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					                                                                      Obligations Outline
                                                                     Professor Levasseur
                                                                             Spring 2002


                            Obligations Outline
                                  Professor Levasseur
                                      Spring 2002


Obligations in General

Classification:
      Based on Object
            To give/To do/Not to do
               o Significance of distinction: damages awarded
                       To give: to transfer (not synonymous with donate)
                              E.g. pay the price
                              Effect: Specific performance can be required
                       To do:
                              E.g. paint the house
                              Effect: Specific performance not generally
                                awarded
                       Not to do:
                              E.g. stay off the grass
                              Effect: Specific performance can be required
               o Result/Means:
                       Significance of distinction: burden of proof
                       Result: Performance or object of obligation is a definite
                         result
                              E.g. airline ticket- contract of result, object is to get
                                to Paris, France, if the airline drops you off in
                                Paris, TX- they are in breach
                              Effect: to prove breach- only need to prove that
                                the agreed upon result didn’t happen- low burden
                                of proof for the obligee. Essentially switches
                                burden of proof to the obligor who must prove that
                                a fortuitous event prevented performance.
                       Means: Obligor is expected to use the best possible
                         means available to him, or to act with the utmost care
                         and diligence in the performance of his obligation, but
                         without guaranteeing a definite result.
                              E.g. contract for medical treatment of a doctor, she
                                agrees to treat you with all her skill but doesn’t
                                promise to cure you.
                              Effect: to prove breach- must prove that the
                                means used were defective- higher burden of
                                proof
               o Pecuniary v. kind
                       Significance of distinction:


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                                                                  Obligations Outline
                                                                 Professor Levasseur
                                                                         Spring 2002

                      Pecuniary: money (do other fungibles fit here too?)
                      Kind: services or identified things (what do I mean by
                       identified?)
       o Based on Source
            o Significance of Distinction: (got me!)
                Juridical Fact: source is the law/a natural event
                    Delict
                    Quazi Delict
                    Legal/natural:
                           E.g. birth of a child
                Juridical Act: source is parties’ will
                    Contract
                    Quazi Contract (does this fall in between Juridical Act
                       and Fact?)
   Kind:
       o Natural/Civil
                Significance of distinction: legal enforceability, nature/quality
                   of cause for other obligations
                Natural: obligation that cannot be enforced. Arises from
                   circumstances (juridical fact) in which the law implies a
                   particular moral duty to render a performance. (§§1760-62)
                        E.g. of circumstances which give rise to a natural
                          obligation (list comes from §1761 but is not exclusive-
                          In re Atkins’ Estate)
                          o When a civil obligation is extinguished by
                               prescription or in bankruptcy
                          o When an obligation has been incurred by one who
                               has discernment but lacks legal capacity
                          o When the universal successors are bound to
                               execute donations or other dispositions made by
                               the deceased that are null only for want of form
                        Effects
                               o Natural obligations are not enforceable
                               o but if performance owed under one has been
                                  carried out freely it cannot be reclaimed.
                                       Freely here means without compulsion
                                          of fraud or violence. Error does not
                                          vitiate the freedom meant here and so
                                          proof of error does not allow a party to
                                          reclaim his performance.
                               o A contract for the performance of a natural
                                  obligation is onerous not gratuitous.
                               o Can serve as the cause for a contract, which
                                  turns the natural obligation into a civil
                                  obligation.



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                                                             Obligations Outline
                                                            Professor Levasseur
                                                                    Spring 2002

          Civil: all obligations that give rise to a bond of law resulting in
           rights and obligations which can be enforced
                E.g. contract of sale, lease, etc
                Effects: can be enforced in a court of law
o Personal/Heritable/real
         Significance of distinction:
         Personal: Only the obligee can be the beneficiary of the
           obligation owed by the obligor. Or only the obligor can
           satisfy the obligation to the obligee. Usually based on some
           unique skill, quality, or qualification of the person to whom it
           is personal. Can also be personal by intent of the parties.
           Can be personal to only one of the parties or to both.
                E.g. artist, lecturer, husband to wife, etc.
                Effects:
                       o No one can inherit the obligation
                       o no one can get it by transfer.
                       o Obligation terminates with the death or
                           incapacity of the party to whom it is personal.
         Heritable: obligations who’s performance may be demanded
           by the successor of the obligee or against a successor of the
           obligor. Opposite of a personal obligation. Obligations are
           presumed to be heritable. §1765
               o E.g. Debt to bank, obligations in a sale of property
               o Effects:
                        Heritable: can pass in a succession
                        Assignable: can be transferred while the
                           original party is still alive.
                        Part of the Patrimony (patrimony is made up
                           only of heritable obligations.)
                        Can be carried out by someone other that the
                           obligor or in favor of someone other than the
                           obligee.
                        Death or incapacity of the party rarely
                           terminates the contract.
         Real: Res=thing. Lit-“Obligation owed by a thing” Right is
           transferred on a thing. Duty correlative and incidental to a
           real right
               o E.g. Ownership, Servitude, Usufruct, Mortgage
               o Effects: is inherited, assigned, and/or transferred with
                   the thing
o Nominate/Innominate
         Significance of the distinction: what rules apply
         Nominate: named in the code
                E.g. sale, lease




                                 3
                                                                    Obligations Outline
                                                                   Professor Levasseur
                                                                           Spring 2002

                           Effects: special code article apply specifically to these
                            types of obligations as well as the code articles on
                            obligations in general
                     Innominate: not named in the code
                          E.g. (?)
                          Effects: no special governing articles
   Modalities
      o Term: the time of an event, which in the course of time will happen,
          that attaches to the performance of an obligation. Obligation exists
          immediately. If there is no term performance is due immediately.
          Terms can arise from law, contract, or court order.
                   Express/Implied
                         Express: parties indicate that there is a term for the
                            performance of the obligation
                         Implied: from the nature of the contract
                   Suspensive/Extinctive
                         Suspensive: right of performance is delayed until
                            some set time
                               o E.g. I will give you my umbrella next time it
                                   rains
                               o Effects:
                                        Before the term comes due
                                          the performance being deferred the
                                             obligee cannot demand performance
                                             before the term occurs.
                                          Presumption is that the term is in
                                             favor of the obligor- unless the
                                             contract provides otherwise (that the
                                             term is in favor is the obligee or in
                                             favor of both parties.) The term
                                             benefits the person that it is in favor
                                             of.
                                          No prescription running against the
                                             person for whom the term is in favor.
                                          The obligor or the one who benefits
                                             from the term can waive the benefit
                                             of the term- they can perform in
                                             advance. § 1780
                                          The interests of the obligee should
                                             be protected (quid pro quo to the
                                             benefit of term to the obligor)
                                             o If the obligor is determined to be
                                                 insolvent the term becomes non-
                                                 existent. §1783



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                                                            Obligations Outline
                                                           Professor Levasseur
                                                                   Spring 2002

                                      o During the term the obligee has a
                                          right to sufficient security. §1782
                                At the time the term comes due
                                      o Performance is due §1785
                                      o Occurrence and passing of the
                                          term without performance
                                          automatically puts the obligee in
                                          default. (recent change to code)
                                          §1990
                                          o From the time of default the
                                              obligor begins to owe
                                              moratory damages
                 Extinctive: right of performance comes to an end at
                   some set time
                       o E.g. lease- right to use property comes to an
                           end at the end of the lease term.
         Certain/Uncertain
                 Certain: fixed time period/ determined
                 Uncertain: not fixed but determinable by the intent of
                   the parties or the occurrence of a future and certain
                   event. If not determinable must be performed within a
                   reasonable time. (is that last sentence just a way to
                   imply the intent of the parties? Leaves a better
                   distinction between a term and a condition)
         How to compute a term
                 Use specific date if one given
                 when the term for performance is not marked by a
                   specific date, but by a time, the term begins to run on
                   the day after the contract is made, or on the day after
                   the occurrence of the event and it includes the last
                   day of the period. (old CC talked about sunrise and
                   dawn) § 1784
o Condition: event, which might not happen, tied to the existence of a
  bond of law. (§§1767-1776)
         Express/Implied
                 Expressed in a stipulation
                 Implied by law, the nature of the contract, or the intent
                   of the parties.
         Suspensive/Resolutory
                 Significance of distinction: when enforceable, illegality
                   or impossibility of a suspensive condition make the
                   obligation null, not true of resolutory conditions.
                 Suspensive: obligation may not be enforced/does not
                   exist until the uncertain event occurs
                       o E.g.


                                5
                                          Obligations Outline
                                         Professor Levasseur
                                                 Spring 2002

                 If on Tuesday person 1 promises to
                  donate something to person 2 if it rains
                  on Friday, there is a suspensive
                  conditional obligation. Until Friday the
                  status between the parties has not
                  changed. Person 2 is the donee to be
                  and person 1 is the donor to be. Person
                  1 can sell the thing. However, if and
                  when it rains on Friday, Person 2 has
                  owned the thing since Tuesday.
               Insurance contract- you pay premiums,
                  but the insurance company owes you
                  nothing unless an accident happens to
                  trigger coverage.
       o Effects:
               the occurrence of the even brings the
                  obligation into existence retroactively
                  and triggers its enforceability.
               Obligee of a conditional obligation,
                  pending fulfillment of the condition, may
                  take all lawful measures to preserve his
                  right. This right is heritable.
               While the obligation is pending the
                  obligor still owns and can transfer the
                  object of performance- good faith
                  tranferee protected under §522
                  “transferee of a corporeal movable in
                  good faith and for fair value retains the
                  ownership of the thing even thought the
                  title of the transferor is annulled or
                  account of a vice of consent.”
               Prescription does not run against the
                  obligee
               If obligor performs before the condition
                  is fulfilled that performance can be
                  reclaimed
               No compensation can occur because
                  none of the performance is presently
                  due
   Resolutory: the obligation may be immediately
    enforced but will come to an end if the uncertain event
    occurs.
       o Effects:
               the occurrence of the event makes the
                  obligation non-existent retroactively.



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                                                                    Obligations Outline
                                                                   Professor Levasseur
                                                                           Spring 2002

                                          If the resolutory condition is fulfilled
                                           whatever performance can be returned
                                           to the original obligor should be returned
                                           or damages will be awarded if this is not
                                           possible
                                         Retroactivity creates problems when
                                           third parties get involved (what are
                                           these?)- good faith 3rd parties are
                                           probably still protected.
                Possible/Rel. Impossible/Absolutely Impossible
                         Why significant? An impossible suspensive condition
                            makes the obligation null. §1769
                         Possible: can be done/can occur
                         Relatively impossible: ?
                         Impossible: can’t be done/can’t occur
                Legal/Illegal
                         Significant because an illegal suspensive condition
                            makes an obligation null §1769
                Casual/Potestative/Mixed
                         Significance of the distinction: §1770
                                o purely potestative suspensive conditions make
                                   the obligation null
                                o purely potestative resolutory conditions must
                                   be fulfilled in good faith
                         Casual: that which depends on chance and/or is in no
                            way in the power of either party to effect
                                o E.g. if it rains on Tuesday
                         Potestative:
                                o Purely: depends entirely on the whim of a party
                                         E.g. just don’t like it anymore
                                o Simply: depends greatly on the will of a party
                                         E.g. I promise to sell you my house if I
                                           take a job in NYC
                         Mixed: mixture of casual and potestative (how is this
                            different than simply potestative)
                                o E.g. my grade on this exam
                Fault of a party in non-fulfillment: a condition is regarded as
                   fulfilled when it is not fulfilled because of the fault of a party
                   with an interest contrary to fulfillment §1772
          o Multiple Items of Performance
                Conjunctive/Alternative/Facultative
                Significance of distinction: how many and which items of
                   performance the obligor is bound to deliver

Conjuctive:                  §1807            o Each item regarded as a separate


                                          7
                                                                     Obligations Outline
                                                                    Professor Levasseur
                                                                            Spring 2002

Binds obligor for more                         obligation. (some sort of fiction
than one item of                               according to comments- allowing
performance- all of which                      separate running of prescription?) (In
he must deliver.                               what sense? Especially as failure to
                                               perform one is failure to perform all)
    E.g. you contract to                   o Items may be different in nature.
     buy a car the seller                   o Items may be separately rendered
     has an obligation to                   o Items may be separately enforced
     give the car and to                    o Items may be carried out by different
     give a warrantee.                         parties
                                            o Failure to perform one item means
                                               failure to perform entire obligation
                                            o An item of performance may consist
                                               of more than one thing
                                            o Courts will sometimes allow partial
                                               performance if the performance is
                                               still valuable/beneficial to the
                                               obligee.
Alternative:                  §§1808-        o Items of performance are separate,
Binds obligor to perform      1814             can’t deliver or require part of one
one of two or more                             and part of another. §1811
possible items of                            o Right to choose is presumed to be
performance.                                   with the obligor. §1809
                                             o Obligor is to exercise his freedom of
    E.g. either buy a car,                    choice within a reasonable time, if he
     buy a van, or buy a                       does not obligee may chose for him.
     truck                                     §1810
                                             o When the choice belongs to the
                                               obligor and one alternative becomes
                                               impossible or unlawful, regardless of
                                               the fault of the obligor, he must
                                               render one of those that remain.
                                                If the alternative became
                                                    impossible due to the fault of the
                                                    obligee the obligor may choose to
                                                    deliver one of the other
                                                    alternatives or may demand the
                                                    return of whatever he may have
                                                    given the obligee (dissolve the
                                                    contract) Comment (c) to § 1814.
                                            o When the choice belongs to the
                                              obligee and one alternative becomes
                                              impossible or unlawful (§1812)
                                                without the fault of the obligor,
                                                    the obligee must chose one of
                                                    those that remain. (§1812)


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                                                                               Obligations Outline
                                                                              Professor Levasseur
                                                                                      Spring 2002

                                                            Due to the fault of the obligor the
                                                             obligee may choose one of those
                                                             that remain or damages for the
                                                             item of performance that because
                                                             impossible or unlawful. (§1812)
                                                      o If all of the alternatives become
                                                        impossible or unlawful
                                                          without the fault of the obligor,
                                                             the obligation is extinguished.
                                                             §1813
                                                          if the impossibility of one or more
                                                             is the fault of the obligor he is
                                                             liable for damages for the last
                                                             one that became impossible
                                                          if the impossibility of one or more
                                                             is the fault of the obligee, the
                                                             obligor is not bound to deliver any
                                                             of the ones that remain. The
                                                             obligation is extinguished.

    Facultative:                     Not in the          The less valuable alternative is the
    Essentially the same as          code                 performance the obligor will owe if
    an alternative obligation                             he seeks to avoid specific
    except that one of the                                performance of the others. Obligor
    alternative items of                                  does not lose choice in default or
    performance is of                                     under the reasonable time
    significantly smaller value                           requirement in §1810.
    than the others

            E.g. a contract which
             allows a potential
             buyer to either buy
             the house or pay
             10% of the value of
             the house.


.

         .




                                                  9
                                                                       Obligations Outline
                                                                      Professor Levasseur
                                                                              Spring 2002

      Multiple Parties
              o Several/Joint/Solidary
                      Significance of distinction: assignment of risk of loss
Several: Each of more than     §1787          Produces the same effects as a separate
one obligors owes a                              obligation between each obligor and
separate performance to the                      each obligee.
same obligee                                  No obligor can be held liable for any part
              Or                                 of a performance owed by another
Each or more than one                            obligor
obligee is owed a separate                    Insolvency of one obligor has no effect
performance from the same                        on the others
obligor                                       Very rare- someone would have had to
                                                 have been short of paper or short of
                                                 time.
Joint:                         §1788-         Obligee can demand from one obligor his
More than one obligor is       1789              share of the obligation. (If there is no
bound to one obligee                             modification it is assumed that each
together- they owe one                           obligor owes a virile [equal] share.)
performance but none are                      Or can sue both obligors in the same
bound for the whole.                             suit. (CCP 641-647).
              Or                              Joint obligors do not represent one
One obligor owes one                             another- they must cooperate to perform.
performance intended for the                  Prescription- interruption of prescription
common benefit or more                           against one obligor will not interrupt
than one obligee, none of                        prescription against the other. (a
whom is entitled to the whole                    contrario sensu from 3503).
performance                                   Putting in default of one obligor will not
                                                 put the others in default.
                                              Risk of loss- if one of the obligors can’t
                                                 pay- is on the obligee. Can however sue
                                                 both for rescission of the contract
                                                 (implied resolutory condition.)
                                              If the obligee remits the debt of one of
                                                 the obligors he may not shift the loss to
                                                 the others.
                                              Each obligor may raise separate
                                                 defenses and be bound differently- e.g.
                                                 different terms, etc. If the obligee was a
                                                 prior obligor of one of the obligors in this
                                                 transaction compensation will take place
                                                 between those two.
                                              Joint obligation is the presumed multiple
                                                 obligation- it is more protective of
                                                 obligors than solidary obligations. (thus
                                                 commonly obligees demand that obligors


                                           10
                                                                      Obligations Outline
                                                                     Professor Levasseur
                                                                             Spring 2002

                                                be solidarily bound)
                                               When a joint obligation is indivisible the
                                                rules of solidary obligations apply- this is
                                                what 1789 says- but it is not quite
                                                accurate- there is a difference-
                                                heritability, when a change in the nature
                                                of the performance occurs
                                               Joint obligees
                                                 E.g. investors who together decide to
                                                    invest in the manufacture of an
                                                    invention- manufacturer indebted for
                                                    the whole but only to each his
                                                    respective share.
                                                 One obligee putting the obligor in
                                                    default doesn’t help the others
                                                 One obligee interrupting prescription
                                                    doesn’t help the others
Solidary                      §1790-           Solidarity in the civil law is not the same
                              1806              as joint and several liability in the
Solidary obligation for                         common law. (what is the difference?)
multiple obligors- Multiple                    Source of solidarity- it is not presumed-
obligors owe a single                           there must be
performance to one                               Clear expression of intent of the
obligee- the obligee can                            obligors
demand the entire                                or the law must impose it. Imposed
performance from any one                            by law in delict by §2323-2324 and
of the obligors. §1794                              under suretyship 3043 et seq. and
                                                    joint borrowers §2905. Mandate and
or                                                  Deposit as well.




                                       11
                                                          Obligations Outline
                                                         Professor Levasseur
                                                                 Spring 2002

Solidary obligation for       Effects of Solidarity for Multiple Obligees:
multiple obligees- One        (Active Solidarity)
obligor owes one                  Obligor can chose which obligee to
performance to more than             perform for- to pay back.
one obligee- gives each           Dangerous for the obligees- so not often
obligee the right to demand          encountered.
the whole performance             Each obligee presumed to represent the
from the obligor. §1790              others and to act on their behalf.
                                  Interruption of prescription by one
                                     benefits all
                                  Placing obligor in default benefits all
                                  If obligor is placed in default or if an
                                     action is brought against him by one of
                                     the obligees he loses the choice of for
                                     whom to perform- until then he had the
                                     choice.
                                  Each obligee can only remit his share of
                                     a debt/performance- obligor still owes the
                                     rest
                                  A fortiori a single solidary obligee cannot
                                     novate the entire performance- only his
                                     share of the performance




                              12
                                                                    Obligations Outline
                                                                   Professor Levasseur
                                                                           Spring 2002

                                       Effects of Solidarity for Multiple Obligors
                                            The standard obligation in practice- most
                                               likely to encounter it, but it is not
                                               presumed.
                                            Each obligor is liable for the whole
                                               performance- obligee’s choice.
                                           Can be bound under different legal
                                              regimes- e.g. term, condition, reason for
                                              solidarity, personal defenses, etc.
                                           If one obligor dies his heirs owe jointly
                                              the performance formerly owed by the
                                              deceased.
                                           Interruption of prescription against one is
                                              good against all and their heirs
                                           Putting in default of one puts all in default
                                           If one obligor performs the full
                                              performance- the other’s shares of the
                                              debt are subrogated to him, the others
                                              are bound jointly and in the case of
                                              insolvency in any of them, the insolvent’s
                                              share is divided proportionately between
                                              the rest.
                                           If one solidary obligor is released from
                                              solidarity by the obligee he will still owe
                                              his share of another obligor who defaults
                                              because the release cannot be to the
                                              detriment of the others §1806


e.g.                        Sale #1-
 Several                    $50,000
sale- Vendor (obligee)                 Obligor #1 (buys a lexis)

                 Sale #2-              Obligor #2 (buys a jeep)
                 $35,000


Joint
sale Vendor (obligee)                  Obligor #1
                                             (together buy a lexis)
                   Sale- $50,000
                   ($25,000 each)      Obligor #2


Solidary
Loan Lender (obligee)                  Obligor #1
                   Loan- $30,00
                   ($30,000 each)


                                       13
                                                                          Obligations Outline
                                                                         Professor Levasseur
                                                                                 Spring 2002

                                            Obligor #2


Divisibility

If there is only one obligor and one obligee the single obligor must perform the
whole obligation as if it were indivisible. Obligee can refuse to accept a partial
performance. §1861Thus the presumption of the law is that it is indivisible.
This presumption is rebuttable.

 If there are multiple obligors and/or multiple obligees divisibility becomes more
significant.

Divisibility: An obligation is divisible when the object of the performance is
susceptible of division §1815
       Effects of Divisible obligations:
             legal regime resembles that of a joint obligation
             Has significance when an obligation starts out indivisible because
                there is only one obligor and one obligee, but the object of
                performance is otherwise divisible, and one of the parties dies leaving
                multiple heirs. The obligation is then joint to the heirs which if they are
                the obligors may create a security problem not desired by the obligee,
                he could have avoided this problem by making the performance
                indivisible by contract.

Indivisibility: An obligation is indivisible when the object of the performance, because
of its nature or because of the intent of the parties, is not susceptible of division.

       Sources of indivisibility:
         o Absolute natural indivisibility: object of performance can’t possibly
             be divided.
                o E.g. sale of a live animal- including 3 obligations
                         To give the animal- divisible because to give here
                             means to transfer ownership and ownership is divisible-
                             could transfer ½ ownership to each of 2 people
                         To deliver the animal- indivisible because can’t deliver
                             half of a live animal- if you tried to deliver half you would
                             have a dead animal and a mess
                         A warrantee on the animal- indivisible b/c - warrantee
                             is on animal itself promising that there is no defect.
                             Breach would be a defect. Either there is a defect or
                             there isn’t so warrantee is itself indivisible.
                o E.g. Granting of a mortgage or a predial servitude. In
                    principle real rights are divisible, but mortgages and predial
                    servitudes are the exception. Mortgage burdens the whole of



                                            14
                                                                          Obligations Outline
                                                                         Professor Levasseur
                                                                                 Spring 2002

                     the mortgaged property and follows the property even if the
                     property is sold/split. Same is true of predial servitudes, follows
                     all of the land, but if land is split each piece becomes a
                     dominant estate, which gets the full rights of the servitude, not
                     just a piece.
                 o Presumptions: obligations
                          To give- generally divisible, except mortgage or
                              predial servitude
                          Not to do- generally indivisible
                          To do- by nature frequently indivisible
           o Relative natural indivisibility: when its object, though susceptible of
             material or intellectual division must be considered as being indivisible
             in relation to, or in light of, the natural objective pursued by the
             parties.
                 o E.g. a co-authored book
                 o The construction of a swimming pool.
           o Conventional indivisibility: an obligation is indivisible when the
             object of the performance because of the intent of the parties is not
             susceptible of division.
                 o Artificial indivisibility
                 o Often stands as an exception to the presumption that obligation
                     are presumed to be joint whenever multiple parties are involved.
                     Parties can turn a joint obligation into an indivisible one, which
                     has many of the effects of turning it into a solidary obligation.
                 o Stipulation of solidarity doesn’t make an obligation indivisible.

Effects of Indivisibility:
       Where there is more than one obligee:
                obligor must perform the whole obligation for one of the
                   obligees, not allowed to perform a part to each, then the obligees
                   can divide up the performance among themselves.
                If one obligee interrupts prescription all get the benefit
                If one obligee puts the obligor in default all get the benefit
                An indivisible obligee may not remit the entire debt or novate
                   the whole obligation without the consent of his co-obligees
       Where there is more than one obligor:
                Obligee gets same rights against the obligors as if they were
                   solidary obligors.
                        o Can demand performance from any one of them
                        o Interruption of prescription against one is against them all
                        o To put one of them in default is to put them all

Differing effects of solidarity and indivisibility-
     Heritability (solidarity is not heritable, indivisibility is)
            e.g. 3 lenders of $900, joint, unless the borrower gets them to agree to
               solidarity- if they do that than each is liable for the whole. If one of the


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            lenders dies with two heirs- what are the rights of the obligee now- the
            obligee can still demand the whole $900 from the other two, but the
            heirs of the deceased lenders are only bound jointly so only bound for
            $450 each. (estate is still solidarily bound with the other two lenders).
            This would not have been a problem had the performance been
            stipulated as indivisible.
      Change in nature of the object of performance
          E.g. contract for delivery of a horse- 3 sellers and one buyer- by nature
            the performance is indivisible. What if one of the sellers, by his fault,
            gets the horse killed in a car accident. Buyer does not want the
            corpse- so he gets damages. The damages are monetary and so
            divisible- What effect? (unsettled ?)
                 L says that this should be the result- The indivisible obligors
                    have become solidarily liable for the resulting damages.
                    Justification in §1818 which subjects an indivisible obligation to
                    the rules governing solidarity. Indivisible bond imposed by
                    nature of performance transformed into a personal relation of
                    solidarity in payment of damages
                 Or, is possible that the indivisibility would survive the
                    transformation, justified on rules of equity or some kind of legal
                    real subrogation.
                 But that this may well be the result- the three obligors are jointly
                    liable for the damages and the obligee can only sue each for his
                    share. Obligee should have included a stipulation that attached
                    the indivisibility to the alternative obligations- like damages.

S &W Investment Company v. Sharp:
Swimming pool case- owner of property says that a contract to build a swimming
pool is indivisible even though it was to be completed in two parts. The contractor
completed the shell, which was then destroyed. The question is who bears the loss
of the destruction. If a divisible part of the contract had been completed the owner
would bear the loss, but if the work was part of an indivisible performance the
contractor would bear the loss. (§2758)
Obligations of result lead to some presumption that the contract is indivisible.
Contracts are the interpreted against the party who authored them.
Contracts are interpreted against the party with the most bargaining
power/experience. (Here there are two professionals- but swimming pools are a
bigger part of the contractor’s business and so the ct. will probably resolve any doubt
against them)




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Conventional Obligations:

Contract: an agreement by two or more parties whereby obligations are created,
modified, or extinguished. (1906)
       For a contract to be formed there must be two parties. Formation of contracts
and not performance of contracts.

Before you can determine that a contract exists you must establish all four for both
parties.
    Consent
    Capacity
    Cause
    Object

Contracts will fall under one of the following classifications:
Classifications in the Civil Code:

   Unilateral (§1907)- when only one party owes a performance. Not the same as at
    common law- at civil law the focus is on the number of obligations, not on the
    formation of the contract as at common law. (e.g. donation; remission of debt)

   Bilateral/Synallagmatic (§1908)- when each party owes some performance to the
    other. (e.g. contract of sale, vendor owes the thing, buyer owes the price; lease;
    marriage)

Significance:
           In a synallagmatic contract- there is generally included some warranty,
              while a unilateral contract does not come with such.
           In all synallagmatic contract- Exceptico non adimpleti contractus. (In
              international law- tu quogue) If one party breaches their obligation,
              the other party is not required to perform. (Different from common law
              where the inability for one party to perform may not be an excuse for
              the other party not to perform) Does not exist in a unilateral contract-
              there is only one obligation owed.
           Putting in default only occurs in bi-lateral contracts- it has no meaning
              in uni-lateral contracts. Why?

   Onerous (§1909)- a contract is onerous when each of the parties obtains an
    advantage in exchange for his obligation. (e.g. sale)

   Gratuitous (§1910)-A contract is gratuitous when one party obligates himself
    towards another for the benefit of another for the benefit of the latter, without
    obtaining any advantage in return. (e.g. donation)




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   Loan is onerous if there is interest on it and gratuitous if there is not. If the
   borrower has no interest to pay he gets free use of someone else’s money.

      Commutative (§1911) – a contract is commutative when the performance of
       the obligation of each party is correlative to the performance of the other.
      Aleatory (§1912)- A contract is aleatory when, because of its nature or
       according to the parties’ intent, the performance of either party’s obligation, or
       the extent of the performance, depends on an uncertain event.

The civil law tradition opposes commutative contracts with aleatory contracts- the
Louisiana civil code takes a somewhat different position. (look at the comments to
Aleatory- the meaning is dif. Then in the rest of the civil law world)

Principle and Accessory:

Accessory: Contract is accessory when it is made to provide security for the
performance of an obligation. (suretyship, mortgage, pledge, and other types of
security agreements)

Principle: when the secured obligation arises from a contract, either between the
same or other parties, that contract is the principle contract.

Effects of distinction:
Accessory contracts cease to exist when the principle contract ceases to exist.

            Succession of Aurianne: testament directs the estate to pay the remaining
            principle on promissory notes given to the decedents sister that had
            prescribed. The sister’s heirs sue for the interest owed on the notes as
            well claiming that interest is accessory to the principle debt and that once
            the prescription on the principle had been renounced the prescription on
            the accessory debt was also renounced- transforming the natural
            obligation into a legal obligation. Ct says maybe not- because this was
            only a unilateral contract

Nominate and innominate:
Nominate- have special designation in the code (sale, lease, loan, or insurance)
Innominate: no special designation

3 C’s and an O:

Capacity:

Persons: only persons can enter into a contract. But Personality ≠ Capacity
       Natural Persons: §27- all human beings, including unborn children when
       their interests are at stake.
Legal/Juridical Persons: §24, §1918


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Incapacity of enjoyment- incapacity to be holder of a right and incapacity to owe an
obligation. Cannot be the obligor or obligee.
       E.g.
            successors declared unworthy- if a successor is judicially determined
             to have participated in unlawfully killing the decedent or attempting to
             kill the decedent- loses his right to inherit. Rt. to inherit is lost forever-
             no one else can act for him to inherit.
            §1476 Minors under the age of 16 do not have the capacity to make
             donations inter vivos or mortis causa to anyone but his spouse or
             children.
            § 2447 Officers of the court cannot purchase litigious rights under
             contestation in the jurisdiction of that court. The purchase of that right
             is null.

       This incapacity of enjoyment of some rights is allowed for reasons of penalty,
       sanction, distrust or to protect certain persons.

Incapacity of exercise- because of personality all persons have all rights not taken
away as above, but all persons do not have capacity to exercise these rights-
generally to protect that person.
           o Unemancipated Minors
                   Unless made for the purpose of providing the minor with
                      something necessary for his support or education or for a
                      purpose related to his business – then no rescission
                   Representation of majority by a minor doesn’t preclude action
                      for rescission, but if other party reasonably relied on the minor’s
                      representation the contract cannot be rescinded.
                   Emancipated minors have a full capacity to exercise.
           o Interdicts-
                   represented by a curator §389 et seq.
           o Persons deprived of reason at the time of contracting
                   Must show that the other person knew or should have known of
                      the incapacity to get rescission
                   Contracts made by a non-interdicted person can be attacked
                      after his death on basis of capacity only if the contract is
                      gratuitous, evidences lack of understanding, or was made within
                      30 days of his death or when application filed before his death.

Effects of incapacity of exercise:
          o Lack of capacity, to protect the person, is followed by relative
             nullity. May be rescinded only at the request of that person or his
             legal representative. It may be cured- either by ratification §1843
             or by confirmation §1842.
          o If the incapacity exists to protect the fundamental values of
             society the result is an absolute nullity- the nullity can be raised by


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            those not party to the contract. It cannot be cured. Has a long
            prescriptive period.
          o Immediately after discovering the incapacity, discovering party can
            require from the other party f the incapacity has ceased, or from the
            legal representative if it has not, that the contract be confirmed or
            rescinded.
          o Rescission: returns parties to status quo ante or if impossible or
            impracticable award compensation to the party to whom
            restoration cannot be made.

Confirmation: Confirmation is a declaration whereby a person cures the relative
nullity of an obligation. An express act of confirmation must contain or identify the
substance of the obligation and evidence the intention to cure its relative nullity.
Tacit confirmation may result from voluntary performance of the obligation.

Ratification: Ratification is a declaration whereby a person gives his consent to an
obligation incurred on his behalf by another without authority. An express act of
ratification must evidence the intention to be bound by the ratified obligation. Tacit
ratification results when a person, with knowledge of an obligation incurred on his
behalf by another, accepts the benefit of that obligation.”

Consent:
                    the expression of a parties will- the will to enter into a
                     contractual relationship.
                    Must make sure that the will is to enter into a contractual
                     relationship and not just a social relationship. (e.g. an invitation
                     to attend a dinner is not intent to enter into a contractual
                     relationship)

Offer- consent on the part of the offeror
       How manifested? § 1927- “may be made orally, in writing, or by action or
inaction that under the circumstances is clearly indicative of consent.”
    Offer can be tacit- by inaction as long as the inaction is sufficiently clear to
       convey the offer to the offeree that an offer is made and what that offer is-
       e.g. display with a sale price.
          o A car on the side of the road with a sign that simply says “for sale” is a
               solicitation for an offer not an offer itself because it did not include a
               price. §2439. §2439- definition of sale- once there is thing, price and
               consent the sale is effective without more- (plus capacity, etc) If one
               wants to review the thing before the sale is final they must reserve that
               right- § 2460.




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Binding nature of the offer?

Irrevocable offer- §1928 an offer which specifies a period of time for
acceptance is irrevocable during that time.
     Period of time may be expressly stated or it may be implied by the
      circumstances.
     If no time is specified the offer is irrevocable for a reasonable time-
           o definition of reasonable time is different in different circumstances-
           o defined by the necessities and practices of a trade/business.
           o Much discretion given to the court to decide how long this is.
     If the offer is not accepted in the time prescribed or the reasonable time it
      expires.

Revocable offer- §1930. offer not irrevocable under Civil Code Article 1928
may be revoked before it is accepted.
   §1931- A revocable offer expires if not accepted with in a reasonable
     time.

The difference between a revocable and an irrevocable offer
   is the intent of the offeror.
   Look at the circumstances and the experience of the parties.
   Experts involved in such transactions will be held to a higher standard of
      understanding- should know of the practices of the trade
   Lay persons- tend to think that an offer is revocable.
          o LA even passed a statute that gives a person buying something at
            home from a traveling salesmen 3 days to change their mind.

§1932- revocable or irrevocable offers both expire by the death or incapacity
of the offeror or the offeree before it has been accepted.

Acceptance: Consent from the offeree
  - must be communicated to the offeror- §1927 “orally, in writing, or by
     action or inaction that under the circumstances is clearly indicative of
     consent.”
        o Express or tacit. CC deals more explicitly with tacit acceptance.
                 By performance §1939
                 By completed performance §1940
                 By silence §1942 (based on common law idea of detrimental
                    reliance)
                 Etc. §1936
                 Added under the influence of the UCC- Levessure thinks they
                    are redundant and over confining on the courts.
  - Acceptance must be timely- within the reasonable time that the offer is open-
     or within the time set out in the offer
  - Acceptance must be identical in its terms with the offer-


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   -   if the acceptance is different in its terms then it is considered to be a
       counter offer.
            o Sometimes hard to tell what is an offer and what is a counter offer.
            o The question is whether the essential terms of the offer are
               effected- accessory elements can be changed-
                    Accessory elements are things that the offeror is likely to agree
                      to.
   -   Conditional acceptance- makes a counter offer: Attaches a suspensive
       condition. e.g. I want that car at that price if I can get financing. - there
       would be no binding obligation on either side until the financing exists.
   -   Adding a term to an offer in your acceptance may not be a counter offer-
            o it depends on the circumstances-
                    Would 5 more days before payment is made make a big
                      difference?
   -   What if the acceptance states that the offeree will pay more than the price in
       the offer? Is that a counter offer? Probably not- the offeror will be happy to
       get the extra money. There is no unjust enrichment- no duty to accept and
       offer and certainly no duty to pay more.
   -   §2601 Additional terms in acceptance of offer to sell a moveable- if price and
       thing are the same the other different terms don’t make it a counter offer
            o Added in 1993- comes from common law influence.


Basic Rules of Offer and Acceptance:

Offer: must contain the essential elements of the contract to be entered into.
Acceptance: must contain a mirror of the essential elements of the offer and
be communicated to the offeror.
       Meeting of the minds in the offer and acceptance will form the contract- from
that point on, when the acceptance meets the offer, the contract exists and the
obligations contained in it are binding.

Timing and method of acceptance:
   - The acceptance of an irrevocable offer is effective when the acceptance is
      received by the offeror. §1934
   - The acceptance of a revocable offer is binding when it is transmitted to the
      offeror. §1935
   - Acceptance by performance- §1939, 1940, 1941

Timing of the effectiveness of a contract can be established by one of four theories.
Only two of which are really used.
    Declaration of acceptance- can be verbal or in writing. Does not require that
       the offeree has parted from his acceptance. Offeree benefits from this theory
       because they are in full control of the formation of the contract- the offeror
       could be bound with out knowing that he is bound- Between the declaration
       and the notification. This theory is by and large rejected.


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      Transmission, mailbox or dispatch theory- modality of the declaration theory-
       the offeree has declared his acceptance and has sent it to the offeror. § 1935
      Receipt theory- contract formed at the moment in time when the offeror
       receives the acceptance. §1934
      Knowledge theory- Does the receipt of the acceptance mean an actual
       meeting of the minds? E.g. what if the offeror does not check his e-mail that
       day, or fails to open the envelope, is he bound? Some commentators argue
       that the offeror must have actual knowledge of the acceptance. Has been
       rejected by most as impractical.

Timing of the formation of a contract is relevant because it determines the
place of formation of the contract.
      If an acceptance is mailed in Farmerville and received in Baton Rouge where
was the contract formed. Under the transmission theory it was formed in
Farmerville, under the receipt theory it has been formed in Baton Rouge. This
becomes very important when transactions start to cross state and national borders-
choice of law problem.

          Wagenvoord Broadcasting v. Canal Automatic Transmission Service:
          contract of sale of radio time. Parties are juridical persons.
             - 1st question is are the legal entities capable of entering into a
                contract? Yes- but are the agents representing the juridical
                persons empowered to bind the juridical person in a contract.
             - 2nd question- is their consent?
             - Canal is the offeror () and they submit an offer in the form of a
                signed document stipulating that they would buy time for 75
                commercials- included the material terms of the contract.
             - Offer document had been signed by the offeror, acceptance had
                been manifested by the offeree, but not communicated to the
                offeror.
             - Ct. says that the contract was revocable, but and that no contract
                was ever consummated.
             - L- thinks that the parties were identified wrong- he says that the
                offeror was really the offeree and vice versa.
             - Suggests that the offer was made under the suspensive condition
                of an acceptance by the radio station- they were the ones soliciting
                business. Final consent conditional upon a writing. During the time
                between the verbal offer and the writing the offeror had time to
                investigate credit, etc. Suspensive condition- was it potestative or
                mixed? Mixed because it came both from the credit report/business
                data which had to acceptable and then on the writing by the
                manger (potestative). Until the signature by the manager you just
                have a pre-contract- negotiations- contract not formed until the
                signature of the manager. Important whether the offer was
                revocable or irrevocable- L says that the offer was irrevocable



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                 because the radio station had given the advertiser time while it
                 checked its credit and during that time both of the parties were
                 bound by an irrevocable offer. When the contract was signed by
                 the manager the contract was formed. §1759 - Good faith shall
                 govern the conduct of the obligor and the obligee in whatever
                 pertains to the obligation. Good faith should have controlled until
                 the signature of the manager of the broadcasting company.


Johnson v. Capital City Ford Company, Inc: Capital City Ford advertised that if you
bought a 1954 model ford they would trade up for a 55 model when they came in.
The Johnson’s traded in their old car to buy a 54, but did not discuss the
advertisement at the time, when they came back to get their 55 model the dealership
said no. Dealership claimed that the trade-in used as part of the price of the new car
meant that this offer was no good for the Johnsons. The dealership usually stamped
the paperwork with something that made that clear, but they did not do that here.
There was only a pencil notation and the Johnson’s claimed that even that was not
there when they signed the contract. The ct. looks at the advertisement to evaluate
whether it was an offer. Then they say that any ambiguity will go against the
dealership and find for the Johnson’s. L- looks at the ad and says that it is not
specific enough to be an offer- not particular about which car and no mention of a
price. Sale and exchange (§ 2660) are both mentioned. “sure thing for you, a
gamble for us” may create an obligation of result. “Only good for the remainder of
September”- extinctive term. “offer”- says that it is an offer. General principle is to
construe the terms of the offer against the offeror, but is it an offer?
        Condition attached- exchange only take place if the 54 is in good shape and
not a convertible or Skyliner.
        Did the Johnson’s accept? According to §1927 acceptance can be by action
on inaction. Tate says that normally people don’t buy cars this way- but that in this
case it was an acceptance- takes an “in concreto” approach to the person’s
behavior, as opposed to “in abstracto” where you look at an average reasonable
person, his approach looks at the person’s age, education, situation, etc. Here he
says that this could be consent.
        Ct. then discusses the ad as an offer- says that the  wrote the ad and called
it an offer and so should be responsible for its terms despite the ’s intent.
        Then there is a discussion of the contract being unilateral- Tate uses the
common law definition of unilateral and intimates that the civil law definition is the
same. Def given is that a unilateral contract is one created when an offer is
accepted by an act. L- says that at Civil law the contract is formed when both
parties have expressed their consent- has to do with whether there is a contract. At
civil law unilateral means that only one obligation is owed.
        How L would have disposed of the case- What is the principle contract
considered in the ad? The sale- there must be a sale for there to be an exchange.
The exchange is only an accessory contract- and it would be tied to the first contract
automatically- must follow it. Obligation of result. By the action of a negotiation of



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sale the dealership and the Johnson’s also constituted a negotiation for the
exchange. Consent to the sale carried with it the consent to the exchange.
 did not get the ’56 Ford- the outcome was delayed by the appeal by the , but the
Johnson’s did not amend and ask for the car and the ’s had the right for the appeal
and shouldn’t be punished for exercising it.

Vices of Consent: Error, Fraud, and Duress

Error: §1948-1952
   o Concerns a cause without which the obligation would not have been
      incurred
   o That cause was known or should have been known to the other party

Not every error leads to the nullity of the contract- it must be serious, not one that
the average reasonable person would have made or that an expert would not have
made if expertise was required. Look both “in abstracto” and “in concreto” (more
and more used to protect consumers). Must bear on the essential element of the
contract- the cause or the object

Error: invalidates consent of at least one party- mistake must be shared by all
parties. Can be error of fact or sometimes of law.

Traditional to distinguish between errors of fact and errors of law.

Errors of fact- bear precisely on the essential elements of the contracts
          o On the nature- a disagreement between the parties on the nature or
             identity of the contract.
                 o e.g. Is a pen given by L to Lee a gift or a loan?
          o On the object- or a substantial quality of the object- error must be
             communicated to the other party
                 o e.g. If L walked into a store and tells the clerk that he wants to
                     by a clock which he says was owned by Napoleon. Clerk does
                     not dispute him and sells the clock. The clock was actually
                     owned by Nelson. L can return it.
                 o However if he had not communicated why he wanted the clock-
                     because he believed it was Napoleon’s- he could not have held
                     the contract null.
                 o Substantial quality of the object- objective quality of the object-
                     substance, important attributes- e.g. silver plated v. silver, pine
                     v. ebony
          o As to the person- or the qualities of that person
                 o Gratuitous contracts- error as to the other party (beneficiary)
                     can become grounds for the nullity of the contract.
                 o Onerous contracts- error as to the other person is fairly
                     irrelevant- except in some contracts which a based on reliance
                     on the skill of another- e.g. contract of mandate, contract of


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                     services (some- where the skill of the service provider is the
                     reason for the contract)
Errors of law-
   o Ignorance of the law is not considered to be a valid defense so it is rare that
      an error of law will result in the nullity of the contract. Some types of
      contracts have legal provisions expressly prohibiting nullity by legal error.
   o 3078- transactions (settlement agreements) have between the interested
      parties, a force equal to the authority of things adjudged. They cannot be
      attacked on account of any error in law or any lesion. But an error in
      calculation may always be corrected.

Error must involve both parties:
   1949- Error vitiates consent only when it concerns a cause without which the
         obligation would not have been incurred and that cause was known or
         should have been known to the other party.

Law will try and establish a balance between a knowledgeable person and the
average reasonable person (customer).
   o Vendor is presumed to know the defects in the things he sells- what it is made
      of, whether it works well or is defective. Law operates to protect the
      consumer.
   o Same is true in contracts of lease- the lessor is presumed to know the defects
      in the leased property.

Effects of error:
   o a nullity in relation to the person who makes the error- it the person who
      made the error who has the right to raise the error.
          o 2029- A contract is null when the requirements for its formation have
              not been met. (error produces relative nullity-2031)
   o 2032- Action of annulment of a relatively null contract must be brought within
      five years form the time the ground for nullity either ceased and in the case of
      incapacity or duress, or was discovered, as in the case of error or fraud.
   o Nullity may be raised at anytime in a defense against an action on the
      contract, even after the action for annulment has prescribed.
       Quae tempozalia sunt ad agendum perpetua sunt excipiensum- things
          which are temporary when raised as a grounds for action are perpetual
          when they are used as a defense.
   o 1952- Recission; liability for damages
       A party who obtains rescission on grounds of his own error is liable for the
          loss thereby sustained by the other party unless the latter knew or should
          have know of the error.


Redhibition: §§2520-2548 (under sale)
2520- Warranty against redhibitory defects- The seller warrants the buyer against
redhibitory effects, or vices, in the thing sold. Defect is redhibitory when it renders


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the thing useless or its use is so inconvenient that it must be presumed that a buyer
would not have bought the thing had he known of the defect.


~Error in Lease:
§2695- Lessor’s liability for damages from vices and defects of the thing which may
prevent is being used even in case it should appear he knew nothing of the
existence of such vices and defects, at the time the lease was made, and even if
they have arisen since provided they do not arise from the fault of the lessee.


Deutschmann v. Standard Fur Company: attempted contract of sale for a specific
kind of fur coat. Deutschman (natural person, buyer)- consumer- reasonable person
presumed to have no special expertise. Standard Fur Company (juridical person,
seller)- professional/expert presumed to have knowledge in the field. Deutschman
described the coat that she wanted using language which had both a general and a
technical meaning- she did not know about the technical terminology- the vendor fur
company did and should have told her.
    o Error of fact results- error as to some substantial quality of the object. Fur
         company knew of her motive, and also of the error (especially after she
         brought the coat back once)
    o may have even risen to the level of fraud- 1953- fraud can result from a
         suppression of the truth- 1955- error induced by fraud…substantially
         influenced that consent. 1958- damages for fraud can include attnys fees.
    o Ct. uses the words “unilateral error” incorrectly- in the common law sense- as
         used in civil law a unilateral error cannot be grounds for recision. Motive
         must be communicated so both parties are in some way involved.

Wise v. Prescott: Accident between bus and car driven by Prescott. Wise was a
passenger on the bus and sued in negligence- both the bus driver and Prescott.
Both were found to be negligent and so the bus driver, his employer the city of New
Orleans, Prescott and his insurance company (Allstate) were all held liable in solido
for $11,000. After the accident, but before the case, an adjuster for Allstate went
to see Ms. Wise (70 year old woman, still injured/woosey from the accident, could
not wear her glasses b/c of injuries) he didn’t tell her that he worked for an insurance
company- told her he was an agent for Prescott and that he wanted to give her some
money to help- asked her to sign a paper he presented as a receipt for the money.
It was actually a form for transaction or compromise (settlement) giving up rights to
bring a lawsuit. She had actually asked whether it had anything to do with the case-
and was told no, so she signed something she believed to be a receipt for a gift from
the driver of the car involved, when it was actually a release form for Allstate and the
driver settling any claims in a potential lawsuit.
     o Error as to the nature of the contract.
     o Court is considering the  as an individual- taking into account her particular
        circumstances and characteristics- an in concreto approach. However L
        says that there is no invitation in the code to treat the parties to the contract


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                                                                       Professor Levasseur
                                                                               Spring 2002

      this way. In fact §1959 on duress appears to set up a “reasonable person” in
      abstracto standard in the first paragraph but modifying that in the second
      paragraph of the article which requires age, health, disposition, and other
      circumstances into account.
    o Fraud in this case? If the case had described the transaction as fraud and
      been developed that way how would it have been different.
    o How are the defendants in this case bound to pay. Says bound in solido.
      Solidarily bound- what would have been the impact of the purported contract
      on the other ’s bound solidarily with the driver/Allstate?
          o §1803- Remission of debt to or transaction or compromise with one
             party solidarily obligated with others benefits all of the parties.
          o § 3076- The creditor who transacts with the surety of his debtor, may
             discharge the surety only, and the transaction will not diminish his right
             against the debtor. But if it is with the debtor himself that he has
             transacted the surety will likewise have the benefit of the transaction,
             because his obligation is only an accessory to that of the principle
             debtor.

Griffin v. Seismic Services: salesman sold a checkwriter to the -  claims that the
contract is invalid because of error as to the type of company/model sold- the 
claims that Griffin knew that he wanted to deal with Paymaster and that Griffin had
introduced himself as a representative of that company. Ct. says the error is to the
party. L- says this is on weak ground- better argument that it was error as to the
object or some substantial quality of the object. Error as to the parties is not usually
enough to void an onerous contract.

Fraud:
   o Suppression of the truth (by silence) or misrepresentation
   o made with an intention to gain an advantage for one party or
     disadvantage to the other.

Lowers burden of proof for error. §1955
   o Error induced by fraud need not contain the cause of the obligation but only a
      reason that has substantially influenced the consent of the defrauded party.
   o No issue of the communication of the error.

If the fraud causing the error is committed by a third person- not party to the
contract- the fraud vitiates consent if the other party knew or should have known of
the fraud. §1956

Proof- need only be proved by a preponderance of the evidence and may be
established by circumstantial evidence. § 1957-

Benefit of proving fraud is the right to demand attorney’s fees in addition to the nullity
of the contract. § 1958-



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                                                                    Professor Levasseur
                                                                            Spring 2002


Not every fraud leads to the nullity of a contract:
§1954- does not vitiate consent when the party against whom the fraud was directed
could have discovered it without difficulty, inconvenience, or special skill.
         o Dolus bonus- the good fraud- the salesmen’s pitch
         o Does not apply to cases where a relation of confidence has reasonably
             induced a party to rely on the other’s assertions or representations.

Code sanctions bad fraud- dolus malus.

Termite damage and house sale- if the vendor knows of termites and does not
reveal that to the buyer they may be liable for fraud.

A mechanic is held to a higher standard than a layperson and can be held liable for
fraud for failure to disclose.

Boucher v. Division of Employment Security: 3 employees of the state submitted
false expense account reports at the direction of their immediate supervisor.
Expense reports were for the right amount, but the wrong place or dates. Fired for
fraud. Ct. says that there was not fraud because not all of the elements of fraud
were met.
     Misrepresentation (met here)
     Intent to gain or an advantage or to cause a loss (not here-expenses reported
       were legitimate)
     Error (everyone in the department knew what was going on- the superiors
       encouraged it)


Duress: (word duress added in 1984 in place of the word violence which is the term
used in most civil law systems) Did not change the law. (L says it is a Trojan horse
of the attack of the common law on the “pristine” civil code.

          o consent is vitiated when it has been obtained by duress (violence)
            of such a nature as to cause a reasonable fear of unjust and
            considerable injury to a party’s person, property, or reputation.
          o Age, health, disposition, and other personal circumstance of a
            party must be taken into account in determining the
            reasonableness of the fear

Threat can also be against 3rd persons- §1960- It is the freedom of the mind which is
being seriously affected by the duress and so it is not just threats against the party
which are an issue.

   o spouses, ascendants, or descendents are included in a presumption of fraud-




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                                                                       Professor Levasseur
                                                                               Spring 2002

   o but the court can expand as far as reasonable- “if the threatened injury is
     directed against other persons, the granting of relief is left to the discretion of
     the court.”
   o Article used to include a specific reference to pets- now they fall under
     property §1959

A threat of doing a lawful act or a threat of exercising a right does not
constitute duress.
   o A threat of doing an act that is lawful in appearance only may constitute
      duress. §1962-


Effects of Duress:
   o Vitiates consent- making contract null
   o Duress by a party to the contract- victim gets damages and attnys fees
   o Duress by a 3rd person- parties who are innocent of the duress can get
      damages and attnys fees from the 3rd person
   o Contract made with a 3rd person to secure the means to prevent threatened
      injury may not be rescinded if that person is in good faith and not in collusion
      with the party exerting duress


Wilson v. Aetna Casualty and Surety Company: 65 year old, illiterate man with no
family injured in an accident for which Aetna was liable. Aetna offered a settlement-
 did not consult an attorney even though he knew he could have, spoke with his
doctor who advised him that if he went to court it could take a long time to get any
money and the lawyer’s fees would take up some of that. Mr. Wilson was still in the
hospital, had bills coming in. So Wilson signed a compromise settling the lawsuit.
   o Trial ct. saw an unsophisticated party signing a very complicated contract.
            o Used an in concreto standard, but hard time finding legal ground to
                nullify the contract.
   o App ct. (Tate) said that he had made a counter offer which indicated that he
        knew what he was doing. §3071 and 3073
   o 3073- Transactions regulate only the differences that appear clearly to be
        comprehended in them by the intention of the parties, whether it be explained
        in particular or in general.
   o §1963- A contract made with a third person to secure the means of
        preventing threatened injury may not be rescinded for duress if that person is
        in good faith and not in conclusion with the party exerting duress.
   o L- argues that the real purpose behind1963 is to protect the one taken
        advantage of- argues a fortiori or a pari ratione that if a person is taken
        advantage of by a party “conspiring” with the circumstances the contract
        should be nullified.
   o §1962- A threat of doing a lawful act or a threat of exercising a right does not
        constitute duress. A threat of doing an act that is lawful in appearance only
        may constitute duress.


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                                                                      Professor Levasseur
                                                                              Spring 2002

   o 1759- Good faith- must govern the parties

Lesion:
§1965- A contract may be annulled on grounds of lesion only in those cases
provided by law

          o Purpose of including this as a vice of consent was to protect the
            owners of land. After the revolution the landowners had no liquidity
            and a need of cash- had to sell to the bourgeoisie at cut rates. Lesion
            allowed the nullification of these contracts.
          o Error as to a substantial quality of the object was hard to argue. As
            was violence- because the pressure was merely economic (1962) but
            the addition of lesion allowed for this.
          o Limited to specific contracts. Successions, partitions of successions,
            (when an heir receives less than ¼ of what he should have gotten) and
            sale of corporeal immovables- 2589 et seq.
          o can be claimed only by the seller, less than half the value. Seller may
            invoke lesion even if he has renounced the right to claim it.

O’Brian there to illustrate lesion-
   o The question in O’Brian was whether there was still a claim of lesion when the
      original buyer sold the standing timber to a third party. §2594
   o Right to get property back-
      Real right or personal right?
   o 2591- option of buyer to supplement price rather than return the thing
      Is this option alternative or facultative?
          o Seller brings the action but in the response the buyer has the choice.
   o Seller cannot sue the buyer for damages.
   o What is the property was destroyed by fortuitous event- the right of rescission
      is gone.

Cause: §1966-1970
The reason why a party obligates himself. §1967
   o Much more expansive then the common law idea of consideration.
   o Each party in a contract may enter into the contract for a different reason, but
      yet we need only one cause for the contact.
   o Contract has a cause but each obligation also has a cause.
   o The cause of the contract is an objective one, the reason disclosed by the
      very nature of the contract.
          o E.g. the object of a sale is the transfer of ownership of a thing; the
             cause of a lease is the lease of the premises; the objective cause of a
             donation is the intent to be generous.
   o Each obligation also has a cause-
          o e.g. a lessee enters into a contract of lease to get the premises while
             the lessor enters into an obligation to pay the rent in order to get use of
             the premises.


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                                                                       Professor Levasseur
                                                                               Spring 2002

   o The objective cause of the contract is very similar to the idea of consideration,
     except that if includes the causes involved in gratuitous contracts.
   o Focus is on the subjective causes of the obligations because they are the
     ones that can invalidate the contract.
        o These must be legal. (The objective cause will generally be legal- e.g.
           it is legal to sell, lease, etc.)
        o Unlawful Cause:§1968 The cause of an obligation is unlawful when
           the enforcement of the obligation would produce a result
           prohibited by law or against public policy.
        o
   o Cause does not have to be expressed. §1969 An obligation may be valid
     even though its cause is not expressed.
        o e.g. grandma doesn’t have to express why she is giving her grandchild
           a car.
        o E.g. A seller does not have to say why they wish to sell an object.

Detrimental Reliance:
§ 1967 A party may be obligated by a promise when he knew or should have known
that the promise would induce the other party to rely on it to his detriment and the
other party was reasonable in so relying. Recovery may be limited to the expenses
incurred or the damages suffered as a result of the promisee’s reliance on the
promise. Reliance on a gratuitous made without required formalities is not
reasonable. (L- says this was imported from the common law- so is bad, and was
put in the wrong place- that it belongs under consent)
The cause is generally presumed to be legal.

Effects of Unlawful cause:
   o The result of unlawful cause is nullity, in most cases absolute nullity.
   o Returns the parties to the position in which they were before the contract.
      Status quo ante.
          o E.g. In a contract of sale the object and price will be returned to their
              original owners,
   o nullity in a contract for a service or for something like a lease which once
      used cannot be returned will result in the end of the obligation, but the
      purchase price of the services or time already expended will not be refunded.
          o E.g. if a contract for lease is nullified after the lessee has lived there for
              6 months the lessee is released from living there any longer, but does
              not get their 6 months rent back.
   o Nemo audituz: the court will not hear/enforce disputes over illegal contracts.

West v. Loe Pipe Yard: The plaintiff was an employee of one gambling house, but
was running another bar where gambling was going on in an upstairs room. He did
not own the bar, not was he directly involved in the gambling. However he lent
money to the  who in turn gave the  drafts- which turned out to be bad.  sued to
get payments on the draft.



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                                                                      Professor Levasseur
                                                                              Spring 2002

     o Ct. said no because the  knew that he was involved in the gambling and did
       have some interest in it. He was operating the club and worked at another
       establishment for some of the major shareholders in the club.
     o Since gambling is contra bonos mores the court refused to enforce the
       contract, but the parties are not returned to the situation they were in before-
       no money is returned based on Nemo auditur.
     o Gambling- alleatory contract.

Davis-Delcambre Motors v. Simon:

Employer               Employee
Gives a             K
promissory                    Bad payments
note paying                   on a contract-
for the car                   possibly fraud
               Car Dealer 

Writing bad checks may be a crime.

 Car dealer is trying to get payment on the promissory note. The  Employer
claims that he does not have to pay because the bad checks were illegal. The 
had been threatening to bring criminal charges against the employee. The employer
may have paid the promissory note to help out his employee. He may also have
done so because he wanted to help the employee get away with writing the bad
checks/ to protect the employee from prosecution. Expected the car dealer to refrain
from prosecution. Was refraining from such prosecution illegal or against public
policy. Was the ’s cause shared by the ? Was it communicated that the purpose
was to avoid prosecution or was the stated purpose to pay the debt of another. L-
says that the ct. presumes the commonality of the cause- i.e. that the car dealer
knew that the point was to avoid prosecution.
    o S.Ct. says that there was no proof of intent to defraud so the contract was
       valid.


Object:
     o Must be
         o Lawful
         o Possible
         o Determined or determinable
                Can be determined by 3rd persons
                Can be determined by output of requirements- measured in
                 good faith §1975
                Future things can be the object- except the succession of a
                 living person (except in a antenuptial agreement) §1976
                Can be that a third person will incur and obligation or render a
                 performance §1977


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                                                                          Professor Levasseur
                                                                                  Spring 2002


Spring Thunder Agency v. Odem Insurance Agency: Sale of Things: the records
and files, and rights to renewals of contracts, and a covenant not to compete.
   o Things- should suggest that there will be multiple objects- may or may not
        lead to multiple obligations.
           o How connected- conjunctive, alternative, facultative…
                   And- indicates conjunctive.
           o Records and Files:: incorporeal movable- it is the information that is
               being sold, evidence needed (written records, etc.), transferred just by
               oral agreement
           o Exclusive right to renew- personal, heritable, incorporeal, movables
           o Covenant not to compete-
           o Are all of these things determinable/determined, legal, and possible?
           o How determinable are the right to renewals?
                   1st paragraph: “right to the renewals on existing active accounts
                      of the agency.”
                          o Indicates the sale of a hope
                   List w/price: “renewals of existing active accounts”
                          o Indicates the sale of a future thing
                   Seller will argue that the sale was for the hope- then he gets the
                      price. Buyer will argue that he bought a future thing.
                          o How does the court determine whether it is a hope or a
                              future thing? Opinion gives no criteria.
                                   Could look at the price- buyer would want to pay
                                      what the thing he bought was worth. I.e. if the
                                      price is lower it is more likely to be a hope, if the
                                      price is higher it is more likely to be a future thing.
                                      The market value of the thing to be transferred is
                                      the starting point- the farther from it (down) the
                                      more likely the contract is a hope.
                                   How much does the effect of the vendor’s
                                      involvement impact whether or not the thing
                                      comes to be. The greater the involvement of the
                                      vendor the more likely it is a future thing.
                                   Insurance- how likely is it that you can get
                                      insurance on a hope. So how insurable is this
                                      thing? What kind of warrantee goes with the sale?
                                      Hope does not have a warrantee.

Stipulation pour Autri: 3rd party beneficiary
                 Once the 3rd party has manifested his intent to avail himself of
                   the benefit the parties may not dissolve the contract by mutual
                   consent without the beneficiaries agreement §1978




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                                                                               Spring 2002

                    Stipulation may only be revoked by the stipulator and only
                     before the third party has manifested his intention of availing
                     himself of the benefit §1979
                    In case of revocation or refusal of the stipulation the promisor
                     shall render performance to the stipulator §1980
                    Beneficiary gets the right to demand performance from the
                     obligor §1981
                    Stipulator can also demand performance for benefit of the
                     3rd party
                    Obligee can raise the same defense against the 3rd party
                     beneficiary that he could have raise against the stipulator
                     §1982

Civil Code does not require that the 3rd party be identified at the time the contract is
entered into- and is generally possible for the parties to change their mind about
who- the requirement is that there be an intent to provide a benefit to a third person
and that at the time the benefit is to be vested in that third person they must be
identified.
    Effects vis-à-vis the third party beneficiary-
            o until the 3rd party is aware of the benefit and expresses their consent
              the parties can change their minds- the 3rd party has no vested right
              until the beneficiary has accepted.
            o The effect between the parties is what the contract stipulates.
            o The 3rd party beneficiary can bring an action against the promisor, if
              that 3rd party has accepted the benefit (only action is that to demand
              performance in his favor, he cannot bring an action in breech in favor
              of either of the parties- can’t substitute himself for one of the parties)
            o 3rd party actions against the stipulator- depends on their legal
              relationship. If there is no contractual relationship between the 3rd
              party and the stipulator the benefit is usually a donation- generally
              must be correct in form. If there was a contract between them, which
              was to be settled by the benefit, then the third party has an action
              under that contract. 3rd party beneficiary’s action against the promisor
              is dependent on the stipulator’s performance vis-à-vis the promisor,
              and the legality of their contractual relationship.


Andrepont v. Acadia Drilling Co.:
       Owner of land leased his land both to a farmer to grow soybeans and to an oil
company to develop an oil well. Contract with the oil company was recorded and
included a clause where the oil company was liable for any damages that they may
cause. Lease to the farmer was not recorded. (transfers of immovables must be
recorded- they transfer a real right which bears on the thing itself regardless of the
persons involved) Leases do not create a real right. Lease §2670- no requirement




                                           35
                                                                       Obligations Outline
                                                                      Professor Levasseur
                                                                              Spring 2002

of form. Lease of things- §§2676-2745- no requirements of form or writing. Contract
of lease creates only personal rights.
    o At first hearing- ct decides that since the lease was not recorded it was not
       binding against third parties and found for the . Seemed to rely on La. R.S.
       9:2721.
    o Reverse themselves on rehearing: §2703-2704: contain the answer. Refer to
       stipulation pour autri
    o One issue is why this matters if the action had been brought in tort- the
       contract would not really have mattered as to the farmer- you do not have to
       know the person that you hit with a car and are still guilty.
    o Renegotiation of the contract – “damages” instead of specifically damages to
       crops and trees- was a change from the specific to the general- indicates that
       the clause was to become more inclusive not less.
    o By providing for the third party benefit in the contract the landowner fulfilled
       his obligation to the farmer.
                           Conveys with it the obligation
                           not to interfere with the rights
Landowner                  of the farmer

     Valid even though not
     recorded and giving the          Oil company
     landowner an obligation not to
     do- not to interfere wit the
     rights of the farmer
Farmer

   o §2704- not cited in the decision, but answers the question- if the person by
     whom these acts of disturbance have been committed, pretended to have a
     right to the thing leased or if the lessee is cited to appear before a court…he
     shall call lessor in warranty and shall be dismissed from the suit by naming
     the person under whose rights he possesses.
   o Person for whom the stipulation pour autri was made is determinable- so
     does not have to be determined.
   o Principle that runs through the civil code that you cannot exercise or transfer
     a right that you do not have- Nemo potior jure ad lium
         o e.g. since the landlord did not have the right to interfere with the farmer
             he could not transfer that right to the oil company.
   o Lease between the landowner and the farmer was to be paid in a share of the
     crop. 20% of the crops- standing crops owned by the owner of the land are
     immovable- component parts of the tract of land. If they are owned by
     someone else they are moveable by anticipation. Oil company has been
     dealing with who they believed to be the owner of the crops, but that owner
     should know that he is an owner in indivision, since the farmer and the
     landowner are owners in indivision the landowner cannot cause injury to his
     co-owner so he cannot contract with someone else allowing them to do so.

McKee v. Southfield School: McKee attended Southfield for the first two years of
high school, his father failed to pay, the school restructured to allow him to continue


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                                                                         Professor Levasseur
                                                                                 Spring 2002

to attend, but then Southfield shut down their high school and McKee transferred to
another school, but Southfield refused to release his transcript to him so he could
not play basketball and could not graduate. McKee sued for the transcript.
    o Ct. finds that McKee was the beneficiary of a stipulation pour autri in the
       contract for education.
    o Question was could he continue to benefit even though the father defaulted
       on the contract?
           o No his rights are subject to the terms of the contract and he has no
               better rights than his father.
    o However the court found that he had detrimentally relied on the contract
       §1967 and so should get his transcripts.
    o Is an action in detrimental reliance in tort or in contract? In the civil code it is
       in contract, but the court treated it like it was in tort.
    o J. Victory dissented- L thinks he was right.

Nullity: §2029-2035
   o results from a vice inherent in the contract from the beginning
   o Relative nullity
           o Meant to protect the parties
   o Absolute nullity
           o Meant to protect the public
           o This kind of contract should never come into existence
           o Often involves an unlawful cause or an unlawful object
Effects of nullity:
   o Return to the status quo ante
   o Prescriptive periods
           o Relative nullity- 5 years from time ground for nullity ceased as in the
               case of incapacity or duress or was discovered in the case of error or
               fraud
           o Absolute nullity doesn’t prescribe




General effects of obligations:
An obligation may give the obligee the right to: §1758
    Enforce the performance that the obligor is bound to render
    Enforce performance causing it to be rendered at the obligor’s expense- this
       is not an effect of personal obligations because they cannot be performed by
       3rd persons
    Recover damages for the obligor’s failure to perform or for his defective or
       delayed performance.




                                            37
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                                                                       Professor Levasseur
                                                                               Spring 2002

Parties to a contract need not stipulate for every possible effect of their contractual
relationship. Focus on the essential elements and leave to the court the outside
elements of the contracts- leaves a lot to suppletive law.

Good Faith: §1759
Good faith shall govern the conduct of the obligor and the obligee in whatever
pertains to the obligations.
    Governs the pre-contractual relationship as well


Heritability/Assignability:
Rights and obligations arising from a contract are heritable and assignable unless
the law, the terms of the contract, or its nature preclude such effects §1984


Payment of damages: obligor is liable for the damages caused by his failure to
perform a conventional obligation, a failure to perform, results from nonperformance,
defective performance, or delay in performance.

      Moratory damages: damages for the delay of performance
          o When term comes due the obligor is then in default and begins to owe
             moratory damages
      Compensatory damages: damages equal in amt to the value of the
       performance sought by the obligee.

Obligor in Bad Faith: an obligor in bad faith is liable for all the damages,
foreseeable or not, that are a direct consequence of his failure to perform.

Obligor in Good Faith: An obligor in good faith is liable only for the damages that
were foreseeable at the time the contract was made.

Obligee in Bad Faith: An obligee may not recover damages when his own bad faith
has caused the obligor’s failure to perform or when at the time of the contract, he
has concealed from the obligor facts that he knew or should have known would
cause a failure. If the obligee’s negligence contributes to the obligor’s failure to
perform, the damages are reduced in proportion to that negligence.

Reasonable efforts to mitigate damages: An obligee must make reasonable
effort to mitigate the damage caused by the obligor’s failure to perform. When an
obligee fails to make these efforts the obligor may demand that the damages be
accordingly reduced.

Damages for non-pecuniary loss: may be recovered when the contract, because
of its nature, is intended to gratify a non-pecuniary interest and because of the
circumstances surrounding the formation or non-performance of the contract the



                                           38
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                                                                      Professor Levasseur
                                                                              Spring 2002

obligor knew or should have known that his failure to perform would cause that kind
of loss.
       Regardless of the nature of the contract these damages may be recovered
also when the obligor intended, through his failure, to aggrieve the feelings of the
obligor.

Obligation to give:
      To give = To transfer a real right, a right over a thing
      o e.g. Contract of sale- object of which is to provide to the buyer the right of
         ownership over the thing
      o e.g. Donation of a corporeal thing- also transfers ownership,
      o Services are not real rights and so cannot be the objects of obligations to
         give. Can’t have a real right over a person.
  Includes
          Obligation to deliver
             o § 2477- Methods of delivery in a sale
                     Fictitious delivery- delivery that takes place by operation of
                       the mind
                        Delivery of an immovable occurs upon execution of the
                          writing.
                        Some movables can also be delivered by operation of the
                          minds, in a writing, the transfer of a key, or even by mere
                          consent
                        If the thing is delivered fictitiously at the time and place of
                          the sale then it is the obligation of the buyer to remove it.
             o Delivery of possession: actual physical delivery
                              o 2483- the cost of making delivery is borne by the
                                  seller and that of taking delivery by the buyer in
                                  the absence of agreement to the contrary.
          Obligation to keep the thing safe until it is delivered
                        §2489. The seller must deliver the thing sold in the
                          condition that, at the time of the sale, the parties
                          expected, or should have expected the thing to be at the
                          time of delivery, according to its nature.
                        Risk of loss: §2467 (changed in 1994)
                              o Rule used to be res perit domino- thing is dead to
                                  the seller.
                        The risk of loss of the thing sold owing to a fortuitous
                          event is transferred from the seller to the buyer at the
                          time of delivery.
                              o risk held by the one who has possession
                              o Whether the delivery was made by fiction or by
                                  physical transfer may have big effects on the right
                                  of third parties.




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                                                                    Obligations Outline
                                                                   Professor Levasseur
                                                                           Spring 2002

                         3rd parties are put on notice when physical delivery
                          occurs- they can see it. Fictitious delivery can have no
                          effect on third persons.
         Damages for breach of obligation to give: Specific performance plus
          moratory damages- if specific performance is impracticable the court may
          allow damages to the obligee.


Obligations to do:
   Generally cannot get specific performance in contracts like this. Hard for a
      court to make a person do something- especially well- and especially if the
      obligation is personal.
   Get damages, which allow the obligee to seek the service from someone
      else.
   Obligations of means and obligations of result- important distinction in terms
      of evidence.

Obligations not to do:
   usually susceptible of specific performance as long as the object is legal and
      possible. Get an injunction to prevent something.

Defenses/rights available to an obligor:
    Contest the obligee’s actions when the obligation has been extinguished or
     modified by a legal cause-
         o Obligation is extinguished when it has become impossible due to a
             fortuitous event. (more liberal than the common law)
                  May have decided the suez canal cases differently
    Obtain the proper discharge when he has performed in full
    Exceptio non adimpleti contractus- if you didn’t perform then I don’t have to
     perform. Known in public international side of the law as tu quo que.
     (difference from common law here)

Putting in Default:
When the obligor has no defense the obligee is entitled to demand specific
performance and that demand must be preceded by a putting in default- (mise en
demure)
   o By a written request of performance, or by an oral request made before 2
      witnesses, or by filing suit, or by a specific provision of the contract.
   o Arrival of a term without performance automatically puts the obligor in default
   o Generally involves a communication that time is now of the essence and that
      he should perform or he will owe moratory damages.
   o Starts the clock running on moratory damages
   o Can’t put obligor in default before performance is due
   o In reciprocal obligations the obligor of one may not be put in default unless
      the obligor or the other has performed or is ready to perform.


                                         40
                                                                        Obligations Outline
                                                                       Professor Levasseur
                                                                               Spring 2002

   o In obligations to give- putting in default transfers the loss of risk to the other
     party.

Stipulated Damages:
   o Parties can stipulate damages in case of non-performance, defective
      performance, or delay in performance.
   o Stipulation gives rise to a secondary obligation for the purpose of enforcing
      the principle one
   o Nullity of the principle obligation nullifies the damages clause
   o Nullity of the damages clause does not nullify the principle obligation
   o If failure to perform is justified by a valid excuse the obligor is relived of
      liability for stipulated damages.
   o Don’t have to prove actual damage to collect stipulated damages
   o Obligor must be put in default to owe stipulated damages
   o Stipulated damages can’t be modified by the ct. unless they are so manifestly
      unreasonable as to be contrary to public policy.

Weingarten v. Northgate Mall, Inc.:  mall sublet space to the  grocery store, 
wanted to expand but needed ’s permission, which it did not get. Started to build
anyway.  asked for an injunction, a temporary injunction was issued but then
rescinded and the  failed to take his right of appeal. Tr. ct. found that the building
should stand-  get only damages. App. Ct. reversed- said to tear down 60% of the
building. S.Ct. reversed again- saying that normally the  should get specific
performance, but that the economic waste and effect on 3 rd parties outweighed that
right. Ct. also seemed to think that it was not really in the ’s interest to tear down
the building. L- says that the ct ditched the law of obligation, brought in the common
law idea of efficient breach, and decided on the basis of equity.

Remedies for obligations to do:
    Damages
    Dissolution of the contract
Remedies for obligations not to do
   Specific performance
   Have what has been done undone
   Damages (proportional to loss)
   Dissolution of the contract

Dicta rejects the idea that the  must clear the inadequacy of damage- irreparable
injury hurdle. Affirms that specific performance is the preferred remedy.

Reasons why the Ct. could deny specific performance:
   Impossible
   Disproportionate cost
   Compulsion in family relationships
   Cost to community- pollution, urban blight


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                                                                      Professor Levasseur
                                                                              Spring 2002


L- says that if you put all of these exceptions together you can forget about specific
performance. It will be denied if any of the above weigh heavily.

Lemmon (concurrence): Focuses on the rights of third parties.



Meador v. Toyota:  young woman with first new car brought in her car for repairs
and did not get it back until 7 months later (5 months too late). Was awarded
damages ($700) for aggravation distress and inconvenience.  appealed. S.Ct.
says that the intellectual benefit must be a principle object of the contract. Looks at
the history of the code articles (now 1998)- not in code until 1825. French translated
into English poorly.
            Liberal interpretation would award such damages whenever there was
               any intellectual satisfaction of which the  was deprived.
            Strict interpretation- must be the principle object of the contract.
Ct. takes a middle ground- that the intellectual satisfaction must be a principle object
but not the only one. Finding that here the principle object was physical gratification
of the car and that the intellectual satisfaction was merely accessory.
However the ct. does say that while the law of contracts does not allow such
damages, but should in light of the law of torts where damages are awarded for non-
pecuniary injury. Ct. refuses to argue a pari ratione and read the law this way
because it chooses to defer to the legislature. L- not so happy with this- says it is a
cop out- that the ct. could have used CC Art. 4. Philippe v. Browning Arms Co.: cited
in Bourne. Did away with the distinction between torts and contracts. Why didn’t the
court do it here as Justice Dixon would have done in his dissent.

Bourne v. Rein Chrysler-Plymouth:  bought a new car from the . It immediately
had a ridiculous amount of mechanical problems. She tried to have it fixed but
things kept breaking. She paid the car notes but the  had it seized an sold anyway.
Because she no longer had the car she could not get a rescission of the sale. Ct.
says that instead she is entitled to a reduction in the sale price under redhibition or
quanti minoris. Ct. distinguishes Meador on this basis- effectively overrules it. Turns
on the s. ct. decision in Phillippe that the distinction between contract and tort was
gone. This is the common law view- same remedy in contract and in tort- plead in
the alternative. L- says that the laws are different; burden of proof and prescriptive
period are different. Tort- 1 year, Contract- 5 years. Says this is a mistake- should
have used the reasoning in Dixon’s dissent instead.
       Fraud: not raised but could have been. 2545, 2531.
§1998- now the law- how decided under this. Contract because of its nature is
designed to gratify. Or when obligor knew or should of known that his failure to
perform. Or when the obligor intended to cause such harm. L- says that the women
with the car issues would have gotten damages.




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                                                                        Obligations Outline
                                                                       Professor Levasseur
                                                                               Spring 2002

Dissolution:
Obligee has a right to dissolution:
   o when the obligor fails to perform
   o can be judicial or depending on the circumstances the obligee may be able to
       regard the contract as dissolved.
   o Can still recover damages
   o If judicial- ct. may allow additional time to perform- if reasonable under the
       circumstances
   o No right to dissolution if substantial partial performance has been rendered
       and the part not rendered does not substantially impair the interest of the
       obligee.
   o Dissolution with notice: upon failure to perform the obligee can serve notice
       on the obligor giving him a certain, reasonable time to perform and warning
       that if the obligation is not performed by then the contract will be deemed
       dissolved. (Requirements and effects of default also apply)
   o Dissolution without notice to perform- obligee can treat a contract as
       dissolved once a delayed performance would no longer be of any value to the
       obligee or if it becomes evident that the obligor will not perform.
Effects of Dissolution:
   o Upon dissolution the parties shall be restored to the status quo ante, if this is
       impossible or impracticable the ct. may award damages.
   o If partial performance rendered and it is of value to the person seeking
       dissolution, the dissolution does not preclude recovery for that performance.
   o In contracts for continuous or periodic performance, the effect of the
       dissolution shall not be extended to any performance already rendered.
   o If there are more than 2 parties to the contract- one parties failure to perform
       cannot cause dissolution unless the performance that failed was essential to
       the contract.
   o Rights of a 3rd party in good faith: dissolution of a contract does not impair the
       rights acquired through an onerous contract by a 3rd party in good faith.

Refusal to perform: Either party to a commutative contract may refuse to perform
his obligation if the other has failed to perform or does not offer to perform his own at
the same time, if the performances are due simultaneously.

Security for performance: if the situation of a party has become such as to clearly
endanger his ability to perform an obligation, the other party may demand adequate
security and upon failure to get that security that party may withhold or discontinue
his own performance

Contract of unspecified duration: may be terminated by the will of either party by
giving notice- reasonable in time and form.


When parties enter into a contract, what they are looking for is performance- so
when the obligor fails to perform the obligee has a choice of remedies-


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                                                                     Obligations Outline
                                                                    Professor Levasseur
                                                                            Spring 2002

   o can sue for specific performance
   o can sue for damages
   o can sue for dissolution of the contract plus damages, plus the return of the
     parties to the status quo ante.

Grounds for dissolution
   o outside the control of the obligor:
         o fortuitous event
         o impossibility of performance
                 happens often when something becomes illegal
                 e.g. law makes it illegal to fish for a certain kind of fish- the
                    obligations between the fisherman and a restaurant may be
                    dissolved
   o in the control of the obligor
         o obligor fails to perform
                 obligee can seek judicial dissolution
                         judge may give the obligor a grace period of additional
                            time to perform
                 or according to the circumstances can regard the contract as
                    resolved
                         never happens because obligor wants the finality of a
                            court order
   o Can have an express dissolution clause
         o Don’t count to much on this, likely to be challenged, but is a benefit in a
             burden of proof
   o Dissolution after notice to perform- if put in default with a warning that unless
     the performance is rendered within a certain time the contract will be deemed
     dissolved.
         o Time allowed must be reasonable
         o Notice to perform is subject to the requirements governing a putting of
             the obligor in default and for the recover of damages for delay shall
             have the same effect as putting of the obligor in default
   o Dissolution without notice to perform- if a delayed performance is no longer of
     value to the obligee or when it is evident that the obligor will not perform, the
     obligor can regard the contract as dissolved without any notice to the obligor

Effects of the dissolution
           o Parties restored to the status quo ante
           o If this is impossible or impracticable the ct can award damages
           o If there has been partial performance and that performance is of value
               to the party seeking to dissolve the contract the dissolution does not
               preclude recovery for that performance
                     Part of theory of unjust enrichment
                 rd
           o 3 persons- dissolution cannot have detrimental effects vis-à-vis a 3rd
               person in good faith.



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                                                                      Professor Levasseur
                                                                              Spring 2002




Simulation: A contract is a simulation when, by mutual agreement, it does not
express the true intent of the parties.
Counter Letter: a separate writing in which true intent of the parties is expressed

Absolute simulation: one in which the parties intend that their contract shall produce
no effects between them-
           o it does not have any effects between the parties.

Relative simulation: one in which the parties intend that their contract shall produce
effects between them though different from those recited in their contract.
           o Produces the effects intended if all requirements for those effects have
             been met.

Effects as to 3rd parties:
Any simulation- absolute or relative- may have effects as to third persons.
Counter letters can have no negative effects against third persons in good faith
Action in simulation is an action that allows a third person to bring the evidence to
prove that a contract is not the one that the parties intended to enter into. Prove that
there is another contract behind that contract which is the true law.

§§2025 –2028

   A. What are the conditions for a simulation to exist?
          a. Parties must fully agree on what they intend to do- they intend to enter
              into two contracts- one a simulated contract and one which will actually
              bind them (a counter letter)
          b. The counter letter must be entered into between the parties at the
              same time that they enter into the apparent/simulated contract.
                   i. If there is too much time between the simulated contract and the
                      counter letter the counter letter could be considered a
                      modification, revision, or revocation of the first contract.
   B. Simulation is not an automatic cause for nullity of a contract- it is not unlawful
      by itself. There are instances of simulation which are perfectly acceptable
      under the law
   C. Forms of simulation
          a. Consent- as part of the formulation of a contract- enter into a simulated
              contract but by a counter letter entered into simultaneously they intend
              for the simulated contract to have no effect whatsoever. Absolute
              simulation.
                      e.g. apparent sale- but parties agree that no thing will be
                      transferred and no price will be paid
              Why enter into such a contract- because of the cause




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                                                                       Obligations Outline
                                                                      Professor Levasseur
                                                                              Spring 2002

   e.g. to give apparent credit- to establish credit in the eyes of third parties. (this
   cause is legal assuming that the “seller” has no reason to know that the
   “buyer” is a crook)
      b. Cause- Counter letter changes the apparent cause of the K
                i. E.g. a contract is written as a sale but is by counter letter really
                   a donation. OK as long as the cause is not to defraud.
      c. Object- Counter letter changes the cause
                i. E.g. if a contract of sale is the simulated contract- and it lists the
                   price as $10,000, the counter letter makes it clear that the real
                   price is $3,000. Not unlawful unless there is an unlawful cause-
                   fraud.
      d. Person- Counter letter changes the person
                i. E.g. an anonymous donation- donor gives to apparent party, but
                   the counter letter will stipulate that the gift really go to another
                   party.
               ii. This kind of simulation contract is used often- popularly called a
                   “straw-man” contract.
              iii. Related to the concept of mandate- a mandatary who contracts
                   in the name of the principle within the scope of his power and in
                   the name of his principle is not bound in any way by the
                   contract. However, if he enters into the contract in his own
                   name- without disclosing his status as a mandatary- binds
                   himself.
D. Effects of Simulation/Counter letter
      a. Between the parties- their contractual relationship is that determined
           by the counter letter- the true intent under §2025
      b. Effect vis-à-vis third persons-
                i. the counter letter (which is a hidden document) cannot have any
                   negative effect as to 3rd parties in good faith, because those
                   third parties did not have a chance to see them/know about
                   them
                       1. “exception” because of the concept of representation-
                           heirs stand in the place of the decedent §§1585, 1586,
                           1587.
                               a. Universal legatees or heirs (who inherit the totality
                                  of the succession) are not considered to be third
                                  persons.
                               b. General legatees (legatees under universal title)-
                                  had a title to the universality of either movables or
                                  immovables, or a title to either the corporeal or
                                  incorporeal things.
                               c. Particular legatees- have a title to a particular
                                  thing
               ii. The counter letter may have favorable effects as to third parties.
                       1. e.g. Simulation is a sale, counter letter says that a
                           donation takes place instead.


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                                                                         Professor Levasseur
                                                                                 Spring 2002

                                 a. If the counter letter cannot be proven then the
                                    creditors of the donor get preference as to the
                                    thing in a revocatory action.
                                 b. If the counter letter can be proven then the
                                    creditors of the donee get preference.

Action in simulation does not occur often because of the difficult burden of proof and
the likelihood of a dispute between creditors of the parties which render the proof
useless.

§3499- unless provided otherwise by legislation (which doesn’t exist) there is a
liberative prescription from the time the counter letter can be proven. Subject to the
general 30-year limit on prescription.


Revocatory Action: (also called Paulian(a) action- the a makes if French)
§2036-2043

an obligee has a right to annul an act of the obligor, or the result of a failure to act of
the obligor- made or effected after the right of the obligee arose, that cause or
increases the obligor’s insolvency.
     Contract must cause or increase the insolvency of the obligor
     Contract must cause an injury to the creditor

           o Creditor under a suspensive term is a creditor- has a right to
             performance, as soon as insolvency occurs the term comes due and
             so that creditor has a revocatory action

           o Creditor under a suspensive condition: creditor of a hope – should
             have a right to a revocatory action

      Creditor must be that of a debt which occurred before that which is
       challenged

Insolvency: when the total of a person’s liabilities exceeds the total of his fairly
appraised assets:
   o Note- not every contract will increase insolvency- e.g. if an insolvent buys a
      thing worth $100 and only pays a $100 the total value of the insolvent’s
      patrimony has not changed- it may now be less liquid, but the value is the
      same and the creditor can always have the thing seized and sold.

as to the parties:
   o Object is to bring back into the obligee’s patrimony as much as possible so
       that creditors will be paid.




                                            47
                                                                        Obligations Outline
                                                                       Professor Levasseur
                                                                               Spring 2002

   o Plaintiffs bear the cost of identifying whatever property is still in the obligor’s
     patrimony
   o Benefit of the revocatory action is personal to the party who brings the action-
     this way the third party gets any excess amount and that money does not go
     to the other creditors who were not party to the action. §2043
   o Prescription is one year from the time the creditor learned or should have
     learned that the debtor has increased his insolvency
   o Obligee must join the obligor and the 3rd persons in the action

Effects of a revocatory action on 3rd parties: depends on whether the contract is
onerous or gratuitous and on the bad/good faith of the parties.

   o Onerous contracts made by obligor-
     o Bad faith- knew or should have know of the insolvency
            o Contract can be revoked
            o 3rd person is only entitled to recover what he gave in return only to
               the extent that it has inured to the benefit of the obligor’s creditors.
               (3rd party gets only what is left over back)
     o Good faith- party did not know that the contract would cause or increase
        the obligors insolvency
            o Contract can be revoked.
            o 3rd person is entitled to recover as much as he gave to the obligor.
            o Good faith is presumed to exist if the 3rd party pays at least 4/5 of
               the value of thing
   o Gratuitous contracts made by the obligor:
     o may be revoked regardless of good/bad faith of the 3rd party
   o Contracts made in the course of business: can’t be revoked

National Bank of Bossier City v. Hardcastle: Insolvent debtor transfers his property
as a supposed sale but for a very low price. His creditors argue that the sons knew
that there father was insolvent and that they intended to defraud the father’s
creditors. The bank also claimed that one of the sons was also a creditor due to a
past loan. Ct. finds that the son was not really a creditor. At the time the law
included a presumption of fraud, but the ct. still did not find that the sons tried to
defraud.
     Causes or increases the insolvency of the debtor
     Injury to the creditor- standing (was the creditor really a creditor)
     (used to be a requirement that there was an intent to defraud)

Principle of civil law- fraud vitiates everything, fraus omnia corrumpit

Under the current law the outcome would have been different because no fraud
would have to be proven.

Owen v. Owen: Father transferred land through purported sales to two of his sons,
on his death the other children challenged the sales as really being disguised


                                           48
                                                                       Obligations Outline
                                                                      Professor Levasseur
                                                                              Spring 2002

donations (simulation) which were illegal because these donations were omnium
bonorum. Donations omnium bonorum are invalid because of public policy wanting
to avoid persons becoming burdens on the state- you must keep enough to support
yourself. Land was then sold to a third party, the bushes, who were told that there
may be something wrong with the title.
        Are donations omnium bonorum are absolutely null? What effect do they
have once transferred to a third party who purchased on the basis of the protection
of the public records? Supreme ct. says that these third parties are protected by the
public records. Knowledge outside the public records is not knowledge. What if the
price in the record is lesionary? Obviously below market value. Right of lesion is
heritable so perhaps a sale on the basis of these public records should be null.


Oblique Action: If an obligor causes or increases his insolvency by failing to
exercise a right, the obligee may exercise it himself, unless the right is strictly
personal to the obligor.
   o Failure to exercise a right which increases or causes insolvency
   o Can be exercised by the obligee
           o Unless strictly personal
   o Action that the obligee brings is the action that the obligor should have
       brought- so the obligee goes through the patrimony of the obligor. Thus the
       action is oblique not direct. And if the right is a personal one the obligee
       cannot take it from the patrimony of the obligor.
   o What ever the obligee brings back into the obligor’s patrimony the other
       creditors have a right to- in the order of creditor’s privilege. The party who
       brings the oblique action does not get first crack at the money
   o Prescription is the prescriptive period of the action being used obliquely-

how is this “failure to exercise a right” differs from “failure to act” in 2036?
  o Used to be easier because there was a requirement of fraud in the revocatory
      action.
  o e.g. forced heir is insolvent but fails to claim his legitime- is this a failure to
      exercise a right or a failure to act.

Succession of Boning: decedent bypassed a living son in her will and left the money
directly to her grandchildren. A creditor of the bypassed son, a forced heir, brought
an action to redistribute the succession and put the son’s legitime into his patrimony.
Ct. finds that this right to reduce a legacy is a personal to the son- reasoning in pari
material and a pari ratione from the articles on collation. And that there cannot be an
oblique action for a strictly personal right. (Judge wanted to keep family sacrosanct-
didn’t want creditors to be able to get involved)Failure to bring an action  oblique
(could there be here an issue of strictly personal right- because the oblique action is
the same exact action that the debtor has- ct says so) Result of the failure to bring
an action  revocatory (Paulian) Probably didn’t bring a revocatory action because




                                          49
                                                                      Obligations Outline
                                                                     Professor Levasseur
                                                                             Spring 2002

they couldn’t prove fraud. Now they may have been able to bring that action.
Principle of law is that rights are presumed to be heritable.



Performance:
Performance (§§1854-1863)- normal extinction


3 modes of extinction by performance
    Party who originally entered into the contractual relationship Performance by
     the obligor extinguishes the obligation
    By a third person (even against the will of the obligee unless there is a
     personal obligation as to the obligor- obligee has an interest in only the
     obligor performing)
    Obligor who has an interest in discharging the obligation of another.
         o E.g
                 solidary obligors (even where there is a principle obligor),
                 mandatary (person acting for or representing another),
                 Management of the affairs of another- Negotiorum gestio
                    (§§2292-2297) (manager acts without authority to protect the
                    interests of another in the reasonable belief that the owner
                    would approve of the action if made aware of the
                    circumstances)

Performer must have the legal capacity to carry out the performance- especially in
obligations to give (i.e. must have the legal right to transfer the ownership of the
thing given e.g. §2452)

Performance must be rendered to the obligee or to a person authorized by him.
§1857 Mandate and representation §§2985 et seq.
    If unauthorized performance may be made valid if ratified by the obligee
    If ungratified a performance rendered to an unauthorized person is still valid if
      the obligee has derived a benefit from it, but only for the amt. of the benefit.
Must perform the appropriate object of performance
    Divisibility- an obligee may refuse to accept a partial performance
          o (unless the object is monetary then the obligee must accept the
             undisputed part and if the obligee is willing to accept that undisputed
             part the obligor must pay it) §1861
    Delivery- must be of the same object of performance
    Quality- suppletive law is that the obligor need not give one of the best quality
      but neither may he tender one of the worst.
    Expenses- expenses that may be required to render performance shall be
      borne by the obligor (e.g. cost of making delivery is borne by the seller, cost
      of removal is borne by the buyer)


                                          50
                                                                     Obligations Outline
                                                                    Professor Levasseur
                                                                            Spring 2002

      Place of Performance- place stipulated by the agreement or the place
       intended by the parties according to usage, the nature of the performance, or
       other circumstances.

Delegation: §1886 a delegation of an obligation by an obligor to a third person who
consents.
                Usually a temporary obligation
                Order issued by an obligor to someone else to be a creditor
                       Obligor (delegator) tells another person (delegatee) to
                         pay the obligee.
                Obligee now has two obligors who owe the same thing- bound
                  solidarily
                If there is no intent to novate than you have a delegation
                  (comment d)
                Perfect and imperfect delegation
                       Perfect is novation
                       Imperfect is delegation as defined above
                Personal obligations cannot be delegated
                Performance owed by the delegated obligor must be the same
                  and entire performance that the delegator owes.

Impossibility:
The obligor is not liable for his failure to perform when it is caused by a fortuitous
event that makes the performance impossible unless
    He assumed the risk of such a fortuitous event
    When the fortuitous event occurred after he was put in default
          o Unless the fortuitous event would have likewise destroyed the object of
              the performance in the hands of the obligee had performance been
              timely rendered
    When the fortuitous even that caused his failure to perform has been
       preceded by his fault, without which the failure would not have occurred.

Fortuitous event: one that at the time the contract was made could not have been
reasonable forseen.

Effects of impossibility:
    when the entire performance owed by one party has become impossible
       because of a fortuitous event, the contract is dissolved.
           o The other party may then recover any performance he has already
              rendered
    When a fortuitous even has made a party’s performance impossible in part,
       the court may reduce the other party’s counterperformance proportionally or
       according to the circumstances may declare the contract dissolved.




                                         51
                                                                         Obligations Outline
                                                                        Professor Levasseur
                                                                                Spring 2002

           o If the contract has been performed in part, the obligee is bound but
             only to the extent that he was enriched by the obligor’s partial
             performance.

Assumption:
By agreement between an obligor and a 3rd person: they may agree to an
assumption by the 3rd party of an obligation owed by the obligor. (how is this
different from delegation?)
     To be enforceable by the obligee against the 3rd person it must be made in
       writing
     Obligee’s consent does not effect a release of the obligor
     Obligor and 3rd person are solidarily bound
            o Except 3rd person is only bound to the extent of his assumption
            o Assuming obligor (3rd person) may raise any defense based on the
               contract by which the assumption was made.
By agreement between an obligee and a 3rd person: they may agree on an
assumption by the 3rd person of an obligation owed by an obligor to the obligee.
             Does not effect a release of the original obligor
             Contemplates promises to pay the debt of another
             Can occur even without the knowledge of the obligor
             Obligor and 3rd party are not solidarily bound
                   o B/c could have negative effects on original obligor- e.g.
                      interruption of prescription or putting in default
             3rd party may not raise any defenses based on the relationship
               between the original obligor and obligee
             3rd party may not invoke compensation based on an obligation owed
               by the obligee to the original obligor.
             What does the 3rd party owe if the original obligor pays- what does the
               original obligor owe if the 3rd party pays? Are they joint obligors?

Subrogation:(§§1825 et seq) the substitution of one person to the rights of
another. May be conventional or legal.
       Creditor receiving performance from someone other than the original obligor
subrogates the performing obligor- giving him the creditor’s rights against the original
obligor

Creditor             Obligor    Subrogated claim- was creditor’s- can
                                now be brought by the subrogated
                                obligor
                     Subrogated Obligor

Effects: when subrogation results from a person’s performance of the obligation of
another, that obligation subsists in favor of the person who performed it who may
avail himself of the action and security of the original obligee against the obligor, but
is extinguished for the original obligee. An original obligee who has been paid only



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                                                                         Obligations Outline
                                                                        Professor Levasseur
                                                                                Spring 2002

in party may exercise his right for the balance of the debt in preference to the new
obligation.

Subrogation by contract:

               Subrogation by the obligee: an obligee who receives performance from
                a third person may subrogate that person to the rights of the obligee
                even without the obligor’s consent. That subrogation is subject to the
                rules governing the assignment of right (sale). Does not have to be
                in writing.

      e.g. if a son buys a car, and payments are made by his father, the car dealer
may subrogate the father. Father gets the privilege of the vendor to secure the
payment from the son.

Vendor                        Son
Obligee (price)               Obligor (price)

                              Father

               Subrogation by the obligor: (§ 1828) An obligor who pays a debt with
                money or other fungible things borrowed for that purpose may
                subrogate the lender to the rights of the obligee, even without the
                obligee’s consent. The agreement for subrogation must be in writing
                expressing that the purpose of the loan is to pay the debt.
              Payment
Obligee                 Obligor             Obligee
(june)                      Loan            (August)            $
                                                                subrogation
                         rd
                        3 person (now june b/c of the subrogation)

Significance is in the preference of the creditors. If there are multiple creditors the
3rd party lender essentially gets the Obligee’s place in line.

Possibility of fraud-
3rd person and obligor could work out a scheme to deprive a creditor of his place in
the line of preference.

3rd person and obligor may also set up a scheme where a false loan is set up and
the obligor then pays the obligee with his own money and then the 3 rd party gets that
place in line ahead of the other creditors, thus protecting the obligor.

Because of this the article requires a very specific writing stating that there is a loan
and that the purpose is to pay the debt.

Subrogation by operation of law §1829


                                            53
                                                                     Obligations Outline
                                                                    Professor Levasseur
                                                                            Spring 2002


             In favor of an obligee who pays another obligee whose right is
              preferred to his because of a privilege, pledge, mortgage, or security
              interest.
             In favor of a purchaser of movable or immovable property who uses
              the purchase money to pay creditors holding any privilege, pledge,
              mortgage or security interest of the property.
             In favor of an obligor who pays a debt he owes with others or for others
              and who has recourse against those others as a result of the payment.
             In favor of an heir with benefit of inventory who pays debts of the
              estate with his own funds.


Novation: An existing obligation is extinguished and replaced by a new obligations
Novation is a contract:
    The intention to extinguish must be clear
    Takes place by agreement of the parties
Thus need all of the elements of a contract
    Capacity of both parties
          o Watch out of capacity of the obligor
                  E.g. if changing a sale to a donation- the capacity to enter into a
                     sale is different than the capacity to enter into a donation.
    Consent of both parties
          o No vice
          o Cannot be presumed, must be clear and unequivocal
          o Must be the intent to novate (animus novandi)
    Object of the Novation
          o The new contract that the parties want to enter substituted for an
              existing one.
                  Need to ascertain that the obligation that the parties wish to
                     extinguish exists.
                          Watch out for suspensive conditions- can’t novate b/c
                             obligation doesn’t exist.
                          Can you novate a natural obligation? Is a natural
                             obligation an existing obligation?
                                 o Answer is controversial.
                                 o §1879 comment (b) natural obligations can be
                                    novated- cites Litvenoff.
                                 o L- says that there is no right which exists with a
                                    natural obligation- so whether it is exists seems
                                    less convincing

Kinds of Novation:



                                          54
                                                                      Obligations Outline
                                                                     Professor Levasseur
                                                                             Spring 2002

      Objective novation: bears on a fact of an obligation
          o E.g. sale of a civil code novated to a sale of Corpus Juris Civilis
                  Object is what changes
          o E.g. sale of a civil code novated to a donation of a civil code
                  Cause is what changes
          o E.g. sale with a suspensive condition to a pure obligation (without a
             suspensive condition) I thought that you couldn’t novate a non-existant
             obligation- wouldn’t one under a suspensive condition not yet be in
             existence?

      Adding or deleting a term is not a novation- just an amendment

      Subjective novation: bears on the persons involved in the obligation
         o Novation replacing one obligor with a new obligor. Sale to obligor 1
             novated to sale to obligor 2.
                  No consent of prior obligor is necessary unless he had a
                    personal interest in performing
                         Ogee           Ogor
                                               Contract

                                          N.Ogor
                           substitution of obligee is not provided for in the code
                            o if obligee and 3rd party want to do something like this
                               they need to have an assignment- problems is that
                               assignment is part of the law of sale, what if you want
                               to substitute obligees without a sale? (assignment is
                               not a new obligation- it is just a transfer by sale)
                            o L- says that there is no reason not to allow novation
                               between obligees


Effects of Novation
    Extinction of an existing obligation
           o Novation between obligee and one of the obligors releases the other
              obligors. No novation if the other obligors are required to be bound
              still, unless they consent to the new obligation.
    New obligation
           o new burden of proof
           o new defenses
           o new prescriptive period


Remission of Debt: §1888-92
      Basically forgiveness of debt
      Extinguishes the obligation


                                          55
                                                                         Obligations Outline
                                                                        Professor Levasseur
                                                                                Spring 2002

      No transfer, no new obligation- just extinction
      Results from the gratuitous intent of the obligee
      Must be clearly communicated to the obligor because not every obligor will
       want his debts forgiven- may be a point of honor
      Consent of the obligor must be given for the remission to be valid
           o Acceptance is presumed unless the obligor objects within a reasonable
              time
      Giving back the instrument is presumed to be remission
      Effective when the obligor receives the communication of the remission.
      Probably no natural obligation remains once the debt is remitted because the
       intent of the obligee was to remove all obligation
      Remission of the debt of a principle obligor releases any accessory obligors
       (sureties). No longer anything to back up.
      Reverse is not true- to extinguish a surety does not release the principle
       obligor.
      Harder when you have solidary obligors- mentioned in the comment
           o If released from solidarity they become joint obligors
           o If released in solido the debt is completely extinguished
           o If one obligor is released- his portion of the debt is extinguished-
              remission of debt to one of the obligors
                    E.g if obligee and 4 solidary obligors- one obligor released- he is
                      gone, and with him goes ¼ of the debt.
                    What if one of the remaining 3 cannot bear the debt.

Remission of debt v. release of solidarity

Remission leads to extinction of the debt
Release from solidarity does not extinguish the debt it just makes the obligors joint
obligors.

If obligee remits the debt of a principle obligors- sureties are relived of the obligation
to pay as well.
The reverse is not true

If obligee remits the debt of one solidary obligor that obligor is relieved of any
obligation and the debt is reduced by the share of that obligor.

E.g. if there is an obligee and 3 obligors in solido who owe together 900 dollars, and
the debt against one is remitted, that obligor owes nothing and the other 2 now owe
600 dollars. If one of the remaining obligors becomes insolvent than the other
obligor owes his share of 300, plus half of what the insolvent obligor would have
owed, 150. Obligee essentially takes on the burden of the obligor who’s debt he
had remitted. Obligee cannot increase the burden on the other two obligors.




                                             56
                                                                    Obligations Outline
                                                                   Professor Levasseur
                                                                           Spring 2002

Compensation: Assume that obligee is owed a debt from obligor and that
obligee also owes a debt to obligor

Ogee                Ogor


Conditions for compensation to take place
   o Things owned on both sides must either sums of money
   o or quantities of the same fungible things
           o no compensation if the fungible things are things that cannot be
              seized.
   o Debts must be liquidated- amount must be determined
   o Debts must be demandable/due
           o Watch out for term, establish in whose benefit is the term, only the
              party in whose benefit the term exists can waive it.
   o May also occur if the parties agree
   o May also occur if the debt is un-liquidated and the ct. declares compensation
       as to that part of the obligation that is susceptible of prompt and easy
       liquidation.
Effects of compensation
   o Extinguishes both debts to the amount of the smaller debt
   o Rules of imputation may come into play in compensation.
   o Solidarity
           o Compensation is a strictly personal defense. Compensation between
              the obligee and one obligor extinguishes the debt to the share of that
              obligor
   o Assignment
           o An obligor who has consented to an assignment of the credit by the
              obligee to a third party may not claim against the latter any
              compensation that otherwise he could have claimed against the
              former.
           o An obligor who has been given notice of assignment to which he did
              not consent may not claim compensation against the assignee for
              obligation of the assignor arising after that notice


Confusion: When the qualities of obligee and obligor are united in the same
person, the obligation is extinguished by confusion.

e.g. Happens in successions- where an only heir borrows money from a parent and
then the parent dies (de cujus) and that heir becomes the universal successor so
owes a debt to the succession, but also owns the succession- there is confusion

Effects:
   o Extinguished



                                         57
                                                                    Obligations Outline
                                                                   Professor Levasseur
                                                                           Spring 2002

o If principle obligation is extinguished this way- the obligations of the surety are
  extinguished
o If the obligation of the surety is extinguished this way the obligation is not
  extinguished as to the principle obligor.




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