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Bankruptcy Provisions in Contracts: Drafting Tips, Mitigating Risks, Enforcement Issues

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, November 21, 2023

Recorded event now available

or call 1-800-926-7926

This CLE webinar will discuss bankruptcy provisions in executory commercial contracts. The panel will identify unenforceable provisions and provide drafting tips to insulate parties from the consequences of bankruptcy filings by the counterparties to their agreements.


Most businesses, no matter what the industry, rely on executory contracts that often contain bankruptcy provisions. When entering into any agreement it is important for businesses to understand the implications of these provisions and the risks they may present if the counterparty files for bankruptcy.

Bankruptcy provisions often provide that upon a bankruptcy filing of any party to the contract, the contract shall be deemed terminated and unenforceable. Bankruptcy courts refer to such contract provisions as unenforceable, ipso facto clauses. Contractual waivers of the automatic stay (established by Section 362 of the Bankruptcy Code) are not per se unenforceable like ipso facto clauses, but the enforceability of such waivers is the exception, not the rule.

Beyond ipso facto clauses and automatic stay waivers, references to the bankruptcy process in any contract should be scrutinized. Such provisions could unintentionally invoke provisions of the Bankruptcy Code, creating confusion at the time of enforcement or seek to avoid the requirements of the Bankruptcy Code in a way that would never be tolerated in a bankruptcy setting.

The better approach when drafting bankruptcy provisions is that they provide clarity in a stressful bankruptcy situation. Regardless of what form bankruptcy provisions take, the parties should understand the terms at the time of execution of the contract rather than try to understand what they've agreed to after a bankruptcy filing occurs.

Listen as our authoritative panel discusses key considerations when reviewing and drafting bankruptcy clauses and provides tips for providing innovative relief in advance of a bankruptcy filing.



  1. Review of common boilerplate bankruptcy provisions
    1. Ipso facto clauses
    2. Automatic stay waivers
  2. Bankruptcy provisions that require close scrutiny
  3. Strategies and drafting tips to minimize the negative effects of bankruptcy on contracts
    1. Shortening the agreed-upon term of the contract
    2. Stipulations and affidavits of fact
    3. Characterization of the transaction
    4. Forward contract treatment
    5. Exceptions for intellectual property contracts
    6. Other innovative forms of relief to include
  4. Lessons learned from caselaw interpreting bankruptcy contract provisions
  5. Practical considerations and key takeaways


The panel will review these and other key issues:

  • What are examples of common unenforceable ipso facto clauses in contracts?
  • What types of bankruptcy process references in contracts should be carefully scrutinized?
  • What drafting techniques are available to minimize the negative effects of a contract counterparty's bankruptcy filing?


Carter, Christopher
Christopher Carter

Morgan, Lewis & Bockius

Mr. Carter focuses his practice on cross-border insolvency matters, bankruptcy, complex litigation, and distressed debt...  |  Read More

Gallo, Andrew
Andrew J. Gallo

Partner, Co-Leader Bankruptcy, Restructuring and Insolvency Practice
Morgan, Lewis & Bockius

Both an accomplished trial lawyer and bankruptcy attorney, Mr. Gallo counsels secured and unsecured creditors, equity...  |  Read More

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