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In GuangDong Midea Consumer Electric Manufacturing Company Ltd. et al. v. Corelle Brands (Texas) Inc. et al., 170 F.4th 928 (5th Cir. 2026), the U.S. Court of Appeals for the Fifth Circuit recently found that purchase orders (POs) for the sale of goods constituted divisible (or severable) contracts for purposes of contract assumption under section 365 of the Bankruptcy Code despite the buyer's and seller's relationship being governed by a master supply agreement (MSA).
The Fifth Circuit found that the MSA and POs at issue were divisible contracts because the MSA merely provided a "foundation for an ongoing business arrangement characterized by an open-ended number of separate transactions" and the parties were left to negotiate key terms in future POs, including price, quantity and various other specifications.
In this Reuters article, Loeb Restructuring & Bankruptcy partners Bethany Simmons and Noah Weingarten discuss this Fifth Circuit ruling, noting that the decision provides helpful clarification to companies on how to analyze the divisibility of commercial contracts when those contracts are assumed and assigned in bankruptcy, as well as highlights the importance of carefully drafting MSAs and POs.
To read the full article, please visit Reuters’ website (subscription may be required).
The Fifth Circuit found that the MSA and POs at issue were divisible contracts because the MSA merely provided a "foundation for an ongoing business arrangement characterized by an open-ended number of separate transactions" and the parties were left to negotiate key terms in future POs, including price, quantity and various other specifications.
In this Reuters article, Loeb Restructuring & Bankruptcy partners Bethany Simmons and Noah Weingarten discuss this Fifth Circuit ruling, noting that the decision provides helpful clarification to companies on how to analyze the divisibility of commercial contracts when those contracts are assumed and assigned in bankruptcy, as well as highlights the importance of carefully drafting MSAs and POs.
To read the full article, please visit Reuters’ website (subscription may be required).
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