; Defense! Defense!: Payments Made Under Assumed Supply Contract Terms Not Recoverable As Preference Payments
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Defense! Defense!: Payments Made Under Assumed Supply Contract Terms Not Recoverable As Preference Payments

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Suppliers of goods and services frequently enter into long-term supply contracts with their customers. Supply contracts provide benefits to both parties; the customer knows that the product or service will be available and supplied, and the supplier knows that the customer will be purchasing on a regular basis. Supply contracts may also lock in pricing for commodities or services which provide predictable costs for the buyer and predictable revenue for the seller. Once the customer/buyer enters into the world of bankruptcy, supply contracts are referred to as executory contracts and governed by Section 365 of the Bankruptcy Code. In the past, several of the Circuit Courts of Appeal have said that these payments are not recoverable under the Bankruptcy Code preference statute, although trustees still appear to attempt to avoid such payments. If you are a party to an assumed executory contract, the payments you receive under the terms of the contract are not recoverable.

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