Study On The Application Of Law To Discharge A Executory Contract By Bankruptcy Administrator

Article 18 of the Enterprise Bankruptcy Law of the People’s Republic of China grants the bankruptcy administrator the right to terminate executory contracts,which can help a bankrupt enterprise to get rid of an unfavorable contract and facilitate the rebirth of the bankrupt enterprise;however,the granting of power under this provision is too abstract,which has led to great divergence among courts in practice.As a special right of rescission that is different from traditional rules,the bankruptcy administrator’s right of rescission is not unlimited,and the application of rescission rules for executory contracts must be based on the basic principles of promoting the value preservation and appreciation of the debtor’s property,taking into account the balance of interests and respecting non-bankruptcy rules.From the perspective of legal application,first of all,the scope of the contract to be performed should be specified,and only a contract that has the payment obligations of both parties that have been fully performed can be an executory contract;secondly,the business judgment standard that takes into account a balance of interests should be adopted as the review standard,so as to give the bankrupt enterprise initiative to make decisions to avoid imbalance of interests,and at the same time restrict the right of the bankruptcy administrator to rescind some special types of contracts;finally,in terms of legal consequences,the retrospective effect of rescission of a contract to be performed shall be denied,and on this basis,the right of claim for restitution enjoyed by the counterparty should be treated as a bankruptcy claim,and the scope of claim for damages should include actual losses and anticipated profit,while the clause on liquidated damages should not apply.