contract,regarding the compulsory provision of guarantee and the large coverage of guarantee,are reasonable and effective and should be maintained.Since the bankruptcy law system’s value pursuit of maximizing the interests of all creditors is different from the general civil law theory,it is necessary for the bankruptcy law system to formulate special rules for handling executory contract,construct a perfect legal system to balance the interests of all parties involved,and achieve the main goal of bankruptcy law to protect the interests of creditors and promote fair liquidation.However,under the current bankruptcy legal system with general expressions and abbreviated provisions,the unilateral option of the bankruptcy administrator is often exercised at the expense of the interests of the counterparty.The few words and thin judicial interpretations in the current Bankruptcy Law are far from sufficient to build a balanced system of rules for the treatment of executory contract.Improving the exit mechanism and optimizing the business environment are the key directions of work in the coming phase of market economy system reform.In this case,it is very important to solve the problem of exit mechanism for market players to optimize the business environment.As one of the necessary parts of the bankruptcy process,the treatment of executory contract is a key step for market participants to be able to exit the market in an orderly manner,and its optimization is of great significance.