WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

Companies should anticipate the possibility that they will find themselves in a situation where a vendor, customer, or other contract counterparty commences a bankruptcy case pursuant to Title 11 of the U.S. Code (the Bankruptcy Code). The ongoing COVID-19 pandemic has caused economic stress to a wide variety of business sectors, and it has underscored the risk that a contract counterparty may file for bankruptcy.

Bankruptcy effect on vendor and supply contracts

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

Companies should anticipate the possibility that they will find themselves in a situation where a vendor, customer, or other contract counterparty commences a bankruptcy case pursuant to Title 11 of the U.S. Code (the Bankruptcy Code). The ongoing COVID-19 pandemic has caused economic stress to a wide variety of business sectors, and it has underscored the risk that a contract counterparty may file for bankruptcy.

Bankruptcy effect on vendor and supply contracts

In Berryman v Zurich Australia Ltd [2016] WASC 196 it was decided that a bankrupt's entitlement to claim a TPD benefit under a life insurance policy is not an entitlement that is divisible amongst the bankrupt's creditors, and therefore such an entitlement does not vest in the Official Trustee in bankruptcy. Tottle J of the Supreme Court of Western Australia ruled that the bankrupt insured could continue an action in his own name to recover the TPD benefit. Life insurers may need to adjust their claims' payment practices in light of the Berryman decision.