Do You Have To Sell To An Insolvent Purchaser?

Given the state of the economy, it will not be a rare occurrence in the short term for a supplier to receive a request to sell and deliver further goods to a purchaser who has filed proceedings under the Companies Creditors Arrangement Act (CCAA) or Chapter 11 of the United States Bankruptcy Code — and who is already indebted for unpaid pre-filing sales.

Can the supplier simply refuse to sell any further goods? Can the supplier impose the condition that some or all of its pre-filing invoices first be paid? And what assurances can the supplier obtain that new post-filing sales will in fact be paid?

In both CCAA and Chapter 11 proceedings, the answers to those questions depend on whether the supplier is bound at the time of the filing by an otherwise valid obligation to sell, for example, under a long-term supply contract.