Examining the Limits of the Forward Contract Safe Harbor

December 14, 2017

As discussed in a recent Dechert OnPoint, section 365(e)(1) of the U.S. Bankruptcy Code provides that an executory contract of a debtor may not be terminated solely because of a provision in such contract that is conditioned on, among other things, a bankruptcy filing (the ipso facto provision). There are, however, certain exceptions to the ipso facto provision of the Bankruptcy Code, including the forward contract safe harbor under section 556 of the Bankruptcy Code.

An examination of the forward contract safe harbor has been addressed recently by the Connecticut Supreme Court in CCT Communications, Inc. v. Zone Telecom, Inc., Case No. SC 19574, Nov. 21, 2017, where the Court held that a contract for long distance telephone services was not a forward contract entitled to the protections of section 556 of the Bankruptcy Code.   

Read "Examining the Limits of the Forward Contract Safe Harbor."