What characterizes an executory contract?

An executory contract is defined as a contract that has not been fully performed by all parties involved. This means that while the agreement has been made and obligations are recognized, there are still outstanding duties or actions that need to be completed for the contract to be fully executed.

For example, in a real estate transaction, if one party has agreed to sell property and the other party has agreed to purchase it, but the transfer of the property has not yet occurred, the contract remains executory. Its status will change to fully executed only once all obligations are carried out in accordance with the terms laid out in the contract.

The other options represent concepts that do not accurately describe an executory contract. If all terms were completed, the contract would no longer be executory; instead, it would be considered executed. A contract created by conduct refers to a different principle known as an implied contract, while bilateral obligations indicate that both parties have responsibilities, but does not by itself define the executory nature unless those obligations are not yet performed.