EXECUTORY CONTRACT AND INSOLVENCY-SETOFF Clause Samples
The "Executory Contract and Insolvency-Setoff" clause defines the rights of parties to offset mutual debts and obligations in the event that one party becomes insolvent while an executory contract is still in effect. In practice, this means that if both parties owe each other money or performance under a contract that has not yet been fully performed, and one party enters bankruptcy or insolvency proceedings, the other party can reduce what it owes by the amount it is owed. This clause is crucial for managing credit risk and ensuring that parties are not left at a disadvantage if the other party becomes insolvent before the contract is fully executed.
EXECUTORY CONTRACT AND INSOLVENCY-SETOFF. 9.1. INSOLVENCY-SETOFF (OR OFFSET). In the event either party to the Assumption Agreement shall be the subject of insolvency proceedings ("Insolvency Proceedings") all independent debts on unrelated contracts between the parties shall be setoff to the extent:
(a) the debt from the creditor to the insolvent arose pre-petition.
(b) the debt from the insolvent to the creditor arose pre-petition.
(c) the debts are mutual, meaning they are between the two parties to this Assumption Agreement, and in the same right and the same capacity. The cash payment due on each reinsurance agreement between the parties shall constitute the "debt" on such agreement.