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An executory contract is characterized by the fact that it has not yet been fully performed by all parties involved. In other words, there are outstanding obligations that each party must still fulfill under the terms of the agreement. This definition is key to understanding various legal and business scenarios, such as real estate transactions or service agreements, where the execution of the contract may be ongoing or contingent upon future actions.

It's important to recognize how this contrasts with fully performed contracts, where all parties have completed their respective obligations. An executory contract remains active until all terms are satisfied, which could involve delivery of goods, completion of services, or payment.

Understanding the nature of executory contracts is critical, particularly in legal contexts, where parties may need to enforce the terms of the agreement or seek remedies if one party fails to fulfill their responsibilities before the contract can be fully executed.