A fixture of many different kinds of business contracts is the termination-on-bankruptcy (or “ToB”) provision. It states that if the party in question experiences bankruptcy or any of a series of rela…
Termination-on-Bankruptcy Provisions: Some Proposed Language
In Brief
- Although termination-on-bankruptcy provisions in business contracts generally are unenforceable, there are certain contexts in which such provisions are valid.
- These include those involving the “personal services” exception, a contract party that is insolvent but no bankruptcy case is filed, or specified securities and financial market transactions.
- In the interest of improved substance and clarity, the authors propose model language both for use in contracts governed by state laws, and in jurisdictions other than one of the U.S. states.
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