Legal Environment of Business 8th Edition by Henry Cheeseman

Exercise 6

Executory Contract The Record Company, Inc. (The Record Company), entered into a purchase agreement to buy certain retail record stores from Bummbusiness, Inc. (Bummbusiness). All assets and inventory were included in the deal. The Record Com­pany agreed to pay Bummbusiness $20,000 and to pay the $380,000 of trade debt owed by the stores. In ex­change, Bummbusiness agreed not to compete with the new buyer for two years within a 15-mile radius of the stores and to use its best efforts to obtain an extension of the due dates for the trade debt. The Record Com­pany began operating the stores but shortly thereaf­ter filed a petition for Chapter 11 bankruptcy. At the time of the bankruptcy filing, (1) The Record Company owed Bummbusiness $10,000 and owed the trade debt of $380,000, and (2) Bummbusiness was obligated not to compete with The Record Company.
Can The Record Company reject the purchase agree­ment? In re The Record Company, 8 B.R. 57, 1981 Bankr. Lexis 5157 (United States Bankruptcy Court for the Southern District of Indiana)