What defines an executory contract?

An executory contract is defined as one in which part of the obligations or duties outlined in the agreement remains partially or completely unfulfilled. This means that while the contract might have been initiated and set into motion, certain performance elements—such as payment or delivery of goods—have not yet been completed by one or both parties involved.

For instance, in a lease agreement, the tenant may have moved in and started paying rent, but the lease spans over a year, meaning that obligations will continue for the duration—making it executory as the terms are still active and not fully performed.

This distinguishes it from contracts that are fully executed, where both parties have completed their obligations, and from non-binding agreements, where there is no legal obligation to perform. Additionally, automatic renewal does not define executory contracts specifically; it refers more to the continuation clause often found in various types of contracts, rather than the status of performance outlined in the contract itself.