What does the term "executory contract" refer to?

The term "executory contract" specifically refers to an agreement in which some obligations or terms have yet to be completed by one or both parties. This concept is critical in understanding the status of contracts, particularly in real estate transactions. In an executory contract, while the agreement is valid and enforceable, the execution of the terms—such as the transfer of property or payment—has not yet occurred, thus creating a pending situation for both sides.

In contrast, a fully completed contract would no longer be considered executory, as all obligations have been fulfilled. Similarly, a verbalized but unwritten contract does not necessarily fall under the definition of executory contracts, since it can lack enforceability and legal backing. Lastly, a void contract, which has no legal impact, is fundamentally different from an executory contract because it doesn't hold any binding obligations to be fulfilled in the first place. Therefore, the essence of an executory contract lies in it being an ongoing agreement that awaits the completion of specified actions or terms.