Under section 365 of title 11 of the United States Code (the “Bankruptcy Code”), “[a] trustee [or debtor], subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor.” Before assumption, a debtor must promptly cure or provide adequate assurance that it will promptly cure any defaults that existed at the time of assumption. Under New York law, an intended third-party beneficiary of a contract can enforce the terms of that contract.
This Article discusses how the Southern District of New York dealt with the issue of whether an intended third-party beneficiary to a contract can assert a cure claim under section 365(b)(1)(A). Part I analyzes the section 365(b)(1)(A) cure right and discusses the implications of, and requirements for, a debtor exercising their right to assume an executory contract or unexpired lease. Part II looks at how New York courts determine third-party beneficiary status. Part III examines the only reported decision that addresses whether an intended third-party beneficiary can bring a cure claim.