What characterizes an executory contract?

An executory contract is characterized by the fact that some terms of the agreement have not yet been fulfilled. This means that at least one party has obligations that remain to be completed under the terms of the contract. It reflects an agreement where the execution or performance is still pending.

When examining the other options, they present different concepts. The idea of all terms being fulfilled pertains to fully executed contracts, where all parties have completed their contractual obligations, which does not fit the definition of an executory contract. Similarly, a fully executed contract reinforces the notion that all actions have been performed, further clarifying that the contract is no longer executory. Lastly, a verbal agreement implies that the contract is only spoken and lacks written documentation. Although it could technically be executory if it involves pending actions, being verbal alone does not define the executory nature of a contract.

Thus, the defining characteristic of an executory contract is the presence of unmet obligations, affirming that option concerning incomplete terms is indeed the correct understanding of the concept.