The following is not meant to be legal advice.
In many contracts, the attorneys see standard language on being able to terminate an agreement if the other party files a bankruptcy petition or has difficulties with creditors.
For example, termination in the event: (i) Licensor has substantiated reason to believe that Licensee may be unable to pay its debts when due, make any assignment for the benefit of creditors, file any petition under the bankruptcy or insolvency laws of any jurisdiction, appoint a receiver or trustee for its business or property, or may be adjudicated bankrupt or insolvent or (ii) Licensee is unable to pay its debts when due, files a petition in bankruptcy, or is adjudicated a bankrupt, or if a petition in bankruptcy is filed against Licensee, or if Licensee becomes insolvent, or makes an assignment for the benefit of its creditors or an arrangement pursuant to any bankruptcy law, or if Licensee discontinues its business, or if a receiver is appointed for Licensee or its business.
Are such provisions actually enforceable? Perhaps see 11 USC Section 365, particularly 11 USC Section 365(e)(1). There is a prohibition on enforcing certain bankruptcy termination clauses, but the area has exceptions such as 11 USC Section 365(n), and rules for when the debtor continues to perform. On termination, it also makes a difference whether the agreement is executory.
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