Non-Monetary Defaults Need Not be Cured to Assume Contract

The obligation of a chapter 11 debtor-in-possession ("DIP") or bankruptcy trustee to cure defaults under a contract as a condition to assuming it is well understood. However, the Bankruptcy Code’s exclusion of certain kinds of defaults from the cure obligation has been controversial in the courts. So much so, in fact, that a rift recently emerged in the circuits concerning whether or not non-monetary defaults must also be cured before a contract can be assumed in bankruptcy. The rift’s provenance lies in a ruling recently handed down by the First Circuit. In In re BankVest Capital Corp., the Court Corp of Appeals held that section 365(b)(2)(B) excuses a DIP or trustee from curing non-monetary defaults under a lease as a condition to assumption.