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Civil Law Obligations

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					                                                  Obligations


II. General Theory of Obligations

Definition:

Art. 1756. Obligations; definition

An obligation is a legal relationship (subject to enforcement by law) whereby the person, called
the obligor, is bound to render a performance in favor of another, called the obligee.
     Performance may consist of giving, doing, or not doing something.

             In a broad sense, the word “obligation” is the equivalent of the two words credit and debt united.
             Obligatio translates ambiguously into English because in English, the obligation only sounds
              negative. In Latin, obligatio could mean that the person could be the creditor, positive.
             Obligor - whoever owes the duty to another person
             Obligee - Whoever is claiming the enforcement of a certain right
             Today, the term obligation is widely used to refer to a two-ended relationship which appears from
              one end as a personal right to claim and from the other as a duty to render performance.
                  o obligations are viewed as a credit-right:
                           obligee is the creditor
                           obligor is the debtor
                  o The party bound to make performance is called the debtor/obligor, whilst at the other end of
                      the obligation we find the creditor/obligee, who has put his confidence in this specific debtor
                      and relies on the debtor's will and capacity to perform.

             in a bilateral contract (or other reciprocal obligations) the parties are reciprocally obligors and
              obligees.

             word obligation comes from “lig” which means that something or somebody is bound; which leads
              to the two-ended relationship (debtor – creditor)

             Positive Obligations and Negative Obligations:
                 o The “object of the obligation: is used to designate that which the creditor has the right to
                      exact of the debtor.
                          In general, this object consists of a “positive act” or “prestation (or things
                             furnished)”.
                          Occasionally, the object of the obligation is a “negative act”, meaning the debtor is
                             required not to do something which he would have the right to do if the obligation
                             did not exist.

             Obligations are usually categorized in one of 3 ways:
                  1. To give – Those obligations whose special purport is the transfer of a right:
                         a. Lawyers to transfer a real right to someone

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                      b.Transfer the owernship of a real right
                      c.Sell blackacre; give usufruct – an owner can create this right
                      d.Granting a servitude across your property
                      e.Lease an apartment – is not giving because you are not creating a real right; it is a
                        personal contract, a relationship only
              2. To do - those obligations whose purport is a physical act:
                    a. To do something for someone, a service rendered, lawyers do nothing but do
                    b. Agent (mandatary) an agent where by you could sell land for your client – selling a
                        thing – would be to give
              3. Or not to do – Negative Obligation, abstention from doing something:
                    a. Not to build a building above a certain height; to abstain from your normal rights,
                        you commit to not do this
                    b. At end of employment, not to compete

          Three tiers of obligations:
              o Civil - perfectly enforceable. (contracts, torts)
              o Natural Obligations
              o Moral Obligations - obligations in conscience. They are unenforceable.


Sources of Obligations:

Art. 1757. Sources of obligations

Obligations arise from contracts and other declarations of the will. They also arise directly from
the law, regardless of a declaration of will, in instances such as wrongful acts, the management
of the affairs of another, unjust enrichment and other acts or facts.


          Leading example is a contract – (definition art 1906) A Contract is an agreement by 2 or more
           parties whereby obligations are created…
          Other declarations of will –
               o An example is leaving a will/testament – Here, the testator creates and obligation
                        a will is not a contract because there is no offer/acceptance but it constitutes an
                           obligation on behalf of the testator
          Torts (delict) fall w/in the field of obligations
               o Arising from the law; a torts arises from a wrongful act:
               o A runs over B
                        A owes money to B (A is the obligor; B is the obligee)



Art. 1758. General Effects

   A. The obligee has the right to:
         (1) Enforce the performance that the obligor is bound to render
         (2) Enforce performance by causing it to be rendered by another at the obligor‟s
             expense;

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          (3) Recover damages for the obligor‟s failure to perform, or his defective or delayed
              performance.

   B. The obligor has the right to:
         (1) Obtain the proper discharge when he has performed in full;
         (2) Contest the obligee‟s actions when the obligation has been extinguished or modified
             by a legal cause.

Art. 1759. Good Faith

Good faith governs the conduct of the obligor and the obligee in whatever pertains to the
obligation.
   o Parallel article 1983 – “Contracts must be performed in good faith.”



      Historical Development of Obligations
           o Delictual Liability - In the beginning the concept of Fault/intent did not play a role;
                    Initially it was „an eye for an eye‟ concept
                    Later tempered through proportionality notion (proportional to the injury caused)
                    Later tempered further by accepting monetary compensation (set according to the
                      degree of the injury)
                    Much much later fault becomes very important
           o Contractual liability – it evolved from the concept of tort – would give power over the person
                    Privity – concept of privity of contract is strongly implicated in the concept of obligations
                      as it evolved from tort into contract
           o Later on Roman law expanded the concept of obligations beyond delict and contract – quasi
               contract, quasi delict

    Linkage Between Obligations, Property and Patrimony
          o   Unitary ideas attached to the study of obligations:
                   Autonomy of the Will – will theory is very important and underlies the theory of
                     contract and testament
                   Patrimony – Serves as the link b/n obligations and property. This is one of the
                     broadest, most unified theories of civil law/obligations
                          Patrimony is a person‟s internal balance sheet; all assets and liabilities put into
                             one
                          It has to have some monetary value…can be zero, can be a negative number if
                             more liabilities are in the patrimony than assets; susceptible of some pecuniary
                             valuation
                                 o e.g., the love of your daughter does not go into patrimony
                                 o e.g., reputation probably doesn‟t – but things of value affected by your
                                     reputation do go into your patrimony
                          you suffer a tort, you are hurt – that‟s an asset – somebody owes you $
                          owe money to bank – passive
                          you own a house – active
                          mortgage – passive


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                patrimony is inseparable from the person, and every person only has one patrimony. As
                 long as a person is alive that person‟s patrimony cannot be transmitted to another
                 person (you could transfer assets in the patrimony, but not the patrimony).
                NON-patrimonial rights and duties
                      All rights and all duties of a political nature…these are the rights like life, liberty,
                        and honor together with the duties inherent in them…these rights belong to
                        public law.
                      Paternal power and marital power (the rights of power which one person has
                        over another)…Even though they fall into the domain of private law, they are
                        characterized by the same non-pecuniary nature.
                      Suits based upon status, of which a person may make use in order to defend or
                        modify its personal position

                Real Rights vs Credits/Obligations (all patrimonial rights are either real rights or
                 credits/obligations)
                      Real rights –
                             o Focuses on ownership – when you have complete, direct control of a
                                 thing (a real right only exists in connection with a thing)
                             o It‟s a right you have as against the entire world, whereas in an
                                 obligation/credit you have a right as to a specific person or persons
                                      e.g., you own land and you have the right to chase people off
                                         your land (that‟s your real right)
                                      cf., if you are owed money, you can‟t just reach out and grab the
                                         money (it‟s not a real right as to the money, it‟s only a personal
                                         right)
                             o Additionally, there is a patrimony of personality rights (honor, dishonor,
                                 fame, feelings):
                                      Dommage moral – Invasion of ones personality.

      o   FAULT – both in Delict and in Contract – civil law gives importance to finding fault
              Was there fault involved in the breach?
              Was there fault in the commission of an injury

                Obligations of Means and obligations of Result – the key difference is FAULT
                      Obligations of means – majority of obligations are of means (obligation to use
                         the best of your abilities – i.e., doctor – obligation to do or act as reasonable
                         doctor would)
                             o For this type of obligation, you need to establish FAULT on behalf of the
                                debtor (doctor) and the burden of proof is on the plaintiff (creditor-
                                patient) to establish the fault
                  Obligation of Result
                          Obligation to ensure that something will “result” from the performance

 Kinds of Obligations –
     Three tiers of obligations:
         o Civil - perfectly enforceable. (contracts, torts)
         o Natural Obligations

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               o   Moral Obligations - obligations in conscience. They are unenforceable.

Natural Obligations

      Historically, obligations contracted by slaves, children, and women were not obligations because they
   lack enforceability: person in power could normally not be parties to a lawsuit; and where they could, the
   other party could not proceed to execution under the judgment.
      A natural obligation is a prescribed debt.
      When a person feels a moral duty that is so strong toward another person that duty becomes an
   element of a clearly identifiable relation called a natural obligation. Through his own action, the obligor
   may promote his natural obligation to a civil one by
     1.        Performing the obligation out of his own free will in which case he may no longer reclaim that
         performance because the obligee has now a right to keep it; OR
     2.        By giving the obligee a promise that he will render a performance in which case the obligee now
         acquires a right to demand that performance
      A natural obligation is not enforceable by judicial action. Nevertheless, whatever has been freely
   performed in compliance with a natural obligation may not be reclaimed. A contract made for the
   performance of a natural obligation is onerous.
      Art. 1762 give examples of circumstances giving rise to a natural obligation. This listing is illustrative
   only. If its not in the list we must next determine if the obligation is natural or only moral.
      Examples:
     o         When a civil obligation has been extinguished by prescription or discharged in bankruptcy.
     o         When an obligation has been incurred by a person who, although endowed with discernment,
         lacks legal capacity.
     o         When universal successors are not bound by a civil obligation to execute the donation and other
         disposition made by a deceased person that are null for want of form.
                       When a testator leaves all property to X but failed to use proper form (will invalid). The
               universal successors have the moral duty to fulfill the deceased's wishes
Natural obligations change overtime.

Art. 1760. Moral duties that may give rise to a natural obligation

A natural obligation arises from circumstances in which the law implies a particular moral duty to
render a performance.
       NOTE: modifier “natural” indicates this is a quasi-legal relationship.


Art. 1761. Effects of a natural obligation

    1) A natural obligation is not enforceable by judicial action
    2) But, whatever has been freely performed (w/out outside compulsion by fraud or violence)
       in compliance with a natural obligation may not be reclaimed (NOTE: simple error is still
       considered freely, so you cannot recover)
    3) A contract made for the performance of a natural obligation is onerous.




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Art. 1762. Examples of circumstances giving rise to a natural obligation are:

   (1) When a civil obligation (civil obligation=legal relationship) has been extinguished by
       prescription or discharged in bankruptcy.
               a) The debtor and creditor may agree for the payment of the debt, creating an onerous
                  contract (Art 1909 – each party obtains an advantage in exchange for his obligation).
                  Here, the debtor‟s “advantage” is the satisfaction of a moral duty. This is related to cause
                  (art 1967-why a party obligated himself)
   (2) When an obligation has been incurred by a person who, although endowed with
       discernment, lacks legal capacity.
   (3) When the universal successors are not bound by a civil obligation to execute the donations
       and other dispositions made by a deceased person that are null for want of form.
               a) Example of this is when a testator leaves all property to “X” but failed to use proper form
                  (will invalid). The universal successors have the moral duty to fulfill the deceased‟s
                  wishes.


         What distinguished the moral duties in 1761-1762 from all other moral duties?
            o First, they are obligations owed to a particular person based on a prior relationship.
            o Second, they are susceptible of pecuniary (monetary) evaluation.


Property
   Personal Rights:
       The right of credit is very often called a "personal rights."
       Additionally, personal rights designate: (1) non-transmissible rights, that die with the person, such as
   usufruct. They are personal in the sense that they do not pass to the heirs; (2) non-seizable rights, which
   a person's creditors cannot make use of in their own behalf.

   Real Rights:
    There is a real right whenever a thing is subject, completely or partially, to the power of a person, in
      virtue of an existing relationship, that can be set off against any other person.
    This definition implies that there is a creation of a relationship between a person and a thing. By this is
      meant that, in every real right, there is no intermediary between the person who is the possessor of the
      right and the thing upon which the right bears.
          This view has been found to be superficial and is an erroneous juridical concept because it reduces
          a real right to the state of a relation limited to an active subject and to its purport or the object of
          the right, which is the thing possessed. It does not include the passive subjects.
    A real right is the direct relationship with a thing without intermediaries. If you own something, you
      don‟t have to go to someone else to get permission to use it.
        Example: If a person is the owner of a house, he has, in his own right, the right to dwell in it. From
        the exercise of such right, all other persons are excluded.
    There is only a limited number of real rights, unlike personal rights, that are unlimited.

         A real right must be envisaged under the form of an obligatory relationship in which the active
          subject is represented by a single person, whereas the passive subject is unlimited in number and
          embraces all persons who come into contact with the active subject.

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         Any real right whatsoever is thus a juridical relation between one person, the active subject, and all
          other persons, the passive subjects. The obligation imposed upon all other persons other than the
          possessor of the right, is purely negative. It consists in abstaining from anything that might disturb
          the peaceful possession which the law desires to assure to the possessor of the right.

         Similar to real rights, there are many legal obligations existing in the law between persons which
          are characterized by being universal on the passive side. All that they impose is an obligation of
          abstention. They are obligations as impose a respect for life, the honor, the health of one's fellow
          man.

         Differences between real rights and rights of credit:

             o   The obligation called "right of credit" never exists except against a single person or, if there
                 be several debtors, they are always limitatively listed. A real right may be set off against the
                 entire world, in as much as it implies the existence of an obligation by which everybody is
                 bound.
             o   Real rights, considered as obligatory universal relations, never impose anything other than
                 mere abstention: to do nothing that may be prejudicial to the person in whom the right is
                 actively vested. Even when rights of credit have an abstention, it differs because the
                 abstention reduces upon a special point the legal rights of the debtor. The obligation
                 incumbent upon him prevents him from doing something which the general law would
                 permit him to do.
                      The existence of a right of credit therefore always becomes a special charge for the
                         debtor, an element of liability in his patrimony. The universal abstention, on the
                         other hand, that the law ordains to assure the respect of persons and of property, is
                         not considered to be a charge. It is a normal condition. Real rights alone figure as
                         assets in the patrimony of their possessor. The obligations to abstain, which form
                         the counterpart of these assets, need not be taken into consideration in the
                         patrimony of any other person.

         If all the creditors of an insolvent trader are on a plane of equality, each of them will receive merely
          a dividend, so much percent upon the sum due. But if someone has a real right, their right can be
          set off against all persons, including the insolvent's creditors. They will, therefore, be able to
          exclude all these creditors, and keep for themselves either in kind of in value the things that belong
          to them or which had been pledged to or mortgaged to them. They have a right of preference.

         When a thing has been stolen, he who is its owner may law claim to it, that is to say, follow the
          thief or any other detainer of the thing to reclaim his property. He who is merely a creditor has
          solely an action in restitution or in indemnification against the person who owed it to him or who
          permitted it to be stolen. The owner follows, pursues the thing into whatever hands it passes. A
          creditor cannot follow the thing. He can attack nobody other than his debtor. Owners of real rights
          have the right of pursuit.

Real Obligations
Art. 1763. Definition

A real obligation is a duty correlative and incidental to a real right.

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      real right is a right in a thing that can be held against the world
      real obligations are those obligations incurred as a result of ownership or possession of a thing
       burdened by a real right (Hawthorne Oil & Gas Co. v. Continental Oil Co. 1979)

Art. 1764 – Effects of real obligation

A real obligation is transferred to the universal or particular successor who acquired the movable
or immovable thing to which the obligation is attached, without a special provision to that effect.

But a particular successor is not personally bound, unless he assumes the personal obligations of
his transferor with respect to the thing, and he may liberate himself of the real obligation by
abandoning the thing.


     a real obligation attaches to a thing. (movable and immovable)
     a real obligation passes to a subsequent acquirer of the thing to which it is attached w/out need of a
      stipulation to that effect.
          o e.g., when an estate burdened with a servitude is transferred, the real obligation that is
              correlative of the right of servitude is also transferred.
    Particular successor, one who acquires a thing by particular title, is not bound by the personal
      obligations of his author with respect to the thing, unless he has assumed these obligations by
      delegation
          o e.g., if the owner of an immovable now has made a contract for its repair sells the immovable,
              the purchaser is not bound to perform the obligation of the owner under the repair contract
              unless he assumes that obligation.
    Abandonment –
          o Mortgage example – the debt owed to the mortgagee by one acquiring, by particular title, an
              immovable subject to a mortgage is also a real obligation for the acquirer. The acquirer of the
              immovable is not personally responsible for the debt, but if it is not paid he must suffer the
              consequences of a forced sale. His responsibility is limited to the immovable.
                   A mortgage is a real right for the owner of the mortgage, whoever acquires that
                      property acquires it with the burden of that obligation
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Strictly Personal & Heritable Obligations
Art. 1765 – Heritable Obligation

         An obligation is heritable when its performance may be enforced by a successor of the
          obligee or against a successor of the obligor.

         Every obligation is deemed heritable as to all parties, except when the contrary results
          from the terms or from the nature of the contract. (NOTE: This is stronger than a mere
          presumption)

              o   Exceptions:
                      When the contrary results from the terms; (This circumstance is very unusual
                        because most K‟s will not have terms indicating the obligation is strictly
                        personal) or,
                      When the contrary results from the nature of the K.

         A heritable obligation is also transferable between living persons.



Art. 1766 – Strictly Personal Obligation

        An obligation is strictly personal when its performance can be enforced only by the obligee
         or only against the obligor.

        When the performance requires the special skill or qualification of the obligor, the obligation
         is presumed to be strictly personal on the part of the obligor. All obligations to perform
         personal services are presumed to be strictly personal on the part of the obligor (painting a
         picture).

        When the performance is intended for the benefit of the obligee exclusively, the obligation is
         strictly personal on the part of that obligee.


         heritable = transferable
         presumption = every obligation is presumed to be heritable – there is a presumption that personal
          obligations are transmissible (that they can be inherited, can be left in a will, can be assigned to
          somebody else)

         Strictly personal:
              o Particular skill (makes no sense to force Pavoratti‟s son to perform his Dad‟s K…may not possess
                   dad‟s skill at all, maybe not as good or very different, therefore, lacks the ability to perform in
                   the manner expected)
                        For this reason, obligations that require specific skills or qualities are NOT transferrable.
                                 I cannot enforce a K to sing Ave Maria on Pavoratti‟s son, Pavoratti‟s son cannot
                                    claim that I must accept a song sung by him (a performance of the obligation),
                                    nor can Pavoratti‟s son get Kermit Ruffins to sing the song that I contracted with


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                           Placido Pavoratti (cannot delegate someone else to perform the contract to
                           satisfy the obligation).
       o   Certain social status or professional standing
               exclusive recording contract - cannot be delegated
                       the obligation running to the artist is strictly personal
                       but the obligation running to the company to pay the money is not strictly
                           personal (there‟s nothing particular about paying money)
               marriage
                       if the obligor dies before fulfilling his engagement, the right of action perishes
                           with him
                               o dancing lessons – personal to the intended recipient of the lesson
               Professional Services –
                       Legal services; architect, could be one of the most strictly personal types of
                           obligations
               remember – things may be personal on the part of the obligee and not obligor and vice
                  versa (so it may be strictly personal on one side, but heritable on the part of the
                  obligee).
                       But if it‟s strictly personal on both sides, then neither one may enforce
                           performance against successors of the other.

   Four sources of obligations that Justinian placed in Roman digest:
       o Contracts
       o Quasi-contracts
       o Delict
       o Quasi-delict

   Our civil code in Art 1757 has opened up the categories that allows other obligations. To make a will,
    renounce citizenship, become citizen of another country, adopt a child are declarations of your will to
    be bound, but are not contracts.
       o All of the old categories are included, but have been rephrased.
   LA Civil Code reshapes the sources:
       o Declarations of the will: includes contracts, but also includes others (will)
       o Duties imposed by law: delict

   Juridical act, for the Germans, is every declaration of the will, which changes one's legal position. A
    contract is the principle example. Louisiana reshaping obligations into declarations and duties are
    coming towards categorizing as juridical acts.
   Juridical acts are distinguished from juridical facts. Punching someone in the nose is a juridical fact
    because you do not intentionally create an obligation, you may intend harm, but not to create an
    obligation.




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Obligations of Means/Obligations of Result
          o   This is an important distinction in the Civil law (especially French family) but it does not appear
              in the LA Civil Code
          o   The essential difference b/n the 2 types of obligations lies in the burden of proof!

          o   Obligations of Means (moyens): The debtor is bound to no more than the exercise of reasonable
              care – to take the measures a reasonable man would take to achieve the purpose of the K.
                   Example: A doctor who is bound to take reasonable steps to cure his patient…doctor
                      must use best efforts to cure his patient, but not liable if no cure is found.
                           Requires showing of Fault
                           Burden on Plaintiff to show fault
                           Most obligations are obligations of means

          o   Obligations of Result (resultat): The debtor‟s obligation is not simply to show due diligence, but
              to achieve the result he promised.
                   Example: Obligation of the transporter to deliver the goods safe and sound to a certain
                      destination
                          A Restaurant has an obligation of means for their food to be palatable, but has
                             an obligation of result not to poison its patrons.
                   Obligations of result are equivalent to strict liability, NOT absolute liability
                                  o The debtor can escape liability by showing that his failure to produce the
                                     result promised was due to a cause beyond his control.
                          Burden of proof – the creditor only has to show that the result has not been
                             achieved and the debtor then has to show a “cause etrangere” (cause beyond his
                             control) – show of an extraneous defense

      If someone was paid in advance to find a hire for an employer. The person used best efforts to find
       the hire, but no one showed up. Employer argued that they paid for the result, the person argued that
       it was in best efforts. Court ruled best efforts, or it was an obligation of means rather than result.

      Person brings in dry cleaning to a cleaner, but they destroy part of the clothing while working on it.
       Customer wants to recover the cost of buying new clothes. Does a cleaner use best efforts or is it an
       obligation of result, that you won't give your clothes back damaged. Court claims that it was an
       obligation of means, but they fell below the standard because they did not sufficiently explain the
       dangers of the cleaning techniques that were going to be used

      It is not in the Code, it was an idea by Demogue that has gained popularity

Henson v. St. Paul Fire and Marine Insurance Co.
   Is there a contract with the doctor? Court says there is a contract because the doctor expected to be
     paid for his services. He made a contract through informal means.
     Having found a contract exists, it follows naturally that the doctor's duty is that of using due care.

      Autonomy of the will is another unifying idea in the law of contracts.
          o To contract or not to contract?
          o Second, free will allows persons to create any contract that they want; regardless of whether
             they are recognized by the law, to allow creativity to tailor the contracts to your specific needs.


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          o   Finally, parties create the contracts, not the courts. Therefore, the courts do not have the
              authority to supply essential elements to a contract. (price, or change thing contracted) Courts
              cannot adjust the balance of interest that the parties have agreed to by changing the terms or
              conditions.

   Meaning of a Condition:

      A condition is an obligation that is dependent on an uncertain event occurring.
      Uncertainty is the relevant feature that an event must offer in order to operate as a condition. An
       event the knowledge of which is certain, even though that event has not yet happened, is not a
       condition but rather an indication of the time at which an obligation will be performed, that is, a term.
       (promising to do something when someone dies.) However, a different conclusion would prevail if the
       promise were to render a performance if a named person dies within a state period, since in that case
       the lack of certainty that death will occur within that time limitation makes the event uncertain, which
       qualifies it as a condition.

Conditional Obligations
Art. 1767 – Suspensive and resolutory condition

A conditional obligation is one dependent on an uncertain event.

If the obligation may not be enforced until the uncertain event occurs, the condition is
suspensive.

If the obligation may be immediately enforced but will come to an end when the uncertain event
occurs, the condition is resolutory.


      Suspensive condition is like the equivalent of a condition precedent in common law; this means that
       you‟re not required to perform until the uncertain event occurs
          o i.e., I will buy your house IF a loan is approved at 5%

      Resolutory – obligation ENDS when the event occurs; i.e., our contract would end if War begins; our
       contract will end until I give you 30 days notice; our contract will conclude if it rains

      Condition is uncertain, but not necessarily a future event; could be something that may or may not
       have happened in the past, which affects the future obligation.
          o The mere passage of time = term

      Uncertainty is a relevant feature of a condition – an event, the knowledge of which is certain, even
       though the event has not happened, is not a condition but rather an indication of the time at which an
       obligation will be performed, a term
           o Condition that someone will die = certain = term
           o Condition that someone will die within a set period of time = not certain = condition




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Art. 1768. Expressed and implied conditions

Conditions may be either expressed in a stipulation or implied by the law, the nature of the
contract, or the intent of the parties.


Art. 1769. Unlawful or impossible condition

A suspensive condition that is unlawful or impossible makes the obligation null.


      only unlawful or impossible conditions that are suspensive make an obligation null
      if the condition is resolutory, the policy reasons calling for nullity are absent
            o in such a case the general principles of the law of obligations apply, and if the obligation to
               which the condition is attached is otherwise valid, the condition is regarded as not written.


Art. 1770 – Condition that depends on the whim or the will of the obligor

A suspensive condition that depends solely on the whim of the obligor makes the obligation null.

A resolutory condition that depends solely on the will of the obligor must be fulfilled in good
faith.


      An event which is left to the obligor‟s whim is one whose occurrence depends entirely on his will, such
       as his wishing or not wishing something.
      Comment example – an obligation to buy a house if the obligor moves to Paris is valid rather than null
       bc it is assumed that moving to Paris or not will be decided according to serious reasons such as
       obtaining a position there or securing admission to a school in that city. It is not assumed, in other
       words, that the obligor will not decide to move to Paris for the sole purpose of deceiving the other
       party.

      Second paragraph – example – a “termination at will” clause is not necessarily null if the right to
       terminate is exercised in good faith.

Art. 1771 – Obligee‟s right pending condition

The obligee of a conditional obligation, pending fulfillment of the condition, may take all lawful
measures to preserve his right.


      Entitled to put the world on notice that he has these rights

Art. 1772 – Fault of a party

A condition is regarded as fulfilled when it is not fulfilled because of the fault of a party with an
interest contrary to the fulfillment.

                                                       13
      If there is a condition, and one party wished to get out of the contract and hopes to defeat the
       condition, and prevents its occurrence through his fault (by doing something active) the condition will
       be deemed as fulfilled –
            o i.e., I attempt to purchase property, subject to condition of whether I obtain a loan or not at a
               certain rate of interest; the approval depends upon my creditworthiness, etc.; but if I attempt to
               get out of it, which indicate incorrectly that I don‟t have money, just in order to defeat getting
               the loan so that I don‟t have to go through the agreement; the obligor‟s fault will not defeat the
               condition
            o this is an equitable principle in the CC
            o Price of this is that there is a penalty

      nevertheless, the party not at fault may have to content himself with damages rather than specific
       performance if the latter has become impossible bc of the nonfulfillment of the condition

Art. 1773 – Time for fulfillment of condition that an event shall occur

If the condition is that an event shall occur within a fixed time and that time elapses without the
occurrence of the event, the condition is considered to have failed.

If no time has been fixed for the occurrence of the event, the condition may be fulfilled within a
reasonable time.

Whether or not a time has been fixed, the condition is considered to have failed once it is certain
that the event will not occur.


If had 15 days to find financing in good faith and could not, then the condition is considered to have failed due
to the time factor



Art. 1774 – Time for fulfillment of condition that an event shall not occur

If the condition is that an event shall not occur within a fixed time, it is considered as fulfilled
once that time has elapsed without the event having occurred.

The condition is regarded as fulfilled whenever it is certain that the event will not occur, whether
or not a time has been fixed.



Art. 1775 – Effects Retroactive

Fulfillment of a condition has effects that are retroactive to the inception of the obligation.
Nevertheless, that fulfillment does not impair the validity of acts of administration duly
performed by a party, nor affect the ownership of fruits produced while the condition was

                                                       14
pending. Likewise, fulfillment of the condition does not impair the right acquired by third
persons while the condition was pending.


      General rule – the effects of the fulfillment of a condition are retroactive
          o If A buys property on a condition, the condition later occurs, A will be deemed the owner as of
              the date of the contract (sale) and not the date of the condition occurring
          o Mortgage example …?

      Exceptions
          o Fruits coming from the property while the condition was pending do not change ownership; the
              seller gets to keep the fruits

Art. 1776 – Contract for continuous or periodic performance

In a contract for continuous or periodic performance, fulfillment of a resolutory condition does
not affect the validity of acts of performance rendered before fulfillment of the condition.


*One could have conditions in a will, attached by court – not just in contracts

Obligations To Give, To Do or Not to Do
      Obligation to give – one whereby the obligor finds himself to transfer to the obligee the ownership of a
       thing or to grant him some other real right in a thing. It is performed simultaneously with the act from
       which it arises.

      Obligation to do – Arises from situations whereby, the obligor binds himself to carry out or execute an
       act, or a series of acts, other than the transferring of a real right, such as making or manufacturing
       something or rendering a service. Essential feature – obligor may not be compelled to perform

      Obligation not to do – one whereby the obligor binds himself to abstain from undertaking a certain
       course of action. Essential feature – in case of nonperformance, the obligee‟s remedy may consist in
       the destruction of whatever the obligor has done in violation of the obligation. Also, injunctive relief
       and stipulated damages.

      Examples:
          o A lease – is not an obligation to give, bc you are not handing over the property, instead it is an
             obligation to do
          o Lawyer service – obligation to do, not to give
          o Sale of property – to give
          o contract not to compete; promise never to cut a tree, etc  obligations not to do
          o one same contract may have all these types of obligations in one


      these are very important distinctions in law of contracts; especially for situations of specific
       performance
           o if you promise not to build a building – easy to enforce bc you tear down the building

                                                       15
          o   but obligations TO DO are problematic in terms of Specific Performance – they are harder to
              enforce

III. Types of Contracts
Definition of Contract
Art. 1906. Definition of Contract

A contract is an agreement by two or more parties whereby obligations are created, modified, or
extinguished.

      Cf. French CC 1101 – a contract is an agreement by which one or more persons obligate themselves
       toward one or more others to give, to do or not to do something.
      Today we can create an obligation – a sale; next day, want to add something to it – modified; third day
       parties want to end contract
           o Offer, acceptance, and mutual consent for each party
                   Need both parties to agree at each stage, or can hold party to original contract
                   In Common Law, Accord and Settlement
                          In Civil Law, simply known as another contract

Unilateral vs. Bilateral

Art. 1907. Unilateral contracts

A contract is unilateral when the party who accepts the obligation of the other does not assume a
reciprocal obligation.
(NOTE: All gratuitous contracts are uni-lateral)


      Cf. French CC 1103 – It is unilateral when one or more persons are obligated toward one or more
       others without there being an agreement on the part of the latter.

      Unilateral contract – there is only one obligor and only one obligee and there is no reciprocity; no
       obligations in return for each other;
           o Different from common law because common law's unilateral contract are contracts in which an
               act has been done without a reciprocal promise. "I will pay you if you do something."
           o Civil law definition is something different. It doesn‟t contrast the promise and the act of
               execution, it says where one side places himself under an obligation but does not obtain an
               obligation in return. It counts the number of obligations.
           o Example: gift - if I give something, but do not expect something back. A gift is a contract in
               obligations. Code says that there must be an acceptance for that gift.
           o A reward is not a unilateral contract in civil law because
                    Must have two wills. Must have an acceptance.
                    It is actually a bilateral contract. The first performance is for the person to do what is
                       required for the reward. The second performance is, if the thing is found, then he must
                       pay the reward.



                                                      16
                     If the person is unaware of the reward, then you cannot make it into a contract because
                      there was no acceptance. Our Civil Code does allow for recovery of a reward without
                      knowing, but it is not a contract, it is something else.
          o
          o   Basic example (but outdated) - a loan: This is technically correct only if you define the contract
              as coming into existence upon delivery of the money (so that the only obligation is that of
              repayment); but today, loans do not come into agreement like this; there is a bilateral
              agreement between you and bank that precedes any delivery of the money
                   Under Roman Law, loan was in a special category
                            Distinctions btw consensual and real contracts
                                   o Real contracts came into being upon completion of an initial act
                                            Obligations formed only after delivery
                      - Today, all contracts are formed through offer, acceptance, and mutual consent
                      - Doctrine had long said that this distinction (real/consensual) should not be operative,
                           despite its adoption in the French Civil Code
                               o In Louisiana, loan would not be an example of unilateral contract
          o   A gift – is the perfect example of the unilateral contract; I promise to give $100,000 to Tulane U
              next year; Tulane accepts
                   This is a contract – there is no need for consideration; there are two wills – the will to
                      pay, the will to accept
                   Donation – donee is not promising to do anything in return
                   Not defining unilateral contract the same as Common Law
                            Common law – a promise made in return for an act or completed performance
                            Civil Law – unilateral when the party accepting something does not assume a
                               reciprocal obligations

Art. 1908. Bilateral or synallagmatic contracts

A contract is bilateral, or synallagmatic, when the parties obligate themselves reciprocally, so
that the obligation of each party is correlative (interdependent) to the obligation of the other.
     The obligation of one party is the cause of the other party‟s obligation (Contract of Sale)
     Compare to article 1911

      Cf. French CC 1102- A contract is synallagmatic or bilateral when the contracting parties obligate
       themselves reciprocally toward each other.

      Doctrine of Cause makes the obligations correlative
          o The obligation of each party is the cause of the other

Onerous vs. Gratuitous
Art. 1909. Onerous contracts

A contract is onerous when each of the parties obtains an advantage in exchange for his
obligation.

      Cf. French CC 1106 – A contract for valuable consideration (a tire onereux) is one which obliges each
       one of the parties to give or do some thing.


                                                      17
Art. 1910. Gratuitous contracts

A contract is gratuitous when one party obligates himself towards another for the benefit of the
latter, without obtaining any advantage in return.

      Cf. French CC – A charitable contract is which one of the parties procures for the other a purely
       gratuitous advantage.

      a contract is gratuitous only when one party consents to obligate himself without receiving any
       advantage in return and he does so for the benefit of the other party

      A contract of mandate (LA CC 2992) is presumed to be gratuitous, but the parties are free to treat it as
       onerous
      Deposit – same thing; I bring my car and you agree that you‟ll store my car in your garage; no mention
       of compensation; article 2926, 2929 – it‟s also presumed to be gratuitous

       A gift does not require consideration, but may require form – a promise to give a future gift has to be
        notarized
     Still bound even if receive nothing in return
             o Distinctly different from Common Law, which requires consideration
- Distinctions
        - donation
                - transfer of wealth (depletes one patrimony and increases another‟s patrimony)
        - interest free loan
        - Not just in familial setting

Commutative vs. Aleatory

Art. 1911. Commutative contracts

A contract is commutative when the performance of the obligation of each party is correlative to
the performance of the other.

Note c. – if one party fails to perform, there arises the defense of exception non adimpleti
contractus – creditor can withhold performance, if debtor not performing
Suspends performance


      Cf. French CC 1104 – It is commutative when each one of the parties engages to give or to do a thing
       which is regarded as the equivalent to what is given to or done for him.
       When the equivalent consists of the chance of gain or loss for each one of the parties according to an
       uncertain event, the contract is aleatory.

      This reference sets forth the ground for the traditional defense of nonperformance (exceptio non
       adimpleti contractus) that operates in the sphere of commutative contracts alone.
      Performance depends upon each other
      No risk – things are certain to occur

                                                       18
      Equality of performance

Art. 1912. Aleatory contracts

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.


      Cf. French CC 1104 above

      Insurance contract is unquestionably aleatory as the risk involved is inherent in the nature of the
       contract.
           o Gambling is an example
      In the sale of a future thing, though, the intent of the parties and not just the nature of the contract,
       must be scrutinized to see whether it was a sale of a future thing or merely the sale of a hope
       (Losecco)
      Because there is risk, the performance could be much greater on one side
           o Gambling – parties do not intend an equal performance on both sides

Principal vs. Accessory

Art. 1913. Principal and accessory contracts

A 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 are examples of such a
contract.
When the secured obligation arises from a contract, either between the same or other parties,
that contract is the principal contract.

- Surety agreement in a lease situation is an secondary on the principal
- If principal obligations are absolved so is accessory

Nominate vs. Innominate

Art. 1914 – Nominate and innominate contracts

Nominate contracts are those given a special designation such as sale, lease, loan, or insurance.

Innominate contracts are those with no special designation.

- Nominate – named and treated specially later on in the Code (Lease, Loan, Insurance)
- Innominate – one that doesn‟t fit other categories b/c not well known and are subject to the rules of the
general principles of Contracts in general
       - need offer and acceptance, valid contractual object, mutual consent, Art. 7
       - part of freedom of contracts – once satisfy the general principles, we are not restricted to the normal
                                      or traditional contracts that people enter into


                                                       19
   Larose v. Morgan, 252 So.2d 766 (La. App. 1st Cir. 1971) –
       o Facts – Morgan dies, but bf he died he transfer the land to his son-in-law just after someone
           has filed suit against him; Morgan‟s creditors want to set aside (nullify) the sale saying that it
           was a simulation
       o Although document recites payment, there is none, and after transfer, Morgan files bankruptcy
                ∏ asking for the court to nullify simulated transfer
                        Presumption of simulation, because, when the thing sold remains in possession
                           of the vendor and thing stays in the family, the heirs must show that the sale
                           was not simulated
       o Courts found that it was not gratuitous, but onerous and that the facts showed that the son-in-
           law had been supporting his father-in-law for a while (by advancing money) and had been
           working on the house, had been supporting, etc and so the court is convinced that the father in
           law is paying off a real debt (in repayment of loans)
                This doesn‟t push him into further bankruptcy b/c repayment of debt does not deplete
                   patrimony
                Given the facts (close relationship between the parties, no payment, etc) there is a
                   presumption that it was a simulation/sham and Δ had the burden of showing that it was
                   onerous contract – bona fide intention to transfer ownership of the property
                        Presumption of simulation – LA CC 2480 -- When the thing sold remains in the
                           corporeal possession of the seller the sale is presumed to be a simulation, and,
                           where the interest of heirs and creditors of the seller is concerned, the parties
                           must show that their contract is not a simulation
                        Questions: Distinction btw onerous/gratuitous contracts
                               o Revocatory actions – obligee/creditors can revoke actions that the
                                   obligor/debtor does to further or cause insolvency through gratuitous
                                   contracts but not with onerous contracts
                                        Much easier to have annulled if determined to be gratuitous
                                        LA CC 2039


   Simon v. Maloney, La. App. 4th Cir. 1989
       o Facts: deposit of coins by one coin dealer with another
       o Distinction between compensated depositary or uncompensated depositary
               Goes to the extent of duty owed
       o Deposit - LA CC 2926 – A deposit is a contract by which a person, the depositor, delivers a
          movable thing to another person, the depositary, for safekeeping under the obligation of
          returning it to the depositor upon demand.
               Generally considered gratuitous
       o Rigorous enforcement – they shift the burden to the depository to show that he was careful
          (defense); the presumption is that he is liable.
       o LA CC 2930 – did not use minimal level of care – not using same level of care for his own
          property
               Duty to be rigorously enforced if at request, rewarded, sole advantage, expressly agreed
                  that depositary should be answerable for all neglects
               Court does not think that the duty is bifurcated
               Case shows that there is different level of care
                       Compensated: general level of care

                                                   20
                         Uncompensated: level of care shown to own property
                         LA CC 2930 – When deposit is onerous, bound to use ordinary diligence and
                          prudence; gratuitous – diligence and prudence for own property


   Losecco v. Gregory 1902
       o Sale of a future thing vs. sale of a hope
       o Contract may be for the sale of a hope – however, if the hope doesn‟t materialize, you don‟t get
           your money back – buyer assumes risk
                Art. 2451 – A hope may be the object of a contract of sale. Thus, a fisherman may sell a
                  haul of his net bf he throws it. In that case the buyer is entitled to whatever is caught in
                  the net, according to the parties‟ expectations, and even if nothing is caught the sale is
                  valid.
                       Risk is the basic ingredient (that is part of the cause)
       o Aleatory contract – it‟s based upon an uncertain event
       o Intentions of parties
                Look to the terms of contract (normally)
                       Price of crops would have indicated if meant as a speculative act
                       However, the real value of the crops did not make it into the record
                              o Can‟t tell if the price matches with market value or is indicative of
                                  speculative price
                Court turns to semantics of the contract
                       Wording is peculiar – not what the trees will produce but what they may produce
                       The sweeping risks – all risks – are assumed by the buyer
                              o Maybe some risks, ordinary risks, but certainly not all risks

       o   Facts: Δ owned orange grove and entered into K with Π to sell oranges produced in 1899 &
           1900; Π paid $4,000 up front and $4,000 was to be paid on Dec. 1900; a freeze destroyed the
           crops in 1898 and so there were no crops in 1899 or 1990; contract language: “purchaser
           assumes all risk”; Π (purchaser) wants the down payment and Δ wants the $4,000 he was due
           under the K

                  Purchaser, plaintiff, characterized the sale as a aleatory – conditional upon the crops
                   actually coming into existence, and that failure of the condition annuls the contract;
                Court found that as o the 1899 crop, the purchaser assumed the risk that there would be
                   a freeze, therefore he wasn‟t due the $ for that (this was the sale of a hope)
                As to the 1900 crop, the court found that the purchaser did not assume the risk hat
                   there wouldn‟t be oranges that second year. (this was extraordinary)
                Court splits the scope of the risk
                         In recent past, one year crop was destroyed, so part of the intention of the
                            parties, but the risk of the destruction of the second year of crop (the killing of
                            the trees) could not be part of the intention of the party
                         Court ascribing prior weather conditions to the intent of the contracting parties
                                o Far more speculative on the part of the court
- Dissent: Obligation is indivisible – cannot divide loses

   Due v. Due 1977 – categorizing the contingent-fee contract –
       o Question: Does the contingent-fee contract belong to the community assets of a marriage

                                                    21
                     Husband wants to avoid the designation of contingent-fee contract as property that
                      belongs in community property regime
          o   The Contract of which the condition forms a part is, like all others, complete by the assent of
              the parties
          o   the obligation of the lawyer is unconditional (he owes services no matter what)
                   Still an asset, still a chance that it will materialize
                           Patrimonial asset if it is a chance
                           Court is willing to say that a contract is property (incorporeal) for purposes of
                              community property regime
                           LA CC 2336 cmt. c – under matrimonial regime – if just patrimonial mass,
                              embracing contracts altogether (property rights no matter if corporeal or
                              incorporeal)
          o   the obligation of the client is conditional upon winning (or whatever they stipulate in the
              contract))
          o   The lawyer can still collect for services rendered upon the client‟s recession (mandate) of the
              contract or his heirs in event of attorney‟s death

          o   court finds that the contingency is an asset, thus falling in the patrimony, even if it‟s an
              unrealized condition at the time; classifying it as aleatory does not affect the fact that it is an
              asset

      Thielman v. Gahlman (1907) – nominate/innominate contracts
          o Ghalman transferred property to his nephew in exchange for the care until he dies (innominate
              contract - ∏ arguing that it should be invalidated because not a nominate contract); in the
              transfer, the transaction was described as a Warranty deed; Shortly thereafter he passes away
              (month or two later); Along comes a relative saying that this was a simulation/sham bc it was
              for $1 – that it was a donation; Nephew proves that the REAL transaction was a service contract
              – he has promised service in exchange for the property … promise to take care of him for the
              rest of his life in exchange for the property; This is onerous since you don‟t know how long he
              would live

          o   Court - Can‟t be a sale (there is no fixed price); not a lease; not a donation (bc it is onerous);
              but it‟s got to be something (this is what the Π argues), but court rules that so long as there is
              consent, public order, etc. it can be a valid contract, even if we haven‟t seen this type of
              contract before
                   Despite it not fitting the mold of the named contracts in the Code, but the code leaves
                       the door open for such contracts
                   Don‟t run into too many innominate contracts b/c the Code takes into account the
                       variety of contract forms




IV. Contractual Capacity

Art. 1918. General statement of capacity

All persons have capacity to contract, except unemancipated minors, interdicts, and persons

                                                        22
deprived of reason at the time of contracting.


      minors – those under 18
           o age incapacity, but can be emancipated before the age of 18 by action of the parents or by
               marriage
           o Different routes to emancipation – judicial, notarial, and marriage
           o Art. 386 – by notarial act and by age of 15, parents can emancipate
           o Art. 379 deals with emancipation by right of marriage
                    Contractual capacity is limited by special rules for those below the age of 16 (limited
                       power of administration of own state)
      interdicts – generally an adult who is so deprived of reason that court has taken away his civil rights
           o Refers to a judicial process
                    Person adjudged by a court to be deprived of reason, having no control of appetites or
                       reason
                    Contradictory hearing – great presumption against interdiction
                    Result does occur until judgment and its put in public records
      person deprived of reason – doesn‟t specify why deprived, so it‟s not limited to insanity, could be
       alcohol, a stroke, an addictive craving to substances; it‟s broader than any psychiatric term and could
       be just temporary (like a blackout)
           o maladies affecting intelligence
           o habitual drunkenness
           o drunkenness causing loss of reason
           o drug sedation
           o senility
                    Contracts are rescindable – language of the Art. is brought here; anything that deprives
                       a person of reason
                            Art. 1925 – interest of commerce upheld – only if merchant knows or should
                               have known of lack of reason

Art. 1919. Right to plead rescission

A contract, made by a person without legal capacity, is relatively null and may be rescinded only
at the request of the person or his legal representative.


Relative nullity vs. absolute nullity
    Absolute Nullity
            o Art. 2030 – A contract is absolutely null when it violates a rule of public order, as when the
                object of a contract is illicit or immoral. A contract that is absolutely null may not be
                confirmed. Absolute nullity may be invoked by any person or may be declared by the court on
                its own initiative.
    Relative nullity can become valid – i.e., minor enters into K, that K may be ratified/confirmed by legal
        representative; or confirmed by the minor when he becomes an adult
            o Art. 2031 – A contract is relatively null when it violates a rule intended for the protection of
                private parties, as when a party lacked capacity or did not give free consent (fraud, error, or
                duress) at the time the contract was made. A contract that is only relatively null may be


                                                      23
              confirmed. Relative nullity may be invoked only by those persons for whose interest the
              ground for nullity was established, and may not be declared by the court on its own initiative.
          o   In interest of protecting certain people – the party protected may wish to invoke rescission but
              not the party that is not sought to be protected
                      - In South Africa, a relative contract is called a “limping contract”


Art. 1920. Right to require confirmation or rescission of the contract

Immediately after discovering the incapacity, a party, who at the time of contracting was
ignorant of the incapacity of the other party, may require from that party, if the incapacity has
ceased, or from the legal representative if it has not, that the contract be confirmed or rescinded.


      Gives merchant who discovers the incapacity later the opportunity/chance to force a choice on behalf of
       the person w/out capacity
      Palmer not satisfied b/c leaves out too much


Art. 1921. Rescission of contract for incapacity

Upon rescission of a contract on the ground of incapacity, each party or his legal representative
shall restore to the other what he has received thereunder. When restoration is impossible or
impracticable, the court may award compensation to the party to whom restoration cannot be
made.

       - Restitution is the normal remedy of rescission when performance on either side has occurred
       - When can‟t make restitution in kind, restitution is in money
               - if the thing in possession is of no benefit, then there is no obligation to restore

      i.e., minor enters into K to buy car and gains possession of it and then has an accident in which the car
       is destroyed;
            o minor (or rep) seeks rescission and get paid back, but there‟s nothing to give back to the
               dealer.; read the comment below: compensation commensurate with the benefit the incapable
               party has derived from the other‟s performance.
                    So the test is the “benefit” - the word benefit implies that there‟s something that you
                       gained from the use of that thing. So if you joyride for 30 minutes, there‟s nothing that
                       comes out of it; need something that remains; a residual benefit. So, a minor who
                       wrecks the car like that would not have to give anything in return; otherwise, we
                       wouldn‟t be protecting minors; protecting the minors against their own immaturity



Art. 1922. Fully emancipated minor

A fully emancipated minor has full contractual capacity.




                                                      24
* marriage
* notarial act



Art. 1923. Incapacity for unemancipated minors; exceptions

A contract by an unemancipated minor may be rescinded on grounds of incapacity, except when
made for the purpose of providing the minor with something necessary for his support or
education, or for a purpose related to his business.


      So a minor can validly contract for necessities or necessaries of life (food, shelter, transportation?,
       other needs?), without the possibility of rescission
      Where parents or representatives do not provide necessities or educational support
          o If parents already providing, duplicates are not necessaries
          o Point is to not make someone a ward of the street
      The merchant is protected when he is selling the necessaries to the minor

Art. 1924. Mere representation of majority; reliance

The mere representation of majority by an unemancipated minor does not preclude an action for
rescission of the contract. When the other party reasonably relies on the minor‟s representation
of majority, the contract may not be rescinded.

      if the minor tells merchant, falsely, that he is of age, this doesn‟t affect the possibility of rescission
      but if the merchant reasonably relies in good faith then it cannot be rescinded,
            o i.e., merchant asks for ID and the ID is a fake
            o Equitable estoppel in common law

Art. 1925. Noninterdicted person deprived of reason; protection of innocent contracting party by
onerous title

A noninterdicted person, who was deprived of reason at the time of contracting, may obtain
rescission of an onerous contract upon the ground of incapacity only upon showing that the other
party knew or should have known of that person‟s incapacity.


      this gives rise to a relative nullity – the noninterdicted person may seek rescission
      Gratuitous contract can be rescinded easily in the interest of commerce
      Evident vs. Not Evident insanity
           o A distinction between insanity that is evident, or if not evident, susceptible of being known by
               those who bargain with the incapable, and insanity that can be concealed to the point of
               deceiving the untrained –
                    In the latter situation, the innocent party deserves the protection of the law against what
                        can be termed a „misrepresentation of sanity‟

The nullity is automatic for a minor, but it‟s not automatic for a person deprived of reason

                                                         25
If it had been an interdicted person then it would be null, period. That person has no civil capacity and the
interdiction records are at the courthouse to inform the world about this person‟s lack of capacity


Art. 1926. Attack on noninterdicted decedent‟s contracts

A contract made by a noninterdicted person deprived of reason at the time of contracting may be
attacked after his death, on the ground of incapacity, only when the contract is gratuitous, or it
evidences lack of understanding, or was made within 30 days of his death, or when application
for interdiction was filed before his death.


     Attack on noninterdicted decedent‟s contract –
If a noninterdicted person dies and his estate wishes to attack some disposition he made before he died, the
proof is on the heirs/estate, have a limited opportunity to rescind
         when the contract is gratuitous or
         The contract itself must show/evidence a lack of understanding; not testimony of people, etc.
         K made within 30 days of death



          Or when application for interdiction was filed before death
              o When this is the case, the standard for rescission would be that the merchant “knew or
                 should‟ve known”

               o   Cases

                          Julius Cohen Jeweler, Inc. v. Succession of Jumonville, La. App. Ct. 1987
                                Π is jeweler, suing for the balance of jewelry sold to former senator,
                                   Jumonville; His estate argues that senator was mentally incapable of
                                   contracting to buy the jewelry; trial court found in favor of his estate; this
                                   court reverses;

                                 Facts: prior dealings: J had purchased up to $200,000 in jewels w/in one
                                  year (1981-82) from Jeweler; family began interdiction action in 1982; in
                                  1983 senator had the jeweler fly down to NOLA and then agreed to purchase
                                  $195,840 worth of jewelry; Cohen found out about the pending interdiction,
                                  he tried to convince senator to cancel the sale, he refused; then he dies
                                 Argument that he is deprived of reason
                                      o The family had petitioned for interdiction
                                      o The jeweler found out about interdiction after the sale occurred
                                 The action is launched after the death

                                 Two-pronged Test
                                     o Therefore, the test/burden here is: the party attacking the contract
                                        has the burden of proving: (1) that the alleged incompetent was


                                                         26
                                      deprived of reason at the time of contracting, and (2) that the other
                                      party knew or should‟ve known of his incapacity.
                                           Constructive knowledge is valid
                    -   The Jeweler did not know so valid transaction
                           o In this case, the senator would have to be notoriously deprived of reason




Art. 389. Full Interdiction

A court may order the full interdiction of a natural person of the age of majority, or an
emancipated minor, who due to an infirmity, is unable consistently to make reasoned decisions
regarding the care of his person or property, or to communicate those decisions, and whose
interests cannot be protected by less restrictive means. (last resort)


Art. 390. Limited Interdiction

A court may order the limited interdiction of a natural person of the age of majority or an
emancipated minor, who due to an infirmity is unable consistently to make reasoned decisions
regarding the care of his person or property, or any aspect of either, or to communicate those
decisions, and whose interests cannot be protected by less restrictive means. (See Goldstein v.
Goldstein: rights should be limited in least restrictive manner and need proof that limitation is
absolutely necessary)


                    o   Farrar v. Swedish Health Spa, La. App. Ct. 1976
                            o Π, Farrar, signed up for a 2-year membership at a spa at a price of $324. the
                                form states that the buyer is “of lawful age”. Was paid on Master Card; now
                                she files petition in restitution saying that she was an unemancipated minor
                                at the time and that she did not ratify the agreement when she reached age
                                of majority; D challenges that payment was made by her father through his
                                credit card
                            o Father and Daughter seeking to rescind the agreement
                                     When rescind agreement, should receive anything that has been
                                         tendered or performed
                            o Argument about natural obligation
                                     Court does not think it should be a natural obligation b/c father has no
                                         conscience problem, since the daughter did not receive any benefit for
                                         the agreement
                            o Does father‟s payment of the Master Card bill operate as estoppel barring
                                restitution? Estoppels not favorable in LA; Δ would have to show that it
                                changed its position to its detriment in reliance on father‟s action.
                                     Simple lesion relieves a minor of every species of contract
                                              Lesion: the injury suffered by one who does not receive a full
                                                 equivalent for what he gives in a commutative contract


                                                     27
                             o      Argument about working-out as a necessity, which would be an exception to
                                    incapacity of minors, but court rejects this argument
                             o      Payment as Ratification
                                         LA rule as to ratification: no intention to ratify will be inferred when
                                            the act can be otherwise explained. Card payment does not
                                            necessarily imply an intent to ratify Cindy‟s agreement – it can be
                                            otherwise explained
                                                 Refusal to pay could have done father harm
                                         Minor can validly contract for necessaries for his support or education
                                         Restitution: LA CC 2301
                                                 He who receives what is not due to him, whether he receives it
                                                     through error or knowingly, obliges himself to restore it to him
                                                     from whom he has unduly received it
                      -   Harris   v. Ward
                             o      Helps illustrate that a minor is capable of entering into contract and gives off
                                    effects as if it were valid
                             o      Unemancipated minor but automobile and injure third party
                                         Question is of insurance – the minor will have insurance through
                                            dealer if it is a valid sale, but if not a valid sale, no insurance coverage
                                            whatsoever
                                                 Court ruled that it was a valid sale b/c the minor had not
                                                     sought to rescind the contract – as long as not disavowed, it
                                                     has the same effect as a person contracting with full capacity

      Law of incapacity in other countries
          o All systems have same basic function of protection and there is a balance struck with commerce
              so as not to take protection too far
          o Germany –
                   you are totally incapable to contract under 7 years old (no capacity whatsoever) – can‟t
                     even ratify,
                   between 7-18 the person has some sort of minimal or limited capacity but not full
                     capacity (can spend pocket money on contracts; contracts may be ratified)
                   If there is no ratification by minor or guardian, then the whole contract becomes null
          o France –
                   Must show two things:
                           That the person‟s age is below 18 and
                           That the transaction was to their economic disadvantage (lesion)
                                 o Time of injury is at the time of sale
                   If minor buys a car and pays fair value and there is no patrimonial loss, then no
                     economic disadvantage… this is different in LA bc we don‟t‟ inquire into lesion; we simply
                     say: below x age, then minor is incapable…


V. Contract Formation
     in French Civil Code there are no offer/acceptance provisions – the only provision is that there must be
      consent to the contract
     French approach about when the parties are in agreement is far more subjective approach
          o Emphasis on consensus and the actual meeting of the minds

                                                          28
          o    Ex: have irrevocable offer, and before party can accept, it is revoked – there is no contract b/c
               the minds are not in accord
                    However, while there is no contract, there is liability based on tort for unlawful
                        revocation that is not based on expectation of contract but the actual or reliance
                        damages
           o Ex: pre-contractual negotiations – seeing whether one party has violated rules of negotiation by
               bad faith – there is a cause of action based on delict
                    Culpa in contrahendo
                    Different b/c do not think in terms of contract but delict
      Of the three solutions in the legal systems of the world to the problem of the binding nature of offers,
       the offeror is least bound in the Anglo-Saxon legal family and most strongly bound in the German
       systems, the Romanistic legal family adopting an intermediate position
           o Anglo-Saxon: offer can be revoked even if stated to be irrevocable
           o German: all offer are irrevocable
           o Romanistic: if stated irrevocable, it is irrevocable

Art. 1927. Consent

A contract is formed by the consent of the parties established through offer and acceptance.

Unless the law prescribes a certain formality for the intended contract, offer and acceptance may
be made orally, in writing, or by action or inaction that under the circumstances is clearly
indicative of consent. (deals with form of contract)

Unless otherwise specified in the offer, there need not be conformity between the manner in
which the offer is made and the manner in which the acceptance is made.


      formalities required under the law include:
           o transfer of immovable property must be made in writing, can‟t prove a sale of land by an oral
               statement (1839)
           o promise to pay a debt of a 3d person must be in writing (1847)
           o executory donations – requires an authentic act (notarized) and must be in writing (1536)
           o Conventional mortgage – must be in writings(3287)
           o Partnership (2847)
           o Ante-nuptial agreements
      Every form of promise should be enforced
      offer and acceptance do not have to be made in the same manner – but the offeror is king (can
       stipulate how he wants it)
      Offer does necessarily have to come before the acceptance – could just be mutual agreement




Art. 1928. Irrevocable Offer


                                                      29
An offer that specifies a period of time for acceptance is irrevocable during that time.

When the offeror manifests an intent to give the offeree a delay within which to accept, without
specifying a time, the offer is irrevocable for a reasonable time.


      an offeror who specifies a time for acceptance which is too long under the circumstances is not bound
       beyond a reasonable time
      No doctrine of consideration

1929. Expiration of irrevocable offer for lack of acceptance

An irrevocable offer expires if not accepted within the time prescribed in the preceding Article.

      Almost all are irrevocable for some period of time- reasonable time
      “expires” seems like it no longer would be on the table, but you could make the argument that it
       expires as an irrevocable offer, but still exists as a revocable offer (but Palmer thinks not)

1930. Revocable offer

An offer not irrevocable under CC 1928 may be revoked before it is accepted.

- Lapses on its own after a reasonable length of time

1931. Expiration of revocable offer

A revocable offer expires if not accepted within a reasonable time.


1932. Expiration of offer by death or incapacity of either party

An offer expires by the death or incapacity of the offeror or the offeree before it has been
accepted.

- This can cause a lot of reliance issues
- It is an act of the will
- Palmer thinks this is a vestige of an older time
1933. Option contracts

An option is a contract whereby the parties agree that the offeror is bound by his offer for a
specified period of time and that the offeree may accept within that time.

      Separate consideration- ie) $500.00 to give me more time to think abt buying house
          o Nothing stated or required about consideration
      an option under this Article is distinguishable from an irrevocable offer.
      An option is a veritable contract that may be assigned and that gives rise to rights and obligations that
       devolve upon the parties‟ heirs when not personal to the parties.


                                                        30
      An irrevocable offer is not assignable, and under 1932, expires at the death of either the offeree or the
       offeror.
      But option contract expires upon the death or incapacity of the grantor if the circumstances show that
       the offer, if accepted, would have given rise to an obligation personal to the grantor (or upon
       death/incapacity of grantee if obligation personal to the grantee or death of both if personal to both)
           o Comments say “personal” but it really means “strictly personal”

ACCEPTANCE

1934. Time when acceptance of an irrevocable offer is effective

An acceptance of an irrevocable offer is effective when received by the offeror.

      if irrevocable – acceptance upon receipt by offeror w/in the period stated or reasonable time

1935. Time when acceptance of a revocable offer is effective

Unless otherwise specified by the offer or the law, an acceptance of a revocable offer, made in a
manner and by a medium suggested by the offer or in a reasonable manner and by a reasonable
medium, is effective when transmitted by the offeree.

      this is the mailbox rule (upon transmittal) acceptance upon dispatch
      risk of transmission is placed on the offeror
      what constitutes effective transmission is to be determined by the courts according to business
       practices
      offeror has the burden of state a particular method of communication
      This is to protect the reliance within revocable offer – it is fragile b/c a revocation could come in at
       anytime and possibly overtake acceptance
           o Earliest possible point and take risk of fault within the transmission process
      Offer (unilateral act of the will)

1936. Reasonableness of manner and medium of acceptance

A medium or a manner of acceptance is reasonable if it is the one used in making the offer or one
customary in similar transactions at the time and place the offer is received, unless circumstances
known to the offeree indicate otherwise.

- If someone sends offer in certain form, safe in accepting in same form
- Customary in similar transaction
1937. Time when revocation is effective

A revocation of a revocable offer is effective when received by the offeree prior to acceptance.


      acceptance of irrevocable offer = upon receipt
      acceptance of revocable offer = upon dispatch when put in mail
      notice of revocation = upon receipt by offeree (prior to his acceptance)


                                                        31
1938. Reception of revocation, rejection, or acceptance

A written revocation, rejection, or acceptance is received when it comes into the possession of
the addressee or of a person authorized by him to receive it, or when it is deposited in a place the
addressee has indicated as the place for this or similar communications to be deposited for him.


      Fact that person does not actually know about the acceptance having reach his zone of possession or
       control does not matter
           o Objective view of when person is capable of having knowledge of what communication contains
      article 1938 supports a “reception theory‟ rather than a „knowledge theory”
           o Whether it was physically sent there vs the offeror actually knowing it‟s there…

ACCEPTANCE BY PERFORMANCE

1939. Acceptance by performance

When an offeror invites an offeree to accept by performance and, according to usage or the
nature or the terms of the contract, it is contemplated that the performance will be completed if
commenced, a contract is formed when the offeree begins the requested performance.

      Ever-Tite –
      If offeree doesn‟t communicate that he is accepting, but he begins to perform, he has accepted
       (provided that the offeror made acceptance via performance an option)
      Ex. of tree cutting – ask two companies – first company starts and it is customary to complete job once
       start job, then can‟t have second company
      Must determine if the contract is one that is usually completed once it is started

1940. Acceptance only by completed performance

When, according to usage or the nature of the contract, or its own terms, an offer made to a
particular offeree can be accepted only by rendering a completed performance, the offeror cannot
revoke the offer, once the offeree has begun to perform, for the reasonable time necessary to
complete performance. The offeree, however, is not bound to complete the performance he has
begun.

The offeror‟s duty of performance is conditional on completion or tender of the requested
performance.

- this deals with a reward-like scenario
- must give the person a reasonable amount of time to complete performance, even though offeree not bound
to complete
- Offeror is bound to hold offer open, but a contract has not been formed until the performance is completed


1941. Notice of commencement of performance

When commencement of the performance either constitutes acceptance or makes the offer

                                                     32
irrevocable, the offeree must give prompt notice of that commencement, unless the offeror
knows or should know that the offeree has begun to perform. An offeree who fails to give the
notice is liable for damages.


1942. Acceptance by silence

When, because of special circumstances, the offeree‟s silence leads the offeror reasonably to
believe that a contract has been formed, the offer is deemed accepted.

      silence is normally not an acceptable form of acceptance, but only when there are special
       circumstances
           o One can set it up by contract – parties agree that silence will renew the contract (renewal of
               lease – silence means renewal)

1943. Acceptance not in accordance with offer

An acceptance not in accordance with the terms of the offer is deemed to be a counteroffer.

      this is the mirror image rule

1944. Offer of reward made to the public

An offer of reward made to the public is binding upon the offeror even if the one who performs
the requested act does not know of the offer.

      this is not significant, but interesting – this is different from the CL rule which insists upon knowledge…
      This is not contractual lb/c breaches the normal rules of contract – no consent required

1945. Revocation of an offer of reward made to the public

An offer of reward made to the public may be revoked before completion of the requested act,
provided the revocation is made by the same or equally effective means as the offer.


1946. Performance by several persons.

Unless otherwise stipulated in the offer made to the public, or otherwise implied from the nature
of the act, when several persons have performed the requested act, the reward belongs to the
first one giving notice of his completion of performance to the offeror.




1947. Form contemplated by parties

When, in the absence of a legal requirement, the parties have contemplated a certain form, it is

                                                       33
presumed that they do not intend to be bound until the contract is executed in that form.


      in this situation, Form Trumps Substance –
           o if they contemplated that the agreement would be notarized when final, it will not be final until
                notarized although the law doesn‟t normally require such formality and an agreement was
                actually reached

Cases re: offer and acceptance
How to answer questions re: offer and acceptance:
1. decide who is the offeror and who is the offeree
2. look at the sequence after the offer? What comes first? Acceptance or revocation?
3. Is the offer revocable or irrevocable?

Offers in the Louisiana Jurisprudence

Johnson v. Capital City Ford Co., La App 1955
Facts:
    advertisement: buy a 1954 car now and we‟ll give you a 1955 car when they come out; the Johnsons
       buy the 1954 car; sign a printed contract (which made no reference to the 2 for 1 deal and contained a
       merger clause); they now sue on the alleged contract
    Issue: Did the advertisement constitute a valid offer or not, which is important b/c the contract
       included a merger clause?
    court finds that the advertisement was the offer and going for the ad was the acceptance; this gets
       around the merger clause bc then K was formed bf signing the agreement (The court uses a two
       contract analysis, namely that the 2 for 1 deal was contract of itself)
                            - so they characterize it as a unlilateral contract (accepted upon the act of
                               responding to the ad)
                                   1. It does not have to be mentioned or verbalized
                                            Acceptance does not have to be in a sacred form
                            - but Palmer: this is wrong, they are using the common law concept of unilateral
                               K
                                   1. should not equate unilateral contract in Common and Civil Law
               - public advertisements can be offers is their language signifies that it is an offer
    The notification problem is solved by the fact that the notification was inherent in the very act of buying
       the car
    Substitute damages in monetary form – namely how much it would have cost to have purchased the
       ‟55 car
           o There is a greater tendency to issue specific performance – but simply unavailable in this case
               b/c ‟55 car is not available
    LA CC 2057. Contract interpreted in favor of the obligor: In case of doubt that cannot be otherwise
       resolved, a contrac must be interpreted against the obligee and in favor of the obligor of a particular
       obligation. Yet, if the doubt arises from lack of a necessary explanation that one party should have
       given, or from negligence or fault of one party, the contract must be interpreted in a manner favorable
       to the other party whether obligee or obligor.
                            - so the dealer should have informed the plaintiffs better; they draft the offer,
                               ambiguities will be read against them and in favor of the bona fide offeree



                                                      34
      Specificity requirements offers? An offer can be too vague; needs price, object, etc.
      France – generally ads are regarded as offers

Irrevocable Offers

Picou v. St. Bernard Parish Sch. Bd., 1924
Facts:
     P was teacher with school board for 10 years
     July 8 – mail offer from school board
     July 18 – school board decides to appoint someone else (revocation, of which she was not aware)
     July 19 – she mails her acceptance
     P sues for enforcement of the employment contract
     Court found that it was irrevocable and it was perfectly reasonable given all the circumstances that she
       would take 12 days to respond; they weren‟t expecting an immediate response
            o Using implied irrevocability
     Hypothetical: if offer was not irrevocable and could be revoked at any time, revocation is only effective
       upon receipt
            o Same result whether characterize the offer as revocable or irrevocable
            o One reinforces the other
     Brought up incapacity – but contract can only be disputed by the incapacitated person (relative nullity)
     Damages/Remedies: they gave her $720 – full expectation damages (salary for the full 9 months)
            o From this, there was a contract despite the revocation
                    Does not take the subjective approach (actual meeting of the minds) in France
                    Upholding contract – not going to delictual damages
                           - Continuing will, even if there was a change
                           - LA follows more of an objective theory of contract and damages
            o In France she probably would not have recovered so much

Wagenvoord Broadcasting Co. v. Canal Auto Trans. Serv., La App Ct. 1965
Facts:
    Contract for radio advertising time; Contract was signed by the defendant; but several hours have
       signing it but bf knowledge that it was accepted by plaintiff, D communicated withdrawal
           o Here again, different from subjective theory of France
           o In this case, there was a subjective meeting of the minds
    Alleged offeror is the client, after salesmen went to client, b/c of what the contract says – the contract
       was worded in such a way that station would be the offeree
           o This is b/c there is an advantage, in that the station (the home office) can check deal that
               salesman did during the negotiation period
           o Offer signed by client at 1pm and several hours after but before home office knows of offer the
               client revokes
    Court finds that the withdrawal of the offer in this case was effective because the acceptance was not
       complete until communicated to the offeror.
    But next must decide if the withdrawal was ineffective bc it was made during period of time in which
       the offer was irrevocable  court notes that a „strong fact situation‟ is necessary bf a court will
       imply that an offer is irrevocable for any substantial length of time
           o Court holds that it is a revocable offer from the beginning
           o Must be careful as to what this means

                                                      35
                      Where the parties have remained silent on the issue of period of time in which offer is
                       left open
                    Need a strong fact situation in the consumer contract situation, as a favor to the
                       consumer in the position of the offeree, whereby the consumer is not bound by some
                       implied term of irrevocability
                            - Consumer is not a sophisticated merchant
                            - More protective towards the consumer
      P should have promptly notified the defendant of the acceptance… bc d‟s offer was revocable at the
       time of its withdrawal, no contract was ever consummated.

Schulingkamp v. Aicklen, La. Ct. App. 1988
Facts:
    Offer made Nov. 15th by letter and revokes Dec. 21st by telegram and then Dec. 26th signed and sent
       acceptance and was received Jan. 29th
    Offer to buy property was made binding and irrevocable “thru and until the act of sale was to be
       passed”; 36 days after the offer, D sent notice of withdrawal bc they had received no acceptance; 5
       days later P‟s accept
    Offer considered irrevocable by the court (offer irrevocable thru act of sale); “act of sale” is not a
       definite date; interpreted it to mean a reasonable time
                           - after those 36 days, offer became revocable (not sure if this is correct Code
                               reasoning); length of time was unreasonable at that point
    Tacit acceptance? P argues that she had tacitly accepted by starting on some of the contractual
       procedures (sought variance from the parish authorities – uncertain event – and variance was granted
       in March)
           o Doing something unequivocal that was necessary for the sale that was particularized
           o In principle, court states that acceptance could be valid by an act in the transfer of property if
               the obligor makes offer in writing
    Court disagrees; silence could be acceptance, but only in special circumstances; generally acceptances
       must be communicated
                    ∏ must prove her actions or manifestations are clearly indicative of an acceptance
                           - court is not saying you cannot tacitly accept, it is saying that under these facts,
                               she didn‟t
                           - Plus here, sale of land requires formality  writing
    Court started with the collecting of a note
           o However, look to the underlying obligation of the note
                    Looking at the underlying cause of the obligation or contract
                           - First thing to look at:
    First thing to look at:
           o Do the facts make the offer an irrevocable offer, which expires by date set or reasonable time,
               or a revocable offer, which lapses at a reasonable time and can be revoked anytime before the
               acceptance

Ever-tite Roofing Corp. v. Green, La. Ct. App. 1955
Facts: Alleging breach of contract of written contract for re-roofing; contract said: “shall become binding upon
        written acceptance by authorized officer or upon commencing performance of the work”; plaintiff
        arrived at def‟s home to find others working on the roof
Issue: Was plaintiff timely notified of revocation of the offer?



                                                       36
Holding: Since the contract did not specify a time within which it was to be accepted or within which the work
       was to have been commenced, a reasonable time must be allowed; and in this case, commencement
       began with the loading of the trucks and transporting materials to defendant‟s residence
Award: Full amount – loss profit and amount in loading – based on contract (disallows attorney fees even
       Though it is stipulated in contract)

Formalities Required in Offer and Acceptance

Ambrose v. M. & M. Dodge, La Ct App 1987 -- Formalities to be observed
Facts:
    this case gives greater credence to the writing requirement
    suit of rescission of the sale of a truck
           o want redhibition – remedy in recission
    law is clear that the acceptance had to be in writing, and it wasn‟t; oral acceptance would not have
       formed a contract
    for acceptance to be effective, it had to be received – telephone conversation is not the reception of
       the acceptance
    P held not to have accepted settlement agreement where P has signed by P‟s atty cancelled check and
       signatures on documents before transmission; acceptance had to have been received by Chrysler either
       by coming into possession or being deposited in appropriate place to be effective
    Court also acknowledged that the parties contemplated a specific form – Art. 1947 – would have
       covered this case and would have reached the same result

“The Commission on European Contract Law,” Principles of European Contract Law
-

Battle of the Forms – LA CC 2601 – Sale of immovables
First Paragraph –
    - not between merchants – there‟s a partial contract and a partial counteroffer; even when no pre-
        printed forms; could be an exchange of letters, even oral exchanges are contemplated
Second Paragraph –
    - Between merchants rule – just like 2-207 in the UCC

           NULLITY
Art. 2029. Nullity of Contracts

A contract is null when the requirements for its formation have not been met.


   -   general requirements for formation are:
   -   1918: capacity
   -   1927: consent
   -   1966: cause
   -   1971: object

Art. 2030. Absolute nullity

A contract is absolutely null when it violates a rule of public order, as when the object of a

                                                      37
contract is illicit or immoral. A contract that is absolutely null may not be confirmed.

Absolute nullity may be invoked by any person or may be declared by the court on its own
initiative.


Art. 2031. Relative nullity of contracts

A contract is relatively null when it violates a rule intended for the protection of private parties,
as when a party lacked capacity or did not give free consent at the time the contract was made. A
contract that is only relatively null may be confirmed.

Relative nullity may be invoked only by those persons for whose interest the ground for nullity
was established, and may not be declared by the court on its own initiative.


Art. 2033. Effects

An absolutely null contract, or a relatively null contract that has been declared null by the court,
is deemed never to have existed. The parties must be restored to the situation that existed
before the contract was made. If it is impossible or impracticable to make restoration in kind, it
may be made through an award of damages.

Nevertheless, a performance rendered under a contract that is absolutely null bc its object or its
cause is illicit or immoral may not be recovered by a party who knew or should‟ve known of the
defect that makes the contract null. The performance may be recovered, however, when that
party invokes the nullity to withdraw from the contract bf its purpose is achieved and also in
exceptional situations when, in the discretion of the court, that recovery would further the
interest of justice.

Absolute nullity may be raised as a defense even by a party who, at the time the contract was
made, knew or should‟ve known of the defect that makes the contract null.


Art. 2034. Nullity of a provision

The nullity of a provision does not render the whole contract null unless, from the nature of the
provision or the intention of the parties, it can be presumed that the contract would not have
been made without the null provision.




Art. 2035. Rights of third party in good faith

Nullity of a contract does not impair the rights acquired through an onerous contract by a third
party in good faith.

                                                  38
VI. CAUSE
     Longstanding term of art in civilian systems
          o Kept in LA civil code
          o Somewhat shrouded in mystery
          o
     other civil law systems do not touch upon this concept, but it‟s a fundamental principle in the French
      family of civil law
     Romans: cause in Roman times meant that you couldn‟t have a contract unless it was one sanctioned
      by law; if the law said it was valid, then it was clothed with enforceability; if it the contract didn‟t fit into
      any category then it was a nudum pactum
     Cause now is about the purpose for which a party enters into a contract; the cause/reason must be
      juridically sufficient

Art. 1966. No obligation without cause

An obligation cannot exist without a lawful cause.

- Underlying requirement of every obligation

Art. 1967. Cause defined; detrimental reliance

Cause is the reason why a party obligates himself.

DR: 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 promise made without
required formalities is not reasonable.

      cause is the WHY, the motive
      detrimental reliance discussed below
      cause is NOT consideration; the reason why a party binds himself need not be to obtain something in
       return or to secure an advantage for himself; an obligor may bind himself by a gratuitous contract, in
       that he may obligate himself for the benefit of he other party w/out obtaining any advantage in return

Art. 1968. Unlawful cause

The cause of an obligation is unlawful when the enforcement of the obligation would produce a
result prohibited by law or against public policy.


      Bad cause – makes the obligation null and unenforceable
      LA CC 7 – Laws for the preservation of the public interest – Persons may not by their juridical acts
       derogate from laws enacted for the protection of the public interest. Any act in derogation of such laws
       is an absolute nullity.


                                                          39
1969. Cause not expressed

An obligation may be valid even though its cause is not expressed.

- just because the reason why someone does something on the face of things does not mean invalid – could
be explainable, a cause
 - May need to allow parol evidence to find out cause

1970. Untrue expression of cause

When the expression of cause in a contractual obligation is untrue, the obligation is still effective
if a valid cause can be shown.

      e.g., a sale that is invalid for the lack of a price may be regarded as a valid donation if the donative
       intent of the alleged vender can be shown and the formal requirement for a valid donation has been
       met.
           o Could be valid, not as sale, but as donation – if in the proper, required form
      Has something to do with simulation – express themselves in an untrue way
      Cause is determinable through evidence – important to look for true cause
           o Performs function of excoriating obligation to get to what is really happening
      There is a presumption that there is always cause-
           o Dad sold C house for $5.oo he says his cause is for the money. If we had notarized the
               donation, then it would‟ve been a valid donation.
           o His cause would be his love for me but the cts would still require a notarial act.

- Realm of Valid Causes is not limited

Roles of Cause
   - Three different role:
            Discovery of the true nature of the contract – are the parties simulating, i.e. look into actual
               intentions of the party – find out if obligation is gratuitous or onerous – find out if there is a
               natural obligation (Art. 1970 – deals with simulation)
            Protection of the true contracting will in cases of error or mistake – not enforcing false will
                    Cause should be recognized as being a false cause
                    Carpenter - buy house in place of transfer – but not transferred
            Protection of public interest by not allowing unlawful causes
                    Against prohibitory laws and the public order
                    Parties will try to dress up cause to make it look legal
                            Ex. contractual kickbacks, license for a brothel
                                  o These cause are outside the simple motives of such lawful transactions
The Concept of Cause
   - Romans did not think that every promise needed cause, b/c state had to give license to enforce certain
       promises
            Contract had to be clothed in formal requirement – if not, there was no cause


Cases on Cause


                                                       40
Hill v. Moorman 1988 (Against public order – not a lawful cause)
      mother is trying to enforce notarial act whereby she agreed to give her child up for adoption in
         exchange for “reasonable visitation rights”
             o Voluntary Act of Surrender fifteen days after ∆s executed a notarial act for visitation rights
             o Asking for specific performance of the quid pro quo
      court says no: the cause of the agreement was against public policy
             o Art. 1968 (should also look to Art. 7 – general interest)
             o Public policy is not written into statute
                       This sounds like a judicially declared public policy
             o Would impair adoptive parents custody and control
             o Could impair new parent-child relationship
                       Court mentions that it would not have enforced the original adoption decree for unlawful
                          cause but statute of limitation
                       Could argue that she made an error in law and relief is available generally but not here
                          due to time limitations
Cases that deal with the “depth of immorality” – malem in se, malum prohibitum – these are on a spectrum
and affects whether a party is still entitled to some form of non-contractual relief:
      Coleman – violation of the public bid laws; P seeks to recover for the construction of roadways under
         an agreement that was not publicly bid; ct found that there had been a violation of the public bid laws,
         but all the parties were in good faith and there was no fraud; the court awarded on the basis of unjust
         enrichment since the contract bc of the illegal cause, could not be enforced
      Succession of Butler – atty entered on contingency fee agreement for a divorce case; this type of
         agreement violates public policy, but ct allowed atty relief on QM
      Graviers Creditors (1841) – Gravier made agreements whereby pretended to convey property to others,
         including Caraby, to hide property from creditors and obtain advances to be paid back at high interest
         rates; Carrabys sold property which G had conveyed in this manner and failed to pay G back amount
         above that which had been advanced; court found this to be an absolute nullity  wont‟ enforce K
         when both parties were at fault  malem in se (not clear on this case)
Cases where the degree of participation by the parties in the unlawful activity affects recovery:
      Domino v. Laborde – gambling was illegal in LA; no recovery bc casino operator was participating
         directly in the illegal activity
      Lamy v. Wills – pweron who sells furniture to furnish a house of prostitution knowing where it‟s going,
         but not being directly involved in the illegal activity (not sharing in the profits) can recover on that
         contract – he could recover despite the moral cause
      Shwegman v. Shwegman – woman claiming compensation for “services” rendered while living with
         partner; court disallowed QM of a concubine.

Use parole evidence to get to the motives and intentions of the parties in order to be able to identify the true
cause of the contract; don‟t stay stuck on the basic, narrow view of cause; dig deep, broader…

French Cases
    Malvezin – husband tried to fix alimony agreement in such a way that it resulted in tax evasion; she
       was unaware that that was the purpose; now she wants rescission; the court held that she was entitled
       to annul K
    Pirmamod – Parapsychologist sells crystal ball; fortune telling is illegal in France; unlawful cause




                                                       41
Shreveport Great Emire Broadcasting Inc. v. Chicoine (shows how cause works with error)
- Suit over money to be paid for advertising
- Sign contract to be sponsor in CCA program and to buy advertising
        - Contract also included an addenda to particapte in CCA sales promotions but nothing about speaking
- The ∏ ran advertisements in compliance with contract, and ∆ failed to pay
- ∆ argues that the cause of the contract was that there was a verbal agreement for him to speak three times
a week at CCA civic club meetings
        - Therefore, he argues that the amount under contract should be reduced according to the quatum
       Minoris
   -   Discusses defects in consent (fraud, error, duress)
   -   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
            Error to subsidiary motive has no effect
            Must prove that he made an error, but he did not make an error
                    Everyone can claim mistake, but when mistake is egregious, this will not be a defense
   -   Detrimental Reliance
   -   Party claiming error has burden of proof (could bring in parol evidence about speeches) – which ∆ did
       not carry at trial (up to trier of fact to make determination and did not make a clearly erroneous
       finding)
   -   Notes:
            P is the radio station running an ad campaign; local businesses would sign contracts for radio
               advertisement
            D is a local chiropractor, failed to pay for the advertisement; he argues that he signed the
               contract bc he was promised certain speaking engagements; neither of the agreements signed
               made reference to any speaking engagement; he admits to not reading the contracts bf signing;
               but he says he was orally promised the speaking engagements;
            What D is doing here is arguing cause as a way to get the parole evidence in, given that if he
               were simply trying to prove what the terms of the contract were, he would have trouble using
               the parole evidence;
            Court found no evidence as to the speaking engagements being part of the contract/cause

Kethley v. Draughton Buisness College, Inc.
   - This case or the use of error illustrates that cause and error are very closely related and the role of
       cause in the articles on error is to protect the intentions of the parties
   - Original suit: contract over teaching two course; Appeal: reverse judgment denying penalties and
       attorney fees
   - Contract called for one course for $200 a month; then asked to teach two courses (at same time)
       without mention of further compensation
   - Asked for expectation damages, or in the alternative, damages for detrimental reliance
   - Looking at price of tuition, credit hours, and pay for teaching courses
   - Notes:
            P is a paralegal instructor working for defendant; he was told that he‟d be paid $200 per class
               per month; he taught one course for a semester; then he was asked to teach 2 courses next
               semester; didn‟t discuss compensation, but he assumed he‟d be paid $200 per each class; D
               argues that they‟d be paying him $200 total
            P sues for $ on the contract; D argues that there was never a meeting of the minds as to the
               salary to be paid
            Court: clearly there was no meeting of the minds as to the rate of compensation

                                                    42
            Error vitiates consent; when both parties are in error, the rescission of the contract is
             appropriate
                  When a contract is invalidated on grounds of error, courts are tempted to find a remedy
                     based on detrimental reliance
            But P is not w/out relief  awarded instructor $400 in compensation on the grounds that the
             party had induced the instructed to rely on the implicit promise to his detriment
            1967: D‟s promise to employ P to teach 2 courses and the implicit promise to pay him more are
             enforceable obligations under 1967; here he will get damages (other option is specific
             performance, n/a here); award him $ for the time he expended preparing the classes;
                  Palmer criticizes this reliance on 1967: the answer was in the articles dealing with error
                     as to cause: art. 1952: liable for the loss thereby sustained by the other party, unless D
                     knew or should‟ve known of P‟s error (when both sides in error, there is no entitlement
                     to loss)
                          The Code itself tells what to do when invalidating a contract due to error rather
                              than finding a remedy through detrimental reliance
                          Court here is finding that there is no meeting of the minds – one had in mind
                              double compensation and other same compensation

Detrimental reliance

 Art. 1967
    - Only civil law jurisdiction that has accepted this into Code
    - Placed abutting cause – something unrelated
Requirements:
    - Promisee must actually rely upon the promise
    - Party making promise knew/should/expects that promise would induce other party to rely
    - the other party in fact relied
    - reliance was reasonable
Qualifications:
    - recovery may be limited just to expenses incurred/damages suffered (no reliance loss)
    - reliance on a gratuitous promise must be in its required formalities.
             Rules out enforcement of donations not in its proper form b/c reliance is not reasonable

      Why was Detrimental Reliance adopted?
         o Basic reason that it was developed at common law as a substitute for consideration in
            gratuitous situations
         o Therefore, there is an uneasy relationship in Civil law because Civil law recognizes and enforces
            gratuitous promises because they have good cause
                 Detrimental Reliance is not why the promisor obligates himself – only the consequences
                    of the promise on the promisee
         o Could use DR when irrevocable offer is revoked
                 Reliance is a pervasive fact in the law of contracts – induce when make offer,
                    acceptance, gratuitous promise, minor misrepresenting age
                 Question of whether DR has general application – No Guidance is in its restricted to
                    niche
                        - Need to have a good knowledge of the Code and how it deals with reliance
                               1. DR has a subsidiary role – Do not upset the structure of the Code if it
                                  disrupts the outcome in any significant way

                                                      43
      Prior to adoption of 1967, LA jurisprudence contained the concept of Equitable estoppel (A
       representation of fact made by one party that another party relies upon and causes him to change his
       position to his detriment)
           o But really detrimental reliance comes from common law promissory estoppel; PE was rejected in
               1952 by the SCT of LA, stating that Promissory Estoppel has no place in this system; but 1967
               comments say that that case is overruled;
      Palmer: if you have a CONTRACT you should not use 1967 (DR), go for breach; if all you have is a
       promise then go for DR; 1967 should not be used when contract formation has been established

      Look at Article 2298 for unjust enrichment

      Edinburgh v. Edinburgh:

          o   Mother owned a home and daughter and son-in-law were living with them
          o   Mother promised that if she took care of her for the rest of her life that she would leave the
              home to them…they had to keep up with all of the mortgage payments and the upkeep of the
              home.
          o   Son-in-law did this for 6 years until the divorce when he moved out.
                  Palmer says he thinks there was a contract
          o   Mother dies and leaves the house to her daughter, so the ex-husband sues to get his mortgage
              payments back
                  Court said no, because when the ex-husband stopped performing then mother was right
                     to think that the contract was over.
                  He made an alternative claim using the DR of art. 1967…the court accepted this as the
                     path to a solution
                         - There are other articles that the court overlooked…the court just said that he did
                             something in reliance so he deserved some money back. The CT could have
                             looked to 2018 to give some money back under the theory of unjust
                             enrichment…he would still be entitled some money back, but at a different
                             rate/or scale.

Morris v. Friedman 1996

      Morris, pres of First Nat‟l Bank, was recruited by Friedman, the majority stockholder, to become
       president of People‟s Bank
      After negotiations, Morris agreed for 3 year period, agreement was put into writing at Morris‟ insistence
      Morris claims that Friedman made personal, oral (not included in contract) promises to repurchase, in
       his individual capacity, any stock which Morris purchased (bc he‟d be able to resell stock upon
       termination to the bank)
      The bank became insolvent, so interested in the majority stockholder executing oral promise
      Did not pursue under a contract b/c such a agreement would have to be in writing
      When Morris quit, Friedman refused to repurchase (and the bank did, too)
      1967 is not retroactive, so court looks at law prior to 1985 to see if claim would lie under pre 1985 law;
      ct determines that court would not have enforced the promise given a writing requirement (statute of
       frauds for this type of alleged K)
           o Court held that law applicable to case was not Art. 1967 – not effective when promise made and
               since this provision is substantive, it can only be applied prospectively (procedural and
               interpretive laws apply retro- and prospectively, in the absence of a provision to the contrary

                                                      44
           o     Equitable Estoppel – Test doctrine and hold that there was no misrepresentation concerning the
                 necessity of formal requirements and therefore does not obviate the legislative intent
     this case illustrates that despite 1967, the court will not allow the circumvention of legislative intent
             o Show not be erasing with one hand and writing with another
             o Where a statute requires something, it should be followed, not the subsidiary provision
                       DR could be needed in a situation where a offeror makes a promise but has not made an
                         offer in a definite form (saying something vague that did not include the necessary
                         elements or terms of an offer that once accepted would establish an agreement)
                       More pervasive – Courts have ignored positive provisions of law set up in other areas of
                         the Code – it is a rogue concept looking for a vocation
                             - Very easy for a court to apply b/c reliance is everywhere – its pervasive
- Edinburgh v. Edinburgh
        - written agreement btw mother and daughter/ son-in-law that she would leave house provided that
taking care for life and the upkeep of the house (including mortgages)
        - Son-in-law got a divorce and stopped performing on contract
        - When she died, the mother left to daughter
        - He wants recovery b/c he made repairs, upkeep, for a certain amount of time
        - seeks remedy based on Art. 1967
        - Contract is null b/c of nonperformance but parties must be restored to position before the contract
        - Court did not look to proper Code provision 2018, which provided that must examine if what was
given was of value (enrichment) – should have been promisor‟s enrichment not the promisee‟s reliance
        - Got nearly to the same result, but had to invent had to it
        - all this is unnecessary – only use 1967 where there is gaps

VII. Contractual Object
* object and cause are interrelated

1971. Freedom of Parties

Parties are free to contract for any object that is lawful, possible, and determined or
determinable.

      Plainol - Mistake to use the term contractual object b/c the obligation has an object and a contract has
       two obligations
    lawful – just like illicit cause, the performance itself has to be lawful; e.g., contraband/illegal
       substances
   -ie) there is a distinction betw things in and out of commerce (out of- drugs, body parts, stolen goods).
    Possible – must be possible at the time of the K in a factual sense. e.g., agreement to sell a book that
       is out of print (see 1972 – nature of the object, not the parties‟ ability to perform)
    determined/determinable
   – Something that is certain or can be made certain
   – e.g., promise to sell “an animal”  not determinable/determined.
   – Percentage lease (rent depends on amount of gross receipts)  determinable later
   – All the wine in my cellar  objective – that‟s a lump sale
   – Taxi trip from Madrid to Paris  determinable by meter
   – Outputs/requirement contracts  determinable/depends on the good will of the parties
   – Franchise agreements: In France, franchise agreements are sometimes struck down, finding that since
       prices can be imposed by the will of the franchisor, it is unfair that franchisor retains such power;

                                                      45
If bottles of wine break, the risk is generally on the seller

1972. Possible or impossible object

A contractual object is possible or impossible according to its own nature and not according to
the parties‟ ability to perform.

      Measure impossibility so it‟s objective, meaning that no one could do it – rigorous notion
      Possible, but not in my ability to perform: I sell you something that I don‟t own. If someone else can
       do it than it is a subjective problem and not impossible.
      Objective standard rather than a subjective standard
           o Must be absolute impossibility – that no can do it
      Ie) the boat that we are selling has been destroyed




1973. Object determined as to kind

The object of a contract must be determined at least as to its kind.

The quantity of a contractual object may be undetermined, provided that it is determinable.

       Must be definite at least as to its kind of thing that it is. For determining the object.
       Sentence 2: At the time of the formation of the K it is not determined, it is okay if it can be determined
        later on (this makes it determinable).
        Ie) I will sell you all of my land. If this is said in the K but we never descrwssibe how much land there
   is, it can be determined.
   - Can leave a formula to determine future prices

1974. Determination by third person

If the determination of the quantity of the object has been left to the discretion of a third person,
the quantity of an object is determinable.

If the parties fail to name a person, or if the person named is unable or unwilling to make the
determination, the quantity may be determined by the court.


   - Contemplates that there is a formula for determining quantity of the object
   - Left to expert appraiser
   - Court may make determination if it can
       - this goes hand in hand with the Law of Sales
       - This goes against view that court should not be making bargains for the parties
               - One situation where there is no power for the court --- if the parties intended the
   determination by a third person not the court --- parties must take away the power of the court


                                                          46
1975. Output or requirements

The quantity of a contractual object may be determined by the output of one party or the
requirements of the other.

In such a case, output or requirements must be measured in good faith.


1976. Future things

Future things may be the object of a contract.

The succession of a living person may not be the object of a contract other than an antenuptial
agreement. Such a succession may not be renounced.

        Succession – no: a future heir can‟t renounce in advance, or make any stipulations abt future K, except
         for antinuptial. Question of safety of person involved; also mt prevent family friction. (ie, loan me $
         now, b/c I will pay you back when I inherit $ later on)
             o This is due to danger or immorality
        Antenuptial – ok ie) a prenuptial agreement

Object   is different than cause
   -     cause is why obligating self
   -     seller‟s cause is the buyer‟s object (payment of money)
   -     An alleged obligation can have a valid cause but an invalid object
               Ex. Lessor of apt. ----- leasing to buyer (pays money) ------ cause of buyer is to run brothel
                       Object deals with the performance

Cases on Object
We the People Paralegal Servs. v. Watley, 2000
        alleged oral contract whereby WTP would provide paralegal services in exchange for fee split
        P‟s are seeking recovery under Quantum Meruit or unjust enrichment
        D alleges K is unenforceable bc it would violate law (fee splitting = unauthorized practice); and bc
         quantum meruit, unjust enrichment are contract-based recoveries, Ps cant recover when there‟s no
         conract;
        Court finds that here the object of the contract was the provision of paralegal services which is neither
         illicit nor immoral; the unlawful aspect was the method of compensation; and per LACC 2034: the
         nullity of a provision does not render the whole contract null unless, from the nature of the provision or
         the intention of the parties, it can be presumed that the contract would not have been made without
         the null provision (but the parties conceded that point, so ct must now deem the K null):
        Effects of a null contract – restore parties to original position (damages), as if K was never made,
         unless party recovering knew that the defect made the K null;
               o Problem can be with the cause and the object
        Quantum meriut & unjust enrichment
        Civilian quantum meruit – refers to the measure of compensation or price unstated in a contract
               o Can use what the work is worth based on objective terms
        Different than how it is used in common law terms.
         -QM in Com L= unjust enrichment

                                                         47
      -In Civ Law= you need a valid K for quantum meruit. Ct here is saying that it shouldn‟t be used here
   because this K is void.
    Should use UE instead: Unjust enrichment is recoverable when K is null/void
    UE is measured by how much was unjustly enriched.
    Here, did not allege facts w/ sufficient specificity to support claim of UE but due to confusion can
      amend petition
    Art. 2033 covers the kind of case her
          o It declares a rule
    Unjust Enrichment is a very broad ideal
          o Art. 2298
                   Cannot use this if another provision would deny
                   Code article is to be used in a subsidiary way
                           - Not used if there is no contrary rule and no available remedy
   Five requirements for Unjust enrichment:
    1) enrichment
    2) impoverishment
    3) connection between enrichment and impoverishment
    4) no valid juridical act justifying the enrichment (i.e., no contract)
    5) no other remedy at law available

VIII. VICES OF CONSENT
Art. 2021. statute of limitations is five years

Error, Fraud, Duress: are unified by:
       1. There is something sufficient to induce each party to enter into the K.
       2. the illegal effect of the annulment is the same and all produce a relative nullity.
    There‟s an overlap betw Fraud and Error, so it mt not make that much of a difference it we use the other
                                   term, however it mt make a big impact to the accused.

1948. Vitiated consent

Consent may be vitiated by error, fraud, or duress.

      To vitiate is to make something ineffective

ERROR

1949. Error vitiates consent

Error vitiates consent only when it concerns:
1. a cause without which the obligation would not have been incurred and
2. that cause was known or should have been known to the other party.

      Cause of an obligation has to be shared or known on both sides but that does not mean that the error
       has to be shared
          o Know why the error is important
          o Error can be unilateral


                                                     48
      you only vitiate consent through error when error is as to a “principal cause”; and the other party knew
       or should‟ve known about that cause
      there may be more than one principal cause (case in bk- judge didn‟t know the difference betw a cause
       and the cause)
      to determine #1: if you told me the shutters on the house I bought from you were 25 yrs old rather
       than 20. Would I have bought the house anyway even if I had been told the truth? Probably.
      a K tainted by error is a relative nullity; the agreement is not automatically revoked by the lack of
       consent, but rather is voidable by the parties
       cause must be known (you can‟t have a “secret” cause – e.g., I go buy a horse bc in my mind my horse
       is dead, but I don‟t tell the seller that I‟m buying the horse bc I think mine is dead – I can‟t ask to
       rescind if it turns out that I was wrong and my horse is alive)
      mutual mistake/error – two parties hire a surveyor to measure land; seller conveys a bit more land
       so satisfy an apparent deficiency in the amount of land sold; turns out the surveyor was wrong; seller
       moved to rescind the sale; allowed; the error of the surveyor became their mutual error – test: whether
       both parties are mistaken as to the same fact  rescission
       unilateral error – Duesthman v. Standard Fur: lady buys fur coat; uses the wrong lingo and doesn‟t
       get what she wanted; seller was not in error; D was expert and should‟ve explained
           o Easy case for court --- comes close to a fraud, since fraud is harder to prove, both error and
               fraud will be pleaded
      Pousin case – the error was the French family‟s certainty that it WAS a pousin when that fact is
       uncertain (no one knows who painted it)
      Laidlaw v Organ– superior knowledge. They didn‟t know that a treaty had been signed that made it
       impossible for ships to leave N.O. during the war. Port closed off- so they lost export $ in tobacco
       sales. Art 1949: the error was known/should‟ve been known to the other side.
      Lake Charles Auto Salvage – court finds that the principal cause of the contract was to buy a
       structurally sound automobile and there were no facts to show that the car was not structurally sound.

1950. Error that concerns cause

Error may concern a cause when it bears on the nature of the contract, or the thing that is the
contractual object or a substantial quality of that thing, or the person or qualities of the other
party, or the law, or any other circumstances that the parties regarded, or should in good faith
have regarded, as a cause of the obligation.

      Categories are very expansive
           o Far more expansive than Roman law or French Civil Code of 1803
      Substantial quality/errors of fact: ie) I sold you a a piece of furniture and I told it was from Louis IV,
       had date wrong,
      nature of the contract – surety vs principle
      thing – silver vs gold
      person – person you weren‟t expecting: I hired the wrong architect (thought you were someone else-
       particular when involves a skill/personal relationship)
      law – when parties have misinterpreted the law (you thought you‟d be tax exempt but you weren‟t)
      other circumstances. Well informed individuals abt facts can still make an error of law. Our code says
       we‟ll give remedies for these actions. Doesn‟t distinguish too clearly betw errors of fact anf law.
      NO ERROR as to VALUE of the thing
      No error based on change in market conditions – that‟s just an error in judgment; no relief as to a bad
       bargain

                                                       49
      Error must relate to a kind of cause that is either known or should have been known;
           o A buys a horse b/c his horse is dead- but seller doesn‟t know this. If horse isn‟t dead- no relief.
              Seller shouldn‟t have known.
      Oauchita (Uni-lateral Error)
           o Hires an airconditioner fixer. Hm owner has a “York” air conditioner. He hires a man who used
              to be a York dealer but is now a different dealer of a different type. He doesn‟t know that air
              condition man switched. The ct held for hm owner. The other side knew he was installing the
              pts of the type of air cond that he now sells. The ct said that the service should have known
              that the hm owner would‟ve wanted the same brand integral pts.
      Marcello (Uni-lateral)
           o Seller, Marcello knows that there is no liquor license, but sells his “ONGOING” business to out of
              state buyers knowing that they will not be able to attain a liquor license for the bar even. (M
              was in trouble w/ police) They don‟t succeed in fraud. Error UNILATERAL, succeeds. The ct
              declares that the ONGOING business didn‟t exist. Only given the buyers fee, not damages.
      Calhoun v Teal: (Mutual Error)
           o The buyer had land measured by a surveyor after land sold. He concluded that the land only
              contained 188 acres rather than the 52 acres promised. The seller made up the shortfall of the
              52 acres. It later came out that surveyer was wrong. So, seller wanted to annul the added 52
              acres transfer b/c of a COMMON ERROR. Both relied on a MISTAKE. This case easily satisfied
              the requirement that the CAUSE should‟ve been known by other side. Makes no difference if
              unilateral or not, still rectifiable.


1951. Other party willing to perform

A party may not avail himself of his error if the other party is willing to perform the contract as
intended by the party in error.

      It‟s like an instant re-affirmation of the K; you were in error, but the other side is willing to do it the
       way you thought it‟d be done; so you can‟t rescind the contract if the other side is OK with it
      This avoids litigation
      Ie) if you wanted Elvis‟s jacket and thought we were contracting for it but we actually contracted for
       garth brooks but I agree to give you elvis‟s b/c I happen to have it, then you can‟t get out of the K

1952. Rescission; liability for damages

1. 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‟ve known of the error.

2. The court may refuse rescission when the effective protection of the other party‟s interest
requires that the contract be upheld. In that case, a reasonable compensation for the loss he has
sustained may be granted to the party to whom rescission is refused.

   1. you made the mistake, but the other side didn‟t make your error. The error is unilateral- you can have
      recission, but you prob have to compensate the other side so they aren‟t harmed by their reliance (the
      reliance damages mt be so great that you don‟t want to rescind anymore.
   2. the ct mt have to refuse recission b/c it may be impossible to compensate in damages.
   3. no relief of party not in error will perform in accordance w/ the erroneous perception of the K.

                                                         50
   4. must be error of fact not error of salvation.
   5. Distinction btw mistake as to fact (any aspect of a thing) – principal basis for recession of consent vs.
      mistake as to value without a mistake as to fact
   6. the bigger the mistake, the harder to get relief
   7. Inexcusable mistake
          a. Made supine error and not sure that made in good faith
          b. Withhold relief in cases of inexcusable error
                  i. Such as signing contract without reading

Propositions:
       1) Error must relate to a kind of cause that is mutually known or should have been known
               a. Some uncommunicated, subjectively held cause is no ground for recission
                        i. A goes to buy horse from B, b/c thinks erroneously that horse is dead, but this is not
                           discussed
                               1. No relief b/c cause that is alleged was retained in own mind
                               2. If can prove that there is reasonable grounds for belief, this is not enough if
                                  never shared by other side
                       ii. Can have relief if cause is shared
                               1. Calhoun v. Teal
                                      a. ∏ meant to sell 250 acres to ∆, subject to survey that ∆ paid for and
                                          survey showed that there was only 198 acres and so in compensation
                                          ∏ conveyed 52 acres --- survey was wrong and ∏ receives relief
                                               i. Both gave credence to survey --- cause mutually shared and a
                                                  mutual error
       2) Assuming that cause is mutually known or should be known, the error may be mutual or unilateral
               a. Either/or --- does not make a distinction and require mutuality of mistake
               b. Ex. Marcello – business buyer were in error, thought buying on-going business which the
                  seller represented it was but knew it was not
               c. Ex. Duestchman – woman used lingo to make coat and the expert used this wrong lingo and
                  disregarded what he knew ---- company, knowing about her error, could not recover
                  reliance damages
       3) When recission is granted for unilateral error and the other party has no knowledge of error, then
           that party may be entitled to reliance damage
               a. Art. 1952 is innovation of the revised code

LaidLaw v. Organ
   -   Dispute over tobacco
   -   Organ is buyer and knew of circumstances that affected price and Laidlaw is the seller and did not
       know of circumstances that affected price
            Laidlaw did not know that the blockade would be lifted and was basing price on these conditions
            Argument in court concerned not so much the error of the seller as the fact that the buyer had
              more information and should have shared this information
            Chief Justice ruled in favor of buyer who withheld info --- disagreed with Pothier and Cicero who
              urged the necessity of good faith in commercial dealings
                   No need to divulge where the means of access to knowledge are open to both but one
                      party is not permitted make imposition to knowledge
                           American approach protects person who has invested money to educate self and
                              thus contracts in which person uses knowledge who be

                                                       51
Times Picayune Art.
   -   Something about a piece of art and the issues in the case are similar to issues in Laidlaw. Get these
       notes from someone.


Lake Charles Auto Salvage v. Stine
   -   Dispute about car – whether the car was wrecked and what type of repairs could be made
   -   Came out that this was a reconstructed car ---- arguing that their was a mistake as to total damage of
       the car
   -   Court holds that cause was fulfilled unless can prove that car was unsafe

Hanover Petroleum Corp. v. Tenneco Inc.
   -   Kaplan contract involved sale of gas with a “take or pay” obligation
   -   Defense of Error
           Arguing that had Tenneco anticipated the collapse of the market and the change in the
              governmental regulation, they would never had entered into the K
           Only error was in judgment founded upon its own evaluation of future market conditions
           Not the province of the court to relieve parties of their bad bargains

Progressive Bank and Trust Co. v. Vernon A. Guidry Contractors, Inc.
   -   Auction
   -   There was a bid substantially higher --- only got 13 items when he thought he was bidding on
       everything
   -   No meeting of the minds
   -   List distributed should have followed and the auction‟s procedures were confusing in themselves
   -   Appellant was in error as to the error of the contract
            Here, the object was related to the cause --- thought he was getting 16 items
            Bank and sheriff should have known that their procedure would produce errors


FRAUD

1953. Fraud may result from misrepresentation or from silence

Fraud is a misrepresentation or a suppression of the truth made with the intention either to
obtain an unjust advantage for one party or to cause a loss or inconvenience to the other.

Fraud may also result from silence or inaction.

* intention to:
- Never results from negligence
- obtain unjust advantage OR
- cause loss or inconvenience
- doesn‟t suggest that it has to be a monetary loss – e.g., see case where angry neighbor used strawman to
buy land his neighbor wouldn‟t sell – it was fraud even though the transaction was at fair price bc it affected
the cause
- Could simply be a matter of inconvience

                                                       52
1954. Confidence between the parties

Fraud does not vitiate consent when the party against whom the fraud was directed could have
ascertained the truth without difficulty, inconvenience, or special skill

This exception does not apply when a relation of confidence has reasonably induced a party to
rely on the other‟s assertions or representations.

- One of the most frequently invoke
- caveat emptor – buyer beware – is the defense to a fraud charge
- caveat emptor doesn‟t apply when there is a relationship of confidence between the parties – you are enttled
to give confidence in people

1955. Error induced by fraud

Error induced by fraud need not concern the cause of the obligation to vitiate consent, but it must
concern a circumstance that has substantially influenced that consent.

* so the target of fraud is broader than that of error; no need to show that fraud induced error as to a
principal cause, but that it went to something that influenced my decision
- Error does not have to be shared, divulged
- should plead alternatively error and fraud

1956. Fraud committed by a third person

Fraud committed by a third person vitiates the consent of a contracting party, if the other party
knows or should have known of the fraud.

* different than when there is duresss; only if you knew that 3d party was fraudulent
       Ie) if a 3rd party moved by the odometer. You can‟t get out of the K with party you were in K w/ if
         they weren‟t privy to the info.
       You can still have relief for error. You can sue in tort.

1957. Proof

Fraud need only be proved by a preponderance of the evidence and may be established by
circumstantial evidence.

   -   now a lower standard than before (clear and convincing) this is INCORRECT! Why? Not needed to
       establish a clear and convincing. Strong and conclusive. Fraud should be just like the other vices of
       consent. This art doesn‟t change the law; it changed the position that the cts had been following for
       many yrs.

1958. Damages

The party against whom rescission is granted because of fraud is liable for damages and
attorneys fees.

                                                       53
Notes
   - Fraud consists of an intentional fault
   - Fault must be imputable to the other party in the contract
            Fraud emanating purely from third party and contracting party is innocent of it is not actionable
               for recission
   - Fraudulent behavior must result in an error in some kind in the person seeking relief
   - The error must not be too negligent or rectifiable by normal prudence
            Scope of error is much broader than that discussed in the error provisions
   - Proof of Fraud – the burden of proof – is not any higher than any other civil cause of action
   - Damages and attorney fees are attached to this action
Cases on Fraud
    Orr v. Walker – two, neighbors fighting over the strip of land; Tally arrived on scene, tells P that he
       bought the land from P‟s hated neighbor and that he will pay P for the land. Tally shows P false
       documents; Tally had never really bought the land. Ct says that P never showed any loss. P says, that
       he was inconvienced, that he never would‟ve sold land if not for fraud. This shows use of word
       INCONVIENCE. Ct found for P? use of strawman = fraud
           o Using false documents and false statements, but the ∆ was that it cost no money and received
               far market price and that without damage the fraud is meaningless
           o SC acknowledges inconvience and it is incorrect to argue that there is no standing without
               pecuniary interest
    Borne v. Edwards –girls renting the apartment  lessor‟s silence evasively answered questions about
       crime in the neighborhood and was sufficient to constitute fraud which vitiates consent of error; the
       lessee‟s and their parents‟ concern for crime and their safety was unquestionably just such a
       circumstance that influenced consent
    LYING, ie) abt one‟s state of health, or driving records, for insurance purposes.

      Watermeier v Mansuetto
          o Buyer is precluded from recovery for their own lack of diligence. They were told incorrect sales
             figures of business they bought into.
          o Assuming that the inflated balance sheet constitutes fraud, is there anything in the code saying
             that DAMAGES are an essential part of the recovery? Isn‟t it enough that they were
             inconvenienced? Ct probably shouldn‟t have stressed this damage issue. Could have gotten
             restitution or pain and suffering. Doesn‟t preclude recession for unjust enrichment.
      Court over emphasizing causal linkage; even if there is the possibility of exception, why not relief for
       error
      You must link the cause to the consent to recover.
      To recover from lost profits, they must prove a loss of reasonable certainty- preponderance of
       evidence.
           o Loss profits could have resulted from something other than the fraud
      “faint echo of caveat emptor” – parties who have never owned a business look into purchase of liquor
       store in Metaire; court: fraud doesn‟t vitiate consent when the party could‟ve ascertained the truth;
       here parties should‟ve been suspicious of the pressure to make a quick sale; etc)
           o Figures missing in report, which should have signaled suspicions
      Marcello – “joy lounge” sell; had lost the liquor license; not enough for fraud bc there was no actual
       misrepresentation; but enough for rescission on error to cause (a working bar); P recovers bc D knew
       or should‟ve known;

                                                       54
   SUPRESSING THE TRUTH.
       o Seller suppressed the real final figure to an illiterate person. Ct found for the illiterate.
       o Marcello case probably could‟ve been found as such in the French courts
   Hartford Accident and Indemnity Company v Louisiana Minority, Inc.
       o Director of the corporation signed and told by bond company that signing under capacity as
           director of the board, not in own capacity
       o Parol evidence can be brought in for any vice of consent
       o Could have easily verified through reading document that person was actually signing in
           personal capacity
       o Fraud and Error must be affirmatively pleaded
       o Case rests on defense of failure of due diligence, which would have discovered fraud…the court
           said that the indemnity clause is unambiguously worded right above his signature. The court
           lets in the parol evidence, but says that he cannot introduce parol evidence to deny his personal
           liability.
   Dugas v Dugas
       o The court actually finds ERROR as to the nature of the contract. the ct says we‟re now going to
           discuss fraud, but never does. Claiming that the grandma thought that the K included a rt for
           her to visit, that she understood the K to mean that. Error easier to prove than fraud.
                 She received oral promises before signing over adoption
                 Error in believing that in act of surrender, one can carve out an exception of visitation
                     rights
       o It is difficult for grandma to prove fraud b/c it wasn‟t established at the time of the K. They
           went back on their word, but none of the vices of consent can be based upon future. VOC must
           be established b/4 or after time of agreement. They must only be based on what‟s in K. Change
           of heart. Court must ignore fraud.
       o Difficult to prove Fraud: Run into the prob. of showing that they had this intent of decieveing
           her from the beginning of the K; hard to prove in this case, b/c in the beginning, they had
           allowed her to see child.
                 Usually involves that there was a misrepresentation of an existing fact
       o Ct concludes that when grandma gave up her “grandma rights”, she didn‟t mean to give up her
           visitation rights. Ct concluded adoption was annulled. Had she not been assured visitation rts
           she wouldn‟t have signed.
   Borne v Edwards SILENCE can constitute fraud
       o Borne, P is landlord, sues tenants, four girls, for their rent.
       o D‟s filed a RECONVENTIONAL DEMAND- CROSSCLAIM, they are trying to annul K. Restitution:
           Get back 1st mths rent, rent, deposit, ect.
                 ∏ claims that there was a lack of intention to gain an unfair advantage
                          - Ct disagrees b/c they knew of high crime rate, advertised that it was safe, and
                             actually assured that other females live in area
                 Fraud by silence and that vitiated consent b/c affected circumstances that substiantially
                     influenced consent
                 Leasees relied on information and fact that drove and around and was told about a
                     recent robbery does not relieve the obligation
       o The Ct found FRAUD in that Mr Borne‟s silence evasively answered the q. that there was no
           crime in area.
                 Silence is not pure silence --- it is within a context where they create an atmosphere that
                     the neighborhood is safe



                                                   55
           o   Landlord said fraud doesn‟t relate to future events but must refer to present events- how can I
               predict that there would be crime, that the girls would get assaulted?
                   Ct said that P had held back what he knew abt area.
                   Landlord knew about the nature of the area‟s crime rate
                          - Cause of ∏s entering contract was that this apartment would be in a safer
                              neighborhood in a city with a high crime rate


   DURESS

-Different than error or Fraud because NO MISTAKE is made.
        Ie) sign here or I‟ll kill your dad. No mistake made
-This vice is abt a unfair restriction on your freedom to choose

1959. Nature

Consent is vitiated when it has been obtained by duress of such a nature as to cause a reasonable
fear of unjust and considerable injury to a party‟s person, property, or reputation. (objective
standard)

Age, health, disposition, and other personal circumstances of a party must be taken into account
in determining reasonableness of the fear. (subjective standard)

-person w/ no education, no money, ect.
-fear must be alive at the TIME the K made.
- “of such a nature” sets a threshold under which duress will not vitiate consent



1960. Duress directed against third persons

Duress vitiates consent also when the threatened injury is directed against the spouse, and
ascendant, (ie, grandpa) or descendant (son) of the contracting party.

If the threatened injury is directed against other persons, the granting of relief is left to the
discretion of the court.
-this list does not include cousins, best friends, or dogs. However, para 2 says its up to cts discretion to decide
if the K is not valid b/c of duress.


1961. Duress by third persons

Consent is vitiated even when duress has been exerted by a third person.


- Duress does not have be exerted from the other party to the contract

1962. Threat of exercising a right

                                                        56
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.

* there needs to be a relevance to the lawful thing being threatened… here has to be a direct connection
between the right that you assert and the contract terms that you extracted; and there has to be
proportionality between what you owed and what you‟re trying to acquire.
-ie) a celebrity shoplifts, and doesn‟t want it to be let out, and you make her sign a K for a lot of $ not to tell
people.

1963. Contract with party in good faith

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 collusion with the party exerting
duress.

* e.g., contract for of loan made for the purpose of paying ransom cannot be rescinded for duress if the lender
is in good faith
* contract for rescue, salvage – may charge something reasonable. Can‟t be rescinded for duress.

1964. Damages (can be recovered, not just annulment of K!)

When rescission is granted bc of duress exerted or known by a party to the contract, the other
party may recover damages and attorney fees.

When rescission is granted bc of duress exerted by a third person, the parties to the contract who
are innocent of the duress may recover damages and attorney fees from the third person.

   o   You can‟t be given attorney fees unless stipulated by law. Each side normally pays their own. This
       hopefully deters unlawful behavior like this, decrease the amt of it. Also, these are morally wrong.That
       is why fraud and duress are singled out.
   o   These threats must come from some PERSON, not from a hurricane, government threat, ect.

    Notes:
- the terminology of violence has been taken out of code and replaced by duress
  -     Mere reverential fear used to not constitute duress
  -     Must be illegitimate pressure to not be duress
  -     State of necessity (duress due to circumstances)
          1. needs are such that party is weak to resist pressure or pressure is simply do to circumstance and
               not due to external act of a person --- no duress by other person
  -     Threat must be proportional and direct to not face recission or annulment
          1. ex. of disproportionality: shop-owners who said would bring restitution suit for stolen object that
               was disproportional to the legitimate right
          2. ex. of indirectness: husband has right of cause to seek divorce and threaten to leave unless
               convey property --- something totally unrelated to cause of action or legitimate right




                                                         57
   o   Wilson v Aetna. a man hit by a car. had no one to take care of him if he left hospital, no insurance.
       Hospital told him he had to leave. Insurance carrier came in and he signed an insurance agreement.
       Ct found that the world, life circumstances put him into this situation, not a person. No duress.
   o   Bryant – court agreed that there was economic duress --- withholding of labor was a restraint of trade
       and would not be a legitimate threat
      Dunham v. Anderson-Dunham –
           o Abt duress by CIRCUMSTANCE: it was IMPLIED.
           o Chairman told underling to hire person, and underling asked why chairman did not do it
           o Shortly after, chairman steps down and company fires Dunham, alleging coercion vitiated
              consent
           o Felt pressure to hire a consultant: however, the company, the alleged pressuring agent NEVER
              said, do this or else, but what are the circumstances that bend the will, make it duress?
                    Fear of his own job security, even though they never threatened that he‟d be fired if not
                    Knew nothing of K
                    Court argues that there was duress by circumstances b/c the chairman nor anyone else
                       overtly threatened him
        CRITICISMS:
           1. Doesn‟t seem to rise to an obvious level of threat
           2. implicit compulsion arising from the circumstances (here, the corporate ladder)
                    law review article argues that court‟s finding is contradicted by Wilson v. Aeta where
                       they found that there was no such thing as duress by circumstance (bc duress has to be
                       caused by people, not by mere state of necessity ---- not suppose to be actionable under
                       the code); Durham distinguished bc here there is at least an implied exterior act
                           - Author thinks that the effect of duress is more important than source

      Terrebonne – threatening to get him locked up and put back in jail -- no showing of duress; plus they
       had a legal right to charge him with statutory rape

      Averette v. Indus. Concepts – duress stemmed from the economic situation he put himself in; too self
       inflicted… duress arose from their financial difficulties brought on by their stock purchase at a grossly
       inflated price;

IX. The Effects of Contracts on Parties and Third Persons – Third Party Beneficiary
     No requirements that stipulation must be in writing
     Stipulator – is the initiator; he who wishes to convey the benefit of the K on a third party beneficiary
     Promisor – is the agent/mechanism by which the benefit is conferred upon the beneficiary
     Beneficiary – the third party that receives the benefit
     Examples:
                    - life insurance contract is the model example for 3d party beneficiary law – the law grew
                        permissive of recognizing 3d party beneficiaries bc they wanted to validate this type of
                        contract
                  insured is the stipulator, insurance company is the promisor, and whoever gets the
                  insurance $ is the beneficiary
                    - credit card – agreement between bank and store vendor which states that when
                        someone presents the card, the card will be acceptable as currency; the holder of the
                        card is the beneficiary of that agreement between credit card company and vendor
                    - Assumption of a Mortgage – the houseowner is the stipulator, the purchaser is the
                        promisor; the bank is the beneficiary

                                                       58
                   -  if the mortgagee just accepts payments by the purchaser, he is accepting & availing
                     himself of the benefit – 10 So. 693 (La. 1895).
Who has power to revoke, dissolve, and defenses, and enforceability; doubtful and disputed third party
beneficiary?

1978. Stipulation for a third party

A contracting party may stipulate a benefit for a third person called a third party beneficiary.

Once the third party has manifested his intention to avail himself of the benefit, the parties may
not dissolve the contract by mutual consent without the beneficiary‟s agreement.


      the beneficiary‟s intention to accept the benefit may be made known in any manner, even implied; the
       filing of a suit is a sufficient expression of such an intention
      Vesting --- can contract itself be dissolved (contract btw stipulator and promissory); can the stipulation
       be revoked by the stipulator
      Availment does not have to be express but can be implied from actions
             Cases: drilling for pipeline in reliance; notification of debt; assumption of mortgage where third
             party forbear one months payment
                     - Manifestation of availing rather than communication to the promisor

1979. Revocation.

The stipulation may be revoked only by the stipulator and only before the third party has
manifested his intention of availing himself of the benefit

If the promisor has an interest in performing, however, the stipulation may not be revoked w/out
his consent.

      stipulation itself also may not be revoked once the beneficiary has manifested his intention to avail
       himself of it, even if the contract can survive w/out it.
      Note that it‟s phrased in “avail himself of benefit” and not “accept the benefit” – it would sound too
       much like contract – it‟s not
      In most instances, the promisor does not have an interest in performing (e.g., the ins co doesn‟t really
       have an interest in paying $ to the beneficiary), but if it did, it would have to consent to have the
       stipulation revoked
      Stipulator can revoke in favor of another beneficiary

1980. Revocation or refusal.

In case of revocation or refusal of the stipulation, the promisor shall render performance to the
stipulator.

      if the 3d party refuses the benefit (or the stipulator lawfully revoked, or it lapsed), the promisor must
       render performance to the stipulator (remember the stipulator – promisor K is still alive)
      revocation: cancellation without replacement
      usually the performance is to reimburse

                                                       59
1981. Right of beneficiary and stipulator

The stipulation gives the third party beneficiary the right to demand performance from the
promisor.

Also, the stipulator, for the benefit of the third party, may demand performance from the
promisor.

      Enforceability is two-sided:
           direct Action – the beneficiary can sue the promisor directly
           indirect Action – the stipulator can sue on behalf of the 3d party beneficiary
                    - If collects money, holding it for the 3d party

Art. 1982. Defenses of the promisor

The promisor may raise against the beneficiary such defenses based on contract as he may have
raised against the stipulator.

      Beneficiary is on the same plane as Stipulator
                       Defenses: vice of consent; failure of condition; non-performance of their agreement
      e.g., if the stipulator does not pay the insurance premium, then the promisor (ins co) would be able to
       use that defense against the beneficiary – beneficiary won‟t get $ bc stipulator did not pay the premium
      one LA case found that ins co should‟ve notified the wife and allowed the wife/beneficiary to pay the
       premium directly since her husband wans‟t paying.


Cases:
Brussard v. Northcott Exploration, (determination of third party beneficiary contract through INTENT)
Brussard has a Farming lease with Lessor-landowner
Northcott has a Drilling lease with Lessor-landowner

The Drilling lease makes the mineral lessee responsible for all surface damage to lessor caused by lessee‟s
operations; Brussard is claiming to be Third Party Beneficiary to the Drilling Lease; court found that they are
not and distinguish it from Andrepont case which had pretty much the same facts
       - Broussard is arguing that he is a third party beneficiary of whatever contract is made btw the parties

The difference was that in Andrepont there was actual evidence that the language in the K was broadened so
as to include third parties more clearly (“the mineral lessee is responsible for ALL DAMAGES caused by lessee‟s
operations”)

Question is if parties are really trying to benefit a third party --- the true and intended beneficiary and the
unintended (incidental) beneficiary
                            - often there are third party beneficiaries who try to get recognized as a true
                                beneficiary
                            - Ex: A engages B to drill an exploratory oil well on property, which, when tested,
                                would give a neighboring landowner useful information --- this is not meant to be
                                for the benefit of the neighboring landowner

                                                       60
                          -   C has nicest home on block; A owns six houses in a row in bad condition and
                              engages B to restore homes --- Although C is an interested person, absent more,
                              the intention is not to benefit C
                          -   A, about to graduate, is promised a rolls Royce by father B; C owns only Rolls
                              Royce dealership --- C is not a third party beneficiary b/c it is not intended that
                              he be benefitted

      Smith Factors (convinces court that there was a third party beneficiary) – the existence of such an
       implied intent is a factual question to be determined by an analysis of both the contract and the relative
       position of both parties as to the third person:
      --the existence of a legal relationship between the promisee and the third person involving an
       obligation owed by the promisee to the beneficiary which performance of the promise will discharge,
       OR
      --the existence of a factual relationship between the promisee and the third person where:
                    - there is a possibility of future liability either personal or real on the part of the promisor
                         to the beneficiary against which performance of the promise will protect the former
                    - securing an advantage for the third person may beneficially affect the promisee in a
                         material way
                    - there are ties of kinship or other circumstances indicating that a benefit by way for
                         gratuity was intended.

Spears v. McCormick 1987

-Suit by husband, mother-in-law against newspaper alleging libel and breach of alleged stipulation pour autrui
made in their favor by wife
- The wife stipulated that she remain anonymous; but this ultimately comes down to intention – did the
alleged promisor have then intention of benefiting them or it was only to keep her anonymity?
     so it‟s not enough that you just happen to benefit – no incidental beneficiary if it‟s not intended by the
        stipulator
     Writing Requirement?? There is nothing in the Code suggesting that there is a writing requirement, but
        it seems that jurisprudence requires so --- came in through the fact that an assumption of an obligation
        must be writing; however, the writing requirement wouldn‟t affect the underlying contract, just the 3d
        party beneficiary aspect of it.

Dartez v. Dixon – 1987

- Sale of business agreement contained a clause whereby the purchaser was released of liabilities prior to the
sale and seller retained them (promisor); tort victim claims he is 3d party beneficiary and that he can recover
from seller; yes.
- Again, key element  intention by the parties couldn‟t be clearer in the contract; it was an intended and
calculated negotiation by the parties; agreement intended to wipe out pre-existing obligations from the
purchase
- Agree to defend or pay liabilities to no cost to the stipulator

Sandi v. Palmer – 1998 – gift beneficiary situation

      once the beneficiary accepts – the rights vests and it‟s too late for the stipulator to take it back
       (revoke);

                                                        61
   the right of the stipulator to insist on having things carried out as he intended is not absolute; he loses
    standing if the beneficiary settles the issue
   Stipulator no longer has an indirect claim when a beneficiary settles with promisor
         Beneficiary agreed to take less than what was promised
         Stipulator wants to dissolve contract for failure to perform and be put in the situation prior to
         the making of the contract
         Beneficiary has something created in their favor but it does not mean that they cannot take less
                  - When right is created in a third person, he is capable of altering --- does not mean that
                     the stipulator has right




                            Remedies for Non-performance

   breach of contract – when one of the parties, for some reason, has failed to perform the contract
    altogether or full or at the right time or place or in some other respect; includes every case in which the
    performance in fact rendered falls short in some way of what was promised in the contract.
        o Traditional POV: must go to court to have contract declared dissolved
                Based on idea that it is not for the parties to make promise fulfillment determination
                Not by operation of law, but must come to court and petition for dissolution--- judicial
                   monopoly
                Now recognizing that certain types must go to court and some can be dissolved extra-
                   judicially
   German Code – distinguishes between impossibility and delay
        o Impossibility – a contract is invariably void if at the time the contract was formed the promised
           performance was objectively incapable of being rendered by anyone
                Contractor who knew or should have know of the initial impossibility shall pay the
                   innocent party for any harm he suffers in reliance on the validity of the contract
                The absolute rule of this code has been alleviated some:
                         Where a contract puts the risk that performance may be impossible on one of the
                            contracting parties, the courts use the notion of „undertaking a guarantee‟ to hold
                            the contract valid, and impose full liability on non-performance
                Initial v subsequent
                         In cases of subsequent impossibility, the question is not whether performance
                            was objectively or just subjectively impossible, instead the question is who is to
                            blame for the obstacle to performance
        o Delay – if the obligor is capable of performance but has not been performed within the time
           allowed by the contract, the question arises whether the obligee can demand compensation for
           the damage the delay has caused him and whether he can withdraw from the contract and
           refuse to accept late performance
                Debtor could be put in default
                         Putting debtor in default does not necessarily mean that the creditor is freed
                            from the duty to accept performance, even if late.
                                o If he fixes a time during which he must complete performance, and
                                    debtor doesn‟t, then he can withdraw from K
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      Romanistic Family – unitary conception of non-performance of bilateral contracts –
           o If one party to a bilateral contract fails to perform his duties under it, the other is entitled to
               have the contract dissolved by court judgment
                    Choice between bringing a claim for performance and bringing an action to rescind the
                       contract/combined with claim for damages
           o Claim for dissolution – must be shown that the defendant has failed to perform his contractual
               obligations; this includes not only total non-performance b/c of impossibility, but also later or
               incomplete performance as well as breach of ancillary or collateral duties under the k;
                    Judge, in his discretion, will look at the circumstances of the case to see how much Δ is
                       to blame for the non-performance, how much harm the Π has already suffered, and
                       whether it would be fair to hold him to the contract and restrict him to a claim for
                       damages
                    Judge can also set a period of time in which the defendant must render the promised
                       performance and typically will order that the K be rescinded, if the period of grace
                       expires w/out performance; if performance was due on a specified date which had
                       already passed when the claim for rescission was brought, no such period of grace can
                       be allowed.
      the code does not require you to pigeonhole the types of nonperformance that give rise to a remedy
           o this is considered a virtue b/c the generality makes it easier to understand the whole concept of
               nonperformance
      While Nonperformance is Unitary, Remedies are divided into:
                    - Specific Performance (contract still enforced)
                    - Dissolution (assumption that there is no contract)
                    - Putting in default (delay damages)
                    - Damages (contract still enforced)
      usually, any kind of nonperformance may trigger almost any of these remedies




                                        Dissolution of the Contract


             this remedy is in the alternative to SP – it‟s the reverse – the negation of the contract, aiming at
              putting parties in their original position

             dissolution has always been viewed as an implied resolutory condition – in that in every bilateral
              contract where one party fails or refuses to perform, the other party has the right to invoke the
              dissolution of the K
                   - French CC: A resolutory condition is always implied in bilateral contracts for the case
                        where one of the two parties does not satisfy his engagement

              exeptio non adimplete contractus: a suspension of performance permitted by law: relates to
              the reciprocity notion: I won‟t perform until you do, if you do perform then I will too


Art. 2013. Obligee‟s right to dissolution

                                                           63
    When the obligor fails to perform, the obligee has a right to the judicial dissolution of the
    contract or, according to the circumstances, to regard the contract as dissolved. In either case,
    the obligee may recover damages.

    In an action involving judicial dissolution, the obligor who failed to perform may be granted,
    according to the circumstances, an additional time to perform.

-      - judicial dissolution – the obligor may be granted additional time to perform, this is at the court‟s
                discretion in light of the circumstances (good faith of the obligor, whether obligor has valid excuse
                for his failure, etc)
-      - extra-judicial dissolution has to be made in accordance with LA CC 2016; availability of extra-judicial
                dissolution depends on the circumstances; comment example: such as when neither party has
                performed and it is clear that one will not, the other may declare the contract dissolved
-      - painting never left store. (if it had left then not the possibility of extra judicial- they would‟ve prob had to
                go through the courts.) Buyer was supposed to make payment by June 1988. They tried to
                accommodate and said they were supposed to pay by Dec. Still no payment made. The buyers
                thought it was a fake. The sellers sent them letter saying pay me or I will put it on market.
                Gallery assumed extra-judicial dissolution. Sold it to another party for high price. Buyer charges
                seller w/ conversion but losses b/c he had been given NOTICE. Buyer entitled to recover lost $
                for any payments he had made on the painting.
-      - Anticipatory Breach is a common law transplant
    2014. Importance of failure to perform

    A contract may not be dissolved when the obligor has rendered a substantial part of the
    performance and the part not rendered does not substantially impair the interest of the obligee.

          A K can be dissolved when the obligor has not rendered a substantial amt.
          this limitation applies to both types of dissolution
          no dissolution if the obligor has: 1) substantially performed and 2) the part not rendered does not
           substantially impair obligee‟s interest
          i.e., if I‟ve painted 80% of your house you can‟t dissolve the contract, provided that the 20% not
           painted does not substantially impair your interests
                 Can recover the 80% according to the rate of the contract
          Town and Country v Henderson
           - T&C were supposed to completely renovate home under K. Siding not well done, front porch not
              done well, ect. The work was performed in such a manner that it was necessary to do much of it
              again. The contractor can‟t sue in K. The K was dissolved. To sue on the K is to give a substantial
              performance. Remedy in QUASI- K. If it results in any value to home owner, then to prevent unjust
              enrichment under Art 2018. You can be sued by contractor then K dissolved, and he gets for unjust
              enrichment or vice versa.
           - Can sue:
                                - in K and ask for either performance/ damages
                                - dissolution (in this case, b/c of lack of performance not due to 1, so K treated as
                                    dissolved and allowed recovery in Quasi-K)

    2015. Dissolution after notice to perform


                                                             64
Upon a party‟s failure to perform, the other may serve him a notice to perform within a certain
time, with a warning that, unless performance is rendered within that time, the contract shall be
deemed dissolved. The time allowed for that purpose must be reasonable according to the
circumstances.

The notice to perform is subject to the requirements governing a putting of the obligor in default,
and, for the recovery of damages for delay, shall have the same effect as a putting of the obligor
in default.

      2015 applies to non-judicial dissolutions:
      after such notice is given, the obligor will be liable for any delay damages that accrue.
      If the obligor was already in default when the notice was given, delay damages accrue from the time
       he was put in default (e.g., when obligor is put in default by passage of time); but you still need to give
       notice in order to have the contract dissolved

2016. Dissolution without notice to perform

When a delayed performance would no longer be of value to the obligee or when it is evident that
the obligor will not perform, the obligee may regard the contract as dissolved without any notice
to the obligor.

      when time is of the essence, or when obligor has communicated intention not to perform
      so dissolution may be had w/out a prior putting in default in these types of situations




2017. Express dissolution clause

The parties may expressly agree that the contract shall be dissolved for the failure to perform a
particular obligation. In that case, the contract is deemed dissolved at the time it provides for or,
in the absence of such a provision, at the time the obligee gives notice to the obligor that he
avails himself of the dissolution clause.

      automatic dissolution – when there is an express provision
      so there‟s no need to give notice or put into default

2018. Effects of dissolution

Upon dissolution of a contract, the parties shall be restored to the situation that existed before
the contract was made. If restoration in kind is impossible or impracticable, the court may award
damages.

If partial performance has been rendered and that performance is of value to the party seeking to
dissolve the contract, the dissolution does not preclude recovery for that performance, whether
in contract or quasi-contract.


                                                       65
      main effect – restore parties to original position
      if impossible/impracticable  damages
      Partial Performance:
                    - a buyer of a quantity of things of which only part has been delivered may keep that
                       part, paying for it, and seek dissolution plus damages for the unperformed portion of
                       the contract.
                    - if dissolution takes place after less than a substantial part of the performance has been
                       rendered, the obligor, if that performance is of value to the obligee, is entitled to
                       recover the equivalent of the obligee‟s enrichment. ; (e) if of no value to the obligee,
                       the obligor is entitled to no recovery (enrichment test).

2019. Contracts for continuous or periodic performance

In contracts providing for continuous or periodic performance, the effect of the dissolution shall
not be extended to any performance already rendered.

      not retroactive

2020. Contracts made by more than two parties

When a contract has been made by more than two parties, one party‟s failure to perform may not
cause dissolution of the contract for the other parties, unless the performance that failed was
essential to the contract.

      e.g., contract for the promotion of public appearances by a particular entertainer may be dissolved for
       all the parties to it if the entertainer cannot or will not perform, on the other hand, failure of a
       performance which is not essential to achieve the purpose of a multilateral contract need not cause
       dissolution of that contract

2021. Rights of third party in good faith

Dissolution of a contract does not impair the rights acquired through an onerous contract by a
third party in good faith.

If the contract involves immovable property, the principles of recordation apply.

      e.g., A sells car to B, B doesn‟t pay, but sells the car to C; A seeks dissolution for not being paid; but
       that dissolution cannot affect the right of C who purchased in good faith
      if it were a gratuitous contract (if B gave the car to C) then it could be dissolved

      immovable property – if A sells to B and it is recorded; B does not pay to A, B sells it to C; C ought to
       have been able to rely on that it was paid (?)

      Robertson v. Buonis – the mere potential harm to third persons should not be an obstacle to
       dissolution of the contract

2022. Refusal to perform


                                                        66
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 at the same time, if the performances are due
simultaneously.

      this is “defense of nonperformance”; This is exceptio non adimplete contractus…
      NOT dissolution
      If buyer tells you I‟m not going to pay- you say then I (seller) won‟t sell, give you your item until you
       pay
      Not simultaneous: You deliver car now; I‟ll pay you later

2023. Security for performance

If the situation of a party, financial or otherwise, has become such as to clearly endanger his
ability to perform an obligation, the other party may demand in writing that adequate security be
given and, upon failure to give that security, that party may withhold or discontinue his own
performance.

      if someone appears to be in financial difficulty then the other party can demand proof that he‟s not.

2024. Contract terminated by a party‟s initiative

A contract of unspecified duration may be terminated at the will of either party by giving notice,
reasonable in time and form, to the other party.

   -   contract for employment at will
   -   requirement/output contract of indefinite duration
   -   must comply with the overriding duty of good faith

Cases on Dissolution
??? Robertson v. Buoni – Effect on Vendee and Third Person.
    - different from painting case- here must be judicial dissolution. The buyer has assumed a mortgage. 1st
    person is still in the book. Bank is 3rd party beneficiary. Old debtor is still liable. Old D is suing to
    recover. Total default on non- payer. lower ct hesitate in declaring this sale dissolved because new buyers
    could be screw even if deservedly so. Even if there were another purchaser- this doesn‟t stop the remedy
    so speculation shouldn‟t matter. Sue of discretion of cts. Lower cts wrong in their refusal.
    - Suit to dissolve a sale of immovable property
    - Robertson sold Buonis a piece of real property
    - Robertson says that Buonis agreed to assume the balance of the existing mortgage (which provided for
        the payment of $7,000 and then $6,000 yearly)
    - Buonis skipped town, land is not on their name and the bank records never changed
    - Robertson continued to make payments so as to not loose the property (avoid foreclosure)
    - The right to dissolution of a sale of immovables for nonpayment is not contingent on the absence a
        third party purchases
Pg 448 Sliman v Mc Bee: Sale of immovable property w/ waiver of vendor‟s lein- irrelavent to dissolution b/c
    she sued off the K. She waived nothing (if buyer doesn‟t pay and buyer is in debt, then someone (either
    vendor/ buyer gets privilege?) and No mortgage. Within family. They default on mortgage and mom
    intercedes to get a dissolution so that bank doesn‟t take property. She uses her power to cancel. Ct saw


                                                       67
   that the children‟s non payment was evidence of their dissolution. No one ever waived the ability to
   dissolution.

Voitier v. Hagan, 1986 – Damages Along with Dissolution
   -   Suit by Voitier to obtain dissolution of the sale of condo bought from Hagan (wants purchase price,
       damages, and atty fees)
   -   She bought unit 4, which had unit 5 above. The unit above was never completed in 2 and ½ years
       therefore there was considerable water damage
   -   In all commutative contracts, such as a contract for sale, a resolutory condition is implied, which
       permits dissolution of the contract for a breach thereof;
           o Damages claims are here incidental to the dissolution claim
           o Other aspects of damages – off set interest that she could have earned if she would have kept
                money by the rental value she would have spent
                    Discrepancy between interest and the use made of thing
                            This a favorite offset but free to argue that figures are not really off-setting
   -   The agreement (condo declaration) Hagan undertook to complete Unit 5 within a reasonable time –
       here it was not
   -   Damages may be awarded when a contract is rescinded under an implied resolutory condition; so
       the court awarded:
           o Dissolution (i.e., return of the purchase price – return of the condo)
           o Expenses of upkeep; actual damages to furnishings
           o Interest on the purchase price, but he gets rental value (so they cancel each other out)[on
                rehearing this was changed and she got $500 per month]
           o NO attorney fees – only if on bad faith OR set by statute/contract (American rule)
   -   Annullment results usually in Dissolution
   -   Redhibition usually the wd RECISSION appears– in the law of sales, principle that if thing l something
       with a latent defect (i.e., not apparent to the naked eye) you can get your money back; this is the
       reverse of caveat emptor; the lower court awarded redhibition but this is wrong bc you need a latent
       defect AND bad faith.
           o You buy an automobile that is rusted in hidden pts, you mt be able to recover this in redhibition
           o The trial ct erred when it called it redhibition, b/c it was apparent to eye
           o TC thought that this contract fell into this category and attorney fees may be granted
                    Not in this case because the defect was apparent at the time of contracting
   -   Why wasn‟t measured from the date of the K interest from this point? Why shouldn‟t it be the same?
   -   You can Sue for 3 things: She sues for dissolution (prob. wants it back b/c property isn‟t worth what
       she paid for it,) breach of K, or specific performance

Brannan v. Wyeth Labs, Inc 1988 – Employment Contract of Unspecified Duration
    Π argues that his employment contract was permanent – until he reached the age of retirement and
      that he would not be fired but for just cause, and there would be probation period before that
    LACC –
   - can‟t bind for term longer than 10 years
          o If it is for more than 10 years than it is at-will employment contract
                  Do not need cause for at-will
   - man can hire out services only for a certain limited time or for the performance of a certain enterprise
   - a contract for an unspecified duration may be terminated at the will of either party by giving notice,
      reasonable in time and form, to the other party
    this was a contract terminable at will

                                                      68
     he prefers to call it a TERMINATION rather than a dissolution
     Art 2024 K w/ an unspecified duration can be terminated when given notice
cts find he was an employee at will, so no reason needs to be given anyway
- even if there is a long term contract, there is failure on the part of ∏ and can extra-judicial dissolution




                                             Specific Performance



Also called Forced execution = Specific Performance = natural execution = the preferred, primary remedy of
the Civil Law (the remedy of first resort), however, it is very infrequent; usually parties ask for damages.
                 When must parties feel they need SP?
                               When what they want is a unique object which can‟t be covered
                                      o i.e. a one of a kind
                               When want intellectual/emotional gratification- i.e. my dream home
                 Define specific performance: if it is the performance of the obligor that counts as opposed to
                   what the code says that you can seek a third person to perform it for you
                      o SUBSTITUTE PERFORMANCE: If you need a ditch dug, sure, we can get someone
                          else to do it besides the obligor. Code of Civil Procedure
                      o If you have an act that can be done by a third person, then you don‟t really need to
                          ask the ct for spec per b/c if you get damages you can just pay someone else for
                          the same service rather than demanding it from the obligor.

1986. Right of the obligee

Upon an obligor‟s failure to perform an obligation to deliver a thing, or not to do an act, or to
execute an instrument, the court shall grant specific performance, plus damages for delay if the
obligee so demands. If specific performance is impracticable, the court may allow damages to
the obligee. (moratory damage)
(List of types of acts where it is an automatic)

Upon a failure to perform an obligation that has another object, such as an obligation to do, the
granting of specific performance is at the discretion of the court. (if its of a different character,
such as an obligation to do, then it is distinguishable).

      SP is bifurcated into two categories:
       1) SP that Shall Be granted by the court and
       2) SP that is at the discretion of the court
      Mandatory SP-
                    - when there is failure TO GIVE or failure NOT TO DO or to EXECUTE an instrument
                    - plus DELAY damages if obligee demands
                    - delay damages are not compensatory damages and so may be awarded along with SP
                         – does not equate to double recover
      Permissive SP –

                                                         69
                     -     obligation TO DO
                     -     discretion of the court, consistent with the principle that the obligor‟s personal freedom
                           ordinarily may not be encroached upon.
                       - French, initial interpretation of Napoleonic Code, favored damages in most instances of
                           breaches of “to do” Ks
                       - French commentator – one argues that forced execution should be ok when it can be
                           realized w/out violence on the person doing the act (Cadet)
                       - (comment d) - “substituting” SP – if a 3d person could do the job instead then 3d
                           person should “do” and 2d person will pay the difference – all of this with court
                           approval
                       - French Rule (Marcade): forced execution can be ordered in contract “to do” when it is
                           possible.
                               - Impossibilities:
                                      o Material impossibilities: if the object is damaged, irreparable, lost or
                                           stolen or cannot be delivered
                                      o Moral impossibilities: e.g., can‟t compel artist to execute a
                                           painting/portrait
                                                Still could be possible to find someone else to do it
      if SP is impracticable, court may allow damages instead. Example: (comment b)
                       - example– as when the obligation is to delivery a thing and the obligor has sold the
                           thing to another person protected by the laws of registry, or when he has destroyed
                           the thing, or when it requires continuous supervision of the court.
                       - Comment d: substitute performance – hire another and charge the contracting party
- French came to accept SP as preferable remedy where possible
- Litvinofff argues that we lie between two positions – common and civil law
          - have tradition of the preferred remedy without the drawback in that French enforcement is
          inadequate
          - With common law inherited, have more authoritative remedies: contempt power (unwritten power)
          that can put people in jail --- French courts invented a sanction called the “astreinte” (a fine that is not
          measured in statuted but is tailored to the recalcitrant defendant
 - In civil law, an obligee has a right to specific performance, whereas at common law, it is not a right
- In civil law, sp is an ordinary remedy; in common law, it is an extraordinary remedy
- In civil law, the test is if it morally and physically possible to enforce; common law, it is only if damages is not
sufficient
- civil law is weak in enforcement; in common law, it is strong
          - LA has underlying principles and has the able enforcement mechanism

1987. Right to restrain obligor

The obligor may be restrained from doing anything in violation of an obligation not to do.

      an obligee may be allowed to undo, at the obligor‟s expense, anything done in violation of the
       obligation; no need to prove irreparable injury. Bc this is a test coming from the common law and
       shouldn‟t be imported here.

1988. Judgment may stand for act

A failure to perform an obligation to execute an instrument gives the obligee the right to a

                                                         70
judgment that shall stand for the act.

       Do not need to force action --- gives document that can be recorded
       e.g., if someone refused to deliver papers showing your ownership the court doesn‟t need to force the
        delivery of the papers, the judgment of the court can stand for the act.
    Four basic differences between Common law and civil law as to SP:
     at civil law the creditor has a right to SP, at common law it is discretionary
     at civil law SP is considered ordinary relief, at common law it is exceptional
     at civil law the test is whether enforcement is possible (morally and materially), at common law the test
        is the adequacy of the damages
     Civil law is traditionally weak in enforcement measures, however, Common law has a strong
        mechanisms available to compel such performance; therefore, Louisiana has the expedient procedural
        machinery to make it more expedient than in France;
                       - such a synthesis places LA in the most favorable position to assert that SP is the
                          primary remedy for the nonperformance of an obligation to do or not to do – “the best
                          of both worlds” (civilian right and common law procedural mechanism)
                       - Palmer is not so sure that it works this well
    Forced Execution in French law:
     astreinte – on issuing a judgment requiring a debtor to perform a court may order that for every day
        he remains in default the debtor must pay a specified sum of money to the plaintiff
     moetary find of no specific amt tailored to meet the needs
     Contempt of ct doesn‟t exist in civil code
Cases on Specific Performance:
Sizeler Property Investors, Inc. v. Gordon Jewelry, 1989
     Obligation characterized by court as obligation NOT to do – i.e., obligation not to close the store (there
        was a „no closure‟ provision in the contract
     Note that it could‟ve been characterized as an obligation TO DO
     P seeks injunction to keep the store open; injunctive relief requires them to show irreparable harm
     Here, P loses:
             1) didn‟t show irreparable harm (so doesn‟t get the injunction) and
             2) SP as a remedy was found to be impracticable, “virtually impossible”, given the circumstances
             (ct didn‟t want the enforcement role, constant ct supervision-this argument remains hallow:
                       - is this really that difficult to monitor? Cts have monitored desegregation, prison
                          treatments, ect. --- much harder to monitor
                             - usually judgments are monitored by the parties
                             - This is a conclusory statement
                       - When an INJUNCTION is sought, the common law overshadow: you now have to pass
                          a barrier demonstrating this IRREPARABLE
                       - You don‟t have to use an injunction to get specific performance, French code points out
                          that you just have use incentives.
                       - Can have SP without an injunction
                             - Injunction is an extraordinary remedy (in the Civil Code of Procedure)
     Exception to SP to be made where:
                       - Performance is impossible
                       - Greatly disproportionate in cost to actual damage caused,
                       - No longer in the creditor‟s interest, or
                       - Would have substantial negative effect upon the interests of third parties


                                                      71
      Jewelry store promised in its lease to remain open, not just to pay rent (which they‟re doing) why
       would lessor want them to promise this? To bring business to the other stores in the mall- mutually
       beneficial.
      Why would damages possibly not be the preferred remedy? b/c he‟s seeking more foot traffic, ect- too
       difficult to determine how much this increases value- difficult to prove.
      If there is a percentage lease, how do we determine what it wouldn‟ve brought? Prob too difficult.
       Affect other stores in mall.

J. Weingarten, Inc. v. Northgate Mall, Inc., 1981
     Obligation NOT to do – i.e., obligation NOT to build on the parking space
     There is a prescribed ration btw building square area and space leased.
     Lessee and lessee only had small opportunity to expand- small ratio, finite amt
     P goes to add a HUGE amt to his store- plainly in lease violation
                 The parties can stipulate in their contract
                 No liquidated damages provision in the contract
     From the day that this began, the lessee tried to stop it- he went to ct rt away
              - P seeks TRO, restraining order (couldn‟t get it b/c had to show irreparable harm); wants
                         building destroyed
              - He also asks for an injunction to stop- not to do
     WASTE: court concludes that it should not be destroyed $4million addition  it would be economic
       waste, detrimental to the community, the costs would outweigh benefits to the plaintiff; plus ct is
       dubious that destruction is truly in the P‟s best interests (he was using this as leverage for the new
       lease); there‟s also harm to third person.
     Damages: Plaintiff is NOT w/out remedy as he is entitled to be compensated fully in damages for any
       loss it sustains as a result of the breach of contract. case remanded. Damage would prob be too
       difficult to show.

Heirs v. Gremillion, 1986
     land sold on basis that buyers would build a bridge on it
     Obligation TO DO – obligation to build a bridge worth $250,000
     Contract had stipulated/ Liquidated Damages if bridge not built- written in K, no proof needed.
        Estimate of future damages, (usually not exactly accurate) $6,600 to be given to by property vendors
        who would also get the property back OR had option to choose SPECIFIC PERFORMANCE
     Trial Court
     – 1st judgment – SP to build the bridge worth $250,000
     - 2nd judgment - $250/day fined as form of contempt
     Ct of appeals reversed the judgment and ordered damages in the amount of $250,000
     Court finds that when you stipulate damages, you may either ask for those damages (and not more)
        OR you ask for specific performance (plus delay damages if any); you cannot get both;
              Surrogate performance: where other person does the action, and the obligor is responsible to
              pay --- Ct of A was not claiming that the award was not damages but a form of specific
              performance --- not called damages but cost
     His K said that he had the rt to Sp, but why didn‟t he have this rt? Ct ignores this issue. Wanted to
        follow the liquidated clause and give it back.




                                                      72
                                                DAMAGES


1) Stipulated Damages (you can stipulate for delay damages and for compensatory damages) LA CC 2005-
2012
2) Compensatory Damages LA CC 1994-2004
3) Damages for Delay (Moratory Damages) LA CC 1989-1993




                                              Delay Damages


      delay damages requires that the party be put in default
      if someone performs, but it‟s late, you cannot get compensatory damages
      but there is injury caused by the delay

Putting in Default
    you must put the party in default if you want to get delay damages
    this gives KNOWLEDGE to the other side AND
    SHIFTS THE RISK OF LOSS to the other party

1989. Damages for delay

Damages for delay in the performance of an obligation are owed from the time the obligor is put
in default.

Other damages are owed from the time the obligor has failed to perform.

      very important – if you‟re late in putting into default, you may end up getting very little in delay
       damages
      Moratory damages presuppose a performance actually rendered though delayed. The object of the
       obligee‟s recovery is compensation for the injury his interest has sustained bc of the obligor‟s
       untimeliness in performing
      You can get delay damages & damages for defective performance; no need to put in default as to
       defective performance.
      Presupposes system of communication by which litigation could be avoided
      It marks the point of delay or departure

1990. Obligor put into default by arrival of term

When a term for the performance of an obligation is either fixed, or is clearly determinable by the
circumstances, the obligor is put in default by the mere arrival of that term. In other cases, the

                                                      73
obligor must be put in default by the obligee, but not before performance is due.

      no notice needed if: term for performance is fixed, or term is clearly determinable (e.g., wedding
       dress)
      all other cases: need to put the other part in default

1991. Manners of putting in default

An obligee may put the obligor in default by a written request of performance, or by an oral
request of performance made before two witnesses, or by filing suit for performance, or by a
specific provision of the contract.

      written request
             one of the earliest means of putting in default
      oral request before 2 witnesses
      filing suit for performance you won‟t recover very much bc late in the game to be putting other party in
       default
      specific provision in the contract
             where to be notified, who to be notified, means to be notified

      this is the same manner of notice in terms of dissolution of the K (2015), but it serves a different
       purpose; here (default) is so that you can get delay damages; there (dissolution) is to give additional
       time to perform so that you can dissolve

1992. Risk devolves upon the obligor

If an obligee bears the risk of the thing that is the object of the performance, the risk devolves
upon the obligor who has been put in default for failure to deliver the thing.

      risk of loss shifts to the obligor

1993. Reciprocal obligations

In case of reciprocal obligations, the obligor of one may not be put into default unless the obligor
of the other has performed or is ready to perform his own obligation.

      reciprocal obligations are those that arise from bilateral contracts
      basic good faith notion: you can‟t in good faith put the obligee into default if you are not ready to
       accept the performance requested.

Example of Delay Damages:
   - boat habored with supply that is not picked up --- docking daily is a damage
   - delay itself is separable damage that is distinguishable from compensatory damage

Code always talked of putting n default but was ambiguous if one needed default in all cases seeking damages
--- even compensatory damages ---- French Doctrine also believes that putting in default is relevant only for
delay damages


                                                       74
I. Moran v. Wilshire Insurance Company
       a. ∏ claims that truck was not fixed in a reasonable period of time so he seeks delay damages
                 i. Contract was verbal and did not fix a time
                ii. Actually there was a six month delay from the time that the ∏ put his truck in
       b. ∏ never put ∆s in default, until suit was filed
                 i. Wife called from time to time but court believes that did not reach threshold of putting in
                    default
       c. Must give notice of putting in default
                 i. The function of a putting in default is to let the obligor know that the time to perform his
                    obligation has arrived and that, from the moment on, he will be held responsible for the
                    damage his nonperformance may cause
                ii. The filing of the suit was sufficient notice
                        1. although not for specific performance, it is implied that the performance is
                             expected and from this date, the obligor will be held liable for delay damages
                                 a. Argument that unless one demands specific performance, one is not put
                                     in default
                                          i. Court does not agree with the argument --- it finds that the suit
                                             apprised the ∆ that the ∏ was incurring damages by not having
                                             truck
                                         ii. Delay damages are from the filing of the suit until the return of
                                             the truck
II. McKay v. Prevost
       a. Facts: Prevost moves into McKay, while McKay is building on Prevost land; if once building is
           complete, 10 days for Prevost to buy land and building, with stipulation of 5 times of daily rent
       b. Issues
                 i. Whether liquidated damages are due under the contract
                        1. ∏ recovered the primary obligations which the stipulated damages clause was
                             meant to enforce
                        2. In order to recover the secondary obligation, or stipulated damages, ∏ must
                             show that the damages were stipulated for “mere delay” --- did not put in delay
                             for not vacating but for not closing the sale --- delay in vacating did not stop the
                             closing
                                 a. Stipulated damage clause does not fit such an interpretation
                        3. The date of the construction of the building was reasonable --- two months after
                             closing
                ii. If not, whether and from what date delay damages are due
                        1. must put in default
                        2. Not ready to perform own obligation, so cannot put in default
III. Meunier v. Liang
       a. Law does not require formal tender of performance or putting in default by one party when the
           other party has actively breached the contract
       b. Earnest Money
                 i. In a contact to sell real estate --- money is put in escrow --- any party could be entitled
                    to money if parties back out of contract
                ii. Court is holding that the earnest money is analogous to liquidated damages
       c. ∆‟s conduct made the timely passage of the act of sale an impossibility
                 i. This was an active breach of the contract, and thereby relieved the sellers of the
                    obligation of tendering title as a prerequisite to recovering the deposit

                                                     75
                                        Compensatory Damages


entitlement to full reparations of all the loss suffered

1994. Obligor liable for failure to perform

An 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.



1995. Measure of damages

Damages are measured by the loss sustained by the obligee and the profit of which he has been
deprived.

      loss sustained (positive loss)(value of the performance) & profits deprived (negative loss)
      cf. common law damages: reliance, restitution, expectations – Civil law doesn‟t classify like this, but
       they fit in…
      think PATRIMONEY

1996. 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.

      foreseeable damages – those that fall within the foresight of the reasonable man; take into account the
       nature of the contract, the nature of the parties‟ business, their prior dealings, and ll other
       circumstances related to the contract and known to the obligor

1997. 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.

      bad faith: intentionally AND maliciously(intent to harm) failed to perform his obligation

1998. Damages for nonpecuniary loss (he prefers “NON- PATRIMONIAL” )

                                                       76
Damages for nonpecuniary loss may be recovered when the contract, because of its nature, is
intended to gratify a nonpecuniary interest and, bc of the circumstances surrounding the
formation of the nonperformance of the contract, the obligor knew, or should have known, that
his failure to perform would cause that kind of loss. Any K invested w/ real EMOTIONS
(sentimental, nostalgic)

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 obligee. then always recoverable if
he intended to hurt the other party.

       Think seller of new house full of termites
       Extra-pecuniary damages ---- pain and suffering
             Aestitics, dreams, aspirations
             Does not say that it must be exclusive cause of agreement
                     - Runs counter to common law and many civil law countries
       Within specific limits --- type of contract and obligor knew or should have know that it would cause that
        kind of loss
       Foreseeability, knowledge (actual or constructive)



1999. Assessment of damages left to the court

When damages are insusceptible of precise measurement, much discretion shall be left to the
court for the reasonable assessment of these damages.

   -    Discretion left to judge for price of disappointment

2000. Damages for delay measured by interest; no need of proof; attorney fees

When the object of the performance is a sum of money, damages for delay in performance are
measured by the interest on that sum from the time it is due, at the rate agreed by the parties…
The obligee may recover these damages without having to prove any loss, and whatever the loss
he may have suffered he can recover no more. If the parties, by written contract, have expressly
agreed that the obligor shall also be liable for the oblige‟s attorney fees in a fixed or determinable
amount, the oblige is entitled to that amount as well.


2001.


2002. Reasonable efforts to mitigate damages

An obligee must make reasonable efforts 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.


                                                        77
       Offsets your rts to recover damages
       Should take not difficult steps to mitigate damages
       You rent an apt w/ hole in roof. It is easy to put a bucket there to save your rug- simple and
        inexpensive- or else you can‟t recover for that CONSEQUENTIAL LOSS.

2003. 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‟ve known would cause a failure.

If the obligee‟s negligence contributed to the obligor‟s failure to perform, the damages are
reduced in proportion to that negligence.

       Comparative Fault Principle
       Farmer wants to sue seller of diseased animal for his loss of animals, loss of crops, and loss of farm
       Good/Bad faith seller? knew of disease- is liable for all direct damages?
        POTIER says
       He shouldn‟t be liable for loss of farm- it was not a necessary loss. He could‟ve taken steps to avoid
        this. Could‟ve mitigated the damages.
       Remember Hadley v Baxendale the judges used Potier as the authority- restricted to foreseeable d‟s.
       art 1996 is good common and LA law.
2004.

   -    Nichols
            o Damnum emergens
                   Higher price of thing, one has to buy above contract price
                   Expectation or reliance loss
            o Middle man in resale --- middleman loses profits --- lucrum cessans
            o Moral damage
                   French – far more generous in allowance of non-pecuniary damage
                           Takes point of view that damages are alike in contracts and torts
                           Do not need material damages first before recovering for non-pecuniary damages
                   LA is not quite so generous because making distinction in the kind of contract upon
                      which these types of damages can be recovered
            o Directness (limitations for those in bad faith)
                   French – Pothier – a man who knows he owns a contaminated cow and sells it to a
                      farmer with a herd --- the cow is introduced to the herd --- the cow dies and so does the
                      herd --- farmer due to the loss of the herd says he could not cultivate crops and
                      creditors seized land and went out of farming business
                           Case of consequential damages --- extends to loss of animals and some of
                              cultivation
            o Practically
                   Distinction between foreseeability and directness is not that important b/c requirement
                      of bad faith ---- however, what does bad faith mean in this area of law
                           If bad faith is based on calculation, then intentional breach of contract would fall
                              under
                           Bad faith actually takes the meaning of intentionality and maliciousness

                                                       78
Cases re: Compensatory Damages

Friedman Iron & Supply Co. v. J.B. Beaird Co. 1952 – Pecuniary Loss

      Feb - binding contract whereby plaintiff was to sell defendant 500 tons of scrap steel at a price of $41
       per gross ton;
      March 7 – D notified P not to ship the steel until he requested it in writing to do so
      March 8 – D allegedly cancelled the contract and refused to take steel. K breach.
                This is an advance repudiation- earlier than steel was to be delivered
      March 12 – P requested the D accept the steel which it had purchased, assembled and allocated for
       sale to D; D refuses; P sues
      P‟s suit for SP was dismissed; P also lost on damages
      Lower ct found: D did not mitigate even at ct date- he separated it from the other metal and said this
       is for D ; now appeal
      Lower court found that plaintiff had to resell the steel in order to claim damages --- steel is still in yard,
       individualized for the ∆ as his property ---- held that no damages because the date of the trial was the
       date on which measure damages
      Resale of the good is NOT a condition precedent to instituting suit for damages; in the event the seller
       elects to resell, he should do so at the earliest practicable moment after buyer‟s absolute refusal to
       accept or w/in reasonable time. Ct says that he has the rt to resell, but he is not forced to. If he resells
       then he‟s treating the initial K as over, dissolved. Ct says he has other options, like:
                     -    to hold onto it and hold D liable, refuse dissolution
      Here, P sustained no damages; the primary aim of the law of damages is to place the plaintiff in the
       same position he would be in if the contract had been fulfilled or if he breach had not occurred;
      Mkt price was greater than the K price, so had he sold the steel he would‟ve come up better than under
       the K; ct says that it would be wrong to let him keep the steel which is more expensive
      Damages for breach of contract for sale = difference between the contract price and the
       market price on the date of breach; on Rehearing: market price – on the DATE OF BREACH (not at
       time of trial- shouldn‟t allow any party to choose the date of the market price- cts afraid of
       manipulation)
        P allowed to keep his steel- took the risk of holding onto it and recover damages. If market had
            gone down, then he‟d be able to get more.
        The court uses a common law doctrine of anticipatory breach
                o This is pragmatic and sound commercial doctrine

       -   When code article speaks of mitigation, it does not contemplate that goods must be resold --- must
           take simple steps to mitigate


   Lafleur v. John Deere Co. 1986 – Mental Anguish

      Court grants writs to discuss the award for mental anguish
      2 farmers bought a defective product from John Deere Co- it only planted 25%
      Crop was only ¼ of what it should‟ve been
      Trial court awarded $125,000 for mental anguish in suit over defective farming equipment which
       caused defective crop; in addition to other damages.



                                                        79
       Non pecuniary loss may NOT be recovered in a simple breach of contract case unless the contract is
        intended to gratify a non-pecuniary interest:
                BUT there are contract situations where there occur damages by reason of fault which are
                 distinct from and/or in addition to breach of a conventional obligation
                BUT in this case they won‟t get the $ for nonpecuniary loss: presented absolutely no evidence
             to support mental pain and anguish


Ditcharo v. Stepanek – Mental Anguish

1) Termites in house, and people were well aware of the termite infestation
2) If sell house with termites, it is a breach of contract --- latent defect (rehibitory defect) --- can rescind the
   contract --- there is a warranty in every sale against rehibitory defects, unless warranty is disclaimed and
   excluded
   a) Question:
       i) Nonpecuniary interest – does contract qualify?
            (1) Are these interest present and is the cause of the obligation
                (a) Emphasize emotional investment in the home --- “dream home” – comfort, aesthetic value
       ii) Proof of emotional damage
   b) Since the sale of the house would cause someone to know that nonpecuniary damages would be
       involved

Kosmala v. Paul

   1)   ∏ is a violinist with BR symphony --- claims that the symphony wronged him by not reengaging him
   2)   Claims that symphony knew that he was out of town and knew that could not accept in time
   3)   Although reinstated, the ∏ claims that he suffered emotional loss by breach of contract
   4)   Court distinguishes artisan for the work contracted for
            a. Patron has an action is artisan breaches but the artisan does not have same action

EB Ludwig Steel Corporation v. CJ Waddell Contractors, Inc.

   1) Damages go beyond contract price and seem to be consequential damages
         a. Claims that he was no longer bondable and that it effectively put him out business
   2) Termination was unlawful because the contractor had substantially performed and cannot be
      terminated
         a. Factors --- substantial performance is a matter of fact and cannot dissolve contract once there is
             substantial performance --- can only seek substantial performance and/or damages
   3) Consequential damages
         a. Is breacher is in good faith – damages restricted to those foreseeable to the damages
                 i. Court rules that Archdiosese was in good faith b/c there was no malice and the
                    termination arose from difference of opinion over substantial performance
                         1. Court says that actual loses to business should have been supported by expert
                            opinions --- not saying that this type of damage could not be foreseeable
         b. If breaching party is in bad faith, all direct damages flowing from the breach
   4) Notes
         a. In order to be in bad faith, must prove maliciousness which can be divined from the acts
         b. Rule for bad faith comes from Pothier

                                                         80
                                   Impossibility of Performance



Art. 1873. Obligor not Liable When Failure to Perform Caused by Fortuitous Event.

An obligor is not liable for his failure to perform when it is caused by a fortuitous event that
makes performance impossible.

An obligor is, however, liable for his failure to perform when he has assumed the risk of such a
fortuitous event.

An obligor is liable also when the fortuitous event occurred after he had been put in default.

An obligor is likewise liable when the fortuitous event that caused his failure to perform has been
preceded by his fault, without which the failure would not have occurred.

Comment d. Case: river froze making it impossible to ship ---- but could have performed anytime between Dec.
11 to 16 --- to sign a contract on 14th for shipment from OHIO when there is evidence that river will freeze ---
implicit assumption that freeze would occur --- event preceded by fault --- allows delay damages


Art. 1874. Fortuitous Event that Would have Destroyed Object in Hands of Obligee.

An obligor who has been put in default when a fortuitous event made his performance impossible
is not liable for his failure to perform if the fortuitous event would have likewise destroyed the
object of the performance in the hands of the oblige had performance been timely rendered.

The obligor, however, liable for the damages caused by his delay

Art. 1875. Fortuitous Event

A fortuitous event is one that, at the time the contract was made, could not have been reasonably
foreseen.
Must be beyond normal or reasonable expectation ---- reasonably in minds of parties at the time of the
contract --- not some record setting event that happen once

Art. 1876. Contract dissolved when Performance Becomes Impossible

When the entire performance owed by one party has become impossible because of a fortuitous
event, the contract is dissolved.



                                                      81
The other party may then recover any performance he has already rendered.



   1)   Madethread through articles is what do we mean by impossibility
          a. Objective, absolute impossibility --- no one can do it
          b. Very high standard
          c. Example:
                  i. Excavator who hits solid rock that would cost more is not relieved of obligation --- not
                     case of impossibility b/c he can still do it
                 ii. Removal of timber by certain time – world wide panic and market down --- burden still
                     falls on obligor
                iii. Hurricane --- builder --- ground still there to build --- have to start over --- lease –
                     argument – inhabitable, against law
                iv. Disaster does not destroy possibility to pay money
         d. Cases:
                  i. Sickenger
                          1. Sickenger lived in property in the middle of school‟s property
                          2. School promised to pay for land value and move house to other side of street
                                 a. Guarantee that the house will be in same condition prior to moving
                          3. Mover delayed and a huge hurricane came
                                 a. Had house on jacks and wood across street and hurricane destroyed it
                          4. School argues that it is excused by impossibility
                          5. Court held that nothing impossible about reconstructing house --- school choose
                             to do this way and it is preceded by the fault of the movers
                 ii. Amercan Leasing Company of Monroe, Inc. v. Lannon E. Miller & Son
                          1. Whether a lessor can terminate a lease and still demand the future rent
                          2.
   2) Imprevision
         a. Theory of the Counsiel d‟Etat
                  i. If contract to provide service to the state or its agencies and it becomes very expensive -
                     -- because not foreseeable --- they do not dissolve the contract but revise the contract




                                     Stipulated Damages

2005. Secondary Obligation

Parties may stipulate the damages to be recovered in case of nonperformance, defective
performance, or delay in performance of an obligation.

That stipulation gives rise to a secondary obligation for the purpose of enforcing the principal
one.

                                                      82
2006. Nullity of the principal obligation

Nullity of the principal obligation renders the stipulated damages clause null.

Nullity of the stipulated damages clause does not render the principal obligation null.


2007. Stipulated damages or performance

An obligee may demand either the stipulated damages OR performance of the principal
obligation, but he may not demand both unless the damages have been stipulated for mere delay.


2008. Failure to perform justified

An obligor whose failure to perform the principal obligation is justified by a valid excuse is also
relieved of liability for stipulated damages.


2009. Obligee not bound to prove damage

An obligee who avails himself of a stipulated damages clause need not prove the actual damage
caused by the obligor‟s nonperformance, defective performance, or delay in performance.


2010. Obligor put in default.

An obligee may not avail himself of a clause stipulating damages for delay unless the obligor has
been put in default.


2011. Benefit from partial performance

Stipulated damages for nonperformance may be reduced in proportion to the benefit derived by
the obligee form any partial performance rendered by the obligor.


2012. Stipulated damages may not be modified.

Stipulated damages may not be modified by the court unless they are so manifestly unreasonable
as to be contrary to public policy.




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