The most important aspect of a bankruptcy sale is the fact that the assets are sold freely and without any right of pledge, receivables, charges and other shares sold by the assets sold and transferred on the proceeds of the sale. The pledge rights, receivables, charges and other shares are transferred before the assets are transferred to the purchaser. All bankruptcy sales require a hearing and the rules also provide that, at the confirmation of sale hearing, other qualified bidders have the opportunity to offer more for the assets than the stalking horse supplier. In cases where there is a qualified bid for more than the amount of the stalking horses offer, the court will reject the stalking horse`s offer and use the angry bid as an opening offer at a public auction. The party making the highest bid at the auction is identified as a winning buyer and enjoys all the protection measures and benefits originally intended to protect and enjoy the stalking horse. Section 365 of the Bankruptcy Code provides for a mechanism for accepting and transferring or refusing enforcement contracts. However, sometimes a contract is overlooked and is not positively accepted or rejected in bankruptcy proceedings. Some courts have held that such contracts are “ongoing” in bankruptcy and remain enforceable after the restructuring. But what happens if the debtor does not reorganize and sell his assets in a sale in Section 363? Can a performance contract that is neither accepted nor refused be enforceable against a buyer? The U.S. Banking Court for the District of Delaware said “no” in the case of Thane International, Inc. Delaware Bankruptcy Court recently published Stanley Jacobs Prod., Ltd. v. 9472541 Can.

Inc. (in re Thane Int`l, Inc.), No. 17-50476 (KG), 2018 Bankr. LEXIS 464 (Bankr. Del, D. Feb. 21, 2018), that a debtor must make a formal application for acceptance and transfer of an executor and, in this context, rejected the doctrine of “implied acceptance” on the basis of the debtor`s conduct. The decision refused to follow cases that allowed for a follow-up by behaviour and stressed the need for a positive movement practice for the adoption of an agreement in the context of a sale transaction. Neither the asset sale agreement nor the order of sale explicitly related to Stanley Jacobs` contract.

After reviewing the requirements of Section 365 and the existing bankruptcy rules, the Tribunal found that the failure to expressly require acceptance and transfer in an application was also fatal to Stanley Jacob`s right to acceptance. A “performance contract” is a contract under which the unfulfilled obligations remain on either side, so that each party would be excused from the benefit if the other party violated its remaining obligations. Section 365 of the Bankruptcy Code allows the debtor to reject, accept or resume his enforcement contracts in the event of bankruptcy. Many contracts usually concluded in the oil and gas industry, including joint enterprise agreements, supplier contracts, farmout and midstream agreements, can be considered performance contracts under the Bankruptcy Act. It is therefore important for a buyer to identify essential contracts that can be considered performance contracts and to direct the debtor in a timely manner with respect to the performance contracts taken over by the debtor and transferred to the purchaser as part of the bankruptcy proceedings. This lawsuit is usually dealt with in each sales contract as well as in the sale application and associated orders that are proposed to the bankruptcy court.