“Caveat Venditor — Ensure Debtor Has Authority To Pay”

(As published in Bankruptcy Law360 on April 20, 2010)

Imagine that you are the head of a major petroleum company that has a sales agreement with a distributor of motor fuel. Under the terms of the agreement, if the distributor wants your products, you are contractually obligated to deliver them. And the sales volume is significant, say $1 million per week. Assume further that the distributor, as is often the case, has pledged all of its personal property, including cash and inventory, to obtain financing. Read More.