An executory contract refers to a contractual agreement which has been made, but performance remains wholly or partly unperformed by both parties. The terms of the contract are set to be fulfilled at a later date. An executory contract is often in place between a debtor or borrower and another party. In a contractual situation where one party has fully completed their duties, and the other party remains to pay, the contract will not be viewed as executory.
In contrast, an executed contract refers to an agreement where performance has been completed.
Some common types of executory contracts include:
- Rental agreement: The tenant pays the landlord rent in instalments (typically monthly), and the landlord provides and maintains the living space.
- Car lease: The customer makes payments to the dealership, which provides the car subject to those payments.
- Development contract: The contractor receives payment from the landowner when construction milestones are met, and the contractor performs building duties for the landowner.