An executory contract — or illusory contract — describes an agreement in which one or both parties have yet to perform their contractual obligations. More simply, it is an unexecuted contract.
An example of an executory contract in real estate is when a buyer and seller are in escrow, and one or both parties still have obligations they must perform.
What Makes a Contract Illusory
An illusory promise is a statement, agreement, or promise that the law cannot enforce. A statement is considered illusory when there is no consideration or possibility of the terms of the agreement will be executed. For example, “I will bet you a million dollars that the messiah is coming back” is an illusory promise and therefore cannot be enforced by law. There is no way to prosecute for an illusory promise.
The term illusionary promise or statement comes from word “illusion” which means “not real” or “based off something false.” An illusionary promise is named as such because it has the illusion if sounding like a contract when in fact it is not one.
If the promise can be reasonably followed up with consideration then the contract is enforceable and it is not illusory.