Legal Definitions - executory

The term executory refers to something—most commonly a contract or agreement—that has been initiated but has not yet been fully performed or completed. It describes a situation where future actions, conditions, or obligations still need to be satisfied by one or more parties before the matter can be considered final or fully effective. Essentially, an executory item is in a state of being "in progress" or "pending completion." Once all outstanding obligations are met and conditions fulfilled, the item becomes "executed."

Here are some examples to illustrate the concept of executory:

• Construction Contract: Imagine a homeowner hires a contractor to build a new deck. They sign a detailed contract outlining the design, materials, payment schedule, and completion date. At the moment the contract is signed, it is an executory contract. The contractor has not yet built the deck, and the homeowner has not yet made all the payments. Both parties have future obligations to fulfill—the contractor must construct the deck according to the specifications, and the homeowner must pay the agreed-upon price. Until these actions are completed, the contract remains executory.

• Conditional Real Estate Purchase Agreement: Consider a scenario where a buyer and seller sign an agreement for the sale of a house. However, the agreement includes a clause stating that the sale is contingent upon the buyer successfully selling their current home within 60 days. This purchase agreement is executory. While the parties have agreed to the terms, the actual transfer of property ownership and payment has not yet occurred. The full effect of the sale is pending a future condition—the buyer's ability to sell their existing home. If that condition isn't met, the executory agreement might be terminated without the sale ever being executed.

• Future Employment Offer: A company extends a job offer to a candidate, and they both sign an employment contract stating that the candidate will begin work in two months, provided they pass a background check and drug screening. This employment contract is executory. Although the agreement is formally made, the candidate has not yet started working, and the company has not yet begun paying wages or providing benefits. Both parties have future obligations and rights that will only fully come into effect on the agreed-upon start date, and after the specified conditions (background check, drug screening) are successfully met. Until then, the contract is in an executory state.