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monetary default.
The non-debtor party to a land sale contract argued that the debtor's failure to timely close was a historic, non-monetary default that could not be cured. The bankruptcy court disagreed, holding that where the default did not cause a substantial economic detriment to the non-debtor party, the default could be waived or cured.
Landlords and non-debtor parties want to avoid a debtor picking and choosing among contracts, leases or obligations therein. Strategies to avoid this result include making obligations interdependent or cross-defaulted, or part of a master lease or similar instrument.
After one court found that a contract was not terminated before bankruptcy, the creditor argued that the pharmacy agreement could not be assumed because the debtor was in default under other agreements which were cross-defaulted with the agreement sought to be assumed. The Fifth Circuit held that cross-default provisions are not inherently unenforceable, although they are suspect and should be carefully scrutinized to determine their enforceability. The Circuit followed a Southern District of New York precedent, holding that if the cross-default provision would not have been exercised outside of bankruptcy, but was being used in bankruptcy to obtain priority payment, it would not be enforced. In the case before the circuit, the pharmacy agreement was related to ownership of the hospital, so that foreclosure of the owner's interest in the hospital also justified termination of the pharmacy agreement with an affiliate of the owner.
A landlord argued that six separate leases which were cross-defaulted could not be separately
