In Re Gold Coast Seed Company, Debtor, M. Nolden, Trustee v. Van Dyke Seed Company, Inc.

The Bankruptcy Code provides that in certain circumstances a trustee may avoid a debtor’s property transfer if the transfer was made on or within ninety days before the date of the filing of a petition for bankruptcy. 11 U.S.C. § 547 (b)(4)(A). One exception to this general rule is that the trustee may not avoid the transfer to the extent it was in “payment of a debt incurred in the ordinary course of business,” and made in the ordinary course of business not later than forty-five days after the debt was incurred. 11 U.S.C. § 547 (c)(2)(A)-(D). In this case, the trustee seeks to avoid the debtor’s payment under a “forward contract” to purchase seed from Van Dyke Seed Company. The issue is whether the debt was incurred within forty-five days of the payment.

A forward contract is an agreement to sell a commodity at a fixed future date but at a price set at the time the contract is written. SEC v. G. Weeks Securities, Inc., 678 F.2d 649, 652 (6th Cir.1982). In the contract at issue here, the Bankrupt, Gold Coast Seed Company, agreed to buy quantities of seed from Van Dyke at fixed prices. There were two contracts: the first was executed in September and the second in November of…