Executory Contract

An executory contract is a contract where “things are yet to be done.” In a typical real estate transaction, the contract is executory from the moment the buyer and seller sign it up until the actual closing, where it becomes fully executed.

Texas-Specific Nuance & Citation

Texas law places strict regulations on long-term executory contracts, such as Contracts for Deed (land contracts), lease-purchase options, and lease-own agreements. Under Texas Property Code Chapter 5, Subchapter D, sellers face severe penalties if they fail to provide annual accounting statements or clear titles.

The Trap

Candidates often confuse “executed” with “executory.” An executed contract means all parties have fully performed all terms (the deal is done and closed). An executory contract is signed but active—the obligations (such as securing a loan or conducting inspections) are still in progress.

Worked Example

A buyer and seller sign a sales contract on May 1st, with a closing date scheduled for June 15th. During this 45-day period, the contract is executory. Once both parties sign the closing documents and funds are disbursed on June 15th, the contract becomes fully executed.