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§ 24-305. Assumption or rejection of executory contract

West's Annotated Code of MarylandCommercial LawEffective: October 1, 2019

West's Annotated Code of Maryland
Commercial Law
Title 24. Maryland Commercial Receivership Act (Refs & Annos)
Subtitle 3. Rights, Powers, and Duties of a Receiver (Refs & Annos)
Effective: October 1, 2019
MD Code, Commercial Law, § 24-305
§ 24-305. Assumption or rejection of executory contract
Currentness
(a)(1)(i) At any time before a court's approval of a final report under § 24-602 of this title, a receiver may assume or reject an executory contract of the owner if the receiver has provided notice of the contract and an opportunity for a hearing to the counterparty to the contract.
(ii) If the requirement under subparagraph (i) of this paragraph is not satisfied, the executory contract shall be deemed rejected.
(2)(i) The court may condition the assumption or rejection of an executory contract on the terms and conditions that the court determines are just and proper under the particular circumstances of the case, except that a condition to assumption shall be a prompt cure of all existing monetary defaults.
(ii) A receiver's performance of an executory contract before a court order authorizing the assumption or rejection of the contract does not constitute an assumption of the contract or an agreement to assume or otherwise prevent the receiver from seeking the court's authority to reject the contract.
(b) Notwithstanding the time period for assumption or rejection of an executory contract under subsection (a) of this section, the court, for cause, may order the receiver to assume or reject an executory contract at any time after the receiver's appointment.
(c) Any obligation or liability incurred by a receiver as a result of the receiver's assumption of an executory contract shall be treated as an expense of the receivership.
(d)(1) A receiver's rejection of an executory contract shall be:
(i) Effective on entry of an order of rejection; and
(ii) Treated as a breach of the contract occurring immediately before the entry of the order appointing the receiver.
(2) The receiver's right to possess or use receivership property under an executory contract shall terminate on rejection of the contract.
(3) A claim for damages for rejection of an executory contract shall be submitted before the later of:
(i) The time for submitting a claim in the receivership case; or
(ii) 30 days after entry of the order approving the rejection.
(e) A receiver may not assume an executory contract of the owner without the consent of the counterparty to the contract if:
(1) Notwithstanding the absence of any provision in the contract expressly restricting or prohibiting an assignment of the owner's rights or the performance of the owner's duties, applicable law would excuse a party, other than the owner, from accepting performance from or rendering performance to anyone other than the owner;
(2) The contract is a contract to:
(i) Make a loan to or for the benefit of the owner;
(ii) Extend credit or financial accommodation to or for the benefit of the owner; or
(iii) Issue a security; or
(3) The contract expires before the receiver's assumption of the contract by the contract's own terms or under applicable law.
(f) A receiver may not assign an executory contract without assuming the contract, absent the consent of the counterparty to the contract.
(g)(1) This subsection applies to a rejection by the receiver of an executory contract for:
(i) The sale of real property under which the owner is the seller and the purchaser is in possession of the real property;
(ii) The sale of a real property timeshare interest under which the owner is the seller;
(iii) The license of intellectual property rights under which the owner is the licensor; or
(iv) The lease of real property in which the owner is the landlord.
(2) If the receiver rejects an executory contract:
(i) A purchaser, licensee, or tenant:
1. May treat the rejection as a termination of the contract, license agreement, or lease; or
2. A. May remain in possession in accordance with the terms of the contract, license agreement, or lease, and for a lease, any renewal or extension of the lease in accordance with the terms of the lease; and
B. Shall continue to perform all obligations arising under the contract, license agreement, or lease as and when they become due, but may offset against any payments for any damages occurring as a result of the rejection after the rejection occurs;
(ii) A purchaser of real property:
1. Is entitled to receive from the receiver any deed or other instrument of conveyance that the owner is obligated to deliver under the executory contract when the purchaser becomes entitled to receive the deed or other instrument of conveyance; and
2. The deed or other instrument of conveyance has the same force and effect as if delivered by the owner;
(iii) A purchaser, licensee, or tenant that elects to remain in possession under the terms of this subsection has no rights against the receiver on account of any damages arising from the receiver's rejection except as expressly provided in this subsection; and
(iv) A purchaser of real property that elects to treat rejection of any executory contract as a termination has a lien against the owner's interest in the real property for the recovery of any portion of the purchase price that the purchaser has paid.
(h) If at the time a receiver is appointed the owner has the right to assign an executory contract relating to receivership property, the receiver may assign the contract with court approval if the receiver:
(1) Assumes the contract; and
(2) Promptly cures all monetary defaults under the contract.
(i) A receiver may not reject an unexpired lease of real property under which the owner is the landlord if:
(1) The tenant occupies the leased premises as the tenant's primary residence;
(2) The receiver was appointed at the request of a person other than a mortgagee; or
(3)(i) The receiver was appointed at the request of a mortgagee; and
(ii) 1. The lease is superior to the lien of the mortgage;
2. The tenant has an enforceable agreement with the mortgagee or the holder of a senior lien under which the tenant's occupancy will not be disturbed as long as the tenant performs the tenant's obligations under the lease;
3. The mortgagee has consented to the lease, either in a signed record or by the mortgagee's failure to timely object that the lease violated a provision of the mortgage; or
4. A. The terms of the lease were commercially reasonable at the time the lease was agreed to by the tenant and the landlord; and
B. The tenant did not know or have reason to know that the lease violated a provision of the mortgage.
(j) Section 4A-606 of the Corporations and Associations Article may not be affected by a receiver's rejection of an executory contract under this section.

Credits

Added by Acts 2019, c. 284, § 1, eff. Oct. 1, 2019.
MD Code, Commercial Law, § 24-305, MD COML § 24-305
Current through legislation effective through April 9, 2023, from the 2024 Regular Session of the General Assembly. Some statute sections may be more current, see credits for details.
End of Document