SALES AND LEASE Book 3 Part 1: The Nature of the Contract of Sale Section 1: General Concepts, Contrast with other Contracts Nominate Contracts contracts with a special name Innominate contracts contracts without a special name If you are going to apply the code correctly, then you need to be sure you characterize the contract correctly. For example: whether the contract is one of sale or construction. A sale is the contract that started the Roman idea of contract. Used sales as the model for all rules on contracts. The sale is the most common kind of contract because of fanatic American consumers. Any time there is a doubt in the regulation of a contract, the civilian will resort to the contract of sale to determine the rules. This is the sa me for common law. A sale is an onerous contract a price is paid in money o CC 2429: person transfers ownership of a thing for a price paid in money o thing, price, and consent are required for the perfection of a sale different from a donation where you get nothing in return synallagmatic-gives rise to reciprocal obligations. The buyer pays a price and the seller is bound to deliver. consensual (CC 2456: ownership is transferred on consent alone even thought the thing has not yet been delivered or the price paid.) o Dave has a horse for sale for $100. Lit agrees to buy the horse and he says he‟s coming tomorrow to pick up the horse. From then on, Lit, the buyer, is the owner. Ownership has been displaced. o Lit is a merchant. Dave is a shirtmaker. Lit places an order for 100 shirts- an offer and Dave thanks him and says I‟ll deliver. o CC 2457: when the things are segregated from the larger mass, then ownership is transferred o CC 2458: sales by tale, weight or measure are instances of segregating thing from a larger mass. When this is done with the buyer‟s consent, ownership is transferred CC 2438 Contract of sale is governed by the rules on obligations in general and conventional obligations/contracts if there is no specific provision CC 2440 Sale of immovable property the sale or promise to sell an immovable thing must be made by authentic act or act under private signature requires a writing for a valid transfer 1839: exception for an oral sale when the delivery has taken place and the deliveror has so recognized under oath. The court transcript is written and then you have the required writing. 2442: the transfer of ownership is effective from the time the act is made. It is effective against 3rd parties only from the time it is recorded in the registry. 2443: Sale from parents to children is suspect of simulation when no price has been paid or the price paid is LESS than ¼ of the actual market value of the property. (Not ¼ less than the market value. There is a difference.) Chapter 2: Persons Capable of Buying and Selling 2447: officers of a court may NOT purchase litigious rights under contestation in the jurisdiction of that court. The purchase of the right is NULL and makes the purchaser liable for all costs, interest and damage. Chapter 3: Things which May be Sold 2448: All things corporeal and incorporeal susceptible of ownership may be the object of a contract of sale unless the sale of the particular thing is prohibited by law. Ex. Lit has a credit against Dave. Dave owes him $1,000 and it is undisputed. He can sell the right to this credit. If the credit is disputed in court, this is a litigious right. Lit may assign a litigious right as long as the parties are not officers of the court. 2450: a future thing may be the object of the contract of sale. o Suspensive condition: you have a pregnant cow and you sell the unborn calf. However, if the cow terminates the pregnancy, then no contract. o Merchant places an order with a manufacturer for a thing that he does not have in stock but that he could produce. If the manufacturer does not produce the goods that he promised, then the shirts never come into existence. Through his fault, the contract is not complete and he is liable for damages. o Future crops: 2452: Sale of a thing of another o David sells a horse to Lit but that horse is not his to sell. Lit does not acquire ownership. This sale does not convey ownership. However, under the present day code, the sale is not null so Lit can sue him for damages. o Take the situation where Dave sells land to both Lit and Jonathon, but Jonathon records first. Jonathon keeps the land. Dave sold something he no longer owned to Lit, so Lit has a claim for damages. Sale of a Thing Pending Litigation of Ownership o 2453 :when the ownership of the thing is subject to litigation, the sale of that thing during pendancy of the suit does not affect the claimants rights. Where the thing is immovable, the rights of 3 rd persons are governed by the laws of registry. Chapter 4 How the contract of Sale must be perfected, ownership is not transferred from the seller to the buyer until the latter gives his approval. Ex. Mail order catalog. 2460: Sale on view or trial When the buyer has reserved the view or trial of the thing Lease rent may be paid in commodities or in fruits extracted from the land leased 2456: Transfer of Ownership ownership is transferred as soon as there is an agreement on the thing contrast with 2467: risk is transferred at the time of delivery 2480: Retention of possession by seller, presumption of simulation 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. forced heir or creditor of the buyer can attack the transaction as null. shift in the burden of proof usually the party claiming the nullity has the burden of proof, but in the case where the seller maintains possession, then the seller has the burden 2670: Essential Element of a Lease Lease-a person may lease out his services which happens in the very frequent employment contract lease of services of a workman to an employer where services are involved as the object, there are 3 alternatives o Hire services for compensation, o a ferryman may hire his service to transport people or things (carriers and waterman) o and a person may lease his labor, skill and add the necessary materials to make a thing (lease of a plot). [Building Contract] different damages to be recovered, prescription is different this is typically called a construction contract ex. denture contract with an orthodontist…not a sale but a building contract. Hunt v. Suares (1836) a distinguished New Orleans resident wanted a fireplace built in his home. He dealt with a stonecutter and selected pieces of marble and asked the stone cutter assemble a mantle in his parlor. the stonecutter transported the pieces to the home and was to return the next day to install. In the meantime, a fire destroyed the materials and part of the home. The home owner said not paying you, drop dead. If it was a sale, then the buyer bore the risk. If it was a building contract, then the stonecutter bore the risk. The value of installation was a trifle compared to the cost of installation- therefore, the court declared this to be a sale. This is called the value test and it still exists today. o Smith v. Arcadian Corp: this is a contract for the defendant to assemble a urea plant. The builder was supposed to install a reactor that would affect the necessary chemical combo. A problem arose with the reactor after the keys were turned over to the owner. The builder sues for the last installment. The owner says drop dead, the job has not been well done. The builder says this is a matter of redhibition (remedy for a contract of sale) where you return the defective thing and you get your money back. The prescription period is short. This remedy doesn‟t work if there is no contract of sale. If the contract is a building contract, you have 10 years prescription and you only get damages. The court looked to Hunt. The whole contract was $4M, but the reactor was $200K. The price of the reactor is so inferior to the cost of the whole job, we must conclude that this was a construction contract. The outcome is different as Hunt was a sale, but the approach is the same because they used the value test. Henson v. Gonzales a jeweler wanted a display case built for use in his store. He made a contract with a carpenter whom he showed the magazine clipping and asked him to build 3 cases of that kind. The case was a frame and glass would be added to the contraption. In the back were storage drawers. Plaintiff built the cases and delivered them along with a bill. Defendant refused to pay because the cases could not support the glass. Sale or building contract? the court said that the magazine clipping could be a blueprint provided by the client, but the craftsman had to use his skill, his labor and materials to build the cases. the parties negotiated before the things were made before the object came into existence-this makes it a building contract. However, you must be sure that one of the parties contributes labor, materials or skills. in order for the builder to collect, he must have performed according to the contract. Substantial performance: dissolution is not granted when one of the parties has performed substantially and the builder is entitled to his full compensation less damages sustained by the other party. The owner should prove the damages. In this case, Mr. Gonzales did not prove his damages for defective performance so the jeweler had to pay. Jeff Parish School Board v. Rowley Bids went out for a job at a school to fit and install a new sc ience lab. Rowley had obtained several other contracts for the school board Rowley brought the materials to the school and were to install them the next day. Like Hunt, a fire ensued and the stuff was destroyed. Who bears the loss? The Judge revaluates Hunt where there was a clear bill itemizes the cost of marble and assembling the pieces. There were 2 contracts between the parties-one for the materials (sale) and another for the assembly. In the present case, there is a different situation. There is a single budget/price and then there is an itemization for the materials. Regardless of the percentages for materials, labor and overhead, the price is a single one. According to the trial court, the schools insurance company was to bear the loss. The appellate judge was of a different mind because according to the bid specs, the bids called for construction where the builder furnished full insurance while the job is in progress. The builder didn‟t take out insurance to spare costs. They never took out insurance before. Clever and Devious: The wily builder says we saw the bid, we filed it and the school board sent us a document titled “Purchase Order.” They argued that if one party is purchasing, the other is selling which would make it a contract of sale. In common law, you can BUY services. In civil law, a service is rendered by a person. Not at civil law. The judge says no way, this is not a sale. In failing to take out insurance, Rowley breached and the school board is entitled to damages. Who owned the cabinets at the time they were consumed by fire? If it was a sale, the school board‟s insurer was to pay because the school was the owner on delivery. However, if it was a building contract, then the K was not complete at the time of delivery. 2758: when the undertaker furnishes the materials for the work, if the work is destroyed before it is delivered, then the undertaker bears the loss unless the proprietor is in default for not receiving it. The sale is one with a suspensive condition of installation. If there has been no installation, then the sale is not complete, no delivery. Even if you won‟t call this a building contract, it‟s not a fully performed contract and it is not fair for the board insurer to pay the risk. Hebert v. McDaniel the contract was for the building of a steel structure topped by a roof. Around the structure, the plaintiff built a house Steel frame instead of wood frame. In this case, the structure was not properly constructed and their was considerable leakage and damage. All the ¶ wants is a new roof because it would not be repaired. the court says this is not a sale, (∆ claimed redhibition prescribed) Negotiations took place before the house was built. The builder, the renderer of services put up his labor, materials and skills. Therefore it was a building contract rather than a sale. ¶ is entitled to the remedy of a disappointed owner. He should get a replacement. French Cousins: any time a party contributes materials as well as skill it is a contract to build by the plot any attachment of a thing to an immovable for improvement is a building contract FMC v. Continental Grain the owner of a grain unloading facility sees a coal unloading contraption and wants to use it for grain unloading. It is 7 stories high- located in the Irish Channel. it was a $2M contract, but the defects in construction were noticed right away the owner supposedly waived the builder‟s liability for damages-therefore he couldn‟t claim redhibition. There was a limited warranty to replace the defective parts. the court concluded that this was indeed a sale-even though it had characteristics of a contract to do as well as a contract of sale. Therefore, the provision limiting liability was enforceable. Terminology Issues Hotel example the sales office in a hotel-are they really selling anything if you make a reservation at a hotel, this is not really a sale Insurance Example not a sale, a contract of guarantee Brown v. Hodge-Hunt timber can me mobilized by anticipation there is a time where the transferee should be required to cut the timber. If the parties have stated a time, whatever have not been removed reverts to the seller Frost-Johnson Lumber v. Salling’s Heirs you cannot sell oil that has not been extracted if you want to make a contract for a mineral lease involving granting a servitude for the land for oil exploration Brown v. City of Shreveport the buyer was supposed to remove the pipe and sell it. They were supposed to pay $250 for the right to reclaim and sell and anything above the price they paid was to be split between the city and the buyer the issue was whether this was a sale or a partnership. the court held this to be a sale Nelson v. Menge a supplier sends good to a retailer and the buyer pays the wholesale price and pockets the difference between the wholesale and retail price. The retailer went bust and bankruptcy proceedings pursued. even though the merchandise is unpaid it still belongs to the retailer after the supplier sent the goods with instructio ns to sell the goods at a certain price and this price was decided weekly. The question was whether this was a sale because no price was fixed. The court concluded that this was a consignment contract. This was more in line with agency/mandate. there was some merchandise that was already sold by the retailer. The vendor‟s privilege 3186: the vendor‟s privilege is the right to be paid before other vendors...with preference to other creditors. A consignor has a privilege on the things he sold on consignment. 3227: Vendor‟s privilege on movables Byrd v. Cooper the plaintiff wants his mules back because he didn‟t get paid by the vendee. The plaintiff and Matney had an agreement where ¶ leased the mules to Matney and Matney would pay in installments and once payment was complete he would become the owner without having to pay anything further. Then he would acquire ownership of the mules. There was an intent to transfer ownership when the payments were made, not at the time the deal was made. In common law this was a conditional sale, but it no longer exists under the UCC. The apparent lessee is not bound to buy. He is acquiring a sort of option to buy. The LA conclusion is that the transfer takes place at the time of the contract. The seller is just reserving for himself as a form of security. Matney sold the mules to the defendant. The court concluded that this was actually a sale –not a lease of the mules and the defendant was actually the owner. Lease of Movables the problem of this statute is that no one is able to understand it it has introduced some changes to the law Collins v. Pellerin Plaintiff claims ownership and possession of some hydraulic presses. The defendant says, nope, ∆ says he took a loan from ¶ for $1500 using the presses as security. The presses remained in possession of the defendant CC 2025: A contract is a simulation when by mutual agreement it does not express the true intent of the parties. If the true intent of the parties is expressed in a separate writing that writing is a counter letter. Although this is an apparent sale, it is really a hypothecary which is a French term which used to be a part of our code. It is a contract of guarantee/security. The parties resorted to a simulation. The plaintiff was a lender and the presses were the security for that transaction. This was not a sale of the presses. Chretien v. Richardson Assume Lit sells property to David on credit, time elapses and David cannot pay. David explains and says would you take the property back? This is a retrocession-the undoing of a private sale. There is nothing wrong with this but problems may arise if the property is worth more. Lit may not be David‟s only creditor. It is in David‟s patrimony and is the common pledge of his creditors. If he returns the property, Lit as a creditor is satisfied, but the other creditors are not. In the present case, when the buyer acquired the property he was married and made it community property. Upon separation, the spouse acquires a judicial mortgage on the property. She becomes sort of a creditor. Ex-wife claims this is an unlawful act in fraud of other creditors. causa necessaria or causa voluntaria: either voluntary or necessary. The difference is that if you just don‟t like the property and you return it, it is voluntary. However, if you can‟t pay, you default and the seller gets his property back. To avoid foreclosure, you can just return it. This is not out of freewill, it is necessary. You are not doing this in spite of other vendors. The original vendor has a privilege anyway. No doubt the retrocession was by way of necessity and it perfectly valid. Plaintiff says the buyer returning the property to the seller, but this is an inverted sale. This is incorrect reasoning. This is NOT a new sale. Limitations on Capacity CC 1918: All persons of age have capacity to contract unless they are loony or interdicted. There is a general allowance for parties to make sales as sellers o r buyers. The person who is interdicted may not make such a contract. CC 2447: an officer of the court may not buy property that is subject to that court. There is a particular prohibition. CC 2443: Purchase of a thing already owned. A person cannot purchase a thing he already owns. Nevertheless, a person may purchase the right of a person who has an adverse claim to the thing. Banks v. Hyde Public auction-the thing sells for $19K but the buyer can‟t pay. The thing resells for $7K. The apparent buyer is an agent for the original owner. the articles on public sales are in the revised statutes. One of those rules recites clearly that in a public sale the thing is bought by the seller himself that this is not a true sale. clear illustration of 2443. Heirs of Wood v. Nicholls executors cannot buy the property of children to whose estate they supervise CC 1146: this article is now defunct and located in the code of civil procedure scheme of the defendant to buy the property of the children: he filed a petition with the court and said they needed cash and should sell some immovable property. The court says fine and it is adjudicated to a Mr. Harrison who was the defendant‟s brother in law from MS. He showed up in Tensas Parish and pretended to buy, but the defendant really paid and Harrison transferred the property to the defendant. the price the property was sold for was not a reasonable market price. The children become adults and sue to get their property back. Doctrine of Antecedent Tender: if the former children want their property back, they should tender the price paid back to him even though it was unreasonable. He paid debts of the succession and distributed the rest of the money to the kids. Redhibition: remedy for buyers who purchase defective goods. You have to tender the thing bought in order to get your money back. This is antecedent tender. the court says the doctrine does not apply in the case of absolute nullity like the situation here. The sanction for absolute nullity is so strong that the heirs may get the property back without having to give any money back. Other people who are subject to legal prohibitions that prevent them from making certain legal acts: Succession of Crowe v. Henry the Supreme Court governs the Rules of Professional Conduct and are practically uniform all over the country. Rule 1.8 is the rule at issue in this case. the surviving spouse never opens the succession. the defendant is the plaintiff‟s attorney and he was the attorney of Mrs. Crowe, the wife. the husband transfers real property to the attorney for $900,000. Instead of cash he assumes mortgages burdening the property. There is another contract between them and another individual to explore for oil on the land where rent is to be paid to the attorney. A dispute arose between them and litigation ensues. ¶ alleges fraud, lesion, nullity the Supremes say they have forgotten something very important. This is a K between an attorney and his client, but is subject to certain requirements for validity. (in writing, fair and reasonable and the client must have reasonable time to find advice from another attorney to ensure that the K is fair) Court says no lesion or fraud, but a glaring violation of a RPC. The remedy is nullity. Morris v. Malagarie An old lady plaintiff has a daughter and a granddaughter. ¶ makes a donation to the wife, another to the husband and one additional to the child for a total of $20K. They use this to buy a small house from the plaintiff. However, this was really a donation of the house The intervening attorney sits as a witness and explains that this is a donation. Donations are always suspect in the records, so he did this silly transaction. the old lady was in the hospital shortly before the transaction for about 7 days probably for chronic alcoholism. The doctor testifies that she was in a daze. The attorney said she looked fine to me when she came to the office and she had tried to make this donation in the past. The court concludes that the ¶ is a strong willed person who exhibited an uncanny sense of humor. She is not of feeble mind. 1918: general rule of capacity is that al persons have capacity to contract except unemancipated minors, interdicts and persons deprived of reason at the time of contracting you can be partially interdicted or fully interdicted. However, there is a clear deprivation of capacity through a judicial declaration. If there has been no judicial action, nullity can still be claimed 1925: a person who is clearly deprived of reason may annul the contract on grounds of incapacity if the other party knew or should have known of the person‟s incapacity. In this case, the ¶ cannot claim incapacity. The lady attempted the donation in the past and changed her mind. She made a gift of a ring and asked for it back. In the pertinent act for the sale, she reserved for herself the right to live in the house. No doubt there was some friction in the house, but no evidence that she lacked capacity. Cohen Jeweler v. Jumonville Plaintiff is a NY jeweler and the ∆ is a wealthy Senator. They first met in CA at a detox center and became friends. Senator starting buying jewelry from the ¶. He invites him to come to NO some time later and he does. He pays his flight and takes him out to dinner and the Senator bought several pieces of jewelry for all kinds of people for more than $200,000. This was not unusual as the Senator was generous. Before the purchase, the brethren of the Senator filed a petition for interdiction. The court had appointed a temporary provisional curator. However, there was never a decision making him an interdict, nor was there a hearing. CCP 4549 says that interdiction is an adversary proceeding where the alleged interdict can testify. Since there was no true acts of interdiction, there is no assumption of incapacity. the court looks at the relative position of the parties. The one attacking the contract has to show that the other party was deprived of reason. They did not do this, the sale stands and the succession owes. the Plaintiff learned of the petition for interdiction just after the sale and tried to get the Senator to rescind the sale. This does not put him at fault for knowing of should have known of the Senator‟s incapacity. The Jeweler made efforts to get the jewelry back and mitigate his damages. Action on an open account: any creditor trying to collect the balance on an open account may also collect attorneys fees for the prosecution and collection of such claim when judgment is rendered for the claimant. CC 394: no retroactivity. Only acts entered into after the decree of interdiction are invalid. Even if the interdiction has been petitioned for, it is only effective after the date of the judicial decree. Chapter II Perfection of the Contract of Sale CC 2439 price, consent and thing are requirements of a contract there is no sale if no price has been fixed Sale v Exchange the UCC clears up the problem of sale and exchange this is not the same in LA. If the transferee goes not receive the price, then it is a donation there must be an intention that the price be paid. o Lit sells his plantation to his favorite nephew for $500K. However, the money never changes hands, but it is recorded in the public records. This is a donation and Lit never intended David should pay. the price should not be out of proportion with the thing Lesion when the object of the sale is immovable property and the price is less than the seller has the extraordinary remedy of lesion the vendee, the purchaser has a choice he can supplement the price already paid to reach at least ½ of the reasonable market value of the property or he can return the property Certain either a fixed sum or a sum arrived at by a certain method agreed on by the parties 2465: the declaration of the price can be determined by another person DB Orban v. Lakco contract for sale of pipe issue of actual weight or the theoretical weight by a formula. Ex. a certain length weighs a certain amount the defendant thought they would be billed on the theoretical weight and the price would be adjusted if the actual weight was less the court orders the plaintiff to take back the remaining goods and the cost of warehousing in so far as a price is concerned, it seems as though the price is clearly agreed, $400 per ton. In the course of negotiating a contract, the parties may be exposed to other happenstance. Ex. you want to buy a car and you find out, the dealer says, OK, $25,000. The dealer and buyer think they have struck a deal. What the seller meant was a cash price, while the buyer understood a credit price-a price to be financed. If you name a price and I understand it to be credit and you mean credit. There is an error of fact and the court can rescind. However, in this case, the court took a different avenue. This decision is useful for another purpose. Lack of agreement on price as when it is not clear in the mind of the parties or when there is a mistake. There is a difference. Defendant received 103 segments. They received 73. So there was 30 left with plaintiff that the buyer never had shipped. The court came to an equitable decision. There was no meeting of the minds and no contract between the parties. Benglis Sash v. AP Leonards the architect, agent for the defendant, placed an order for an apartment building for windows. They had to be special ordered. Architect asked how long will this take? The window manufactuer said 10 weeks. The defendant comes back and fires the architect for some other things he didn‟t like. The architect calls a short time later and says I have your windows. The delivery was 1 week late. The defendant says, I don‟t want your windows. The trial court enforced the contract but the COA reversed because there was no price fixed. The Supremes granted cert and reinstated the decision of the trial court. A merchant sends you goods with a price attached because he is a usual supplier to you. If you consume the goods, you owe the price. There is an implied in fact agreement. You know this is not a donation from your supplier. He charges a reasonable price. This is the same even if the supplier does not include a price In the dissent by Judge Marcus, says that LA did not adopt the UCC for sales. That allows a reasonable price for a sale. Traditional common law agreement to agree. §305: an agreement to agree on a price is valid. Where this has been enacted, you can validly agree on the price. If you fail to agree, the court can set a price. Ex. Garment industry-this is the end of the season. Wholesalers might have remnants that they would want to get rid of. They would call the buyer and say I‟ll ship these to you and you pay me whatever you want for these shirts. This is an everyday transaction between merchants. The price ultimately paid sho uld be determined by the buyer in good faith. Retailer probably has an idea of manufacturing costs and you also know your own overhead, you also know your supplier‟s overhead. Manufacturers don‟t sell below cost. To determine good faith you would take all the circumstances into the situation in determining good faith. The present case falls squarely within our articles on consent and also with a new code article. 2466: No price fixed by the parties. When the thing sold is a movable of the kind that the seller habitually sells and the parties said nothing about the price, or left it to be agreed later and they fail to agree, the price is a reasonable price at the time and place of delivery. If there is an exchange or market for such things, the quotes or price lists of the place of delivery or those of the nearest market are a basis for determining a reasonable price. Our article does not like the idea that the price may be fixed by just one of the parties. Article 2 of the UCC deals with the Sale of Goods. It suffices that one party is a merchant It does not deal with immovable property. So, no agreement to agree on price for immovables. Union Tank Car v. LA Oil Refining Corp. In the oil business, it is usual in our jurisdiction, it is a frequent practice for the lessee to make considerable improvements on land. The lease contemplated quite clearly that lessee was free to take the improvements away at the end of the lease OR the lessor was to pay the cost less depreciation of the improvements. Lessee opts for the reimbursement. Lessor says “Ain‟t paying you, drop dead.” This was a sale. The court says this was no sale. It contemplates a transfer of ownership from lessee to lessor and contemplates compensation. CC 511: this article contemplates a transfer of property without a specific price, but it contemplates compensation. This is not a sale. Haymon v. Holliday this case concerns the sale of a timber loading machine there was a difference in the understanding of the price by about $140 the court said the difference was less than one percent of the intended total price and concluded that the price was sufficiently certain to satisfy the code prices. the court took the highest figure to determine the price. This is satisfactory because of the huge figure involved. Hearsey v. Craig through an authentic act there is a transfer of immovable property in return for her past services and for her future services as well. The greedy heirs attack the validity of the transfer. Usually recipients of services paid for those services. In the old times when there were still kindhearted country doctors, a farmer could pay in chickens rather than in cash. 2655 This is giving in payment of a thing in payment of a debt. There is a creditor and a debtor for a sum of money. The creditor can agree to take a thing in settlement of a debt. For this to be valid, you need an agreement as to the thing and a price are essential to the perfection of the giving in payment. You need to look into the value to see whether it is a donation to determine if an authentic act is needed. However, in this case they did the deal trough authentic act. Dixon v. Turner naked ownership of property only would have made the sale price less. Louis Werner Sawmill v. O’Shee this case came before a change in the law before 1995-the old law said if the estimators didn‟t agree, there was no sale. the sawmill was buying a plot of land for the timber so they could make paper the price was set-$1.50 for each foot of merchantable pine timber-the only thing not fixed was the quantity on timber on the land to be sold. The final aggregate price depended on the measurement of the amount of timber on the land. for the unitary price to be set from the final aggregate price, they employ experts to measure and to go upon the land-one says to go by the acre and the other says to go by 40 square foot as a means to measure. The chose the 40 square foot and contrast results between the two and they are disparate. The experts could not agree the defendant didn‟t agree on purpose-that seems to be a situation that the article does not contemplate. Let‟s go in steps: parties agree that they will appoint estimators, they don‟t appoint or at least one of them refuses to appoint an estimator, then two estimators may not agree, so no sale. However, it would not be fair to leave the K at the discretion of one of the parties. This is why that some French city courts started granting damages to a party who the other party has refused. This can‟t happen in a sale, because there is NO sale. However, you can get damages for failing to uphold your agreement to agree. LA court upheld damages when one person refused to appoint an estimator The alternative is to let the courts appoint an estimator. However, this could be a problem because you can choose someone you trust, but the court might choose one eyed Joe who just got out of jail. French doctrine says this alternative was not acceptable-SP not possible. The amended text of the Civil Code decided to tackle this: Price left to determination of a 3rd person. The price may be left to the determination of a third person. If the parties fail to agree on or to appoint such a person, or if the one appointed is unable or unwilling to make a determination, the price may be determined by the court. CC 2672: this is a lease article where the parties to a lease may agree that rent may be fixed by a third person. If he cannot or will not, then there is NO lease. This is not consistent with 2465. The new article that the LLI has drafted is consistent with 2465. 1974 is also consistent where quantity may be determined by the court. Ex. Diamond cutters: large stone for one big diamond which would command a greater price or several stones. This determination is left to a third person. The original drafters probably thought of oil and wine. Parties to agree that an expert in the case of wine…a nose, will determine the price of wine. Lake v. Lejeune: the court said that appointing two appraisers of any local homestead association was too vague. Contrast this with the Shell company case where the parties agreed that the price would be determined by a certain senior federal judge. A valid method for the parties to agree on… B&K v. Garrett Mercantile a K provides for the fixing of the price on the basis of the market price of the thing sold at an agreed on future time is valid. Princeville v. Hamilton: the price is this one but the price may fluctuate with the fluctuations of the market price. The court held this too indefinite-there was no statement on how the market rise would be determined and no agreement as to the particular market. Floor and ceiling of the price determined, the there is a true, valid situation Landeche Bros. v. New Orleans Coffee Co. Sugar farm and a coffee company make a contract for a certain grade syrup the price of syrup is determined from the price of yellow cane sugar. .15 - .20cents-then 6 ½ times the price of yellow cane sugar .20 -.25 .25 - .30 –then 6 times the price the price dropped to around 6 cents. If the price of sugar is low, the price of syrup is low as well-so not profitable. Plaintiff contends that there is no fixed price, we have a formula. The ratio decreases ¼ each time the sugar decreases 5 cents. He was acting in his own interest. Plaintiff still intended to make a profit from his formula. The court said no way, the formula is fixed…meaning that the parties contemplated a minimum price or a maximum price. Any price less than .15 or more than .30, then no contract because it doesn‟t fall within the scope of the formula the parties fashioned for themselves. Assuming that the parties would still be performed even if the price of sugar were .5 cents, they would have said it in the contract. Lessard v. Lessard Acres, Inc. the purchaser of this huge tract of land was supposed to develop it into a subdivision into 100 lots. The price was $35,000 at a time when real estate was expensive. it was to be paid in a peculiar way. o $1,000 cash o $3,000 in a promissory note o the balance in extant mortgages this suggests a sham corporation because of the names the sale contained 6 additional obligations o the purchaser was supposed to build a chain link fence around the place o utilities to each lot o see to it that there would be streets and blacktop o after utilities, then they would belong to a third company Lessard Acres Water and Sewerage If after 5 years, some lots remained unsold, then the first remedial alternative was that ownership of the lots would go back to Lessard-a REVERSIONARY clause, and the price would not be returned (courts do NOT like reverter clauses). If the clause was to be found null then the second alternative remedy was $500 per unsold lot. 5 years elapse and not a single lot was sold. The court said the reverter clause was utterly invalid. Before the 5 years elapsed, the defendant borrowed $40,000 from a bank and secured it through a mortgage on the property. The defendant hadn‟t paid any of the previous 3 mortgages. Mr. Joe paid them himself when the mortgages came due and had them erased from the registry. So, the original 4th mortgage is now the first. There is a conflict of interest between the plaintiff who says he‟s owed $50,000 as part of the sale price and as an unpaid vendor of the p roperty, he argues he should take precedence over the bank. The bank said, that was not part of the price, it was stipulated damages if the defendant did not fulfill the obligations. Stipulated damages are not recoverable until a court has established that there has been a failure to perform. You need a judgment. This would follow the mortgage of the bank and the bank would prevail. This is the dispute. Missed Tuesday Vermeer Sales and Service v. Electrical Sales only evidence is that of a check for the purchase of heavy equipment The judge is in a hard spot because the evidence is limited. ¶ says I brought the machinery to LA and ∆‟s said that they were going to buy it and gave me a check. They asked ¶ to keep it for a few days so they could get the funds to cover it. The ∆‟s said that they were forming a new corp. and they needed to go to the bank to get a loan personally to cover the check. They were doing this for tax purposes. The evidence is contradictory. The trial court said that ∆‟s told plaintiffs that the deal was off prior to the date on the check. ∆ changed his mind. The court of appeals said that this fact was utterly wrong. They didn‟t give notice until 2 days later. If the defendants said we are ready to buy if the financing comes through. This is a sale subject to a suspensive condition. They would not be bound unless the financing came through. If on the other hand, they gave a check and said just wait a few days to cash, then there is no condition. ∆‟s fail to prove there was a condition to the sale. There was consent, a clear object and a price. Put in a cocktail shaker and you have a sale. The court held so. Billiot v. Lovell Mama and son go to the dealer to get a Lemans, but they are unable to get the financing. So they decide on a Colt. They sign a purchase order and a finance agreement and an odometer certificate. The son takes the car home. This occurred on 8/29. Mama has insurance for her son. However, by the time the docs were signed it was after 6 and the insurance agency was closed. Therefore mama could not get a floater on the policy to cover the car. The saleslady told her that she was covered until the next day under the dealer‟s insurance and also by Chrysler Insurance until the car is sold. Junior takes the car for a spin late on the 29 th until the wee hours of 8/30. He gets in a fatal accident. The red colt is practically totaled. The parents of the friend bring a wrongful death suit and sue everyone. Chrysler says the car was no longer their property and it was being driven by the buyer. They are out. The dealership and the dealership insurance are still on the hook. The main question is who owns the car? The purchase order reads clearly: “This order is not valid unle ss signed as accepted.” The court looks at Toyota v. Wiggins where the language said “this order shall not become binding until accepted by dealer or his authorized representative.” The court concluded that there was a valid sale even though it wasn‟t s igned. The car is a movable, so no writing is formally required. The code says that if the parties do not intend to be bound without a writing, then they are not bound. The buyer needed to deposit several checks over the course of a few weeks. The mother signed all the docs, but no authorized rep of the defendant actually signed. The manager was not in the building at the time of the sale. She didn‟t sign until the next day after the wreck. The court reasons according to CC 2456. There is a agreement on the thing, the price and consent. Sherman v. Allstate The dealer lets a prospective buyer take the car home to try it out. The prospective buyer totals the car. There was no sale here, so the dealer has to pay. The principal in these 3 cases is that ownership is not transferred until consent. SECTION 2 SPECIFIED VS. UNSPECIFIED THINGS CC 2457: Transfer of ownership, things not individualized. When the object of a sale is a thing that must be individualized from a mass of things of the same kind, ownership is transferred when the thing is thus individualized according to the intention of the parties CC 2458: Sale by weight, tale or measure, Lump sales When things are sold by weight, tale or measure, ownership is transferred between the parties when the seller with the buyers consent, weighs, counts or measures the things. When things, such as goods or produce, are sold in a lump, ownership is transferred on consent, even though the things are not yet weighed, counted or measured. If the parties are not in the same jurisdiction, you can have a conflict of law problem. The place of individualization determines the jurisdiction. Louisiana Jurisprudence Berth v. Bell (17 LA Ann. 196) Old case on cotton Seller counts 100 shirts and sets them apart. Does ownership transfer at that point? Or can seller change his mind and put those back in stock and choose another 100. Assume that besides segregating the 100 shirts, the seller puts them in a box and stamps them with a label with the address of the buyer. Easy to undo this. If the buyer requests that the shirts carry the buyers label on the collar and the seller does such. (Seller is the regular supplier of the buyer and has these labels in his possession. Is this different?) Yes, it is harder to remove these, though possible. The sewing or gluing the labels has a finality that is not like the mere segregation. Delivery to a carrier is not the only way to show finality. Collins v. LA State Lottery In the past, a ticket was a long strip of paper in 20 segments. You could buy 1/20 if you wanted. ¶ placed an order for 20/20 with different numbers. The ∆ has printed forms which recite that buyers should purchase tickets in sufficient time and they can‟t mail tickets after the day before the drawing. The business of the defendant may elicit suspicion. The particular number hit bingo and the plaintiff wants his money. When a letter is received, it passes to another clerk and then a 3 rd reads it, a 4th clerk selects the ticket, the 5th is to put the tix in an envelope and a 6th registers and a 7th seals it and an 8th mails it by registered mail. Because the mail is not open all the time, there is a cut off point. The tickets were actually segregated, put in an envelope and registered, but they were not mailed. Issue, when did the identification take place? Upon segregation OR otherwise? The business of finality is important here. The court cites Benjamin on sales: he was a civil law lawyer and a US Senator until the civil war. He was attorney general, sec. of war and sec. of state of the CONFEDERACY. He was supposedly the brains of the operation. He took refuge in Florida. He fled to Southampton and wrote “Benjamin on Sales” for the common law. So, this is really civil law authority. In the case of the lottery tickets when they were placed in the envelope they could still change their mind according to their own processes. They buyers knew this. The last time that the lotto could change their mind was at the post office. In this case, it was never brought, so lotto remained owner of the tickets. State v. Shields at the time, everyone boozed it up in Ouachita and in Winnfield they kept their booze in the closet the defendant was a liquor salesman. He took an order for a quart of whiskey in Winnfield. He sent the order to the home office in Ouachita. He was convicted criminally of selling liquor in a dry country. Issue: Did ∆ enter into a sale or was it of a different kind? The court of appeal says that when an order is placed (it is not yet a sale) parties are free to determine when the object becomes the buyer’s property. “As soon as you segregate from a larger stock, the thing will be mine.” Or the parties may agree, that when you deliver to the carrier, only then will I acquire title.” The trial judge concluded that in the absence of such an agreement, there was a sale when the order was taken in Winn. The COA says this is utterly wrong. They say there has been no sale unless there is an individualization (according to the strict interpretation of the penal rule which says “No sale of liquor in Winn.”) There is a difference between a sale and a K that looks forward to a sale (where the object has not been individualized.) The court says it is probably a good anti-booze measure for the legislature to change this. Lit;s Hypo: Assume that parties was so crazy to express in their contract that I will not take title until you deliver it to me in Winn field…then everyone would have gone to jail. George D. Witt Shoe v. Seegars Vendor‟s privileges: the vendors right to be paid before other creditors. In our jurisdiction is the right to be paid with preference also has the executive force of a lien. In LA, a traveling salesman took an order for a large quantity of shoes. ¶ has a home office and manufacturing plant in VA. They co has 42 salespersons. ¶ is trying to show to the court that the salesman who took the order is a different kind of salesman. The others are rewarded on commission and this particular one is paid on salary and he is an agent with authority to bind. He can make a K of sale with a client. The court dismisses that because the salesman has trunks with samples and the goods have to be filled from the stock of the ¶ and others have to be manufactured and delivered. The original purchaser in this case went broke. There has been an arrangement with the creditors for the new owner. The creditors granted a respite (3084: an act which a debtor who is unable to satisfy his debts at the moment, transacts with his creditors and obtains from them time or delay for the payment of the sums that he owes to them. An unpaid debts which are privileges: price due on movable effects if they are yet in the possession of the purchaser. You can only have a vendee and a vendor when you have a sale. Just taking an order is not a sale. it is not a true contract until the order is appropriated or specified. This was all to take place in Lynchburg VA and this law does not apply in VA. Consequently, this is NOT a LA contract. The K says: “our responsibility ceases when we ship the shoes”-that‟s when they think the appropriation/specification takes place. Localization has a lot to do with the remedies a vendor may implement. Note cases Courtin v. Sharp sale of a pony. The buyer is in LA and the seller is in KY. The LA buyer calls and says I want to buy the pony and the seller says I want this much. There is an agreement over the phone. The K is localized: where acceptance is made: KY. Universal rule of conflict: a contract made by parties sitting in different jurisdictions is governed where the acceptance is made. Clafin v. Meyer an order is placed with a traveling salesman for some of his samples. The things are manufactured in NY. This is a NY contract because the things will be individualized there. Boro v. Culotta an order is placed with a LA cabinet maker for ordinary kitchen cabinets for a buyer in MS. The builder makes the cabinets and ships them to MS. The wily customer refuses to pay the bill because there was no acceptance. The court says there was acceptance as soon as the cabinets were shipped. Edgwood v. Falkenhagen another booze case for an order for staggered delivery of barrels of whiskey. ¶ segregates the liquor-20 barrels segregated from a larger stock and ¶ made a gauging certificate to show proof of alcohol quality. A public agency engages in this process. according to local provisions in this state, the gauging is to take place when the manufacturer sells the goods. The seller is also supposed to name the buyer. The barrels were places aside in the warehouse. The buyer asked the seller to delay delivery because he had no space. Then he said the sale was off because of transportation problems through Texas. The seller sues for specific performance. You have to prove that there was actually a sale. The buyer says all he did was place an order. The court says there is something wrong. There was no delivery to a carrier, thus no sale. The importance of delivery in appropriation is noted in several cases: delivery to a carrier is an objective appropriation. There is no doubt that goods that have been identified. The seller says that one is a requirement to a sale, the other is not. Appropriation is a must, delivery to a carrier is not the only way of appropriation. Obtaining of a gauging certification limits the seller‟s freedom to sell the goods to someone else. This is a bit of finality. The court omitted something…wily defendant, you pay the price and then the plaintiff has to deliver the whiskey. RISK 2468: risk is transferred on delivery while ownership may transfer on consent. Our new law has separated ownership from risk. In earlier law this was not so because of an old principal that occasionally is still applicable. Res perit domino- the owner loses the thing that is destroyed by an accident. This is a centuries old principal. According to our new rules, this is no longer so. Lit places an order for a quart of booze by phone. The clerk climbs a latter and reaches the high shelf and takes a quart. He sneezes and drops the quart. It falls and breaks. The clerk calls back and says the bottle just perished…I‟ll send you a bill. This is extremely unfair. In our code, we have a peculiar rule –the old rule in 2458 tried to make some split between ownership and risk. The French rule took this rule very literally…the buyer becomes owner of the thing when it is measured. If the object does not exist, then you cannot have an owner. Writers and judges resorted to a centuries old principal-If the risk remains with the seller, that is because he is also the owner. This is reflected in our early jurisprudence. Shuff v. Morgan 1821 case-quite an old case- it is here because it is still talked about in contemporary jurisprudence. the ¶ bought 20,000 hoop holes. The ¶ took delivery and paid the price to a certain Matthews, the seller. Hoop holes were being unloaded from the barge and they were being counted while they were being unloaded. (Tale: by counting) However, here comes the sheriff with a writ if fifa to execute a judgment that the creditors had obtained through the courts. Issue: who was the owner? the court said that parties are free to agree that ownership and risk do not go together. Since the ¶ was already the owner, creditors of the seller may not attach the poles. The thing is that the good judge had an easier way out because the plaintiff bought the boat and the hoop holes. This was probably a lump sale and there was really no problem. A creditor of the seller is a 3rd party- after delivery-a 3rd party has no right, Goodwyn v. Pritchard Old rule that ownership and risk go together. No one ever disputed that the parties through their contractual freedom, could dispose otherwise. In the absence of this, ownership and risk went together Problem with sale by weight, tale or measure in an old article where the sale was not complete until they be counted, weighed or measured and the risk remains with the seller risk in this context means either the damage or total destruction because of a fortuitous event- force majeure. When this is the case, who should bear the loss? In Europe and other continental countries and even at common law, when such a risk occurred, the court first ascertained who was the owner because they would know who should bear the loss. The UCC and the LA revision of the law of sale departed from this approach. In this peculiar case, it deals with the sale of a whole crop of molasses. P bought all the molasses that could be made out of a crop of sugar. The defendant was a planter. There was a price determined by 12 pounds to a gallon for .12 pe r gallon. Between the contract and a harvest a fire destroyed the sugar house which destroyed the molasses. There was a payment in advance –the merchant drew on the account of the plaintiff for $1,600. There was a credit in the planter‟s favor. He could draw on this even thought the plaintiff was not a bank. Under the uniform negotiable instruments law, there was a difference in the forms of negotiable instruments- only the word draft is used. It may be a check-a draft drawn on a bank. There are other negotiable instruments. Plaintiff honored this draft. After the destruction, plaintiff didn‟t get anything for his money. Plaintiff wants his money back. The code misunderstood something-the code SAID-the Romans departed from principles of equity. This is not so, ownership transferred on delivery. Our French cousins departed from this practical principal. According to the law then prevailing in this case, in a sale by things of weight, tale or measure, ownership and risk transferred when the things are weighed, counted and measured. The EXCEPTION to the exception is when you are dealing with a LUMP sale. If you buy an entire crop or all your molasses, this is a LUMP sale. In a lump sale, you go back to the basic rule where ownership is transferred on consent. If this was a lump sale, in this case, the plaintiff became the owner when they agreed on the price. However, the court said, there was no final price on the amount of molasses. There can be no sale without a final price. The rule is that there is no LUMP sale unless there is a LUMP price. Plaintiff prevailed and got his money back. Kelham v. Carroll, Hoy and Co. cotton crop where the parties agreed on the price of .08 per pound with a half cent fluctuation up or down for lower or higher grade cotton when the parties agreed on the Liverpool middling- a pattern of quality. The port of Liverpool was the world market for cotton. Parties established a pattern of quality. Cotton to remain at the plantation at the risk of the buyer until picked up at the pertinent dock on the MS. Explicit in the contract. According to the preceeding case, there would be no price until 100 bales are assembled and each bale was weighed. Only then would you know the number of pounds. The difference with the preceeding case, this was not a sale by lump. According to the earlier article, because the cotton perished before it was baled, the risk was on the seller However, the parties contracted regarding the risk. They may agree that the risk will be on the buyer even before the things are counted, weighed or measured. By saying this in the contract, the parties departed from the basic principles. Which damages may be allowed to the reconvening defendant who refuses to return the money, but wants the FULL price. There is no cotton to bale, so they cannot determine the full price. This court used its discretion. SECTION 4 THINGS IN TRANSIT Every buyer has an interest in receiving the things that they bought. If their things are elsewhere as they after are in commerce, the goods must be transported. They can be operating at quite a distance. This can be intra-state or international The seller has the goods if he is a manufacturer or a wholesaler with a stock. The seller is in charge of SENDING this thing. Another party intervenes between seller and buyer- he is a carrier-this can be a ship, busline, railroad, air-any kind of conveyance-even a caravan of camels which are still used in the middle east. Seller delivers to the carrier. The seller needs some sort of evidence that the things have been delivered. The carrier issues a document-a bill of lading which actually contains terms. The bill of lading is a receipt extended by the carrier-I have received from so and so-this many things. The seller has something to show as proof that he has delivered. The carrier assumes the obligation of transporting these things to a place and deliver it to a particular party. The services of the carrier are called the freight. The bill of lading is called an instrument of title. The carrier who issued the bill of lading will deliver the things to the consignee. The carrier can remain in possession until the bill of lading is returned to him. If another person, not the original consignee, has the bill of lading-which is a negotiable instrument –the carrier can deliver it to him as long as it is endorsed by the original consignee. The possessor of the bill of lading has a right to retrieve the goods. It suffices that the party has in his possession the document. The bill of lading represents the things. In commerce, A retailer places a large order of whatnot and the seller dutifully sends it to you by carrier. Retailer gets the bill of lading and sends it to the buyer. The buyer can then sell the goods by selling the bill of lading. The BOL needs to specify to whom the things are deliverable. It may make things deliverable to the buyer. The seller is enticed, but does not have full confidence in the buyer. So, he makes the bill of lading deliverable to himself. The seller procures an agent to make sure he gets paid. Uniform of Bill of Lading Act was drafted at the dawn of the 20 th century. LA enacted it in 1912. If the bill of lading makes the things deliverable to the buyer, ownership is transferred to the buyer. If it is made deliverable to the seller, it remains with the seller. BUT, if were it not for the form of the bill, title would have passed to the buyer on delivery to the carrier, then the only has a security interest in the goods. The buyer has the title. California Fruit Exchange v. Meyer Inc. A CA seller makes a K with a fruit merchant in New Orleans. When the fruit arrives it is rotten. The merchant does not want to pay now. The problem is who should bear the risk. Were it not for the form of the bill of lading, where the things were deliverable to the seller, ownership would have passed to the buyer. The seller says all they did was reserve a security interest in the fruit. However, the parties may agree otherwise. The parties agreed otherwise in two ways: they took the bill in its own name as a security that the buyer would pay the price. They could have preserved a security on a bill of lading of a different form. Plaintiff could have made the bill of lading deliverable to the d efendant but sent to the agent. Since plaintiff didn‟t do it this way, it is obvious that plaintiff intended to keep the ownership.??? Permit inspection without bill of lading/waybill before delivery. Inspection by the buyer. Result: plaintiff lost The practice of the New Orleans wholesale market is to buy only on arrival and inspection of the fruit. This means the acceptance is in New Orleans. If he doesn‟t accept, there is no contract. This is a splitting of the incidents of ownership-2 parties have different ownership interests in a piece of property. Several parties can have an ownership interest – this is far from being an absolute right. §490 originates from common law-this interest by way of security is an example. o Mortgage is an accessory real right of ownership. If the mortgagor does not perform is obligation, in NE, the mortgage forecloses. o Our Supremes do not like splitting the incidents of ownership. Although the court makes extraneous effort to favor the Louisiana buyer. Greeson v. Harnischfeger right of inspection: a buyer always have the right to inspect the court makes a conclusive assertion the case is for the sale of a dragline that defendant sold to plaintiff. If is supposed to be shipped from Milwaukee to a particular place. It has to be assembled after being unloaded from the wagon. Defendant is supposed to provide an engineer to supervise assembly and another one to supervise the transportation from AR to the final destination of the dragline in LA which is 9 miles away. defendant performs-Pete is supposed to drive the dragline 9 miles. He drives down a steep embankment and falls in a drainage canal. Pete attempts to drive the thing out and the motor burns up and other damage ensues. The defendant seller ships the thing and obtained a bill of lading making the dragline deliverable to itself. There was no problem of payment because they sent the bill of lading to the agent. The price was paid through a draft. The plaintiff is suing to recover for damages of the thing. The issue is who bears the loss caused by a fortuitous event. Who has the risk? The bill of lading was made to the order of the seller. But for the form of the bill, the risk would be on the buyer on delivery. The latest moment that you can charge a buyer with risk is delivery. The defendant assumed the obligation to deliver the thing to AR. It was just an accommodation to see that it made it to LA. The buyer had the bill of lading and the payment had been made. The dragline was delivered when it reached Bradley, AR. The dragline was the property of the plaintiff and they bore the risk of loss. This is consistent with the traditional notion of the dislike for the splitting of the incidents of ownership. CC 2613 When according to the terms of the contract, the seller sends the thing through a common carrier, the form of the bill of lading determines owners hip of the things while in transit When the bill of lading makes the things deliverable to the buyer or his order, owne rship of the things is thereby transferred to the buyer. When the bill of lading makes the things deliverable to the seller or his agent, owne rship of the things re mains with the seller. When the seller or his agent remains in possession of a bill of lading that makes the thing deliverable to the buyer or to the buyer‟s order, the seller thereby reserves the right to retain the things against a claim of the buyer who has not performed his obligation. CC 2616 Things in transit, risk of loss 2 different terms of agreement-duty of a seller to hand over the things to a carrier. A seller may bind himself to deliver Lit sells goods to David and binds himself to deliver the goods in Baton Rouge. In this case, the risk of loss is transferred to the buyer upon delivery to the carrier regardless of the form of the bill of lading. but he may sell to David the same goods and bind himself to deliver those things to his place of business in the Mall of Louisiana in Baton Rouge, LA. Here, the risk of loss is transferred to the buyer when tendered by the carrier at the place of destination. When the parties incorporate well established commercial symbols, the risk of loss is transferred in accordance with the customary understanding of such symbols. o FOB: free on board-the seller must transport the goods to the carrier and place the goods on board. The buyer pays the freight. o CIF: Cost, insurance, freight: extended duty of the seller. The seller places this goods on the carrier, takes out insurance making it payable to the buyer and pays the freight. The price paid by the buyer amounts to the cost, insurance premium and freight o FAS: Free along side ship Rail or truck are the most common for intrastate transactions. UCC Mr. Thomas sold some sugar. The warehouse perishes and so does the sugar. Under earlier law, the question of risk was easily answerable depending on who was the owner. Now, the modern approach, risk depends on possession and allows control of the thing. People don‟t usually take out insurance on things they don‟t yet have. The new approach is practical. The new rules in 2613 and 2616 go very much along with the rules in the UCC separating ownership and risk. the article is the same as the UCC but have much better language. They provide through title, and we provide it through the traditional right of retention. Banque de Depots v. Ferroligas goods entered through the Port of NO. A creditor of the brazilian wants to attach to the things. seller sold the things but they are still in his possession. Unless otherwise provided in the K, the transfer of ownership takes place as between the parties and is effective against 3rd persons when the movable is delivered to the transferee. However, the creditor can still attach. The creditor is a US corp. If those goods are in transit, creditors of the transferor may seize the movable while still in its possession the court concluded that title to a cargo shipped through LA was governed by the LA law pertaining to movables CC 2617 Goods delivered to a carrier in Milwaukee destination Shreveport. The seller gets a bill of lading from the carrier. The goods are traveling by freight train. The bill of lading may be sent to the buyer or to an agent of the seller at the place of delivery by mail. The bill of lading arrives first. The parties in the initial K of sale agree that the seller will do the bill of lading routine. He makes it deliverable to the buyer-the seller remains in possession because the agent gets the bill of lading. The agent shows the buyer the bill of lading and says pay up…even though the goods are not yet delivered. According to this code article: the buyer must make payment against tender of the document and others as required. The seller may not tender nor may buyer demand delivery in lieu of the documents. A seller may endorse the bill of lading to another buyer. This is the importance of the paper and payment upon paper. A person may have more interest in the piece of paper than in the goods. That‟s the way merchant buyers work. If the transaction is international, the importance is enhanced because of the way this transaction is financed. (Letter of credit) CC 2604: Buyers Right of Inspection buyer has a right to inspect to determine if the seller actually sent what he said he would send if the seller sent 1,000lbs of turtle droppings instead of 1,000 pairs of shoes, the buyer would be unhappy. in the CA Fruit Exchange case, the inspection was to determine whether the fruit was in good condition. The buyer refused the peaches, the seller resold them to mitigate his damages. Assume that the privilege of inspection was to see whether the thing was in good condition, if it is not, the buyer rejects and does not have to pay the price. The condition is suspensive condition-you will accept if the fruit is in good condition. If you reject the fruit, the condition fails and there is no contract. This is good for the buyer. Meyer wanted to sell the peaches not use them for his personal consumption. He intended to make a profit and he has no peaches, therefore no profit. He is losing income. Damage caused by the fault of the seller. If there is no contract, then the buyer has no right to damages for mis-performance. How would the buyer be better protected? By saying that the seller breached the contract, the buyer can get damages. The seller promised peaches. He sent peaches. There was a contract. If the peaches are rotten, then it is a non-conforming shipment. The buyer is NOT bound to take the peaches. The seller will probably so the same as he did in this case. When the seller sues for the price, the seller reconvenes for damages. American Creosote v. Boland Machine CHAPTER IV SALES SUBJECT TO CONDITIONS TRANSFER OF TITLE AND TRANSFER OF RISK Canal Motors v. Campbell Financing is the most frequent suspensive condition defendant buys a truck from a dealer. They agreed on a price. The buyer put up a $25 deposit. The sale was a condition of the financing. The next day he wrecked the truck and didn‟t want to pay. The bank refused financing once the truck was wrecked. The dealer let him take the truck because an employee of the bank said he was approved for financing. According the plaintiff, the initial contract was a sale subject to a suspensive condition. The buyer said the deposit was just to allow him to test drive the truck. It was still owned by the dealer. The trial court found for the plaintiff. Notes draft as the price in a sale-this is not a suspensive condition. If the buyer pays with a check and the check bounces, the thing still belongs to the buyer. The seller can seek dissolution or sue for the contract price Financing: supposed to be fulfilled in good faith. The buyer must take some steps to secure the financing. If the buyer never asks for it, this is the buyer‟s fault-the contract is treated as if it were fulfilled. Felder v. Terry: K to buy a house on condition of financing. Buyer appears before a notary with a suitcase full of cash. He tells the seller, here is the money. The seller says no way you were supposed to secure financing, ain‟t selling to you, drop dead. The condition was for the benefit of the buyer and he can waive this. Blair v. Diaz: if there is no term fixed the conclusion of the parties is that a reasonable time Sale of immovable property subject to approval of a public agency. A long time elapsed and nothing happened. The agency told him approval would take 2 more years. Lack of appropriate time defeated the purpose of the plaintiff. It was as of the condition did not materialize, hence NO contract. CC 1773: If no time is fixed, an event shall occur within a reasonable time SALE SUBJECT TO VIEW OR TRIAL (Sale subject to approval) this used to be held as a kind of suspensive condition. Approval by the buyer is some kind of uncertain event, the trying and the viewing is some kind of suspensive condition. The words were eliminated in the revision to eliminate the idea that the buyer could reject on arbitrary grounds. 2460: Sale of view or trial: when the buyer has reserved the view or trial of the thing, ownership is not transferred from the seller to the buyer until the latter gives his approval of the thing. o the buyer is subject to the overriding obligation of good faith o viewing or trying is distinct from buyer‟s right to inspect things delivered by the seller in performance of a contract of sale. Right to inspect=no sale of dissatisfied. The right to inspect + non-conforming=breach of contract. In France, assume a bottler of wine buys in bulk wine from a certain producer. The terms of the oral contract to buy a certain quantity of wine. Tradition holds that without saying anything, the buyer intends to taste the wine (or oil) and if it is not acceptable then there is no sale. This is customary. There is nothing similar to the business practices in our jurisdiction. There is another article that is just like our 2460. Viewing or trying need not be adversary. It is presumed that the buyer will do that on his own. The buyer has a duty to try the thing. If it is already delivered, but the buyer does not signify its approval. The buyer does not try the thing, he is preventing the condition. 1772: if the condition does not come to pass because the fault of the party, the condition is considered as fulfilled. The seller may sue for the contract price or he may sue for dissolution in the case if the market price has gone up. The negligent buyer should not benefit from his own wrongdoing. What is the margin of discretion? It is possible to establish objectively through expert 3rd parties whether the thing works or not. You buy a machine for your plant on approval. At a certain moment you may say that the thing does not do what you want. An engineer may test it and say that that is not the case. The discretion is not arbitrary. In other transactions, assume you buy a quarter horse on approval. After a time you say, I don‟t like it. In this case, no one else can say that you do not like it. There the buyer has wide discretion. This is a feature that makes us more prosperous than other countries. Ex. Sears and Roebuck catalog. You could buy anything from the catalog and return it at any time. No questions asked. The company has always observed this very practice. The buyer is allowed wide latitude, but this is not a matter of law- it is a matter of tradition. All sales by mail are sales on approval. There is a term and within that term you can return it. You have an absolute margin of discretion. In commercial transactions, the margin is considerably more reduced. There is a possibility of determining whether the machinery works or the purchase in bulk of goods for resale, it is possible on rejection by the buyer that the goods are actually fair and merchantable quality. Ex. Habadashery makes an order for shirts. His discretion is reduced. Hamilton v. Medical Arts Bldg. rule of localization a third party intervenor has sold the defendant some refrigeration equipment to place in a doctor‟s office building. It was supposed to be installed on the premises. It was probably like an air conditioner. The machine was supposed to produce 6 tons of a/c for 24 hours. The intervenor was supposed to furnish part of the work and an engineer to supervise the installation. Once completed there was a test run fo r 3 days. If after 3 days, the defendant did not object, then that would amount to approval. All this was carried out. There was a small balance on the price owed. An unpaid seller has a privilege on the thing. Although the system and the parts were movable, but once installed inside it became a component part. The vendor loses his privilege on the thing, but the law gives you a privilege on one acre on the lot of the building when the component part resides. The problem here is that the owner of the building took out a 30K mortgage on the building. The intervenor claims that they delivered the installed unit before the mortgage and they prime the mortgage. They want a sheriff‟s sale. The court said that this would be true provided that this was a LA contract. For a creditor to invoke the privilege of the unpaid vendor, it has to be a LA contract. The intervenor has its home office in KS city, MO. It went to Shreveport – purchase order becomes a contract once accepted by an officer of the intervenor at the home office. It was approved in KS City. If this is so, the contract was formed in KS City. This would make it a MO contract. However, the test run of 3 days was to be accomplished in Shreveport in the defendant‟s building. Therefore, this contract was to become perfect. As such, the intervenor could avail itself of its privilege. In dictum, the court said the buyer could not reject arbitrarily. If he did and seller could bring in a 3rd party expert. SECTION 3 OTHER TRANSACTIONS WHERE A CONDITION MAY BE FOUND Agreements of sale or return: Supplier sends a certain amount of goods that you take and resell and the understanding is that the unsold goods may be returned to the seller for credit. If you don‟t sell, you can send back. There is a resolutory condition- if the condition happens the contract comes to an end. Sale by Sample: buyers place orders for the sample things. If I like your shoes as in Dewitt you place an order with the idea that the goods will conform to the sample. Buyer order 100 pair of men‟s running shoes. You get ladies pumps with stiletto heels. The shipment doesn‟t conform. It‟s better if conformity of goods to the sample is NOT a suspensive condition. This is the best way to protect the LA consumer. If he has nothing to resell, then he takes a loss. The purchaser can sue for damages only if there is a contract. If it is a condition, then no sale. Better for buyer to make it a breach rather than a condition. Layaway Plan: you buy something in July to give as a Xmas gift. The thing is set aside and remains in the possession of the seller. The buyer makes payments. Berry v. Ginsburg Buyer makes weekly payments on the purchase of the ring. The seller kept possession of the ring. It was necessary for her to make a payment of any amount every week. If she failed to do so, she would lose all of her payments and the ring. She started making payments of varied amounts. The payments became so small the defendant refused to take additional payments. He refused to return the money or the ring. He offered to credit her account so that she could buy something else. It seems that the evidence favored the version of the plaintiff. The court concludes that in spite of the way that the parties concocted the contract where ownership of the ring would be transferred when payments were completed to give the seller a security interest. Actually, ownership transferred on making of the contract. She can get her purchase price back. The court thought that this was a lopsided agreement because the markup was excessive. The jeweler was not nice and he was the more sophisticated party. He should have known better. This has changed because of the lease of movables act-the intention of the lawmaker is…. There is a building contract and there is flooring material. The material ends up not being suitable for the floor. There is an implied suspensive condition. The decision is fair, but technically, it would have been better grounded on a failure of cause. The consequences on one or the other grounds may be quite important concerning the claims one party might have against the other. This contributes to the conclusion that the court‟s like suspensive conditions. They will use it even when they are wrong. SECTION 4 RIGHT OF INSPECTION CC 2604: Buyer‟s right to inspection The buyer has a right to have a reasonable opportunity to inspect the things even after delivery for the purpose of ascertaining whether they conform to the contract. American Creosote Works v. Boland Machine Defendant orders 24 poles from the ¶ that have a specific measurement. They were to be creosoted according to a known procedure that the plaintiff specialized in. ∆ wants these poles for a Navy contract. The specifications are particularly important. The purchaser defendant would send a truck to take delivery. It was later agreed that they would send a barge to pick up the poles. Once the creosoting procedure was finished, the poles were transported to the wharf. The barge arrived and the poles were loaded on the barge. A fire started and extended to the wharf and eventually to the barge. So, they company let the barge loose to save it, but it was too late –it was drifting downriver on fire. The trial court and court of appeal reasoned that this was a sale by tale and that the sale is perfected when the things are counted. In this case they were counted twice. The defendant was owner and charged with the risk. Writs were granted. This is not a sale by tale. In the contract, it is agreed that they would be tendered to the defendant for inspection, but that never took place. This particular sale was never perfect because the inspection was a sort of suspensive condition that was never fulfilled. Consequently, the loss was at the risk of the plaintiff. Note case Brown McReynold’s v. Commonwealth Bond and Casualty Was the creditor entitled to attach to the things? At the time of the attachment, the buyer had no lumber and they sued the surety of the seller. Inspection was not a condition here. The court said the inspection was for the buyer to ascertain whether the seller performed to the terms of the contract. It does not suspend the effects of the contract. Lit says this interpretation was the correct one UCC §2-513: inspection is not a condition. The buyer has this right even after delivery. The buyer cares most about getting exactly what the seller promised. According to business practices, 2604 follows precisely this approach according to Brown McReynolds rather than American Creosote. (p.114) Failure of a Suspensive condition results in no contract. Rather, you need to conclude there is so . Rather, you need to conclude there is so buyer can sue for breach. Insurance: the barge was under the buyer‟s control and so were the barge. On the other hand, the kind judges will look to equity. SECTION 5 COMMON LAW CONDITIONAL SALE AND SIMILAR CONTRACTS Sale Subject to a condition and conditional sale. The effects on one or other transaction are diametrically different. Conditional sale: transaction developed at common law. The main scheme is this: the party interested in buying starts paying price and gets possession. He gets to use the thing as if he is owner, BUT title remains in the seller until the whole price or any agreed on portion of it is paid by the buyer. Only then does he obtain ownership. In the American practice of year‟s past, there were other terms attached. If the buyer didn‟t make just one payment, even the last one the seller could repossess the thing by self help and keep all the payments. This was especially common for movables. People will scarce resources could buy things. However, the results were obnoxious and there was plenty of abuse. Our judges never adopted this scheme. Barber Asphalt v. St. Louis Cypress: o a piece of machinery was sold according to the common law conditional sale. This is a lopsided contracted that the LA courts could not countenance. The buyer was unconditionally bound to make payments, but the seller was conditionally bound to give title. The condition was that the buyer paid up. There was a perfect sale as soon as there was an agreement on the thing and the price. Under 2456, the main effect occurs even before the thing is delivered or the price paid. It was nothing but a credit sale. o Our courts carefully distinguish a conditional sale from a lease with an option to buy. This is like the mule case. Lit leases a car to me. We agree that this is a 5 year lease and the payments are $400/month. After 5 years if you pay all the rentals, you become owner. This is a SHAM lease. It is a disguised sale. The lessee becomes owner upon consent. o This is distinguished from the kind of lease where the lessee has the option to buy by paying an additional amount after all the payments are made. o On policy grounds, why would common law develop a conditional sale? This allows the seller of movables some security. Keeping title was regarded as a strong security. o In the LA code scheme, the unpaid seller has the right to dissolve and the vendor‟s privilege. There was no need for the seller to obtain an additional security. Our court‟s dislike the forfeiture clause that they find abusive and they hate self help. o This was the condition of our jurisprudence. However, in business practices of significant financial importance, there was a necessity of leasing in order to acquire costly movables. This practice could not be ignored in our state because of necessary business practices. o What does leasing consist of? David wants to start a new business. He has a great idea, but no money and he needs an expensive piece of machinery. He needs financing but can‟t get it from a bank because he has no security. The only thing he can offer is the machine that you don‟t yet have. The progressive bank refuses to take your children as security. So, you make a deal. The bank buys the machine and they own it. Then the bank leases it to David who pays a price that includes the interest and the amount to amortize. Once you have completed all the re ntals, you get ownership of the machine. This resembles a conditional sale. o At a certain moment, our lawmaker‟s came up with the LEASE OF MOVABLES ACT. The act contains a policy declaration that allows this conditional sale that the courts hate to foster business. The legislature comes up with the term “financed lease” but it has all the same legal effects as a true lease. The lessor reserves title/ownership. Both parties are free to agree to all sorts of terms- like charges for late payments and early termination. The result is that from then on where movables are involved this sort of transaction is now valid. o Common Law-sale with reservation of title in the seller. No one complains of the validity of this transaction. This is similar to a conditional sale. In the civil law tradition, some obnoxious terms like “forfeiture of all payment and self help” was never allowed. Practically all states have enacted the Uniform Conditional Sales Act, but then they practically disappeared. Now replaced by the financial instrumentalities of Title 9 in the UCC. There is a practical and easy way to give security to a seller/creditor/lendor by filing a recorded financial statement. You file it with the Secretary of State and through the internet. Conditional sale no longer has any purpose. Blackledge v. Vinet: o the object is a Fleetwood Mobile Home. The seller plaintiff actually concocted the following scheme-he would buy the mobile home on credit with a bank and then he would lease it with an option to buy- in the form of a conditional sale. The plaintiff intended this to be an investment. He agreed to pay the bank monthly notes, but the bank had a security interest in the trailer. The defendant defaults and advised the plaintiff that he could not continue the plaintiffs. He tendered it back. The trailer was located on the defendant‟s lot. The ∆ told him to take it back OR he would have to pay rent on the land. Eventually, he took it back and returned it to the bank in settlement of his own loan. The trial court awarded the plaintiff all sorts of costs and the defendant appeals. o The trial court allowed him to recover on his investment. He got back his down payment. But the Court of Appeal says regardless of the intention of the plaintiff, this was a lease of movables o The court cites a statute that gives him two choices: he can sue for accelerated payments-sue for all the payments of the whole term of the lease and the lessee keeps possession OR. the lessor may seek dissolution of the lease, recover possession of the property, and recover whatever stipulations the parties introduced in their contract. The plaintiff chose this remedy. o Rents were due on the first of the month and there was a $20 late fee for each late payment. There were 5 late payments. There was also a $250 deposit that would be forfeited upon damage or default. The COA awarded $350 in lieu of the huge amount awarded by the trial court. o Assume that in the same case the defendant stopped paying but continues occupying the mobile home for 10 months. The lessor is entitled to recover some payment for the occupation-the fair value of the occupation. It could be the agreed upon rent, but it is at the discretion of the court. In Re Appeal of Chase Manhattan Leasing Corp. o This is the case of the scoreboard in the Superdome that was falling apart and a new one was needed. The problem is that neither the LSED OR FML had the funds to buy a new scoreboard. They are quite expensive and they needed to be installed in the facility. Component part problem. o LSED=Louisiana Stadium and Exposition District. FML=Facilities Management of LA-they are in charge of managing the Dome. ASI=American Sign and Indicators. o FML offers ASI a deal. If you can buy such a scoreboard and install it in the Superdome, then FML as agent of the LSED, will allow them to display advertising in the scoreboard. From the proceeds of the ads, ASI could pay for the rent on the scoreboard and still make a profit. o ASI gets the Scoreboard from the Chase Manhattan Leasing Corp. The bank is owner of the sign. They lease it to ASI who is a borrower and who has an option to become owner. The state also an interest because the state is the owner of the Superdome. They exercised their option to purchase. o Merchants who own movable things as part of a certain things as part of their business must pay ad valorem tax. State sent a tax bill to Chase. They paid the $153K. Chase Manhattan wanted their money back when the state exercised their option because states don‟t pay ad va lorem taxes. o The court said that substance prevails over the form. The leasing agreements between ASI and the Chase and FML and ASI were entered for the sole purpose of ultimately giving ownership of this huge expensive thing to the state. The alleged lessee acquires title upon consent. The scoreboard became a component part of the Superdome. SO, the state should not pay taxes on its own property. Chase‟s tax bill was unwarranted. The bank was allowed to recover. o Is this consistent with the lease of movables act? No, Chase would remain owner until the last payment was made. Still this is a fair decision of the court. The state should not get involved with these contractual gimmicks. The state was circumventing the public bidding process. When the state has no money this was a way to pay for a very necessary thing that was needed right away. SECTION 6 BOND FOR DEED CONTRACT This is a counter part of an old style common law conditional sale. Although the courts complained for a long time of conditional sales of movables, the same scheme was allowed for IMMOVABLES because there was a statute that allows this. A bond for deed is an obligation attached to a contract to sell immovable property where the seller gives the title to the buyer upon paying a certain amount. Our statute says: the buyer agrees to pay the seller in installments and the seller agrees to transfer the title when all the installments have been paid. This is a depression statute that was to allow persons to acquire very small lo ts where they could build a home. This was not meant for huge extensions of land. This was a contractual made used very frequently. WW2 started and the bond for deed was forgotten. It was resuscitated in the mid-70‟s and became popular anytime mortgage interest jumps up. Banks in any mortgage contract will not allow a mortgagor to assign the mortgage without the bank‟s consent. An assignment of the mortgage would take place with the sale of the property. The buyer will assume the mortgage of the seller. An ingenious LA attorney dusted off the bond for deed contract. An owner of mortgaged property entered a bond for deed contract with the purchaser. The purchaser has everything except title that remains with seller. You are leasing because there is NO transfer of ownership and the bank may not object. Under this particular scheme the banks could not object. So when interest rates go up, this is a great way to transfer immovable property without have to get a higher rate. Eventually, the banks reacted and this scheme has been considerably restrained. It is always possible to resort to the statute. St. Landry v. Etienne o 1969 case –Port Barre Lumber conveys property to Etienne. The court must determine whether this was a sale that conveyed property or a bond for deed contract. o Buyer agreed to pay a certain sum in 36 monthly installments. The buyer tried to put a mortgage on the property and the finance company did not check the public records. The mortgagor was not the owner of the property. o The COA said that the requirements of the pertinent statue were not complied with. Payments by the purported purchaser should not be made directly to the purported seller, but made to an escrow account. This is for the protection of the consumer and preventing the purported seller from absconding with the money. However, if there is no mortgage on the property, there is no need for the funds to go into escrow. Substantial compliance is required, but not all have to be especially like in this case where the property is not mortgaged. Cosey v. Cosey: o A bond for deed in a family law problem. Payments are made during the community. Final payment is made during the second community. Originally the conclusion of the courts was when title was transferred. On rehearing the court said title belonged to the first community and the child of the decesased was entitled to ½ the property. Gray v. Debose o bond for deed contract where wife was supposed to be given possession on fulfillment of her obligation of paying the first $5K. She would have the right to start making improvements on the first installment of $10K. She was to take title of the house on making the last payment. o when there became a problem with her paying the total price, they made a rental agreement. According to the terms of the contract, if she defaulted then she would lose all her payments. o the trial court said that the $5K was earnest money. Lit says they were mistaken. The COA allows recovery for all she paid. o . In a bond for deed, the purported buyer takes possession. Starts using the property as her own, but doesn‟t take title until the whole thing is paid for. o The defendant argues that this is not a bond for deed because there are pertinent elements that are not present in this deal. The statute said that is unlawful to sell mortgaged immovable property without a written guarantee by the bank or mortgage holder that they will release the property. o No doubt the defendants have a point, BUT here again the court says there is substantial compliance. The court is really saying the requirement is quite stupid and does not need to be complied with. The mortgagee can‟t refuse to release the property once the mortgage is paid. o Escrow account: On the other hand, part of the payment was supposed to be paid directly to the bank to retire the mortgage. There was no possibility that the seller could abscond with the money. Compliance would be entirely moot in this particular situation. o Defendants also want to reclaim negative improvements. They have to prove a detriment to the value of the property. Plaintiff also failed to show positive improvement. There is some evidence that she was allowed to remain as a tenant. o This case is useful because it explains substantial compliance with a bond for deed contract. o Bond for deeds have been allowed since 1936. SECTION 7 SALE OF FUTURE THINGS No sale unless the future thing comes into existence. The rule has great importance in an industrial society. Plaquemines Equipment v. Ford Motor Plaintiff made a deal with the Ford dealer where they would obtain a chassis and modify the vehicle for use in oil field services. The thing was not in existence. Before the dealer was able to perform, it went bust. So Ford Motor reclaimed their chassis. ¶ sues because he had already paid and a new one would have been more expensive. The thing never came into existence. The intention was to buy a completed thing. He was not buying separate elements. Therefore, defendant kept the chassis. ¶ never got ownership Future thing (2450) vs. Sale of a Hope (2451) aleatory contracts sale of a hope is a sale of a future thing where the buyer assumes the risk of the thing not coming into existence. This is like the orange case. A powerful buyer can stimulate a weaker seller to produce whatever the buyer is interested in. buyer places an order for things that don‟t exist. They have to be made by a supplier. Some French decisions concluded that there was no perfect sale until the things were made, delivered and approved. If so, any sale of things to be manufactured would be a sale on approval. This protects the buyer. If the buyer is a merchant and he doesn‟t pay, he could get damages because there is no contract. SO, you have to say that the sale becomes perfect whe n the thing is given to the carrier etc. The buyer would now have all the remedies that the code allows for a disappointed buyer. SALES OF MOVABLES CC 2601-2617 BATTLE OF THE FORMS 2601: if there is an agreement to price and thing there is a contra ct even if there are additional or different terms UNLESS acceptance is made conditional on the offerees acceptance of those terms. Additional Terms: new or additional terms are regarded as proposals for modification and must be accepted in order to become part of the contract these proposals are counter offers however, if the parties are merchants, the additional terms become part of the contract UNLESS the offer expressly limits acceptance, the terms materially alter the contract OR the offeree is notified of the offerors objection withing a reasonable time. In such cases, the terms do not become part of the contract. Material alterations are such that it must be presumed that the offeror would not have contracted on those terms. 2602: Contract by conduct of the parties In a printed form buyer orders 6 elephants, the seller‟s form says 6 giraffes and they are installed in the living room of the buyer. If the buyer keeps the giraffes, then there is a contract. Contract may be made by conduct even though the communications do not suffice to form a contract. The contract consists of those terms which the parties agree along with any applicable provisions of the code in the title on sales. 2603: Obligation to deliver conforming things seller must deliver conforming things. non-conforming things are those different in kind, quality or quantity than the one agreed on 2604: Buyers right to inspection the buyer has a right of reasonable inspection to determine whether they are in conformity the importance of this is that if the things do not conform, you still have a contract. The seller breached and you have a remedy of damages. The right of inspection is not a suspensive condition. 2605: Rejection of non-conforming things a seller may have a longstanding relationship with the buyer. The seller may send things that don‟t conform in the hopes that they might need it and can sell it. The buyer knows that he will get the things that he ordered soon. If so, he might not need to give notice if they have a long relationship. a buyer may reject these things in a reasonable time for the rejection to be effective. Failure to do so in a reasonable time, shall be regarded as an acceptance. 2606: Buyer‟s acceptance of non-conforming things a buyer who accepts non-conforming things with knowledge may no longer reject on non-conformity. He may reject on other grounds- like defects- he may seek redhibition. 2607: Buyer may accept part of the things delivered buyer may accept the conforming things and reject the others. If he keeps part, then he must keep the part that forms a commercial unit. buyer must pay at the contract rate for things that are accepted. 2608: Merchant buyer‟s duty on rejection It is easy to deal with the non-conforming goods when the seller has an agent in the place where the things are delivered. when the seller has no agent or business office at the place of delivery, a buyer must follow reasonable instructions of the seller with respect to those things. If there are no instructions or the things are perishable or suspectible of a rapid decline in value, the merchant buyer must make a reasonable effort to sell those things on the sellers behalf. must act as a prudent administrator 2609: Purchase of substitute things by buyer if the seller fails to deliver, the buyer may purchase substitute things within reasonable time and good faith the buyer can recover the difference between the contract price and the price of the substitute things. if the seller breaches by not delivering, the buyer has a saved expense of the price and certainly shipping 2611 Resale by the Seller when the buyer refuses to perform, the seller may resell the things in his possession the seller is entitled to recover the k price and the resale price 2610 Cure of conformity can do this in 2 instances-when the term has not expired. If goods to be delivered on Sept. 30 and sends giraffes rather than elephants on Sept. 30. The seller still has 15 days to cure. the other case is when the seller has a reasonable belief tha t the seller had a reasonable belief that the non-conforming things would be acceptable to the buyer. the seller must give reasonable notice of his intention to cure the defects. 2612: Deposit of the things by the seller when the buyer 2613: Things in transit, ownership prior notes 2614: Stoppage in transit the seller may stop delivery of the things if he learns that the buyer will not perform the obligations arising from the contract of sale. CHAPTER 5 OPTION, RIGHT OF FIRST REFUSAL AND CONTRACT TO SELL Becker v. Lou Ark Equipment ¶ leases a huge piece of equipment for a steep price. ¶ could acquire the equipment-he had an option. This was a monthly lease that was renewed for 2 years. the court has to decide whether the option was valid. The old law said the option had to be for a specified time. The judge concludes that unless the option is for a clear term it is not valid. 2686: any lease by the month may be cancelled by giving the other party 10 days notice. SO there is no way of knowing how long it will be and the term is not specified. But now, Justice Dennis gives the plaintiff a LA lagniappe. No doubt if plaintiff had either thought or known that the option was invalid, he would not have made the contract. So, there is error as to the cause. It is a vice of consent. Therefore, ¶ is entitled to have the contract dissolved. But he cannot get off scott free. He has to make rental payments for the value of the use of the thing. The court made a strict application of the requirement of the specified time. 2628: 10 year limit on options in immovable property. There is an exception for periodic performances. If that is the case, the option can be extended to the whole term. This is the same for right of first refusal. A lease is a contract for periodic performance. The max time for a lease in our jurisdiction for 99 years. So, the option can last that long. This is limited to lease of property that someone wants to build on. This article doesn‟t say anything about movables, but there has been an amendment. The limitation is 5 years. 2625: Right of First Refusal party agrees that he will not sell a thing without first offering it to a certain person may be enforced by specific performance 2626: Terms of offered sale the grantor of the right of first refusal may not sell to another person UNLESS he has offered to sell the thing to the holder of the right on the same terms OR on those specified when the right was granted if the parties have so agreed. Lit grants K a right of first refusal on a piece of immovable property. On the 5 th year, David offers Lit 10K for the property. He is willing to sell. Lt has to offer to sell the property to K for $10K. If Lit calls K and does so, K has 30 days since it is immovable. If it was a movable, she would only have 10 days. Lit grants K a right of first refusal to K for whatever the reasonable market price is at the time of the sale. This is a term that the parties agree on. This is not an option because there is an offer good for a certain period of time and the K is unilateral. The contract can turn into a bilateral contract, the buyer just has to exercise the option. In the case of an offer of first refusal, you need Pacte de preference Travis v. Heirs of Felker a lady sells property to the sister with a clause that allows her to buy the property back if the property is ever sold. 20 years elapsed when the heirs of the buyer tried to sell the property. If the buyer ever decides to sell, then the original seller has the right of first refusal. However, these words are not used here. You can get this from the intention of the parties. An option needs a specified time. There was no time specified in this agreement. However, this does not govern a right of first refusal. The right of first refusal was valid in this case. Even though it is similar to an option, but it is not the same. This takes the property out of commerce. The amendment reversed Travis because now there is a 10 year limitation on the option OR right of first refusal. One of the special modes of sale is the sale with the right of redemption. I sell to you the property but I reserve the right to buy it back from you. The time limitation on this is 10 years. defendant contends that this peculiar language actually was nothing but a right of redemption and since 20 years had elapsed the right was no longer valid. Here the court makes a subtle but correct distinction. If I say to you I am selling, but reserve the right to buy back, anytime I decide to buy back, the buyer must sell the property back. In the right of refusal, you can buy back anytime you want, you can only buy back when the original buyer wants to sell. Right of First Refusal: Lit sells to Eric and says if you ever decide to resell then you must give me the offer to buy it. Lit may never demand that Eric must sell. Lit can force him. Eric must want to sell. The pawn market is a peculiar market that has the right of redemption. The court indicated that the sale with the right of redemptio n for immovable things since the mortgage became such a strong security. Before there were accessible public records, mortgage was a flimsy security. The sale with the right of redemption was security for a loan. The term was for the length of the loan, but never longer than 10 years. This benefits the seller. In the right of first refusal, this was to benefit the sister-the buyer. She needed the property to offer it as security for the loan. There is an important change now-the 10 year limit on right of first refusal. CC 2627 Unless the grantor concludes a final sale or a K to sell, with a 3 rd person within 6 months, the right of first refusal subsists in the grantee who failed to exercise it when an offer was made to him. this is to prevent the seller from extricate himself from the right of first refusal Lit grants to Eric the right of first refusal for 10 years. At a certain moment, Lit makes Eric an offer to sell it for $50K. Eric declines because the price is steep. 6 months elapses and Lit still has not sold the property. So, Eric still has the right of first refusal even though he declined to buy for $50K. This prevents the seller from destroying the buyers right fictitiously CC Lit grants K a right of first refusal. It is recorded in the registry. Lit sells to Eric without offering it to K. Eric should have found it in the public records. If he didn‟t ask K or Lit if Lit complied then K can get specific performance. Jones v. HCA Doc Jones buys a lot for his office, build on it and wants to expand his property to the adjacent lot. Doc contends that he had a right of first refusal and HCA sold the lot to a competitor. This was an oral right of first refusal and a verbal sale of the property. There is a strict formal requirement for the sale of immovables. The same form applies to granting a right of first refusal. Doc argues that ∆ is estopped from arguing he wasn‟t granted the right of first refusal. This was before the right of first refusal had to be express. If immovable property is involved a writing should be required. Since this was previosluy accepted by the Supreme Court, this court abides by it. Doc also contends a servitude on the land. Even dismemberment of ownership requires a writing. Pelican Publishing v. Wilson Publisher publishes a book for Justin Wilson. In any subsequent book, the writer offers his next work to another publisher. There was a term to grant an option on any new work to Pelican. Language: “Author will grant an option.” This is not an outright grant of an option. The author can decide to publish a new book at a later time. In that case, when he decides to do so, he will then grant the option to his next book and set the terms for price and time them. The judge says there are no specifics as to the price and the term so no option. It seems that there intent was to grant a right of first refusal. Lit says the good judge is not correct. The decision to publish a new book is at the discretion of the writer. It is not necessary to grant a time. This should be 10 years for an immovable. In this case, for a movable 5 years. The plaintiff says this is really a right of first refusal where you don„t need a fixed price. The judge says, even so, it‟s no good because there is no evidence that Wilson negotiated his work with any other publisher. If the publisher fails to reject in writing in 90 days, the writer is off the hook. If the publisher doesn‟t reject, he could keep the writer in limbo for an indefinite period of time. The conclusion of the court was that this was neither an option nor a right of first refusal. Peculiar term-a covenant not to compete that is connected to the first clause. This may be valid provided it is restricted in time and region, it is acceptable. SECTION 3 BILATERAL PROMISE CC2623: Bilateral Promise of Sale, Contract to Sell An agreement whereby one person promises to sell and the other promises to buy a thing at a later time or upon the happening of a condition OR upon some obligation by either party. a contract to sell must set forth the thing, the price and meet the formal requirements of the sale it contemplates. such an agreement gives either party the right to demand specific performance this diverges from the old code in that it contemplates specific performance. Our French cousins have problems with this. If you take this to the letter, then it seems like the parties have made a contract. Ownership and risk would transfer. However, under our code, ownership and risk does not transfer. In a purchase agreement, the buyer agrees to buy and the seller agrees to sell. Sometimes there is a condition or two and if those are fulfilled then they are bound to complete the contract of sale on a certain term. If the seller refuses to perform, the buyer seeks ownership under specific performance. This gives rise to obligations to do. The prospective o wner the obligee of the title and the prospective seller the oblige of the price. Notes cases Henry v. Rembert : a bilateral promise to exchange is perfectly valid. You might not have a contract of exchange yet, but you can sue for specific performance. Farrier v. Guillory: Peck v. Bemiss: at the time of this case, there was no remedy for specific performance. the case reproduces the text on an agreement to sell immovable property. The plaintiff brings a petitory action like he is already the owner. Plaintiff insists that this writing is a sale and therefore a transfer of ownership defendant says nope, this is a bilateral promise of sale. The court says that the law must allow prospective agreement to make contracts that bind them to sell. This is a contract TO sell. the prospective purchaser did not have possession. As such, this agreement was not a final act of sale. This is because possession transfers upon execution of the writing. Hines v. Dance this court distinguished Peck. This was a peculiar case where surrounding circumstances were ambiguous. Possession was given to the transferee, so the instrument represented a contract of sale rather than a contract to sell. Capital v. Northern the property in question had been auctioned off at the initiative of the plaintiff foreclosing on the mortgage. There was only one bidder-the property was adjudicated to him, but he failed to pay the price. It burned shortly thereafter. The insurance company denies coverage. the issue was whether a sheriff‟s sale transfers ownership? The mere adjudication does not transfer title. The adjudication makes a contract to sell. Thomas v. Pace: contract is transcribed in full. Plaintiffs are buying a residence and they make a deposit on the price. They made another inspection of the residence after a heavy rain and found that the lot flooded. The prospective buyer specifically asked for property that did not flood. This was his cause. The court decides the case on error as to the cause. You can get rescission and should get the deposit back. They want attorney‟s fees as well if either party had to sue to enforce the contract. However, they are not enforcing the contract. Since the contract is being rescinded, it is not a valid contract. So, this term does not subsist. SECTION 4 EARNEST MONEY CC 2624: Deposit, Earnest Money a sum given by the buyer to the seller in connection with a contract to sell is regarded to be a deposit on account of the price, UNLESS the parties have provided otherwise the parties can stipulate that the sum given is earnest money. In this case, either party may recede from the contract, BUT if the buyer recedes he forfeits the earnest money. If the seller recedes, he must return double the amount given. If either party fails to perform for any reason other than a fortuitous event, the party is regarded as receding from the contract. if there was not yet a bargain and the buyer backed out, he forfeited the deposit. Assume a sum of money was given in connection with a sale. Seller refuses to deliver and buyer sues. He obtains damages, not specific performance. Should he get damages on top of double the earnest? Poithier says certainly not, if the buyer were to get damages plus double deposit would be a double recovery. The law would not approve. 2 Alternatives: earnest or deposit on account. Breaux v. Burkenstock this is old law. There have been important changes in the law. buyer gives $1,000 in acceptance of the offer. The buyer wants specific performance. The seller refuses and says the money given by the buyer was earnest money and says he cannot get SP. All he can get is double damages. The language of the agreement says that $1000 is on account of the price. There were conflicting cases and the court relies on one which says no matter what the parties call it, the money is always earnest and the buyer has no right to seek specific performance. 2624 was later enacted. A sum given by the buyer to the seller is a deposit unless parties have expressly provided otherwise. Before this if the parties says either deposit or earnest, it was always earnest. The only way to get around this was to say it in so many works. Mind you, stupid, this is NOT earnest. This is a deposit. Hayes v. Loo here the object of the contract is a very valuable piece of property valued at $800K. The K contained a condition of financing. The homestead granted a mortgage for $500 and they already have $300K on deposit with the bank. The seller‟s take a second mortgage for $60K. The financing conditions were fulfilled. The closing was supposed to take place at the Homestead Assn. The buyers called the manager and informed him that they were not going through with the sale. The sellers received notice from the Homestead manager while they were dressing to go to the closing. One of the terms was that the buyer was to put up a deposit of $10K. It is unclear whether the deposit was ever actually given or not. Sellers sue and buyers say no because there was no default. According to the contract, the deposit would be forfeited with tender of title and title was not tendered. If you appear before a notary ready to sign the transfer, this is a tender of title. Readiness of the seller to perform is the tender of the title. Since they were warned in time, they did not appear. The court says if the breach were passive, a tender of the title would have been necessary. If you tender a title that the other party does not take, you are putting them in default. But, if the breach is active, that is not necessary. There is no longer a distinction between active and passive. Now it is delay and non-performance. CC 1989 gives damages of non-performance from the time of failure to perform. Apparently the money was not earnest because there was no penalty stated for the seller. Whether deposit or earnest, a requirement must be met. There was no need to put in default because the buyers stated they would not perform. The deposit is forfeited as liquidated damages. If the parties agreed that the buyer would forfeit but the seller had no sanction for a seller, then this is a deposit. The buyer could seek specific performance or damages, but not the deposit. EDCO v. Landry there was a lease where the lessee was given the option to purchase the price. He dutifully pays rent and at a certain option decides to buy. The seller decides no ain‟t selling. The seller says the rent paid was earnest money. No way. Lit‟s hypo, David gives Lit an option and he pays $100 for that option. If Lit exercises his option, David cannot say here is $200, not selling. An option is a contract where if the option is exercised, another contract is formed. If the option is exercised, the parties are now bound by a contract to sell. According to earlier jurisprudence, any deposit given in conjunction with a contract to sell was earnest. This is old law. 2463: if the contract was made with the giving of earnest, it only makes sense if the promise is bilateral. In the more complicated situation of a lease with an option to buy, this is not earnest. The defendant assumed an attitude because the value of the property had skyrocketed. ***Note case: Any deposit given in connection with a contract to sell is earnest. Cloudy title= a title that is not clear. Therefore no one would be interested in buying it because there would be a potential lawsuit or a headache. If there was a contract to sell along with earnest money, but the seller couldn‟t sell because there was a cloud on the title. The seller should return double when he just refuses to sell. Inability to sell is not the same as flat refusal. The seller should just return simple the earnest unless the parties reserved the right to specific performance. Ducuy v. Falgout: If there is a right to specific performance, then double the earnest when there is a cloud in title. Lit’s horse example: if you offer a horse it should have 4 legs, just as immovable property should have clear title. Even though a prudent buyer examines title, it is the duty of the seller to offer a clear title. A seller is in a better position to know the condition of the property. So he should be required to give damages. 2624: a cloudy title is not a fortuitous event. See third ¶ of this article. Searcy v. Gulf Motor Co. there was a deposit for a used car. The buyer failed to pay the price. The buyer says this was a deposit on account of the price and there was already a sale. If the deposit was earnest and buyer didn‟t go through he forfeited it. The issue is whether the seller appropriated the money without going through the proper steps. When earnest money in connection with a completed contract, you have to get judicial dissolution. Problem though, simple transaction becomes extremely complicated and expensive. Fortunately, there is now more expeditious solutions such as Art 2015 which is an alternative to judicial dissolution. You can dissolve with notice to the other party. Buyer is unable to go through with the sale and gives no notice, the seller can send a letter saying look if you do not go through with the sale within a certain time, the contract is dissolved. SECTION 5 CONTRACT TO SELL-DESTRUCTION OF THE THING Daum v. Lehde fire damages a building before the sale. They have a purchase agreement the buyer asks for all sorts of options the court says there is no rule that the prospective seller is under a duty to deliver the the building in the condition it was prior to the fire damage. there is a more interesting problem concerning the insurance, that the buyer wants along with the property. This gives rise to the following question. When a seller delivers, he also delivers whatever actions that seller may have against 3rd parties. You can see this in connection with eviction and redhibition. Owner as the insured as an action against the insurer. In all systems is that insurance is NOT an accessory right. An insurance policy is a conventional thing between the insurer and insured and that does not transfer automatically together with the insured thing. At one time, the buyer could ask for a reduced price that could be fixed by the court. In this case, the purchaser waited too long. There is no period of time fixed for this purpose. The matter has been considerable simplified today. We have a general rule dealing with obligations in general 1877: Fortuitous Event: when a fortuitous event has made performance impossible, the court may reduce the counter performance or may declare the contract dissolved. Borneman v. Richards: there was a purchase agreement on a house that had a very nice garden. The garden was destroyed in a freeze. A deposit was given on the house. If there is dissolution, what happens to the deposit that at the time, the deposit was earnest money? Simple earnest or the plain deposit as it is nowadays unless the parties said the money given was earnest. 1877 is now the rule. CHAPTER VI FORM OF THE CONTRACT OF SALE SECTION 1 IMMOVABLES Pierce v. Griffin at a certain moment the ancestor of the plaintiff owed Griffin about $100. By some arrangement between them, Pierce transferred a lot to Griffin. The agreed price was the $100 owed plus another sum that remains unclear. Defendant was probably supposed to pay in installments. Defendant took possession. According to witnesses, the plaintiff‟s ancestors took 4 stakes and drove each one into a corner of the lot and wrote on each stake with a pencil, sold to Silas Griffin by Pierce. After a while the defendant builds a fence around the lot and the stakes were removed and burned together with other debris. the plaintiffs regard themselves as owners because they believe there was no writing. The ∆‟s want to protect themselves by relying on 1832 which says if the writing has been destroyed, lost or stolen, parole testimony can be used to prove the writing. The judge says that you do not need a writing ON PAPER. In this case, a writing existed at a certain moment and it intended a transfer. the plaintiff argues that the destruction of the thing on purpose does not fall under this article. The judge disagrees that in this case, the thing was not destroyed on purpose because they didn‟t realize that it evidenced a sale. It seems that Mr. Griffin never paid what he owed to the Widow Pierce. She went to get the balance. This seems that there must have been a sale and delivery took place. This is a confession that the transfer took place. 1839: an oral transfer is valid when the property has actually been delivered and the transferor recognizes the transfer when interrogated on oath. Notes: Chauvin v. Bohn: Checks as written proof as a transfer. Written on the back is a notation that indicates the address of certain property, the selling price and the deposit and balance due. You have a declaration by a transferee, but no statement by the transferor. In cashing the check, is this sufficient to show that he was abiding by the agreement? The payee has to endorse the check and would have been aware of the recital. In this case, the court said that this is not formal enough. This is odd because they allowed a scribbling on a wooden stake. There is an important factual difference because there was delivery in the previous case, but not so in the latest case. This makes sense because it promotes orderly conduct. Sit down and write something more formal and less ambiguous and does not create problems. Lemoine v. LaCour there have been 9 out of 10 payments for a small piece of land, but there was no writing. The purchaser wants the court to recognize that there was a sale and in the alternative he wants his money back. The trial court said, nope no writing and you can‟t use parole evidence. The COA affirms but allows the plaintiff to amend his pleading to show that there was delivery. He can seek recognition in open court by the transferor that a transfer took place. 1839: delivery is a sort of prerequisite Boyett v. Wingfield partition of community property where the property was transferred to the wife. However it was not signed. Does this count as a valid writing? She wants to call her former hubby to recognize the transfer but there was no delivery. Therefore she was not allowed to use parole. White v. Baston notary signs for a blind transferor. There is an objection saying for the notary to sign validly, the notary would have needed a power of attorney. Since there was no the instrument was not valid. The court says this is not the case because he is not signing as a mandatary. The court simply said that the notary was acting as an instrumentality to show that the person was present and no power of attorney was needed. Who has to sign? 1837: an act under private signature need not written by the parties but must be signed by THEM. All parties should sign. Old common law practice that just the signature of the transferor. offer and acceptance: an offer may be accepted by conduct. You would not develop a subdivision without accepting the offer of the sale of property. If the writing is signed by the transferor and there is conduct on the part of the transferee that he has accepted, then this should be enough. this does condone the sloppiness of the parties. If you were the attorney for the developer, you should advise the buyer to sign before you start spending money. Triangle Farms v. Harvey you can have a perfectly valid partnership through an oral agreement. However in order for the partnership to own immovable property, there must be a recorded writing. Otherwise, it doesn‟t belong to a partnership it belongs to the partners individually. defendant is in possession of a lot of land. He gets a notice of eviction. he claims he bought the land from Sherburne Industries. These people claimed to be agents of the owners who are not plaintiffs. There was no such mandate. Sherburne never had any authority to sell the plaintiffs property. The court is heartbroken because the defendant is a victim of Sherburne. There is nothing the court can do for you. There are certain articles that say the authority of a mandatary to AEL immovable property must be express. Rule of equal dignities: if the sale requires a writing, then the agreement authorizing the mandate to transact that sale must be in writing. If an act requires a formality, the mandate for that purpose also has to meet the same formalities. in this case the buyer should have asked to see the mandate authorization. Hackenburg v. Gartskamp: widow claims that her late hubby gave authority to wily defendant for him to buy property for the husband. However, the defendant bought it for himself. The dead defendant, said many times that he would make the transfer but it never took place. Here the defendant committed fraud. Someone claims ownership of a piece of property. The claimant has no writing. However, there are exception to the parole evidence rule. CC 1848. There are exceptions where the evidence may be admitted to prove vice of consent, a simulation, or to prove that the written act was modified by a subsequent valid oral agreement. So the fraud in this case can be proved by parole evidence. In order to do so in the performance of a contract, you need to prove that there was indeed a contract. How do you do this is there is NO writing? The court says no way, if you cannot prove the contract, you may not prove fraud. The court is perfectly aware that this is a harsh rule. It is better that the ¶ suffers the consequences of his sloppiness then open the door to all these questions about the title of immovable property. What if the fraud consists of saying, “We don‟t need a writing for this.” This is fraud in the making of a contract. It seems that you should be able to prove witnesses for this. The circumstances in this case don‟t fit into this. Mitchell v. Clark this case is 100 years after Hackenburg, but the court still cites it. The court doesn‟t want to jeopardize the stability of title. It is preferable for a party to suffer the consequences of his own negligence than to open the door. a lady ¶ bought a small house in Shreveport and asked the seller to make the transfer to her nephew. She paid for it and a notarial act was executed in 1958. She paid the price and the taxes and lived there. the defendant nephew learned of the sale 28 years later at which time he wanted to come back and occupy the property. Auntie sues the clerk of court and the defendant. She wants the court to recognize that she is owner and the act recorded. there is a writing called a notarial act in NE that is not the same as ours, but because of full faith and credit we have to recognize it as an authentic act. There is parol evidence of witnesses in this case. CC 1848: LOUISIANA PAROL EVIDENCE RULE-testimony or other evidence may not be admitted to negate or vary the contents of an authentic act or an act under private signature. However, there are exceptions for vice of consent due to error, fraud committed by the other or when duress exercised. You can also use parol to prove that the written act is a simulation. Finally, you can use parol to prove that the written act was modified by a subsequent valid oral agreement. the trial court goes through the exceptions, and none of the exceptions are present in this case. The plaintiff simply changes her mind. She intended it to go to her nephew upon her death. She could have done this through a will. However, any method she chose had to clearly express her intent to transfer on death. The method she chose did not show this. It was not in the proper form. A sale of immovable property has to be in writing. The seller can remain on property through a lease after the sale has taken place. The seller remains in possession. CC1835: Authentic act constitutes full proof of the agreement it contains as against the parties, their heirs and successors by universal or particular title. the trial court admitted testimonial proof. The defendant was not put on the stand. There is an evidentiary rule when a defendant doesn‟t testify but is available there is a presumption that his testimony would be damaging to his case. The trial court took this as a confession under oath. Problem: the plaintiff was in possession, so there was no delivery to the defendant. The general rule is that a confession under oath by the transferor when there is delivery is sufficient to validate a sale of immovable property lacking a writing. Title to immovable property may NOT be proved by parol. “No way of making title to immovable property through parol.” Confession is a peculiar kind of testimony because it is the testimony of a party to the sale. Hoffman v. Ackerman a disappointed creditor has a judgment against a debtor but cannot find any property to seize Ms. Ackerman had a lot of money. She gave it to Ms. Peter to buy property but the intention was for Ms. Ackerman to actually be the owner. The purpose was to defraud the creditors. A creditor has a right under certain circumstances for a revocatory action. For example if Dave owes Lit money, but he sells it to me to hide it, Lit can bring a revocatory action. The sale might be a real sale and I could be an innocent party. However, it could also be a simulation. Either way, the fooled creditor has a remedy. If any of those remedies are granted, the property that left the patrimony of the debtor is brought back. the property in this case was never in Ms. Ackerman‟s patrimony. A creditor may bring back property into patrimony, but you can‟t do this for an item was never there. The reason is that you would be making title to immovable property through parol evidence. Frank v. Motwani parties have a purchase agreement with peculiar terms for payment. There is a deposit –but no clear evidence that it was ever given. Plaintiff wants specific performance. the contract was dissolved so plaintiff can no longer get specific performance. the issue in this case is whether the parties can dissolve a contract themselves when a writing is required. Another contract where the law does not require a writing if you tear out a testament, you don‟t want it to be valid. This is the same for a contract to sell. If they both tear it up, they don‟t mean to sell. Parol evidence should be admissible to prove this. The Rule of Equal Dignities: If you give a mandate to execute an act that must be made in writing, the act giving the mandate authority must also be in writing. Shouldn‟t this be the same for the dissolution of a contract that requires a writing? Guess not, because the court concludes that a writing is NOT required to cancel a contract that has to be in writing to be valid. The other thing is that the contract to sell had not been recorded. If a contract to sell is recorded and the parties decide to dissolve, they don‟t want it on the public records. There is no way of recording an oral act. In this case, there was no record of the dissolution. SECTION 2: SUFFICIENCY OF DESCRIPTION USE OF EXTRINSIC EVIDENCE Eeking out title: parol may be used to correct a descriptio n of a piece of land. If a property reaches beyond a certain mark, you are not negating the contents of the writing, you are not varying it if the writing says nothing. So, you are not violating the rule that says you can‟t use testimonial proof to negate or vary. The writing is a sale, an authentic act-that says a certain price has been paid. You cannot use witnesses to show that the price has not been paid. You are negating the sale. If you want to prove that Lots A,B,C in a particular subdivision were sold instead of just A and B. You can use parol because this is varying the writing. Through this notarial act, 2 landowners in indivision say that the price was paid to them for property in a notarial act. May one of the co-owners prove through parol that the other owner never gave him his share? Yes. the article says parol or OTHER EVIDENCE-this means you can use another writing either. You can use parol for vices of consent or for simulations. You can also use it to prove an additional contract for which no form is required. You can also use it for the purpose of interpreting contracts that are ambiguous. Eeking out title is a form of interpreting ambiguous titles. If you buy a can of Campbell‟s soup at the grocery, there is no problem with the description. Same thing for a car that you test drive. If you buy a parcel of land of 250 acres in Tangipahoa, this description doesn‟t say where it is exactly. This is not the same as buying a house that you can ID by number. You have to locate it and identify it especially in the case of rural property. Lemoine v. Lacour there is no hint in the title of where the land is located. It seems that the contract lacks an object. Therefore, it is not a valid contract. there must be a substantial description of the affected property in order to admit parol evidence to establish the identity. The court distinguishes the Saunders case because there was a sufficient description-the Judie Lewis Place. The court also looked at the Guice case where the court said an 80 acre tract alongside your 160 acre tract. the very best way of describing rural property is through the US Survey System. This prevents doubt to the location of the property. It is simple and works satisfactorily. There is a 6 mile square called a township. The township is broken up into 1 square mile sections. The sections are broken up into quarters. From the center axis, the row of townships are called ranges. There can also be a non-political map kept by the assessor called a cadastre. Boundary may be a natural thing such as a bayou, can be an artificial monument such as a fence or a fallen tree. Williams v. Bowie Lumber Co. omnibus description-all property is a particular parish or in a particular place. Such a sale is perfectly valid between the parties. Even though recorded, it is not valid for 3rd parties. Lit sells to Eric all his property in Lafourche Parish. It is recorded and valid between the two. Later, Lit sells a separate piece of that property to Ryan with a proper description and it is valid. SECTION 3 MOVABLES Jeanfreau v. Jeanfreau one brother gave money to the other one to buy a boat. The boat should be bought in the name of the brother giving the money. However, the other brother bought the bought down in Violet in his own name. The third brother testified that the boat was supposed to be in the name of the first brother. the defense is no parol evidence. The court says no way, for movables, the situation is entirely different. You can use parol. The reason is because you don‟t need a writing for a valid sale of a movable. If there is an oral sale of a movable you can prove it by parol. CHAPTER 7 THINGS THAT MAY BE SOLD SECTION 1 GENERAL PRINCIPLES CC 2448: Anything in commerce may be sold 2450 2451 St. Martin v. Pinckney you can get mineral royalties when a landowner receives money from an oil lessee if the lessee finds oil or other minerals on the property that landowner gets money. in this case, the landowner sold the mineral royalty to a person in this case, the buyer said it was a sale of a future thing that never came into existence. the court says no way. The landowner said, if I ever find a lessee and the lessee finds oil, then you will get the mineral royalties. Hicks v. Clark reversionary right is when a land subject to a servitude is not used for 10 years, the right goes back to the owner of the servient estate. If Lit grants a servitude and tells David we know if you don‟t make use of it, it will return to me. I‟ll sell you the reversionary rights as well. Can you also sell your reversionary right? No. 3451: you cannot enlarge prescription. Mineral code says that reversionary rights may not be sold. prevents the placing of property out of commerce. White Properties Inc. v. LoCoco Doc and his wife sign a purchase agreement of a house on Tolmas Street in Metry. They decide the house is not big enough and sign a contract for a lot along the lake for $53K and are to build a house no more than $90K. They wanted a larger version of the Tolmas Street house on their lot on the lake. The deposit they made on the first house was to pay the realtors commission. According to the evidence, plaintiffs put the doctor in touch with a builder, Keller. The discussions were procrastinated. After the contract was made, the doc and wife decided that they wanted a more majestic house. They wanted columns and a third floor with balconies to enjoy the view of the lake. The new specs exceeded their $90K budget. Then the builder died. The plaintiffs are seeking for forfeiture of a deposit that was never given. They say they made a contract, a deposit was given and that deposit was earnest. The majority concluded that there was no contract because there was no agreement on the specs for the property. There is an emphatic dissent by Judge Stoulig who says there was a defined, clear object. The defendant‟s just changes their mind and the plaintiff‟s are entitled to damages. Was the contract a sale? There was one part-the sale of the lot that was truly a sale. There was also this contract to build the house-a future thing that was not yet in existence. Plaintiff‟s introduced Keller to defendants. There is a clear contract to build established by the conduct of the parties. The parties are entitled to the proper remedy regardless of what is on the face of the petition. Specifications are important. You can‟t have a contract to build without it. The specs distinguish a building contract from a sale. The parties failed to reach an agreement because the specs exceeded the price the buyers wanted to pay. They didn‟t want to pay more than $90K. This is not a fixed price. In this case, lack of agreement on the specs was on the buyer. They were being unreasonable. This case is an example of the attitude of LA were parties jump at a contract too soon. SECTION 2 LITIGIOUS RIGHTS CC 2652: Litigious Redemption: when a litigious right is assigned, the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment with interest A right is not litigious before a suit is instituted. There are a few exception contained in the article. CC 2447: sale of litigious rights, prohibitions Lit‟s Hypo: May a person who is not an officer of any court, but just a decent, honest person buy a litigious right? Yes, and the transaction is valid. The obligor of that right would be the defendant in the suit. Lit is suing David for $1,000. Rachel pays Lit $500 for the right that Lit has to sue David. Rachel moves to be substituted. David can buy the right from Rachel for $500 plus interest. Act 24: There is an act that is now obsolete. An attorney could acquire a proprietary interest in the property in question for payment of their professional services. McClung v. Atlas Oil: McClung has a potential suit against Atlas. He has no money to pay his attorney, Huey Long, so he assigns the claim as part compensation for professional services. There were 9 potential plaintiffs. Atlas settled with all o f the plaintiffs except Long. the court allows this because Huey acquired the right before the suit was filed- before litigation started. Therefore it was not a litigious right. As an officer of the court, you may not acquire a litigious right. However, you may acquire it not for a price to be paid in money, but you may acquire it if what you give in return for it is professional services. This is a reduced exception because it only applies to attorneys, not judges, clerks etc listed in the code article. Hope v. Madison this case reasserts the validity of Act 24. Clients is suing attorney. The agreement from which the transfer is made does not mention professional services. Plaintiff is claiming nullity because this is a transfer made to an officer o f the court and litigation had already started. Although the agreement between the parties does not mention professional services, it does mention “other valuable consideration.” She testified that the valuable consideration was professional services. Succession of Cloud Rule of Professional Conduct: a lawyer may not acquire a proprietary interest in a cause of action or subject matter of litigation he is conducting for a client. the rules of professional conduct are substantive law. The Supremes ha ve the privilege of governing the profession. Contingent fee agreement and liens in favor of an attorney is still valid. David is attorney. Lit wants to sue Eric for ownership of 100 acres of land with oil. Lit has no money, but he wants David to take 20 acres as payment. He is giving David a proprietary interest and a true party plaintiff in the litigation. Different take: Lit has no money. He asked David to cover the costs and if they recover from Eric, David will get 20% of what they recover. This is a contingency fee contract. this is the snafu of poor Mr. Sanders in Succession of Cloud. He was subject to disciplinary proceedings and got a 3 year suspension. what matters in this case is the seriousness of how the court looked at the attorney‟s conduct. Taking a present interest in a claim for property what is the subject of litigation and taking a percentage of whatever is to be gotten from the case are two different things. The first is a big no no, the second is merely a contingency fee agreement and is perfectly acceptable. Smith v. Cook this is a case with multiple party plaintiffs. One of the plaintiffs assigns a portion of the claims. The assignee now moves to be accepted as party plaintiff and the defendant says they want to redeem the litigious right according to 2642. the assignee resists because he says redemption in this case does not put an end to the litigation because the other party plaintiffs has not assigned their rights. the judge looks at our roman ancestry. assume A is suing B for $1,000, but in the course of litigation, A assigns his claim to C for $600. If A was willing to accept $600 from C for a claim worth $1,000, wouldn‟t he have been willing to settle with B for $600? Of course. A has some intention to continue engaging B in litigation. The purpose of this rule is to give B some benefit of the action he has concluded with C. the court says it would circumvent the law if you could escape redemption by only assigning a portion. Note case Calderera v. O’Carroll a debtor, O‟Carroll has his car seized by a creditor. He says it is wrongful and sues for damages. The judge renders judgment, but it is not signed. The litigation has therefore not ended. The debtor files for bankruptcy. The pending suit was part of the assets of the debtor. The trustee takes over the suit. The trustee assigns his right to judgment for $250. The creditors move for a litigious redemption. The assignee objects because $250 was not the value of the claim. the court says that the language of the code says the redemption value was the value of the assignment, not the value of the claim. Martin Energy v. Bourne Martin is president and CEO of about 17 LA corporations. He built a mansion in Beau Chene. His neighbor, Mr. Borne and he have a feud concerning compliance with the rules of the subdivision. It ends up in bitter litigation. Martin assigns important assets to another corporation and the assignment is made for $10 plus other items among which include the accounts receivable of Martin Energy which is the expected proceeds of the suit against Borne. That was up to a million dollars. The court uses the same kind of reflection. The code contemplates a fixed sum of money, not an expectation of money. The consequence was that the defendant was allowed to redeem himself upon paying $10 plus the .92 in interest. The court left aside the expectation of the million dollar recovery. the court in the two cases is using litigious redemption as an important tool to put an end to litigation. If the solution was the opposite, litigation would have to continue. the court cites Calderara as the main precedent CHAPTER VIII THINGS THAT MAY BE SOLD: MOVABLES ISSUE: MAY A SELLER SELL A THING THAT BELONGS TO ANOTHER. 2452: The sale of a thing belonging to another does not transfer ownership this protects the true owner-that is the policy-security of title. if third persons who may buy in good faith, if those persons were not to be protected in some way, you would not have fluid commerce. Assume you go to the grocery soup and you buy a can of Campbell‟s soup. You don‟t demand documents of title. Unless you knew that you would be protected in your purchase, it would not be possible for consumers to make all of their transactions with their movables. All western systems have provided a solution to protect third party purchasers in good faith. Important to understand the common law way to understand LA. At common law, you have a principle, nemo dat quod non habet, if you don‟t have title, you cannot convey it. However, there are exceptions. Voluntary transfer of title under error, fraud or duress, transfers title. Hypo: David has a horse. Lit breaks in, beats up David and takes the horse. He then sells it to Eric. Eric does not acquire title. On the other hand, if David sells to Lit under duress, title transfers but it is a voidable title. When Lit resells to Eric, title transfers and Dave has an action against Lit not Eric. If you think you are dealing with a different person because they say they are someone else, but you are dealing with them in person, you believe that you are dealing with the person in front of you. Title transfers. On the other hand, if you deal by correspondence, you intend to deal with the person Eric says he is in the letter, not really Eric. Consequently, title does not transfer. Second exception: surrender for purposes other than selling. Indicia of ownership. This is a situation where Lit does not intend to sell a horse to David, he only intends to keep it for safe keeping. You only mean for David to be your depositary. In case anyone questions possession of the horse, Lit gives Dave his bill of sale. David gives the horse to Eric. Does title transfer? Indicia of title is of all importance. Assume when Lit delivers the horse to David, Eric is present. Lit says, David, have the horse. David says thank you. This seems as indicia of ownership. This sequence of acts have been interpreted as the indicia of ownership. Third Exception: Equitable Estoppel-when two innocent persons must suffer from an act of a third, that party who gave occasion to perpetrate the fraud must bear the loss. When Lit delivers the horse plus incidia of ownership and he delivers for safekeeping and Dave sells the horse to Eric, Lit is sustaining a loss. Eric says I have paid good money. I am keeping the house. Eric and Lit could both sustain a loss due to Dave‟s acts. Between Eric and Lit, Lit gave the occasion to perpetrate the fraud. Therefore, Lit should be the one to bear the loss. Bona Fide Purchaser Doctrine: it has a scope. It applies to movables but also immovables, but protects only purchases for a value and without notice. Without notice equates to purchasers in good faith. In French law, possession amounts to title for movable things. David rented a horse from Lit. If David sells to Eric, Eric acquires ownership. Same thing for Lit giving Dave possession of the horse for a pledge. Here possession is more important than title. The policy is to protect 3rd parties rather than the owner. There is one big huge exception dealing with a thing taken from the owner without the owners consent. Theft is the exception and it applies only to the thing taken with the owners consent. The owner must reimburse the price that a third party paid to a merchant to get the thing back. The scope: it deals only with movables and is not applied to immovables. It protects purchasers and donees. There is considerable difference in scope of the two systems. Defunct Article 520: A transferee in good faith for fair value acquires the ownership of a corporeal movable, if the transferor, though not owner has possession with consent of the owner as pledge, lessee, depositary or other person of similar standing. so even though the lessee does not have ownership, if he sells to a third person- that third person is protected. this article was repealed. CC 521 the owner of a lost or a stolen thing may not transfer ownership stolen means a thing that has been taken from the owner without his consent it is not stolen if the possessor obtained by fraud this is in conjunction with the general principal that the one in possession has ownership. This is in conjunction with common and French law. CC 522 the transferee in good faith and fair value retains ownership even when the sale is annulled on a vice of consent. ex: imagine that a seller sells a thing to one eyed Joe due to error, fraud or duress. Joe sells the thing to good faith purchaser. If Joe was still in possess ion, then the seller could get the thing back. However, since he transferred it to a good faith purchaser, the purchaser retains possession. This is consistent with French law and common law. CC 523 a person is in good faith unless the acquirer knows or should know that the transferor was not the owner. if the acquirer has notice of the facts that would put a reasonably prudent man on inquiry he has a duty to investigate. If he does not make an inquiry he cannot claim good faith. CC 524 Owner can recover lost/stolen things from possessor by reimbursing the purchase price this is only true when the thing is bought at a public auction or from a merchant customarily selling similar things this does not apply is sold by authority of law CC 525 these provisions do not apply to movables that are required by law to be registered in the public records. SECTION 2 LA JURISPRUDENCE All of these cases with the exception of one were decided before the pertinent articles were revised. Holton v. Hubbard Holloway v. Ingersoll these two cases deal with a new rule under the UCC. We will review these later Brown and Root v. Southeast Equipment this is the only case decided under the new articles ¶ is the owner of a piece of machinery that has been outright stolen. It appears in another lot where the defendant buys it for a fair price for $23K from a merchant. The thing is stolen and traced to the hands of the defendant. The owner can get his machine back, but he has to pay the price that the good faith buyer paid. However, the buyer had to be in good faith and pay a fair price. There was evidence that he was not. The serial numbers had been scraped off. But, the buyer did not have a duty to look for the serial number. In addition, the price paid by the defendant was fair because the ¶ often sold this kind of machinery for much less. Frantz v. Fink ¶ in this case is a prestigious jewelry store in New Orleans-Adler‟s. There is an intermediary named Moss. ¶ delivered 2 pairs of earrings to Moss so he could find purchasers for them and he would make a profit margin. This is a consignment deal. the ¶ had an intention to sell. the first pair of earrings are worth $500. Moss sells them for $300 to Fink. Moss pawns the second pair which is worth $1,000 for $500. Fink also gives Moss a bunch of little bitty diamonds to put in a brooch worth about $1500. He also pawns this for $900. Moss kept telling the ¶ that he hasn‟t yet found a purchaser. Then he tells him that thugs stole the jewelry. ¶ has the police investigate and the truth comes out. Moss confesses that he has pawned the jewelry. Moss proposes the Fink that he take the pawn slips and can retrieve the thing. the good judge says something that is relevant. Moss has a dual capacity as an occasional merchant. This is why ¶ gave him the earrings on consignment. However, he is also an artisan. The first pair was actually sold to Fink. He acquired this in good faith. However, what the merchant did was fraud. Moss‟ title is annullable, but they were acquired validly by Fink. The second pair was given as a sort of settlement because Moss pawned Fink‟s brooch. At this point Fink knew or should have known that Moss was an embezzler. A third party who is not in good faith is not protected. The earrings should be returned to ¶. ¶ would not have to pay the price paid. The outcome of the decision would it to happen today would the outcome would be exactly the same. Port Finance v. Ber ¶ is a used car dealer in Lake Charles. The intermediary is perpetrating fraud by impersonation. The sales guy at the car dealer was suspicious when the intermediary said he wanted to pay by check. So he checked with the bank to make sure that there were funds and that the description of the account holder matched the intermediary. The check is returned because the signature was forged. The intermediary goes to New Orleans the next day and sells the car to a used car dealer there. What solution should prevail here? The judge looks at the criminal code which merged the theft by larceny and theft by fraud. At this time, theft by fraud was a form of theft. Therefore the thing was stolen and the owner ¶ should recover. Today, there is a different story. CC 521 theft does not include fraud. However, the third party was not in good faith and should not be protected. The solution would be the same. The owner may recover the movable of a subsequent transferee in bad faith. Jeffrey Motor Co. v. Higgins the plaintiff is a car dealer in AL. They are supposed to drive the cars to LA and get cash for the cars from Dabbs, the buyer. Dabbs gives a draft for payment of the cars. He believes that a draft is the same thing as cash, but its not and the draft bounces. Bouncing checks are fraud. However, it is still a sale. It is a credit sale and ownership transfers. the buyer gets arrested, tried and sentenced for theft. The criminal code cannot have any impact on the rules of the civil code. In so far as the prior decision in Port Finance dissents, we disapprove it. It has been overruled. When plaintiff through its agent accepted a draft rather than cash, they converted the transaction into a credit sale. Title transfers to Dobbs. He could re-transfer it immediately. Higgins is transferor. He is in good faith and paid a fair price. He should keep ownership. Flatte v. Nichols a man, Carley, buys a car in Texarkana and he gets the manufacturers certificate- this is the main instrument that goes with the car. It is courtesy of the LA dealers who handle all the paperwork for the buyer. The dealer gets your license plate for you. The purchaser had to do this himself rather than the dealer. Carley doesn‟t like the Cadillac so he sells it to the plaintiff dealer. He delivers the car together with the manufacturer‟s certificate. The plaintiff sells to Pat Murphy, a dealer in MS. Murphy pays with a check and the check bounces. However, Murphy resells to a LA dealer, Nicholls. Nicholls sells to a CT dealer and eventually it goes to a PA buyer. Plaintiff chooses to sue the LA dealer, Nicholls who is not in possession of the Cadillac. he demands the car or the value. His main grounds is that Nicholls is not a good faith purchaser because never got a title certificate and you need that to buy a car in LA. But, Nicholls was selling out of state so there was no need to obtain a LA certificate. The court says sorry, you are wrong. This is the same principle as in the Transportation case. The conclusion is that it is perfectly valid to sell the car without a title certificate. The title is not merchantable, but will become so as soon as the certificate is obtained. A TX title certificate was sent to Nicholls. Murphy did not ask for one because there is no such requirement in MS-there you get a road and bridge permit. The main point is that you can make a valid sale of a car without a manufacturer‟s certificate. Ownership becomes perfect when you get the title. When the ¶ accepted the check from Murphy, he was entering into a kind of a credit sale. This was mentioned in the preceding case-except it was a draft rather than a check. You can also have a credit sale with a promissory note. In the case of a check, when you take the check, you have a sale. The payer who pays with a bouncing check is committing fraud. The original seller may sue the buyer and get annulment on grounds of fraud. If the fraudulent buyer sells the thing in good faith and value, the subsequent buyer gets to keep the thing he bought. You can validly sell a car without a title certificate even with our registered movable statute. The plaintiff in this case gave occasion for the fraud to be perpetrated. He turned over all the documents and the possession of the car. The plaintiff gave possession and indicia of ownership by giving the papers. Trumbull v. Maxwell a unit of a lot of cars to a TN dealer, the OK Motor Car Dealer. This TN dealer pays with a bouncing check, but the dealer resells the car to a LA dealer. The defendant has a business in Monroe. The case here is different because plaintiff did not deliver any documents-very prudent. So when the check bounces and plaintiff wants the car back, he still has the papers. This is distinguished from the other case because the certificates were not delivered. The court says no matter, you do not have to deliver the documents to transfer ownership. The court ignored the movable registration law. Yorkwood v. Charlie Hardison & Sons Yourkwood is a financial institution who lends money to a couple to buy a mobile home. At a certain moment they cannot make payments. They surrender the mobile home to the finance company along with the papers-the title certificate. The plaintiffs used the services of this company that sells the reposed trailers. One buyer, Allen expresses an interest in buying. In this particular case, the thing was located in Boyce, LA. The re-seller sets up a pick up order that will allow him to pick up the trailer and deliver it to his own lot. Mr. Allen was never given the title certificate because he couldn‟t ever get together the money. He shows up to get the trailer but he doesn‟t bring a certified check. The reseller finds another buyer, defendant Hardison Brothers and he pays with a check. The defendant takes possession of a trailer. The reseller runs off the check. Why shouldn‟t defendant be able to keep the trailer? This is distinguished from Flatte. You can sell something without title. This case is not the same as the present case because there was a bill of sale even though no title certificate. In the present case there is no bill of sale, only a pick up order. The pick up order does not evidence a sale that should lead us to believe there has been a transfer of ownership. This case is also distinguished from Gomez/Rigger. Gomez has a car to sell. Rigger is a prospective buyer. Rigger and Gomez goes for a ride and he expresses satisfaction with the car but wants a mechanics opinion. Gomez, the seller, consents provided that Rigger makes payment. In the meantime, Gomez sells to a sued car dealer. He endorses the title to him. If the dealer pays a reasonable price and gets the endorsement of the title certificate, he was in good faith. In a way, the used car dealer got to keep it. But plaintiff reimbursed the purchase price and got the car. In the present case, the seller never let go of the title certificate and the fraudulent intermediary never got possession, not even by theft. NOTE CASES Defendant left his car with a dealer with instructions to sell it. Dealer sells to ¶ and he leaves it with the dealer for the dealer to make some repairs. Plaintiff obtains a certificate of title. The defendant changes his mind, breaks in and takes his truck back. If he has title certificate then he is the owner and he should get it. Ballard v. McBride: there is an intermediary named Woodall. Defendant lives in a trailer and Woodall resells it under the guise that the defendant is a tenant. ¶ never gets possession. He wants the trailer. Here there is a party who took the pain of obtaining a title certificate and the defendant never did. So the buyer got the trailer. This is crazy. Lit’s explanation. You can obtain a car without a title certificate. Once you obtain the certificate, ownership is clear. The sale is still valid even if you don’t give the certificate. The remedy of the buyer is that the buyer can sue for the certificate and he will get it. A person in possession of a certificate, but not the thing. This is like the Yorkwood case. Cameron Equipment v. Stewart and Stevenson you sell a thing but you remain in possession. If you sell the thing to another and deliver possession, the second person gets ownership. the claim of the plaintiff is that delivered has not truly taken place to defendant this case involved two heavy engines that were not easily moved. Plaintiff said he obtained delivery. Defendant says certainly not, we obtained delivery through consent alone. If so, the seller could not validly sell to another. The court says this is not true because the second purchaser was able to move them and take possession Art 518: Voluntary ownership of transfer of a movable Holton v. Hubbard a rice planter delivered his produce to a factor to sell on his behalf. The broker, rather than selling stored the rice in the warehouse, obtained a warehouse certificate and pledged the certificate for a loan and absconded with the money. Plaintiff is the original owner of the rice and the bank is the pledgee. Defendant says the French principle prevails. The court says sorry that was never part of LA law and cannot be invoked here. Court said ¶ should recover the rice or at least its price. Now there are specific rules. The warehouse certificate is a document of title. Whoever is in possession is presumed to have title. The statute says a document of title confers no right in goods against a person who before issuance of the document. The owner gave the intermediary authority to sell. Nowadays, He is not protected. The bank should prevail. Holloway v. Ingersoll Mr. Cobb persuades plaintiff that a buyer is coming for NY and will pay more than market price for the cotton. The intermediary persuades the farmer to store the cotton with him. He represents that he is a cotton broker. They do to the defendant‟s site of plaintiff. Cobb delivers the bails of cotton to a clerk of the defendant. Plaintiff thinks he is storing it, but he is really selling it. Cobb absconded with the money. The plaintiff gets his cotton back under the grounds that he never instructed Cobb to sell. The intention was to sell himself once the purchaser appeared. In France, the person in possession would be able to transfer title. The fraudulent party would be in possession. In Nebraska, just delivery of possession is not enough. There was no documents or paper involved. The plaintiff did not object to storing the cotton with the broker. Mr. Cobb gave him a receipt. There was an indicia of ownership. So, the defendant would prevail in Nebraska. Today, how would the case be decided in LA today. The plaintiff is a cotton farmer. Courts have a soft heart for LA farmers and he would win. CHAPTER IX PUBLIC RECORDS DOCTRINE SECTION 1 BASIC PRINCIPLES A sells to B. Wily A then sells to C. C records his title first. C will prevail as long as he is in good faith and will obtain just title. However, A sold to C property actually belonging to B. Why is this so? Until 1984, there were a series of articles concerning recordation- they were taken out of the code and lodged in the revised statutes. LA RS 9:2721: sale is effective between the parties, but not against third parties until the instrument is filed for registry in the office of the parish recorder where the land is located. LA RS 9:2722: the acts that are recorded are still valid between the parties, but null and void regarding third parties. Whatever is not recorded is null vis a vis third parties. This means that if you record an act that is not valid-a notarial act where the signatures of the witnesses are missing, this act is not valid. Recordation does not add validity to any act. The importance is that if it is NOT recorded it is not valid for 3 rd persons. Any third person is entitled to ignore it. The basis of recordation is publicity. A third party is a party dealing with the property as purchaser or mortgagee or lessee. Constructive knowledge: if it is recorded, then the law arbitrarily assumes that you know about it. You are charged with constructive knowledge. This is not 100% so as we will see from the cases. Time is an all important element. A judgment is recorded at 1:40 pm. The judgment takes precedence over a sale recorded a few hours before the judgment is recorded. In another instance, the clerk of court is handed 3 acts from 3 attorneys. They give this to him in the courthouse and not in the office. The clerk does not remember which one was given to him first so he records all of them as if they were given to him at the same time. The act says that it is valid from the time that it is filed for registry IN THE OFFICE. The recording has effect from the time when the act is deposited in the proper office and indorsed by the proper officer. Heirs are not third parties protected by records. Papa sold property. The sale was not recorded. Papa dies and the children become heirs. After Papa kicks the bucket, purchaser records the sale. The heirs claim the sale is invalid on the grounds that they were third parties. They could pretend that the property sold but not recorded was still in Papa‟s estate. The heirs stand in the shoes of seller. papa could not claim that there was no sale. So, the heirs may not do so either. Harang v. Plattsmier: there was an act of mortagage. The act showed that there were 2 proceeding mortgage, but neither one was recorded. A third person is acquiring a mortgage. The third is the only one recorded and it prevails. The fact that the act indicates the 2 previous mortgages do not give actual knowledge. Lit is conveying this property that has an extension of 200 acres, but out of that Lit sold 20 acres to another such person. However, this sale was not recorded. The transferor is making quite clear what he is transferring. The buyer is only getting 180. Who is a third party? There are occasionally peculiar cases. An authentic act requires a signature before a notary and two witnesses. T sells to Rachel through a notarial act and Ryan is a witness. The act is not recorded. T sells to Ryan. May Ryan prevail over Rachel? No, he is not a third person. He was a party to the act. The book cites King v. Peoples Bank. King owns a lot and wants to build a home. The builder is the general contractor wants King to transfer the lot to the builder because he will get a speedier granting of mortgage by the bank. King makes the transfer and records. The builder gives King a counter letter and starts construction, but the counter letter is not recorded. After a while, the wily builder obtains a second mortgage on the property. Neither party pays the loans and the bank attempts to foreclose. According to the bank, the second mortgage is valid because the counter letter is not recorded. The court says wily bank, you are wrong. The attorney for the bank drafted the counter letter. Bank cannot claim position of a third party because represented by attorney as agent, the bank was a party to a counter letter. McDuffie v. Walker: ¶ buys himself a lot from the succession of Emma McClellan. The defendant is residing on the lot and bought the same from Ms. Emma when she was alive, but he did not record the act. Defendant recorded the 1807 sale after the plaintiff recorded his act. There was a plat attached. The court says there is no difference in a mortgage and a sale in terms of the public records. In this case, defendant says the plaintiff knew of the prior sale. He had knowledge that what he was buying from the Succession no longer belonged to them. Defendant claims fraud as well. You cannot say that a party commits fraud when that party regards as null something that the law says is null and void. RS 9:2756. This is the foundation case of the LA Public Records Doctrine. The conclusion in this case opens the door to fraud. The drafter of the rule assumed a third party without notice. Not a ll jurisdictions require recordation. In most of those when there is actual notice, it prevails over lack of recordation. However, this is not the case in LA. There is one LA case where the court recognizes fraud. In Broussard v. Doucet, there was an outright conspiracy to deprive an old lady of her property. If you prove fraud, it is ok, but you can not presume fraud from the fact that the third party has actual knowledge of an unrecorded act. The courts call this secret equities- it cannot be raised against a third party. This refers to immovables but like the rule of movables in 522. Rachel obtains the sale from Tonya through fraudulent means, but Rachel tells T that she is Julia Roberts. Rachel then sells to Ryan. Tonya sues Rachel. Even in she obtains rescission of grounds of fraud, she will not prevail over Ryan. That a secret equity that cannot be raised against a party in good faith. However, if Ryan were part of the fraud or in any manner participated in it, then Ryan would not be protected. P. 819 Appendix D. READ Phillips v. Parker: this case concerns a boundary action between two lots. Weaver owned both lots. He sold them to A and B. When B took possession, he encroached on A‟s lot by a few feet. They possessed in good faith over 10 years and claims acquisitive prescription. However, the trial court said no way because B commissioned a title examination. There was a plat for the lots and he should have known because it showed that the narrow part belonged to A. The lower courts said, if you do this, the examiner is acting as your agent and whatever knowledge he acquires is imputed to the buyer. Constructive knowledge matters in this case. The Supremes reverse the lower courts. This business of constructive knowledge destroys good faith for acquisitive prescription. Prudent people make a title search before buying. Now, if they do that they face the risk of being cast in legal bad faith and losing the privilege of acquisitive prescription. So, the court said, this is a no go. Before the redraft of 3480, the court took a subjective approach. Now they take an objective approach and look at the circumstances. You can look at the records and still believe that you have a good title. The notion of constructive knowledge went out the window. Seeking a title exam does not alter your good faith condition as long as you do not have actual knowledge. SECTION 2 MATRIMONIAL REGIMES the principle of equal management has applied since 1980. Since the Supremes ruled Kirchberg, the basic rule was changed that requires the concurrence of the two spouses to alienate, lease or encumber community property. Not all of the problems have disappeared. The same kind of uncertainty may arise. According to old law, the Succession of James, if he the married husband sold property, the buyer got valid title. However, if the wife did this then the purchaser would not acquire a valid title. Today, if he who is married sells, the wife‟s consent is needed and vice versa. However, one of the spouses may renounce the right to concur. In order for this to be valid, the act must be recorded. If there has been this renunciation, but no recordation and she/he sells, there is a problem with a third party getting valid title Succession of James: the decision is obsolete since the revision on equal management, but some things still hold water. Mary James married Willie Johnson who is a maritime fireman and travels for business. Mary starts a boarding house business and prospers. She represents herse lf as a singe woman and buys and sells property and takes out a mortgage. Since it was bought during marriage, the property is community. She dies and leaves a detailed will that leaves the impression that she is a single woman. There is no mention of W illie. The loan is not paid and the mortgagee forecloses. Willie seeks the nullity of the transaction because at that time he was the head and master and she lacked the capacity to grant the mortgage. He was the only one who could do such a thing. Although the sheriff‟s sale is not annulled, at lease Willie gets the money. There was no indication from the record that Mary was married. o Marriage records are not filed in the registry of conveyances, but matrimonial agreements are filed when they contain information regarding immovable property. The public records did not reflect that Mary was married. The husband still won. Humphrey’s v. Royal : Soldier and Gracie marry in MS. WWI strikes and the husband has to go to Europe. Following the war, he spends a few days in Paris and decides he‟s not going back to Podunck, MS. He moves to New Orleans, forgets about Gracie and buys immovable property through a credit sale. He then obtains a divorce, but it is not recorded. He has trouble paying so he sells to defendant. This property was next to a piece of land that yielded oil. A land speculator buys Gracie‟s undivided part of the land. He wants to buy the defendant‟s part. o The mortgage granted was valid because he was head and master. But this ended at divorce. After they divorced, he could not validly sell the property because they were co-owners in indivision. What about the defendant? Could he buy validly since the records say nothing? Judgments are things that need to be recorded when they have a connection to immovable property. Therefore, it seems that for a judgment of divorce to be effective against 3 rd parties, it has to be recorded. If not recorded, then the defendant is warranted in believing that the person whom he is buying is not divorced and he acquired validly. o The dissent said, In Succession of James, the marriage might not be recorded and all you have to do is look at the date of the marriage to determine if the property is community property. Shouldn‟t we do the same where a divorce is concerned. o However, the outcome of both of these cases, NO need to record a marriage certificate. Since a divorce comes in the shape of the judgment, it does need to be recorded to make them effective against third parties. Magee v. Amiss: The case involves an important piece of property purchased by a prosperous physician while he was married to married to Doris. The parties later separate without a divorce. The doctor remains living in the home and he contracts for a new roof with a cost of less than $2,000. The roofer puts a lien on the property to ensure payment. Doc doesn‟t pay and he gets a judgment in 1979. In execution of the judgment, in 1980, the sheriff sells the property to Stockman in a public sale for $49K. In the same month, she got a judgment of separation. There is then another sale from Stockman to the Inglehart‟s for $80K. Doris sues all the parties including the sheriff because she said her half was invalidly sold. o According to the dates, there is not equal management before the divorce. he can AEL the property without concurrence. There is no problem for the 3rd party because they have no knowledge according to the records that he is married. The sheriff is supposed to obtain the certificate from the clerk of court what may come out from the book of mortgages. In this particular case, the certificate that the sheriff obtained cited that no mortgages were recorded in the name of Doc Magee or Doris. No doubt, that this is a clear indication of marriage. He might be divorced, but he was once married. o Doris was entitled to notice. Since the sheriff failed to do so, the whole process was annulled. Regardless of the requirement of notice, she recorded the separation after the sale. But for the lack of notice, the sale would have been valid. However, there is a bad faith issue because of the purchase price. o Mennonite case: tip in advance. Camel v. Waller: sometime in 1975 there is a voluntary separation which does not have to be recorded. In Dec. 1975, he buys a condo and declares that he is judicially separated and the act is recorded. He also buys a second condo and records this as well. She obtains a judgment of separation in 1977. She did not record here and this was her problem. In March of 1978, he sells one condo and the other to Waller and records these. Later she obtains a divorce and that is recorded. In 1978, Waller sells to a third party. Camel wants her interest in the property. o The property was community. There is a clash between protection of a spouse in indivision and the public records doctrine. o He looks at Succession of James and Humphrey v. Royal where the wife did know record the divorce because she didn‟t even know she was divorced. o The law provided with her a simple means of protecting her interest. She failed to avail herself of those means. Therefore, the mistress prevails. o What about once there was a judgment of divorce. Waller sold to a third person. Since her title was good, the third party got the same title as Waller. o Does this still hold water now that the concurrence of both spouses have to consent to the AEL of immovable property. Lit says either spouse may obtain from the other a renunciation of the right to concur that can be effective against 3rd parties by recording that renunciation. Suppose after renunciation there is a divorce. The renunciation is not needed anymore. As long as the divorce is not recorded, the renunciation is still valid for third parties. Title 35 §11: Notaries: a declaration of marital status in an act of acquisition is presumed to be correct. Even if you lie to the notary, then the consequence is that the 3rd parties may rely on the state you have declared even if it not true. There is an explanation of the remedy for the deprived spouse is to sue the other spouse. The notary has a duty to ask about marital status. He can rely on that the wily party tells him. There can also be an act under private signature. There is no duty to make a declaration regarding status. SECTION 3 RIGHTS OF HEIRS Long v. Chailan: the mother and father are married with 6 children. No need to record the birth of children. They own community property. Mom dies. Pop borrows money and offers the property as security. Pop defaults on the mortgage. The sheriff seizes and sells the property to Signor who resells it to Ms. Love. There was some evidence that Ms. Love had actual knowledge of the heirs. However, actual knowledge is not relevant. Pop was no longer the full owner of the property. The kids inherited Mom‟s share. The issue is whether the sheriff could dispose of the property in satisfaction of the Pop‟s debts. o Even proceeding jurisprudence, it is clear that the need to protect third parties cannot prevail over the rights of heirs. o Today, there is a new public act where the court places heirs in possession of the estate. One heir might have been left out -perhaps there is an absent sibling or maybe the result of the family feud. This heir does not become part owner of the estate. Such heir does have a some protection. SECTION 4 SIMULATION Chachere v. Superior Oil: Mom and pop have 6 kids. Mom dies. Pop acquires a piece of separate property. At a certain moment he decides to donate the property to 3 of the children just to benefit them over the other 3. The act is recorded as a sale, but it is really a donation. This is a recorded simulation. After a while, the 3 children transfer to another party through a recorded act. There are a series of transactions. The 3 kids left out want it annulled. If this would have been community property, the rights of the heirs would prevail. However, 3 rd parties were warranted in believing that this was a valid sale based on the public records. Third parties are entitled to rely on the recital in the act. o What if there was a counter letter that was recorded. You can rely on the counter letter. If one exists and it is not recorded, then that is too bad. SECTION 5 OPTIONS In 1981, a company that owns this property grants a 10 year lease to Falgout with an option to renew for another 10 years. In May 1991, the lessee complied with the terms, Falgout exercises the option, but it is not recorded. In 1993, the property is sold to Avenue Plaza. Since the option was not recorded, it is not effective against the 3rd party. Avenue Plaza does not have to recognize the lease. o The original lease with the option was recorded. However, the third party has no duty to peruse the records for the original lease. SECTION 6 DONATIONS Mr. Morel donated property to the post to build a lodge right next door to his house. Enthusiasm faded and he arranged for a re-transfer of the property back to him. There was a recordation of a sale from the Post to JB Morel. He transferred it to his son, Donald, as a sale. The Post attacks the transaction between the Post and JB because not enough members voted on it. The Post would not have prevailed it the transfer of Donald and JB had it been a real sale. However, in this case, no price was paid. The apparent sale was a simulated donation. A donee is not a 3rd party protected by the records. See the code article. SECTION 7 LIS PENDENS Lis Pendens: the existence of an ongoing suit. Party A sues Party B claiming that A is the owner of certain property in the possession of B. Party C buys from B. The filing of a suit does not constitute notice for another party. o In the case of a divorce proceeding, if the wife files. The husband sells during the pendency of the suit when he is head and master. The absence of recordation of the pending suit does not effect 3 rd parties. Public Records and Conflicting Obligations Smith v. Taylor: there is a title examiner who wants to buy a piece of property. He wanted to lease the property from the vendee. He later bought it Even if he knew there was a lease, but the lease was not recorded. He bought it on the strength of the public records. Judice Henry May Agency v. Franklin: there is a sale from owner to A which is recorded. There is a lease from A to B which is not recorded. B assigns lease to C and records. A sells to D. Does D acquire the property burdened with the lease. Even though the assignment is in the records, the original lease was not recorded and he has no duty to make an inquiry outside the records. Even if he could see the assignment the original lease was not recorded, so D acquires the property without the lease. Transaction from O to A which is recorded. A leases to B but does not record. A sells to C and recites that there is a lease in the recordation. C assigns the lease to D and records. Can C sell to D without the lease? In the act of sale C acknowledges that the property is leased. In assigning the lease, C assumes the position of lessor. In this case, he cannot ignore the encumbrance. Jackson v. D’Aubin: A makes a testamentary trust and transfers the property to this trust. For this transfer to be effective, does he have to record for it to be effective against his creditors. This is a real transfer. You are vesting ownership in another party. It has to be recorded. There is no exception for immovable property of a succession that includes a testamentary trust. Keller Building v. Siegen Development material man‟s lien has to be recorded within 60 days of completion. The owner that wants to sell the improved property files an affidavit of completion. The date of completion is fraudulent- it is antedated. This screws the material man/subcontractor because he misses the filing date. The material man/sub may prove the fraud. There is no secret equity. This is fraud perpetrated on the records itself. Any times the affidavit is a forgery or falsity the injured person is allowed to prove it. SECTION 9 PUBLIC RECORDS AND DUE PROCESS Small Engine v. Cangelosi Cascio the Cascio‟s are the owners of the property who sell to Krause. When they sold, he granted a mortgage note which contained a confession of judgment. All sorts of defenses are waived in the executory process. Therefore, all the mortgage has to do is seize the property. Sheriff gives notice to the original mortgagor and none of the subsequent transferees. The property is then auctioned off. The notice is served to Krause, but he is no longer in the picture because the property had been transferred a bunch of times along with the mortgage to small engine. This is a due process issue. LA has a statute-the request for notice statute-any person with an interest in a piece of property may file a request and pay $10. If there are no requests, the sheriff only has to give notice to the original mortgagee. The state is instituting a method of abiding by the constitutional guarantee. The current possessor would certainly have an interest in getting notice. The 5 th circuit judge thinks a confession of judgment opens a door for an action against the property itself-an action in rem. Things like immovable property do not have rights, people have rights. If there is no notice, a person is deprived of his rights. The court concludes that the request notice statute is utterly unconstitutional because it violates the guarantee of notice. Small Engine did not get notice. The sale was NULL. The court refers to the Mennonite case: diligence on the part of the state actor. The sheriff is the state actor in this sale. Using ordinary diligence, you can rely on the public records to find out who at a certain moment who is the current owner and possessor. All he has to do is check the records. There is additional diligence to notify that person. There is no need for actual notice only that you use means as certain to ensure actual notice. The sheriff doesn‟t have to guarantee that the property owner read it. In Mennonite, the M. Board sold property to Moore. They granted a mortgage for the remainder of the purchase price. Moore was making payments, but he forgot to pay the taxes. The sheriff sold the property to Adams. The Board eventually found out of the sale, but it was after the redemption period. When there is a tax sale. The dispossessed owner has a certain period of time the owner who failed to pay taxes may redeem the property from the one who bought it. The Board claims that due process has been violated. The court held that any person whose property is about to be taken must be given notice. Our lawmakers reacted by amending the request notice statute. You can see the effect in MHC Properties. When there is an omission of notice, this does not work to the detriment of the person who bought it. The sheriff is chastised. In order to proceed in an action against the sheriff, you have to prove the actual market price, that if he had been given notice he would have been able to buy the property. The action is difficult, but the remedy exists. MHC Properties v. Law Three at a certain moment an owner sells to Willett. There is a mortgage to secure the price. Willet transfers to LAW Three. Willet defaults and the owner forecloses. He sells to MHC. LAW Three says it never got notice of the public sale. Willet is actually the president of LAW Three. Willet as original mortgagor, he had been given notice. The corporation is not the same as any member, but notice to the president amounts to giving notice to the corporation. A corporation can only act through its president. The court concludes that the requirement has been complied with. CHAPTER 10 OBLIGATIONS OF THE SELLER: DELIVERY 2474: Construction of ambiguities the seller must clearly express the extent of his obligations arising from the contract any ambiguity must be construed against the seller this is different from common law- let the buyer beware-Caveat Emptor. Our article is more consistent with good faith 2475: Obligation to deliver and warrant seller warrants ownership and peaceful possession-this is the warranty of eviction he also warrants that it is free of hidden defects-redhibitory devices he also warrants that it is fit for its intended use 2477: Methods of Making Delivery delivery of an immovable follows the execution of an act of transfer. Once the act of sale is signed, nothing else is needed to show possession the situation for movables is different. o One way is to hand it over o if it is a large amount of goods, you deliver the keys to the place where the things can be bound o there may also be delivery by consent when the things cannot be moved. This is like the case where the engines could not be moved so delivery took place by consent. However, since they were moved they could be moved and this was not a defense. However, growing crops cannot be moved before they are ripe. These can be delivered by consent. 2480: presumption when the seller remains in possession there is a presumption of simulation and the person who remains in possession must prove that it was a true sale. 2481: Incorporeals, methods of making delivery promissory notes, shares of stock and bonds- you negotiate the instrument to the buyer to deliver Delivery of other things like credit rights takes place on the transfer of those movables. Lit has a credit with Dave. Lit can transfer that right to Ryan. You can deliver this through a simple procedure. Notify David of the transfer to Ryan or Ryan gives the notice that he has a right to collect. Notification amounts to delivery. 2482: Seller who is not in possession the broker is not always in possession. He sells the things he buys before he receives them. in that case, he must obtain possession and deliver the things to the buyer 2483: Cost of delivery and removal Lit order 100 shirts from David because he is the regular supplier. David would put them all in a box and send them to a carrier. Seller pays for the order to be packaged. the cost of making delivery is borne by the seller and that of taking delivery by the buyer in the absence of agreement to the contrary. The buyer pays for picking it up it is not to be delivered to a particular place. 2484: Place of delivery Delivery must be made at the place agreed upon by the parties or intended by them. In the absence of such agreement or intent, delivery must be made at the place where the thing is located at the time of the sale. 2485: Buyer‟s right on default, damages when seller fails to deliver or to make timely delivery of the thing sold, the buyer may demand specific performance or may seek dissolution. The buyer make seek damages for a late deliver. 2487: Delivery excused until payment of price and for insolvency 2489: Condition of thing at time of delivery I the condition that the parties contemplated. SECTION 2 TRADITION OR DELIVERY OF MOVABLES Cook v. West: Wood had only put sown a small down payment for a large order of hay. He was the owner. The seller said he wanted more money. He stopped delivery because he thought he wasn‟t going to get paid. Wood went to get more money from the plaintiff who bought the hay from him. The seller was justified in refusing to deliver the hay because he was justified in believing that he would lose the price. Maxwell Motors v. Davis David traded in his old jalopy and bought a new car. In order to make a valid transfer of his car he needs to deliver it to the dealer along with the certificate of title. He couldn‟t find the certificate and he couldn‟t do the trade in. The trade in usually suffices as a down payment in a credit sale. The dealer suggests a mortgage on the defendant‟s home, but he says no way. The dealer sues for the mortgage notes. Buyer says no way, you have failed to deliver. So the buyer says I want the contract dissolved. The buyer only has remedies when the seller fails to deliver through his own fault. The court said the buyer doesn‟t have a choice because the delivery didn‟t happen because the defendant didn‟t pay the down payment. Matthews v. Gaubler: this is the simple sale of a home- immovable property. There is a contract to sell. It stipulates that possession is to be given at the final sale. On the date assigned for the final act and after the act was signed and a certified check tender, the seller failed to turn over the keys because they had a sick child. The plaintiff says no way. He sues for dissolution and wants double the deposit back. There is a substantial defense. The code says that delivery accompanied final act of sale, so the sellers argue that they delivered. However, plaintiff wants possession, not delivery. The court interpreted the meaning of possession. It is possible to possess through a third person. There can be precarious possession. The court says no way. The court is equating possession with actual occupancy. If in the contract to sell, the parties add language like in this contract-they mean the right to occupy a vacated piece of property. The counter is that the seller has no security that the buyer will go through with the deal. It seems stupid for them to move out of their house of the sale doesn‟t go through. If the buyer doesn‟t show. But sorry, this is not what the contract said. The court could have granted an extension of time but the defendant failed to bring up this defense. Lohman v. Lonergan seller is selling a house with a garage apartment. The apartment was of great interest to the purchaser. The court ordered dissolution when the seller couldn‟t turn over the property free to the apartment tenant at the specified time. Manning v. Cohen: buyer sought and got specific performance and damages based on the amount of rent that the buyer would have gotten from the rental of the property Note case Plaintiff is a hindu doctor who was able to validate his practice and went to work in Carville at the leprosy hospital he wanted a house for his bride to come home to. The builder was late. It was not ready so the doctor and his young bride had to spend the honeymoon at the leprosy hospital. the court awarded damages for mental inconvenience etc. Elliott v. Dupuy plaintiff calls the seller‟s attorney when all was ready to seal the deal for the sale of immovable property. The secretary said that the seller‟s attorney couldn‟t be there. They decided on another date and the seller attorney didn‟t show up. ¶ wants double the deposit/earnest is sort of damages. You can recover damages provided the other party is put in default. The defendant says there has been no putting in default. The court distinguished between active and passive breach. If the breach is active, then there is no need for a putting in default. Consequently, plaintiff, the disappointed buyer is allowed to recover. Today, article 1990 governs but the outcome is the same. if there is a time for the obligation and the term arrives and no performance this puts the obligor in default automatically. There is no need for a putting in default. What about dissolution of the contract? The contract is not dissolved just because one part does not show up. Just send a notice of article 2014- non-judicial dissolution. The disappointed party has to fix a different date and say if you don‟t perform time, then no contract. This could be a waste of time. Draft an express dissolution clause in the contract in the event that either party does not show up the contract is automatically dissolved. There is no problem with the dissolution or recovery of double earnest/damages. Lanier v. Bank of Rayville: there is a contract for the sale of movable things-office equipment. What if there is no term for delivery. It should be a reasonable time if there is no delivery. Reasonableness depends on the nature of the thing which is the contractual object. the time for delivery is just a term that can be established subsequently. Dation en Paie ment: this is a form of sale. If you give something in payment of what you owe, the thing you give is the amount you owe. The old article said the giving in payment was not effective on consent alone but on delive ry. should there be actual delivery rather than the presumed delive ry. The conclusion finally reached was CC 2477. The legal delive ry prevails over any actual delivery. SECTION 4 MERCHANTIBILITY OF TITLE Buyer is entitled to ownership and a clear title. In general terms a merchantable title is that a reasonable person would accept it in the regular course of business. It is not merchantable when it is subject to substantial litigation. The seriousness of the threat of a lingering claim of a third party makes this possibility of substantial litigation. This means that buyer you are probably going to lose so don‟t take that title. it is not merchantable. Schaub v. O’Quin there is a contract to sell and seller is suing buyer for refusing to go through with the contract of sale. The reason is because there was a problem with the title. The tutor of the minors who owned the property didn‟t do everything correctly. The minors might have a claim when they come of age. A prudent defendant should join the minors in the suit. Here the title was not merchantable because the minors claim is potentially very valid and the buyer is not obligated to accept. NOTES: Examples of non-merchantable title. father sells immovable property to one of the children after the mother died. Part of the property was community and other heirs have a claim. Nowadays if the wife buys property and sells it without consent from the husband. This is not a merchantable title. Property is not in compliance with zoning regulations. It was only for residential property and the property sold was commercial. What is the buyer going to do? There is danger of litigation by the neighbors. Even if there is potential litigation by a lessee with an unrecorded title, it would not be substantial. Young v. Stevens the contract to sell involved a piece of property. There are several issues: there is an encroaching driveway and an encroaching fence in another area of the property. The amount of encroachment is de minimus. The buyer is aware of this before executing a final sale. The buyer calls on the neighbor and makes propositions to settle with the buyer but the neighbor is not amenable. People want to live peacefully in the house they buy. They do not want to litigate with neighbors. The neighbors claim is valid. The title is NOT merchantable because the buyer is buying a future lawyer. Buzbee v. Fidelity \ the original buyer/developer is charged with building a road and a bridge on the land. Developer built the bride but not the roads. He surrenders the property to the bank because he couldn‟t pay. The bank sells to the plaintiffs. The plaintiffs are claiming that the property is not merchantable. Here the sale actually took place. It was not a contract to sell that did not go through. Here the plaintiff is seeking dissolution because the seller failed to deliver a good valid title. Litigation is protracted. No doubt there was exposure to a suit by the original sellers for whom the developer had not performed. There was already litigation going on. This is another example of non-merchantable title. Unless the additional obligations along with the contract are fulfilled completely, then there is a serious potential for litigation. SECTION 5 ACCESSORY TO THE THING SOLD Vincent v. Gold there is a house in New Orleans with a door way between a double parlor. There is a free standing screen attached in some way to the door. the court refers to the Foret case which dwells on a window a/c unit that was screwed down. It could be removed without causing any damage and was consequently not an accessory. Anything that can be easily removed may not be considered an accessory to a removable. It is not a component part. The will of the parties have a great deal to do with the list. Chandeliers and window units are not accessories. They can stay by the will of the parties rather than because they are accessories. Buttons are accessories to garments. In the case of incorporeals, if the object of a transaction is a promissory note secured by a mortgage, the main thing is the promissory note, an incorporeal movable, and the note goes with the mortgage which is an incorporeal immovable accessory. this is more a matter of property law than sales law. CC 2491 the seller should deliver the full extent of the immovable the obligation may be modified CC 2492: sale with price per measure if seller is unable to deliver the full extent, the price may be proportionately reduced-a diminution of the price o if 100 acres sold for $100K, this is $1,000 acres, but only 98 acres can be delivered, the price to be paid is $98K if the tract sold contains more than was named in the contract, the buyer owes a supplement. However, if the surplus is more than 1/20 the buyer has the choice to recede from the contract Ex.: a tract of land containing a 100 acres is sold at 1,000 per acre, but the survey shows 103 acres. The buyer must give an additional $3,000. If the surplusage is 5 acres, the buyer must pay, but 6 acres, the buyer can recede. CC 2494 the price is a lump price of an immovable with an indication of the extent of the premises there is a right to a dimunition if there is a shortage or excess of 1/20 if there is such a surplus, the buyer has the right to pay or recede tenements means adjoining owners, from boundary to boundary this is a sale per aversionism without regard to the amount of acres 2495: sale of certain and limited of boundaries or of a distinct object for a lump price there is no right to an increase or diminution of the price in case of surplusage or shortage in the actual extension of an immovable. sale by name of property OR designated by adjoining owners. the maps attached to a plan of a subdivision –the limits of the lots are indicated on the pertinent plan. These abstract lots serve as tenements. Sale per Aversionem Johnston v. Quarles the act of sale said 320, but the survey said 275. There is a difference of 45 acres. The shortage was more than 1/20? The plaintiff wants diminution of the price. this tract was a triangular shape the property is described by the adjoining property owners 2495, when there is a sale per aversionem, there is no adjustment of the price because the actual measure is less important than the whole. The sale conveys all the property found within the boundaries given. Sale by Measure Phelps v. Wilson the defendant sold to the plaintiff a certain and limited body of land, a section in a township. Today this case would fall under 2494. There was a limp price Then this wasand in this case, the plaintiff got a dimunition of the price. It was a sale Look at the outline because this made absolutely no sense. Lasiter v. Gaharan plaintiff thought he bought 80 acres for $50K. The land was described with only 3 clear boundaries. There was no boundary for the west. Plaintiff bought the land for the timber. He hired an expert to cruise the land and estimate the amount of timber on the land. He encroached on neighboring property because there was no western boundary. He only got 40 acres and cut the neighbors timber and has to pay them for it. ¶ sues his vendors. He can only get a diminution of the price if the property if it falls short of 1/20. This was not a sale per aversionem, nor was it a sale per measure. It was a 2494, sale for a lump price. He got a reduction in price. Sheldon v. Varnado the vendor is selling a lot in a subdivision. It is being sold in an unusual way. It was per acre in a subdivision. the price was $6,000 per acre-a sale per measure. The defendant entered into a boundary agreement before the property was sold so the buyer didn‟t get all they bought. He was supposed to get three but he only got 2.1 so he was entitled to a dimunition of the price. this is a 2492, sale by price per measure. CHAPTER XI WARRANTY AGAINST EVICTION CC 2500: warranty against eviction from the right of a third person covers encumbrance except apparent servitudes and natural and non-legal o this can be a lease o concerning servitudes, the property codes deal with this. Predial servitudes are divided into apparent and non-apparent A natural servitude is drainage and is not covered by the warranty because it is apparent a good example of a legal non-apparent servitude is to keep buildings in good condition and right of passage where the right of the third person is perfected only after the sale through negligence of the buyer o this applies to prescription when a third party possesses in good faith. If the buyer does not claim possession, the buyer through his negligence forfeits his warranty Richmond v. Zapata there was an encumbrance that was not declared which would have ordinarily been covered by the warranty however, this is a mineral lease. The buyer has no duty to check the records. However, you can see with your own eyes that there is mineral activity- towers, drilling equipment, roadways. The buyer can‟t ignore that. Apparent servitudes are excepted from the warranty because you can see them. The mineral lessee has exactly the same function as a servitude. The visibility of mineral activity on the land that the plaintiff bought is a reason to exclude it from the warranty as is the case in an apparent servitude. Bologna Brothers v. Stephens Mr. Stephens bought a piece of land consisting of 3 different lots in the Bonnecaze subdivision. There are two squares with several lots. He buys the property and duly records. Mr. Stephens transfers the property to his closely held family corporation. Stephens transfers to Bankston , but the description is incorrect. He dies and successors wife and daughter come into po ssession. They sell to the Bologna Brothers. Bologna pays $1,000 to Bankston for whatever claim he has. The court says look, Bankston‟s title is no good, but he is not a party to the suit. The court said the best they can do is third party Mr. Banksto n and the conclusion of the court would be effective against him. CC 2503 warranty against eviction is implied in every sale they may add, limit or exclude if they wish by contract even so, the buyer that has been evicted still has a right to the return o f the price unless o at the time of the sale he was aware of the danger of eviction, o was buying at his peril and risk, o or if they agree that the buyer will never be entitled to the return price. in all those cases, the seller is liable for an eviction tha t is occasioned by his own act and any agreement to the contrary is null o that‟s fraud the buyer subrogates himself in the right of the seller against other parties even when the warranty is excluded CC 2506: Rights of the Buyer against seller in case of eviction price he made value of fruits he had to return to the person who evicted him expenses of the sale damages with exception of increase in the value of the property CC 2507 seller is liable for the full price even if the value has been diminished due to any clause including the buyer‟s neglect if the buyer has benefited from the diminution of the value casued by his own act, the amount of his benefit must be deducted from the total owed by the seller because of the eviction o ex: if buyer removes a marble fireplace and sells it, the price he got is deducted from the sale price of the property CC 2509 reimbursement to buyer for COST of useful improvements o buyer builds a gazebo and it increases the property value, the seller must reimburse if the seller knew at the time of the sale that the thing belonged to a 3 rd person, he must reimburse the buyer for the cost of ALL improvements. CC 2511 partial eviction o when the buyer is evicted from only part of a thing, he may obtain rescission if he would not have bought the thing without that part o if he doesn‟t rescind, the buyer is entitled to dimunition of the price in the proportion to the value of the part lost CC 2512 warranty against eviction from proceeds this includes fruits and crops CC 2513: Scope of warranty in sale of succession rights covers the right to succeed the decedent and you get the things that are part of the estate does not cover the right to get any particular thing CC 2517: Call in Warranty if the buyer finds out that he may be evicted, he should give notice to the seller if the buyer is sued by the third party, notice to the seller to defend the suit counts for such notice if the buyer does not give notice he may forfeit his warranty of the seller is able to furnish proof that the third person had no right Kling v. McLin when the buyer bought the car there was a chattel mortgage on it and he couldn‟t get title a chattel mortgage is an encumbrance. There is a 10 year prescription-which is the regular contractual prescription it is not a hidden defect that calls for redhibition Reidlinger v. Rudy Brown Builders: defendant built 2 residences, he sold one to the Guthrie‟s and the other to the Ragusa‟s. there was an encroaching fence doe to some survey problems on the Guthrie‟s property. Rudy Brown settled with the Guthrie‟s. the plaintiff wants damages and attorneys fees. The court says no way. As in the case of the car, an encroachment is not a hidden defect, it affects title to property. You can still live in your house, you just didn‟t get all you paid for. The remedy is through eviction and Rudy has already paid off the neighbors what they thought they were owed in damages. Attorneys fees are only recoverable according to the contract OR according to the law. Neither allows for it in this case. What about non-pecuniary damages. They were very aggravated. The court refers to Meador v. Toyota, you buy a car to drive it not to impress your neighbors. In this case, the houses are not mansions, they are modest houses. The purpose was just to live in them, therefore no pecuniary damages. Collins v. Slocum: Mr. Walker Sr. grants a pipeline servitude to Humble. He then sells the property with a full warranty to his son, Walker Jr. He resells with full warranty to joint buyers-an informal partnership, LSH. The sale is for 256 acres for a total price of $125,000. Walker Jr. also sells a small lot to Collins for $4,000 and he build a house that costs $19,000. A pipeline servitude is non-apparent. This is a conventional servitude. This is an encumbrance covered by the warranty. You cannot build on land where a pipeline runs. Humble exercised his right and Collins had to demolish his residence. He was evicted and he is entitled to recover. What should he get? He gets the price he paid for the lot. The demolished hosue was of no benefit to the land. So what he recovers is what he actually spent, not the increase in value of the lot. What is the impact of actual knowledge of the buyer if the sale is with full warranty? none, this does not effect his right to recover the price. There was earlier litigation because Humble neglected to mark the pipeline properly. This was an action in tort, not eviction. Actual knowledge of the danger in tort is contributory negligence. However, what happened in tort has no impact on this particular litigation. How much should LSH get? Don‟t know why?, the 4,000 that Collins had paid. the trial court said sellers were solidarily liable for the purchase price and damages. This court said no way, they are joint vendors and they owe for the price and this is divisible. So each owes 1/3. The obligations to pay damages is indivisible. An evicted buyer recovers the price because of loss of the use of the thing be bought. The cause was land to build a home. He did not get it. The cause failed. Therefore he is entitled to get the price back. The damages do not impinge on the cause. That is why the damages are indivisible even though they are paid in money. SECTION 4 SALE WITH WARRANTY the only difference between sale with warranty and without is damages, you can get the sale price back in either case. Boyer v. Amet there is a sale from Mrs. Amet to a party which is recorded. The buyer does a retrocession back to Mrs. Amet but it was not recorded. Amet sells to B and records. O grants a mortgage to a certain mortgagee. the buyer used to have to right to the appreciation in the value of the property. The court said this didn‟t seem to be fair. The seller doesn‟t benefit from the appreciation. This is not fair. Buyer is entitled to recover the price he originally paid, not the cost of curing the title. Since then the rule has remained in force. After the revision in 2506, the buyer may recover, the price, fruits, damages, but not the increase in value of the property. Note cases seller sells property to buyer 1 for $3,000 who then sells to buyer 2 for 4500. All he could recover was $3,000. Buer pays $750 for a piece of property. Some heirs appear and claim 7/8 of the property. Buyer pays the heirs $3000 and he has a clear title. He wants to recover from the seller. He only gets 7/8 of what he paid the seller Guglielmi v. Geismer Sale of Waterloo plantation bounded by the river in the south and Riverside plantation. It was a sale per aversionem. After the sale it was found that before the sale defendant Geismar has surrendered to the neighboring plantation to which the neighboring owners had a clear title. Another part was part of the public lands and in possession of someone else. Plaintiff wants a proportionate return of the price. The seller says no way this is a sale per aversionem. The seller did not deliver all that was supposed to be conveyed within the boundaries. So they per aversionem rule where you can‟t get a price adjustment does not apply. This is a clear case of partial eviction and he gets a proportionate reduction in the sale price. Katz v. Katz Realty there was a survey and it showed that the property was encroaching on the Melpomene side of the lot. The foundations of the building also encroached on neighboring property. Buyer pays the neighbors to clear his title. now he wants to recover what he paid to the sellers. The questions is whether he is entitled to recovery? Is this eviction? the buyer is entitled to have the building demolished and rebuilt within the proper bounds of the property. Rather than demolish and rebuild it, he bought a narrow strip from the neighbors. This was less expensive. The buyer was mitigating the damages. This is debatable because when the buyer is evicted he may lose all or partial use of his property. In either case, he gets less than what he bought. In this case, the buyer has more property that he originally bargained for. Technically this is not truly eviction. This is clearly a case of a breach of con tract that escapes the warranty. However, the plaintiff recovers. Cooper v. Burson There were two transactions. The current owners sue their seller. That seller calls the original sellers in eviction. There was an encroachment. The court finds an eviction took place. The shed did not belong to the plaintiff. The court finds in favor of defendants against their own seller. There was a vast extension of land. There is timber land on part and undergrowth on part. There is a road right in the middle of the property. Property close to the road is more valueable than land removed and timber land is more valuable than undergrowth. Therefore, it is not fair to use the average value of the land when the whole is not worth the same throughout. The bring in experts to value the part in question. The court values it at $650. This particular decision shows that it is possible to conclude in case of partial eviction that buyer may recover a price less than the average price per acre he paid simply because of the nature or quality of the land in which eviction took place. Carpenter v. Herndon Herndon wons and grants a mortgage to Jones. H sells to Brown who sells to Bank. Bank resells to Herndon. Herndon resells to Carpenter. The mortgage evicts him. The principle of subrogation applies in warranty. So there is a deep pocket in this chain. However, the bank is debtor and creditor at the same time. Confusion occurs and the obligation is extinguished. The same goes for Brown. The chain of title is circular. Aizpura v. Crane Pool Company property is sold that contains a swimming pool that starts to sink. The pool builders are at fault. The plaintiff sued the seller and the pool b uilder. Between owners and the pool builders there is no privity of contract. The seller has right in contract. However, when the seller transferred the property to the buyer, the buyer subrogates himself to the right of the seller. Subrogation usually applies in chain of title when there is a claim for eviction. But the court says the rule of subrogation is sufficiently broad to cover this claim. SECTION 5 SALE WITHOUT WARRANTY New Orleans & Carrollton RR v. Jourdain’s Heirs: the warranty is limited the only the acts of the seller. This can never be excluded anyway. So there is still a warranty. In the chain of title there is a sale that originates in bankruptcy. The court calls this a syndic sale. the buyer is evicted, the buyer is entitled to the purchase price unless the buyer knew. The defendant claims that the buyer was aware of the danger of eviction. The court says certainly not, whatever comes out through the records has nothing to do with eviction. The buyer must be aware and must declare that he is buying at his own peril and risk. The knowledge has to be ACTUAL. The way in which 2503 is drafted, requires that the buyer can recover the sale price unless he stipulates that he is buying at his own peril and risk, buying without warranty. If he assumes the risk, knowledge doesn‟t matter. SECTION 7 SELLER‟S LIABILITY FOR HIS OWN ACTS Clark v. O‟Neal buyer did not record the sale so seller is still the owner of record a creditor of the seller seizes the property and it is auctioned off. Buyer wants to recover the sale price. Buyer still owes 2 notes on the property. Seller says you cannot claim eviction because the right of a 3 rd person that existed before the sale. The creditor comes around after the sale. The true explanation is that the eviction takes place because of the seller‟s dereliction of duty. All the seller had to do was notify the buyer and she could have endorsed those promissory notes to the creditor and that may have satisfied the creditor. The buyer usually records, but the seller usually has as many reasons to record. The seller got in trouble for not recording and he had to pay the buyer back the purchase price. Parties may not contract this out. This is a clear example of the buyer‟s warranty against the seller for his own acts. SECTION 8 THE DOCTRINE OF AFTER ACQUIRED TITLE St. Landry Oil v. Neal there is a duty of a seller to convey clear ownership. If after the sale he procures clear title, he is just performing his duty. The problem arises concerning the question of whether the buyer may accept or reject the after acquired title. This is different from the prevailing notion in France. Out courts asserted that if a seller acquires ownership before the buyer brings suit for eviction, then the buyer is bound to accept the after acquired title. If the seller acquires title after litigation has started, it is up to the buyer to accept or reject the suit for eviction he has already started. This decision prevails today. SECTION 9 QUIT CLAIM DEED the name clearly indicates that this comes from common law. It originates in England as an incident of old feudal law. It landed in our country. It was of considerable usefulness because there were vast extensions of undeveloped land. squatters would just hang out and get a claim for title from the state once the homestead statutes came along. Even before those statutes, he could still have a claim. John Wayne comes along and decides he wants to buy the squatters land. He says, I am not the owner. However, I will sell you whatever rights I have to the land and I promise to never interfere. The same kind of agreement may be useful in present context. In LA, when someone dies and there are 11 LA children scattered all over the US. Either the local heirs or a party that they want to sell their inheritance rights to. They want to obtain the agreement of an heir that is far away. The quit claim allows the proceeding to continue. 2502: Transfer of rights to a thing. The expression of quit claim deed is NOT here. However, this article is the process of a quit claim deed. The transeferee has no right to restitution of the price in case of eviction. Such a transaction is not the sale of the property, it is a transfer of rights that they may have in the property. This is a just title for acquisitive prescription. The doctrine of after acquired title does not work in the case of quit claim deeds. SECTION 9 QUIT CLAIM DEED AND WARRANTY A quit claim deed is the same as buying at your peril and risk. Simmessport State Bank v. Roy Tanners owned some property and the Bank was their creditor. The Tanners turned their property over to the bank to satisfy their debt. The bank did not record. The Bank didn‟t pay property taxes one year and it was seized. the property is sold at a tax sale and acquired by Mr. Roy. You pay a trifle at a tax sale. You have a 90 day redemption period. The Roy‟s wanted to buy whatever rights the Tanners had in the property. He gave them $500 for their quit claim. The Bank does not record their sale from the Tanners until after this quit claim deed was issued. The Roy‟s called the bank and said that they were now the owner. The court said no, through a quit claim a party transfers the rights they presently have, not what they may have in the future. At the time the Tanner‟s transferred, the Tanners had no rights. What about the public records? When you are dealing with a quitclaim, the rights that the transferor might have are not record rights, they are actual rights. It is quite clear that the Tanners had no right at the time they granted the quit claim. Roy was well aware of this. There is an elegant illusion to fraud. If you examine title and you find a quit claim deed in the records, you should make an inquiry outside of the records. This makes a quitclaim deed as suspicious as a donation. Lit says this doesn‟t really do against the public records doctrine because the doctrine is negative rather than positive. Your warranted reliance is what is not in the records. Even though something is recorded, it might not be valid-a forged document or a forged judgment of possession in favor of certain heirs. Rapp v. Lowry plaintiff granted a quit claim deed. The next year, the same lands were sold at a tax sale and the plaintiff bought the property. In effect he kicked out his grantee. the court did not allow the grantor to evict his own grantee. It cannot be tolerated that a vendor even without warranty should subsequrntly acquire title superior to that which he conveyed to his vendee and attempt to ouse the vendee under that title. Waterman v. Tidewater there are two parallel chains of title. Waterman‟s title begins with the Levee Board and Tidewater‟s begins with the State. The plaintiff claims that at the time that they got the property because of an after acquired title. The court said that after acquired title can work in the case of warranty and even without warranty, but does not apply to a quit claim deed. This is a dispute between successors, not the original parties as in Rapp v. Lowry. Article 2502 describes the effect of a quit claim deed. WARRANTY AND ASSIGNMENT OF RIGHTS there is an important change brought about by the revision Ratcliff v. McIlhenney Ratliffe obtained an option from McIlhenney who obtained it from a certain owner. When he went to exercise the option, the original owner did not have title. The one that assigns a right does not warrant the solvency of the debtor unless he expressly does so. In assignment of a right, there is NO implied warranty. The court concludes that the fact that the original owner does not own the property, is the same as being insolvent. The assignment only guarantees that the option exists. The purpose of this was to guarantee money debts. It is applied to the transfer of an option. Now we have an article that reaches a different conclusion 2622: the assignor of an option to buy a thing warrants the existence of that option but it does not warrant that the person who granted it can be required to make a final sale. If upon exercise, the person who grnated it fails to make a sale, the assignee has against the assignor the same rights as a buyer without warranty against the seller this means that the assignee can get the price he paid for the op tion back. Tomlinson v. Thurmon if you assign a mineral lease and the lease is invalid because of lack of recordation, you have actually assigned ? the plaintiffs were allowed to recover the main difference lies in the nature of the assigned right CALL IN WARRANTY Sweatman v. Theriot Plaintiff acquired from 4 joint vendors. There was no title exam when they bought. They want to resell now. The records show that there is a judgment that gives rise to a judicial mortgage because of a debt of one of the vendors. In order to cure the title, the plaintiffs pay the creditor. They were partially evicted but they didn‟t call the defendants in warranty the defendant says they weren‟t called in warranty and they have no right except the right of a possessor who pays a debt of an owner and subrogates himself as the mortgagee. They say all you have is a right to recover from the joint vendor who owed the debt. The court says hogwash, this does not exclude your right in warranty that was breached in this case. Certainly no notice was given, but for a buyer to forfeit the right to eviction, seller has to show that had they been given notice they have to show that the third person had no right. In this case, the defendants would not have been able to show that this right didn‟t exist. It did. Plaintiff preserved their right to the warranty. CHAPTER 12 REDHIBITORY DEVICES CC 2520 Warranty Redhibitory defects thing is useless so inconvenient that the buyer would not have bought you can get rescission if not totally useless, buyer would have bought for a lesser price. This limits the buyers right to a price reduction this does not apply to contracts TO sell CC2530 to be redhibitory-device must exist at the time if the same if it appears within 3 days of a sale, it is presumed to exist at the time of the sale it must be hidden CC2522 Notice buyer must give seller notice of defect so the seller can make repairs buyer may forfeit his warranty CC2524 the thing sold must be reasonably fit for the use if the seller knows that the buyer wants it for a particular use, it must be fit for that purpose if the buyer represents that the thing contains a certain feature and it doesn‟t there is a remedy in other articles on conventional obligations-there is an action in breach-not warranty buyer may seek dissolution or damages or both this is important to prescription and items of damage recoverable to an aggrieved buyer. quality may mean that something is of a certain grade, but it may also mean that it is a particular feature of a thing that gives it a higher value. Here where a seller represents that the thing contains a particular feature, this is the second one. CC2529 thing not of a kind specified thing is not of the quality specified in the contract-this means a certain grade of excellence CC2531: if seller did not know of the defect o he is bound to repair, remedy or correct the defect o if he can‟t he is bound to restore the price with interest from the sale of the sale and reasonable expenses associated with the sale, plus expenses for preservation less any benefit he got for things like fruit. the seller has an action against the manufactuer if the defect is not the seller‟s fault CC2545: this is one of the few places where the law allows recovery of attorneys fees this is when the seller is in bad faith and knows of the defect presumption of knowledge when he is the manufacturer CC2532 the buyer has to return the thing to get his money back he has to take care of the thing as a prudent administrator he is not bound to return it until all the claims for the thing have been settled. in products liability, you only recover for personal injury, no pecuniary damages for defects of the thing. You have to sue in redhibition to get the return price for the thing. You can bring both your claims together. The reason why you don‟t have to return it is because it may be an important piece of evidence. if the thing is destroyed, the buyer can still bring his action The seller bears the loss if the thing is destroyed before delivery. However, if it is a fortuitous event that destroys the thing before the buyer gives notice, he bears the loss. If after notice, the seller bears the loss. If the buyer insures the thing, the buyer bears the loss. If the whole thing is not covered, the seller pays the difference after notice. the seller subrogates the buyers right to sue a third person for causing the destruction. 2537: redhibition does not apply to sheriff‟s sale 2538 2540: redhibitory vice of more than one of several matched things sold if one of the pair is defective, you are entitled to return the whole 2541 buyer can choose reduction of the price when he had the right to obtain rescission 2545: Liability of the seller who knows of the defect, presumption of kno wledge 2548 Exclusion or limitation of warranty must be brought to the attention of the buyer the exclusion does not apply when a seller says the thing has a quality that he knew it did not have the buyer is subrogated to the rights in warranty of the seller against the other person even where the warranty is excluded. Harkins v. Howard Lumber the seller was supposed to deliver clear redwood siding. They delivered siding of a lesser grade. According to the evidence this was a clear fact. He did not ge t the quality specified. The trial court found for the plaintiff and granted him a huge recovery. The price, cost of removing the siding and the interim financing that he had to get to cover the time of construction. As a kind LA lagniappe, the tc ordered the cost of replacement of the new siding he had to buy. The COA said that this was too much. It is unjust enrichment. You do not get the cost of a new non-defective thing. It also corrects the interim financing award. The seller third partied its interim seller. The defendant had no claim against its own supplier because they told them the grade they were sending. Fusilier v. Ardoin this is a suit to rescind the sale of a colt. The cause of the sale was to enter the colt in Quarter Horse races. Plaintiff spends some money to train the horse. It was entered in a race and he placed and got a price of $1200. The defendant was unable to obtain the registration papers. There was a white spot on the left side of the pony so he did not pass the test. Plaintiff sues and raises redhibition. For redhibition of animals the prescription was 2 months. This is no longer so. If so, the plaintiff‟s claims would have prescribed. The court says this is a case of the seller saying the thing has a quality which it does not have. In this particular contract, you have more than a plain sale, you have an additional obligation of the seller-not just a pony, a registered pony. The cause was clear. Defendant did not perform the most important obligation. The court says this is no longer redhibtion, but a plain breach of contract. The court subtracts the benefit the plaintiff obtained from the race. Bo-Pic v. Polyflex this case falls squarely within 2524 buyer relies on the sellers skill to select the thing. the buyer is a potato chip manufacturer. The buyer is an old client of the defendant. He is looking for less expensive packaging. A new product comes on the market that may do the job. Defendant advises the buyer to order a sample. It is delayed. When it finally arrives, plaintiff has already placed the order for a large amount. There was no defect in the thing, it just wouldn‟t work the purpose the plaintiff needed it. It is quite clear that the plaintiff was not given good advice. He didn‟t mean to pay, he was ready to return the goods. The matter is quite simple for the court. Buying this particular quality was at the seller‟s advice. This is NOT redhibition, this is plain breach and the prescriptive period is 10 years. SECTION 3 DEFECTS THAT ARE REDHIBITORY a field infected with poisonous weeds a cracked slab a termite infection lemon automobiles machines that do not work properly Conditions: defect must exist at the time the thing must be useless or so inconvenient that the buyer would not have bought at that price If it appears within 3 days there is a presumption that it existed at the time of the sale. Otherwise, plaintiff must prove the defect existed Rey v. Cuccia plaintiffs bought a camper trailer that could be attached to their automobile the buyers take it on a trip and the thing bottoms out. The camper detached itself from the trailer. More than 3 days elapsed since the time of the sale, but they only drove it a few miles. The trial court blamed Mrs. Rey‟s driving. The welding was not done correctly. There was some evidence that the hitch was not put on the car to specs and this probably caused the thing to fall apart. The Supremes take up the case. Judge Tate says a plaintiff in redhibition needs to show the defect but does not have to prove the cause of the defect. There was lack of proof of any other reason. A favorable presumption results then that the defect existed at the time of the sale. When the plaintiff bought the trailer the seller installed the hitch. The manufacturer gave instructions. The ultimate distribution of weight was effected by this. Because the installation didn‟t meet the specs, the car fell apart. There was no evidence that the defect existed when the manufacturer sold the trailer to the defendant. Even though there were instructions, there was no indication of the dire consequences of not following the installation instructions to the letter. Foreman v. Jordan plaintiffs bought a house, they spend the first night in the house. They then realize that they had a termite infestation. the defect was hidden, the duty to inspect is only to look at the thing and see what is visible. you do not have to disassemble the thing Pursell v. Kelly the circumstances are not the same as in the Foreman case. Some damage was apparent and this was sufficient to put the plaintiff on guard. You can‟t get redhibition if you could have discovered the defect Anytime there is visible evidence of some kind of defect, the buyer is under a prudent duty of inquiring further. Rusty gutters and curling shingles should lead you to suspect a leaky roof. If you notice cracks int eh foundation, you should investigate further. When does redhibition apply? applies in a K to exchange, but not a K to sell because you can get rescission on the grounds of error of cause assignment of the right to manufacture crop heaters. There is no right to redhibition. You can only get warranty on eviction. Same concept applies to all incorporeals. Jefferson Bank: seller buys a car and assigns a note to the bank there is warning by the FTC saying that the maker of the note reserves for himself all the rights the person has against the seller. The car dealer sues for the note, the buyer reconvenes for redhibition. There was a warning-the bank was aware that the buyer of the car may have some claims against the seller. The buyer could reconvene for redhibition There is a contrary solution where the circumstances are different. Sims buys a car froma dealer and gives him a promissory note. The dealer assigns it to GM. GM sues to enforce the note. The buyer does not have an action against a lending institution. The buyer has no action in redhibition against the financier. This is different when the seller finances the note. Aucoin v. Fontenot: the buyer sells in quanti minoris. The seller raises redhibition. This is not allowed. The buyer is the only one who can claim redhibition. Kegler‟s v. Levy: new carpet is installed in a living room. It is defective. The buyer sues after the prescriptive period for redhibition. This applies to K‟s of sale and exchange. Carpet had to be cut and installed. This is more of a building contract. Therefore redhibition does not apply and the person gets a longer prescriptive period in breach. PRESUMPTION OF KNOWLEDGE a maker of a thing such as a cooper fashioning a copper bowl holds himself out as an expert in his trade. If he did the thing wrongly, he should know better because he is an expert. Important developments in French law-also extended to a professional seller like a car dealer who sells cars for a living and has considerable experience in evaluating cars. He is burdened with the same presumption as a manufactuer. LA courts have not gone so for although it was attempted in the Poirrier case. Media v. Mercedes Benz: Mercedes is a german company with a national distributor. Plaintiff buys a Mercedes and it is a lemon, but the seller had a dealership across from Bon Marche. He was out of business by the time the suit comes around. Plaintiff sues the national distributor. He acquires the same experience and should be under the same duty as a manufactuer even though he is not a manufacturer. sick on Thursday-Rachel sent the notes CHAPTER XIII RIGHTS OF THE SELLER Freidman v. Beaird: a buyer orders a huge amount of steel and recants. Here the seller exercises his choice. The seller may sue for specific performance or damages. The seller sues for damages. types of damages –the seller is entitled to the difference between the market price and the contract price at the time of the breach. The time to determine the price is not at the time of the sale because they are probably the same at this time. The court adopts a time that is fixed as soon as a certain event occurs. Damages can be recovered at the time of breach. In this case, the seller kept the goods rather than selling them. Due to the foibles of the market, the market price is far above the contract price. He can make a profit here as well as getting damages. The court says he is regarded for risk if the chances turn out in his favor. In some cases it if difficult to determine the market price. The stock market is linked through the internet, so determining price is easy. On the other hand, it can be more difficult to determine. The market price might have to be adjusted by the cost of the freight to ship it. Notes: in a case of non-delivery when the delivery date is postponed, damages are determined from the date of postponed Shreveport Bank v. Terrell: buyer refuses to take delivery and plaintiff sues for damages. If there is no market price for the goods, the seller can get the full anticipated profit from the goods. The full contract price. Godchaux v. Debuys LA courts grant specific performance ordinarily, not in exceptional circumstances Cotton v. Moises: (The Pedro case) this is a shipment from N.O. to Honduras. Buyer refuses to take delivery. The seller instructs the buyer to ship the goods to another party. The things are resold at a loss for less than the contract price. All sorts of defenses are raised. The price was excessive. The court rejects all the defenses. A seller has upon breach the right to make a sale outside and recover the difference even if he resold. This is especially the case where the goods are perishable. SECTION 3 DISSOLUTION FOR NON-PAYMENT OF PRICE Right to Dissolution: 2561: dissolution of sale for non-payment to the price. if the seller transfers the credit to another, the transferee has the right to dissolution. if the right is transferred to several people, all must concur for dissolution. The transferees can pay the share of the person who wont consent and subrogates himself a promissory note may represent the credit. The credit tracks with it the right to dissolve. The holder of the note has an action to dissolve the sale even if he is not the seller. If the buyer gave several promissory note and endorsed them away to each person, if they want dissolution they must all act together. If one refuses, the others must buy him out to bring suit. Prescriptive period for a promissory note is 5 years. It is 10 for dissolution. According to th article, if the promissory note prescribes, then the action for dissolution prescribes as well. 2562: Dissolution of the Sale of Immovables for non-payment, extension of time for payment if a seller sues for dissolution for non-payment, the court may grant an extension of 60 days max. The sale is dissolved if not paid within that time. 2563: parties may write in an express dissolution clause this article contains an important modification even when there is an express clause because even then the buyer is given an additional chance to pay as long as the seller has not given the buyer notice that he has availed himself of the clause OR has not filed suit for dissolution. 2564: Dissolution of sale of Movables if the seller seeks judicial dissolution, the buyer cannot get an extension of time Johnson v. Bloodworth unrecorded mortgage the court says the right to dissolve does not depend on recordation. What the court means is that the right to dissolve does not depend on recordation in the book of mortgages. There are two main books-conveyances and mortgages. It only has to be in the book of conveyances. The privilege of the unpaid seller is to be preserved by recordation. The right to dissolve is not the same as the privilege. They are entirely different things. The court is in agreement that the sale must be recorded in the conveyance records Schwing v. Arkansas there is an exchange between the Schwings and Molbert. Molbert transferred Munce and Munce to the defendants. The property that Molbert gave to Schwing is LOST. Schwing wants his property back. There is no price in money here. If you record an exchange in the public records there is no exchange in price, but this is similar to a cash sale. The third parties are not on notice that the property may be lost to eviction. Ex. Immovable property sold for $10K. The act of sale says paid in cash and it is recorded. What if $2K paid in cash and $8K promissory note for 2 years. The purchaser gets the property encumbered by the unpaid portion of the price. Since the exchange contains the presumption that the things exchanges are of the same value, the purchaser obtains the property unencumbered. Robertson v. Buoni: there were outstanding notes on the property. The buyer didn‟t pay them and disappeared. There was a mortgage on the property. They were to pay the purchase price and the mortgage. The seller knew that bank was going to repossess if the buyer‟s didn‟t pay. She wants to avoid foreclosure so she starts paying the mortgage notes and the taxes. She should be able to get dissolution. She doesn‟t file the act of sale with the complaint, just the unpaid note. The district court refuses dissolution because there may be a 3P with an interest who might be impaired. There was no 3P in the picture. The COA affirms. The Supremes reverse. The lower courts paid great heed to an earlier case that said dissolution should not be easily granted and some requirement have to be met. Lit says examine the magnitude of the failure, fault of the obligor, the danger for the obligee who may lose the price and the property. In this particular case, disappearing without notice if fault. This creates a danger for the oblige because the lady was about to lose her property. It also contained great expense for her. No third party will be impaired by the dissolution. The Supremes reverse and grant dissolution. Razorback v. Taylor Oil TC renders judgment $50M in damages and dissolves the sale of the patents. The plaintiff must pay for the price. The COA is practically horrified. You cannot get dissolution and the price. You only get one or the other. This is the most important concept. The huge sum of damages was grounded on a series of notes were prescribed and the other party raises the exception of prescription. Old law: Prescription for a seller who had a note for the price could let the note prescribe and then still sue for dissolution after 5. Templeman v. Pegues: p.819. Before the revision, there was an attempt to correct the situation. They said the right to dissolve was accessory to the note. The Supremes later said, accessory said it is transferred together, but it does not touch on a period of prescription 2561: if a note or other instrument is given, the right to dissolve prescribes at the same time as the instrument. Vendor‟s Privilege: immovables there is no problem because there is a code article. The sale must be recorded in the book of mortgages. There is no need to record in book of mortgages in order to dissolve as long as it is in the book of conveyances. 3227: there is no recordation for movables. The seller preserves the right to dissolve as long as it remains in the hands of the buyer. No dissolution for the sub- vendee. However, if the buyer resold on credit, the privilege that was lost attaches to any balance that the sub-vendee may owe to the vendee for the price. This is important where the buyer turns a movable into a component part. Ex. A door is built into the residence and it becomes immovable. The code gives a solution. The privilege of the unpaid vendor becomes a privilege on the immovable itself and 1 acre on the land where the movable rests. Sliman v. McBee: there was an intra- family transaction where mom sells to daughter and son in law. the act says the balance of the price will be a personal obligation of the buyer‟s. No lien will encumber this particular tract. Buyers default and the parties compromise but the buyers again default. The idea was to develop the subdivision at a profit, but it didn‟t happen. Since the seller was disappointed twice, now she wants to exercise her right to dissolve. Even though there was no lien, there is still a right to dissolve. In passing, the court said in dicta, the right to dissolve may be renounced provided this renunciation or waiver is express. Just saying no lien does not mean no right to dissolve. Graves v. Joyce no other decision has followed this case, but it is important to keep in mind. Sale of a large tract of land that is clearly divided into 15 smaller tracts. Each one is perfectly described. Since the sale is on credit, there is a mortgage granted by the buyer to the seller. However, the act of sale clearly recites that lots 3-8 are excluded from the mortgage. So that the mortgage then covers 10 portions. The defendants disappear and only come back when a default judgment has been rendered. The court allowed enforcement of the mortgage over the whole tract including the portions that has been excluded. Even a defendant in default has a right to such correction. lien is a common law notion. If there is a mortgage in LA there is no lien. It is simply surplusage Defendants object that the five portions were excluded, the decision declared that the seller still preserved the lien. The court makes a Solomonic decision. A 3P examining the records and learning about the exclusion or release of certain property from mortgage, would be inclined to believe that the lien would be released as well. Although the right to dissolve is implied in every sale, no lien is implied. Note case: George v. Knox: property is sold and notes are given for the price. They are for a staggered maturity one year after the other. Prescription on the whole starts upon default on payment of the first one. Default accelerates maturity of the following notes. Holder of the notes allowed prescription to elapse on the first or second. Seller brings suit on the third. To avoid prescription, the holder remits payment on the amount of the first 2 notes. Nothing is owed concerning those notes and you can get accelerated payment. The court said no way. If you allow the first note to prescribe, you are not going to collect on any of the notes. CHAPTER XV LESION In Modern codes, lesion is preserved only in codes of the French family and not in all of them. It is an institution that is going fast out of fashion. No articles on lesion for minors because they have defense of lack of capacity Movables-simply a price that is not equitable or vile We have the 3 Roman limitiations 2589: o rescission when price is less than ½ of the fair market value o can be claimed by the seller only o applies to corporeal immovables o does not apply to judicial sales o can invoke lesion even if seller has renounced the right to claim it 2590: 2591: remedy: the buyer may even return the property to the seller or may keep it by paying a supplement equivalent to the difference in the contract price and the reasonable market value 2592: if buyer elects to return, he must also return the fruits from the time the demand for rescission has been made. The seller owes the price from the same time. If the buyer elects to pay the supplement he owes interest on the supplement from the time demand for rescission has been made. 2594:Lesion, action against vendee who has resold the immovable o seller may not bring an action for lesion on the 3P who bought from the original buyer o the seller may recover the profit made by the buyer. It may not exceed the supplement that the buyer would have paid the seller had he elected to keep the property. 2595: Preemption for action for lesion o preemptive period of 1 year from time of sale o not prescription, preemptive 2596: o there is a sale, the price is not the right one, the buyer grants a servitude to a 3P. o if the seller sues for rescission, it cannot impair the rights of the 3P who acquired the servitude o the buyer does owe the seller the dimunition that resulted from the servitude. o it still can‟t exceed the price of the supplement that the buyer would have had to pay had he elected to keep the property. 2597: Condition of the property o seller must take the property as it is o if the buyer benefits from the deterioration, then the seller should be reimbursed for that price 2599: the buyer may retain possession of the immovable until the seller reimburses the price and the recoverable expenses. 2600: Multiple sellers o if sellers own a piece of property in indivision, each one may sell his share separately o each may bring action for rescission of his share in ownership of the property o this is the same if the seller dies with heirs. McWilliams v. McWilliams: o there wan never an intention to pay the sale price. It was a simulation. It was a donation in disguise. Therefore, there can be no lesion where no price is paid. It does not operate in a gratuitous contract. O‟Brien v. Legette: property is sold for 12K even though the value was $34K. This is less than ½. the buyer resold to the American Box Co. for $30K. The plaintiff sues the 3P. At that time there was no express language in the code forbidding this. The court finds according to the French code you can bring lesion against a subvendee, but never in the law of LA even in the first digest. This was not an oversight. it was a policy choice. Therefore no action. The seller should not left holding an empty bag. 2597: If a buyer turns a deterioration to his profit, he owes a profit. If he sells the whole thing, doesn‟t this amount to a deterioration of the whole. Certainly he owes the deterioration of that in the amount he sold the property for. 2594 basically says this now. 2591 gives the buyer a choice. A judgment allowing rescission contains the choice to the buyer. Within 30 days defendant has to elect which one. A judgment creates an obligation. This is an alternative obligation. If the buyer as obligor resells the property, he loses the alternative performance. He is bound to pay the seller the supplement of the price-described in 2591-difference between the price paid and the fair market value. Clark v. Davis: timber land is owned by Mrs. Palermo. She sells part to B and another part later to C. C sells to D. They sell for a low price/lesionary. The buyer‟s transfer to Palvest. The subvendee makes of profit. there was also an obligation to build a road in order to get the timber out. It this action strictly personal or heritable? If it is heritable it is assignab le. Court relies on an earler case where Creditors of the seller were allowed to bring the sellers action, subrogating themselves to the right of the seller. They are perfectly entitled to do this if the seller declines to do it himself. If creditors may bring the sellers action, for greater reasons heirs of the creditors should be allowed to bring this action. Transferees of the seller should be allowed to bring this action. Action for lesion is not strictly personal. It is heritable and assignable. This is peculiar-when a seller sells he sold the timber as a separate item, but A continued owning the land. Speculating: may a seller who sold the whole thing for less than ½. May be simply assign his action for a price? yes, of course. Lesion was quite clear. What should plaintiffs recover? The court determines that it was about $13,000. The main expert said at the time of the sale, the land including the timber was about $48,000. Webb Scott: even if you have knowledge of selling for less than one half, you can still get lesion. it is not a matter of error. it is a matter to be determined objectively to determine if the price is below ½ the market price at the time of the sale even if she intended to donate the balance of the price, no matter. She can still get lesion if the formalities are not met. simulation calls for a basic article, 1970, when the recited cause of the obligation is not true, the obligation is valid if another cause can be shown. Hypo: the sale is a simulation, you might be able to prove it as a valid donation through a notarial act. Can you use parole to show that this is a remunerative donation. In general terms you can use parole, but NOT in the case of lesion. This is an important limitation. The court concludes that you cannot prove that a certain transaction is a disguised donation when a price has been paid. If there is a price it is a sale. There is no doubt of the parties intention. Assume a seller is ready to sell immovable property to his favorite nephew for less than market value because he really does intend a donation for the remainder. If uncle wants to make a gift of the balance, then he needs to execute a notarial act to donate the remainder in a separate act a few days letter. The court would ha ve no other way out to make it valid. Succession of Rogers v. Read: the old man was 95 when he sold his home surrounded by a few acres for $4,000. it is worth considerably more and lesion is brought by the judicial admin. of the succession. Lesion is granted. defendant raises several errors. Action for lesion is NOT strictly personal. it is heritable and assignable. It is NOT limited to forced heirs. It extends to collateral heirs as well. It is true that certain actions are limited to forced heirs. Ex. While alive, ancestor made a donation that encroached on the legitime of the other heirs. He makes a donation to favorite child and there is not enough to meet the legitime of the other children. Here only the forced heirs could allege the nullity because there is a conflict of interest between the forced heirs and the ancestor. Even though forced heirship has been curtailed, it is still enforced for kids under 23, winos and junkies. In the case of lesion, the heir is suing a 3P not the ancestor. He steps into the shoes of the ancestor. Any heir can do this whether forced or not provided the plaintiff is actually an heir. Disguised donation-renumerative donation. The frailty of the health of the ancestor, occasionally defendant and father would bring the groceries to the old man‟s home. This is not the kind of services that would call for a donation. Estimation of value: this is of great practical importance. If you claim the defendant bought for less than market value, the plaintiff has the burden of proving the market value. The trier of fact has great discretion. Judges used to draw an average between the experts. Now they side with the witness who is the most sincere. The defendant has to return fruits of the thing as well. Lesion in cases of exchange. all the rules of sale apply to contracts of exchange exchange of movable thing for an immovable thing: only the party who gave immovable is the party who is allowed to bring lesion if the movable received in exchange is not worth more than ½ the price of the immovable. rather than less than ½, it is more than ½. the better translation is that if the movable thing is worth less than one half the value of the immovable thing. Petosia v. Semple a lot is traded for a used automobile. The witnesses who attest to the value of the immovable property are neighbors. Lot is $750. Car is $250. The car is less than ½ of the lot, so lesion. 2666: the situation contemplated is immovable for immovable where the buyer also pays the balance in money. the balance can be corrected in money and movables it is only the person who paid the balance can bring the action for lesion. the presumption is that the value of the properties in an exchange is that they are of equivalent value. Hypo: there is proof that one plot is worth $1,000 and the other is worth $1,000 as well and the owner of that plot pays a balance of $1510. This exceeds the value of the property by more than ½. He can bring lesion because he paid $2510. Saizan v. Century 21 the party who does not pay the balance does not have an action for lesion. The action is dismissed. PART II LEASE 2669-2704 the revision on lease is about to go to the legislature and likely we will have a different law. we will go over the basic principles that will likely be the same. A lease follows the provisions on obligations and sales with a few exceptions. 2671: price-should be certain and determinate, but can be paid in money, but can be commodities, or portion of the fruits yielded by the thing. 2672: Price can be determined by a 3P. It must be a designated party. They can‟t say just an arbitrator or estimator, there is no lease. This is the same where the designated person cannot come up with a price, there is no lease. This is different from sales, because there the court can fix the price. 2673: for the time being an employment K is a lease of services. 2674: one party gives the enjoyment of the thing and the other pays a certain stipulated price. 2676: Letting out of things: house, movables, predial estate Person who grants the lease is the owner or the lessor and the person to whom a lease is made is lessee or tenant. Lease of corporeal things: movables as well as movables may be leased except things that are destroyed by use. Lease of incorporeal things: you can pay for a right of passage. Hypo: you own immovable property. There is a legal servitude of passage through part of your property. There is a shorter route. You can lease this right of passage. Usually the state leases this to private corporations. Servitude: a right of servitude cannot be leased separately from the property to which it is annexed. No formal requirement for the validity of the lease. It does not have to be written. It can be verbal. If there is no duration for the lease of a house or apartment, it is by the month. The party desiring to put an end must give notice to the other 10 days in advance of the end of the month that has begun to run. 2688: Tacit reconduction The maximum duration of a lease is 99 years or 3 generations. This is still enforced in France, LA and IL and OH where the same French statute is the ground to establish the max. duration of a lease. Until the 70‟s that kind of lease was relatively popular. 2690: if you give a security deposit on a lease, you may have a co-signer. In a reconduction, the security shall not extend to the lease being prolonged. 2691: if notice has been given, the tenant may not claim that there has been a tacit renewal if he continues in possession. 2683.1: if a commission is owed by the lessor to a 3P for perfecting the lease of immovable property, the commission and to whom it is owed shall be clearly stated in the lease agreement. This is an empty rule because there is no sanction attached and a lease does not have to be written. Obligations of the Lessor: 2692: delivery maintain the thing peaceable possession 2693: delivery and necessary repairs bound to deliver in good condition and free from any repairs he has to make those during the lease that may become necessary 2694: if the lessor does not make the repairs, the lessee may make them and deduct the price from the rent. 2700: There has been some conflicting jurisprudence on this article. This concerns a thing leased that is in want of repair. If the whole rent is remitted, there is no longer a lease. This seems to be a fair interpretation. The lessee would have to suffer great inconvenience if the left the premises and was bound to come back. 2701: if there is a discrepancy in the quantity of the estate leased if the lease stated more than was actually there you can get an abatement use the articles on the title of sale 2702: payment of taxes lessor has to pay taxes, rents and other duties 2703: 2704: Disturbance by a 3P who claim rights to the thing this is a form of eviction it can be a person who comes forth and says he is the owner or a suit against the lessee. The lessee is supposed to call on the lessor to defend him. In the case of a suit, as soon as the lessor responds to the call in warranty, the lessee shall be dismissed from the suit. 3440: deals with precarious possession and it may not exist for very long. this article allows a lessee to act on his own in a possessory action without calling in the lessor a lease gives the lessee a personal right not a real right. This means lessee does not have a right in rem. This rule, 3440, that allows lessee to raise these actions, then it would seem that this article gives the lessee more than a personal right. Initial Write-ups: Personal nature of the right of the lessee. In our system it is somewhat different. The adoption of 3440 is practically contemporary to the amendment of the code Napoleon. Civil Law: You rent property for 10 years. The property burns down. The lease terminates. In Common law: at least for 10 years you are a quasi-owner of the property. Therefore if the property goes up in flames the lessee bears the risk and he has to continue paying rent. Grave v. Scott: this is a suit for eviction where the lessee stopped paying rent. the lessor reconvened for a possessory action. He was already in peaceful possession. He may not contest the title of his lessor. A lessee who is being sued by the lessor is still in peaceful possession. Even if eviction is sought, failure to pay rent is the lessee‟s fault. Levee Board v. Dalton: Dalton leased an extension of land to use for trapping animals the K establishes rent of $1000 per year payable in advance. He paid for the first. The second year becomes payable. Alpha intercepts him and says I have a lease to the land from another Board. Dalton went to the commissioners and said look here, this other person has a claim, ain‟t paying you. The Board files suit. Dalton is contesting the title of his lessor. However, his peaceful possession has been disturbed. He has a right to withhold payment of the rent. This is the same as a sale where there is a buyer who owes payment on term and is threatened with eviction. Note: according to Dalton, he was not actually kicked out, but he was threatened with eviction because of the claims of Alpha. In French law, actual suit is the only thing that suffices. Lesseigne v. Cedar Grove plaintiff bought a property encumbered by a recorded lease. The lessee is a certain Nagle. He is supposed to pay rent in advance and represented by non- negotiable notes. Although ¶ bought in January, it went from March to March. When ¶ bought, Nagle had already delivered notes to defendant for the year that the sale took place. ¶ was entitled to the rent since he bought. Defendant kept the notes. There was no proof in the act that defendant was to keep the notes. The collection of rents is the right of the owner. The general article on fruits. Civil fruits accrue day by day. This is why the right to rent belongs to the owner. Summers v. Clark there was an unrecorded lease. They were to be paid in advance with negotiable notes. at the time the property is attached the tenant had already delivered for the ensuing year. In case of an attachment, the sheriff has to do a certain procedure. He decided to garnish rent. The court said no need for you to do that. if you attach property, then you are also attaching the fruits of the property. On the other hand, you cannot execute a promissory note by garnishing the maker. The tenant complains that he ahs already paid. The sheriff wants him to pay again. We‟ve got a problem. If the lease is not recorded, it is not effective against 3P‟s. A creditor is a 3P and the lease was not effective to the ¶ creditor. The court says there is no contradiction. Upon attachment, the tenant would have regarded the lease as dissolved and left. Where commercial leases are involved rent is paid in notes. Notes that are negotiable may be endorsed to someone else. The tenant says, I owe payment to whoever holds the notes, not to the lessor. The courts holds that in some instances, creditors may have rights that the debtor has already lost or does not at the moment have. Ex. A sells property to B. It is not recorded. May creditors of A attach? Yes. A has no rights against B. His creditors might have a right even though the seller no longer has the rights. The lesson: you better record your lease so you are not exposed to having to pay twice. Coyle v. Goeghegan: there was a recorded lease on the property. It was in effect during the 14 months that they owned the property. After they resold it they realized that they did not collect the rent. Rent was payable in negotiable notes. Through the records, the party is on notice that the rent might already be paid and not in possession of vendor and is payable to whoever holds the notes. This is analogous to the creditors? Calhoun v. Gulf Refining: lease says if in the future I acquire any additional interests, Lessor will lease them to lessor. However, the property is sold and the new owner acquires a new mineral interest. The lessor wants it from the new owner. The court makes a subtle distinction between rights that would pass with the sale and rights would not pass to a new owner because they are personal to the former owner. The court concludes this was a personal obligation that is not transferred to the new owner through the sale. Canco: when in an act of sale, the buyer says he is assuming a position of lessor, even if the lease is not recorded, the public records doctrine is not applicable when the purchaser assumes Faroldi v. Nungesser: plaintiff had rights in quasi contract but it was not a lease there was no acceptance Juneau v. Laborde: this is a case on co-ownership. Property now owned by heirs. One is now operating the farm. You cannot deny another co-owner the use of the thing. If one co-owner extracts fruits, all co-owners are entitled to fruits in proportion to their share after the costs of producing the fruits are paid. Chaney v. Whitney: surviving widow and her married daughter and her husband are living in the house other heirs want the husband of the sister to pay rent. The court says no way, if you are an owner in indivision you have a right to use the thing and so is your family. Myers v. Burke: there is an alleged lease for $1 per year. The new owner takes over and raises the rent because there is no recordation. The court said this was not a valid oral lease because the price is out of proportion with the value of the thing. All the person has was a license to occupy the premises. Armour v. Shongaloo Lodge plaintiff‟s father was the leader of the lodge. The lodge got $1500 when the state confiscated property for public right of way. However, they lost their lodge. So the father and the lodge came to an agreement where papa would build a building. He would maintain the downstairs and the lodge would get the upstairs. The lodge maintained their end of the deal, but there was no upkeep downstairs. 20 years later, Papa is dead. Sonny says get out and the defendants reconvene for sonny to maintain. There was no rent fixed so it was not a lease. However, since the contract was executed by a notarial act, then it could be a donation. The judge says no way, the parties called it a lease but it is invalid. Well there was yet another option- maybe it was a paid up lease. The lodge paid no price in money, so no paid up lease. According the COA, the contract was null. There was a strong dissent. The majority overlooked the weighing of the relative values according to the time the contract was made. Building the second story is not a value equivalent to the plaintiff allowing the use, but at the time the contract was entered, value was quite different and perhaps the transaction was quite fair. The requirements for a valid lease are quite strict, a price must be paid in money or part money and part commodities. You own several locales in a shopping center. You can lease to a dentist. If you agree that he will not pay rent, but take care of your teeth and those of your 11 LA children. This is a valid contract but not a lease. Form of Lease Hammonds v. Buzbee: suit for eviction. tenant claims he entered into a lea se through an agent. Rule of Equal Dignities. No written mandate contract. However, an oral lease is perfectly valid. Therefore the k of mandate did not have to be in writing. Laroussini v. Werlein: parties may bind themselves orally before the writing is executed. This is a thorny problem. If the parties have agreed that they won‟t be bound until a writing is executed, then they won‟t be bound. This is the lease of commercial property in the middle of Canal Street. There has been a contract for 5 years for $700 and the lessor executed promissory notes. When the term is drawing near, the parties negotiate an extension of another 5 years for $750 a month. The lessor brings the notary to finalize and the lessee says no way. Since the lease does not have to be in writing, then the notarial act should have been just a formality. The court takes a practical approach. They look to the original lease. There were clauses for automatic dissolution, acceleration of payments in case of default, destructio n for fire and the tenant would be bound to come back. Hmmm…these are pretty serious terms. Reasonable parties would want them to be in writing. The reasonable intent is not to be bound until a writing is signed. Note case: Barelli v. Szymanski: mortgage on leased property. The owner defaults on the mortgage and the mortgagee forecloses. The lease was recorded after the mortgage and paid rent in advance. The mortgagee buys the property through a sheriff‟s sale. Ordinarily as a buyer he would be entitled to the rent and he may demand that the tenant pay the rent again or leave the premises. In this particular case, however, since it was a sheriff‟s sale you buy free of encumbrances. Thompson v. Flathers: there was an agreement in the mortgage that the mortgagor was not to alienate the property. The mortgagor put a lease on the property. The mortgagee could cancel the lease and take possession of the property. Lit says this is debatable. The mortgagor is binding himself not to sell in the non-alienation pact. This is an agreement not to sell. A lease is not an alienation. Reconduction/Renewal of Lease LeBlanc v. Barielle: the grantor of the option should know what the choices are for the grantee. Lingle v. Wainwright: An option for lease on the Column‟s Hotel. The renewal was not made in the correct way. The new rent was $650 while for the first year it was $250 for the first year. For a few months the lessor took the rent. Then he decided he wanted him out. The court said no way. The lessee was under the warranted belief that he had a new lease. The silence of the lessor from accepting the rent is banned from denying the existence of the lease. SALES AND LEASE CODE ARTICLES I. NATURE OF THE CONTRACT OF SALE II. PERFECTION OF THE CONTRACT OF SALE a. PRICE b. TRANSFER OF TITLE AND RISK III. PROMISE OF SALE a. OPTION b. RIGHT OF FIRST REFUSAL c. CONTRACT TO SELL IV. FORM V. THINGS THAT MAY BE SOLD a. LITIGIOUS RIGHTS b. MOVABLES c. IMMOVABLES VI. OBLIGATIONS OF THE SELLER a. DELIVERY b. WARRANTY AGAINST EVICTION c. WARRANTY AGAINST REDHIBITORY VICES AND DEFECTS VII. RIGHTS OF THE SELLER CODE ARTICLES Art. 2438. Rules of other titles In all matters for which no special provision is made in this title, the contract of sale is governed by the rules of the titles on Obligations in General and Conventional Obligations or Contracts. Art. 2439. Definition Sale is a contract whereby a person transfers ownership of a thing to another for a price in money. The thing, the price, and the consent of the parties are requirements for the perfection of a sale. even if the price has not been paid, you can still have a completed sale. That occurs in credit sales or bouncing checks. o credit sales can be distinguished from conditional sales where title remains with the seller until the whole price or an agreed on portion is paid by the buyer. Our courts hate this and do not countenance this. Now we have the lease of movables act which resembles a conditional sale. So from now on, the transaction is valid. o bond for deed contracts: this is a scheme for immo vable property where the seller gives title to the property after the buyer pays a certain amount. There is a statute which allows this. It requires that the purchase price be made into an escrow account rather than to the seller if there is a mortgage on the property. Also requires a written guarantee that the bank will release the property, but not always followed. However, a price must be fixed either in a sum certain or by method agreed on by the parties. It can be left to a 3rd person. If the parties fail to agree on or to appoint such a person, the price may be determined by the court. o there can be lack of agreement on the price when it is not clear in the mind of the parties OR where there has been a mistake. There must be a meeting of the minds. In the case where the price is sufficiently certain even though the parties can‟t come to an overall conclusion, there is a sale especially when the sale price is very high and they price difference is low. o when a party is a usual supplier, there is an implied agreement as to the price-a reasonable price at the time and place of delivery. Look to price lists or quotes at the place of delivery or at the nearest market. o If the parties list a floor and a ceiling of the price then it is valid. However, saying the price will fluctuate with the fluctuation of the market is too vague There must be an intention that the price will be paid. the seller can reserve for himself a security interest in the goods sold, however, the transfer of ownership takes place at the time of the sale. This occurs where the parties resort to a simulation and there is no sale Art. 2464. Price, essential elements The price must be fixed by the parties in a sum either certain or determinable through a method agreed by them. There is no sale unless the parties intended that a price be paid. The price must not be out of all proportion with the value of the thing sold. Thus, the sale of a plantation for a dollar is not a sale, though it may be a donation in disguise. Art. 2465. Price left to determination by third person The price may be left to the determination of a third person. If the parties fail to agree on or to appoint such a person, or if the one appointed is unable or unwilling to make a determination, the price may be determined by the court. Art. 2466. No price fixed by the parties When the thing sold is a movable of the kind that the seller habitually sells and the parties said nothing about the price, or left it to be agreed later and they fail to agree, the price is a reasonable price at the time and place of delivery. If there is an exchange or market for such things, the quotations or price lists of the place of delivery or, in their absence, those of the nearest market, are a basis for the determination of a reasonable price. Nevertheless, if the parties intend not to be bound unless a price be agreed on, there is no contract without such an agreement. Art. 2440. Sale of immovable, method of making A sale or promise of sale of an immovable must be made by authentic act or by act under private signature, except as provided in Article 1839. requires a writing see CC 1839 for exception of an oral sale when delivery has taken place and transferor recognizes the transfer under oath Art. 2442. Recordation of sale of immovable to affect third parties The parties to an act of sale or promise of sale of immovable property are bound from the time the act is made, but such an act is effective against third parties only from the time it is filed for recordation according to the laws of registry. Art. 2443. Purchase of a thing already owned A person cannot purchase a thing he already owns. Nevertheless, the owner of a thing may purchase the rights of a person who has, or may have, an adverse claim to the thing. Ex. in a public sale, if the seller buys the property it is not a true sale Art. 2444. Sale of immovable by parents to children; disguised donation The sale of immovable property by parents to their children may be attacked by the forced heirs as a donation in disguise if those heirs can prove that no price was paid or that the price paid was less than one fourth of the value of the immovable at the time of the sale. simulation when no price has been paid or the price is less than ¼ of the actual market value. Art. 2447. Sale of litigious rights, prohibitions Officers of a court, such as judges, attorneys, clerks, and law enforcement agents, cannot purchase litigious rights under contestation in the jurisdiction of that court. The purchase of a litigious right by such an officer is null and makes the purchaser liable for all costs, interest, and damages. Art. 2448. Things that may be sold All things corporeal or incorporeal, susceptible of ownership, may be the object of a contract of sale, unless the sale of a particular thing is prohibited by law. you may sell credit rights or litigious rights these may be assigned as well as long as the buyer of the litigious right is not an officer of the court Art. 2450. Sale of future things A future thing may be the object of a contract of sale. In such a case the coming into existence of the thing is a condition that suspends the effects of the sale. A party who, through his fault, prevents the coming into existence of the thing is liable for damages. Merchant places an order for a thing that has to be manufactured. If the thing never comes into existence, then there is no contract. However, if it is the manufacturers fault, he is liable for damages. Art. 2451. Sale of a hope A hope may be the object of a contract of sale. Thus, a fisherman may sell a haul of his net before 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. in the sale of a hope the buyer bears the risk of the thing never coming into existence Art. 2452. Sale of the thing of another The sale of a thing belonging to another does not convey ownership. the buyer has a claim against the seller for damages Art. 2453. Sale of thing pending litigation of ownership When the ownership of a thing is the subject of litigation, the sale of that thing during the pendency of the suit does not affect the claimant's rights. Where the thing is immovable, the rights of third persons are governed by the laws of registry. see lis pendens LEGAL PROHIBTIONS ON SALES executors may not buy the property of the children they supervise. If he has another person buy the property and then makes a transfer to him but there is no price or the price isn‟t paid this is a simulation. The sale is a nullity and the heir get their property back without having to pay contracts between attorneys and clients have strict rules to avoid conflicts on interest. If they do not get the proper consent, the sale is a nullity unemancipated minors, interdicts and persons deprived of reason do not have capacity. Even when there has been no judicial declaration of incapacity a person who is clearly deprived of reason may annul the sale. If there has been a judicial declaration, it is not retroactive to the date of petition-only after the decree has been entered. HOW THE CONTRACT OF SALE IS TO BE PERFECTED Art. 2456. Transfer of owners hip Ownership is transferred between the parties as soon as there is agreement on the thing and the price is fixed, even though the thing sold is not yet delivered nor the price paid. ownership is transferred on consent alone Ex. Dave is a shirtmaker. Lit places an order for 100 and Dave says, thanks, I‟ll deliver. Lit is the owner. contrast with 2467: where in cases of fortuitous events and non-conforming goods, risk transfers on delivery. Risk is distinct from ownership. Art. 2457. Transfer of owners hip; things not individualized When the object of a sale is a thing that must be individualized from a mass of things of the same kind, ownership is transferred when the thing is thus individualized according to the intention of the parties. look at the place of individualization to determine the choice of law. A contract made by parties in different jurisdictions is determined by where the acceptance is made look at the finality in individualization. Where the seller can still change his mind, the individualization is not complete delivery to a carrier is not the only way to finalize. This is an objective appropriation and there is no doubt that the goods have been individualized. However, if there is a situation which limits the freedom to sell the goods to someone else, there is some finality there the parties are free to determine when the object will become the buyers property. Just taking an order is not a sale. it is not a true contract until the order is appropriated or specified. Art. 2458. Sale by we ight, tale or measure; lump sales When things are sold by weight, tale, or measure, ownership is transferred between the parties when the seller, with the buyer's consent, weighs, counts or measures the things. When things, such as goods or produce, are sold in a lump, ownership is transferred between the parties upon their consent, even though the things a re not yet weighed, counted, or measured. produce is usually a lump sale buying a whole crop from a farmer is a lump sale make sure you have a lump price for it to be a lump sale Art. 2460. Sale on vie w or trial When the buyer has reserved the view or trial of the thing, ownership is not transferred from the seller to the buyer until the latter gives his approval of the thing. contrast with the right to inspect where a contract is concluded even though the buyer has a right to inspect. Conformity of goods to a sample is not a suspensive condition. When the buyer takes a loss, he may sue for damages when a contract has been concluded. In this case, where the sale is subject to a condition of approval, ownership is not transferred until approval. if the buyer is dissatisfied there is no sale. The buyer has an overriding obligation of good faith. Sales my mail are sales on approval. You have an absolute margin of discretion. In commercial transactions, the margin is considerably more reduced. The place where the contract is accepted is the place where the contract is perfected. Important in choice of law problems like vendor‟s privilege that apply in LA and not elsewhere Art. 2461. Inclusion of accessories The sale of a thing includes all accessories intended for its use in accordance with the law of property. Art. 2463. Expenses The expenses of the act and other expenses incidental to the sale must be borne by the buyer. WHO BEARS THE RISK AFTER THE SALE IS COMPLETED Art. 2467. Transfer of risk The risk of loss of the thing sold owing to a fortuitous event is transferred from the seller to the buyer at the time of delivery. That risk is so transferred even when the seller has delivered a nonconforming thing, unless the buyer acts in the manner required to dissolve the contract. parties are free to determine when risk will transfer and depart from the basic principles risk is transferred on delivery while ownership transfers on consent risk of loss is damage or total destruction because of a fortuitous event Art. 2613. Things in transit, owne rship When, according to the terms of the contract, the seller sends the things to the buyer through a common carrier, the form of the bill of lading determines ownership of the things while in transit. When the bill of lading makes the things deliverable to the buyer, or to his order, ownership of the things is thereby transferred to the buyer. When the bill of lading makes the things deliverable to the seller, or to his agent, ownership of the things thereby remains with the seller. When the seller or his agent remains in possession of a bill of lading that makes the things deliverable to the buyer, or to the buyer's order, the seller thereby reserves the right to retain the things against a claim of the buyer who has not performed his obligations. bill of lading is an instrument of title and a negotiable instrument if the seller is not confident that the buyer will pay, he can make the bill of lading deliverable to himself as a security device and hires an a gent to go to the buyer and say-pay up and you get the bill of lading. In such a case, the buyer is the owner. Art. 2616. Things in transit, risk of loss When the contract requires the seller to ship the things through a carrier, but does not require him to deliver the things at any particular destination, the risk of loss is transferred to the buyer upon delivery of the things to the carrier, regardless of the form of the bill of lading. When the contract of sale requires the seller to deliver the things at a particular destination, the risk of loss is transferred to the buyer when the things, while in possession of the carrier, are duly tendered to the buyer at the place of destination. When the parties incorporate well established commercial symbols into their contract, the risk of loss is transferred in accordance with the customary understanding of such symbols. the latest moment that you can charge a seller with risk is delivery if the goods are deliverable only to Baton Rouge rather than a specific place like the buyer‟s store at the mall of Louisiana, then risk is transferred to the buyer on delivery to the carrier. In the latter case, risk transfers when tendered to buyer by the carrier. the creditors of the seller may seize the goods while they are in transit Art. 2617. Payment against docume nts In all cases where the parties have agreed that the seller will obtain a document showing that the things have been delivered to a carrier or a depositary the buyer must make payment against tender of that document and others as required. The seller may not tender, nor may the buyer demand, delivery of the things in lieu of the documents. the piece of paper is sometimes more important than the goods. The buyer may be a merchant who is reselling to another buyer. He may endorse the bill of lading to another buyer. Art. 2604. Buyer's right of inspection The buyer has a right to have a reasonable opportunity to inspect the things, even after delivery, for the purpose of ascertaining whether they conform to the contract. in the case of inspection, ownership does not transfer until the things are inspected and accepted. If there is no acceptance, then no contract if the goods to not conform it is better to conclude that there is a contract with a breach rather than a suspensive condition. If there is a breach, the buyer can get damages. the parties may agree that a contract is not concluded until a buyer inspects. In the case of the creosote poles, the inspection WAS a suspensive condition. The risk of loss was on the seller. Usually, the right to inspection is only to determine whether the seller performed. It does not suspend the effects of the contract. THE NATURE OF THE CONTRACT OF LEASE AND OF ITS SEVERAL KINDS Art. 2669. Lease or hire, definition. Lease or hire is a synallagmatic contract, to which consent alone is sufficient, and by which one party gives to the other the enjoyment of a thing, or his labor, at a fixed price. Art. 2670. Essential elements of lease. To the contract of lease, as to that of sale, three things are absolutely necessary, to wit: the thing, the price, and the consent. Art. 2671. Price, necessary and permissible elements. The price should be certain and determinate, and should consist of money. However, it may consist in a certain quantity of commodities, or even in a portion of the fruits yielded by the thing leased. Art. 2672. Determination of price by third person. The price, notwithstanding, may be left to the award of a third person named and determined, and then the contract includes the condition that this person shall fix the price; and if he can not or will not do it, there is no lease. The contract would be null if the price were left to be fixed by a person not designated. THE LETTING OUT OF LABOR OR INDUSTRY Art. 2745. Kinds of lease of services or labor. Labor may be let out in three ways: 1. Laborers may hire their services to another person. 2. Carriers and watermen hire out their services for the conveyance either of persons or of goods and merchandise. 3. Workmen hire out their labor or industry to make buildings or other works. this is a building contract note: type of damages and prescription are different from a contract of sale o building contracts have 10 year prescription and can only get damages o sales-prescription is short and the remedy is redhibition- you return the thing and get your money back. This is the doctrine of antecedent tender In determining whether it is a sale or a building contract, use the VALUE TEST: o value of the goods compared to the cost of installation o if the goods are more expensive- it is a sale o where the cost of installation is higher it is probably a lease/building contract You can also look at whether the parties negotiated before the thing came into existence. If so, it is a lease a party contributes, labor, materials, or skill Be careful of instances where the sale has a condition of installation. If the condition is not fulfilled there is no sale Art. 2758. Destruction of work before delive ry, liability of contractor furnishing materials. When the undertaker furnishes the materials for the work, if the work be destroyed, in whatever manner it may happen, previous to its being delivered to the owner, the loss shall be sustained by the undertaker, unless the proprietor be in default for not receiving it, though duly notified to do so.* MANDATE Art. 2989. Mandate defined A mandate is a contract by which a person, the principal, confers authority on another person, the mandatary, to transact one or more affairs for the principal. Art. 2997. Express authority required Authority also must be given expressly to: (1) Make an inter vivos donation, either outright or to a new or existing trust or other custodial arrangement, and, when also expressly so provided, to impose such conditions on the donation, including, without limitation, the power to revoke, that are not contrary to the other express terms of the mandate. (2) Accept or renounce a succession. (3) Contract a loan, acknowledge or make remission of a debt, or beco me a surety. (4) Draw or endorse promissory notes and negotiable instruments. (5) Enter into a compromise or refer a matter to arbitration. (6) Make health care decisions, such as surgery, medical expenses, nursing home residency, and medication. Art. 2997. Express authority required Authority also must be given expressly to: (1) Make an inter vivos donation, either outright or to a new or existing trust or other custodial arrangement, and, when also expressly so provided, to impose such conditions on the donation, including, without limitation, the power to revoke, that are not contrary to the other express terms of the mandate. (2) Accept or renounce a succession. (3) Contract a loan, acknowledge or make remission of a debt, or become a surety. (4) Draw or endorse promissory notes and negotiable instruments. (5) Enter into a compromise or refer a matter to arbitration. (6) Make health care decisions, such as surgery, medical expenses, nursing home residency, and medication. Art. 3133. Pledge, definition. The pledge is a contract by which one debtor gives something to his creditor as a security for his debt. Art. 3152. Delivery and possession of thing pledged. It is essential to the contract of pledge that the creditor be put in possession of the thing given to him in pledge, and consequently that actual delivery of it be made to him, unless he has possession of it already by some other right. MORTGAGES Art. 3278. Mortgage defined Mortgage is a nonpossessory right created over property to secure the performance of an obligation. Art. 3279. Rights created by mortgage Mortgage gives the mortgagee, upon failure of the obligor to perform the obligation that the mortgage secures, the right to cause the property to be seized and sold in the manner provided by law and to have the proceeds applied toward the satisfaction of the obligation in preference to claims of others. Art. 3280. Mortgage is an indivisible real right Mortgage is an indivisible real right that burdens the entirety of the mortgaged property and that follows the property into whatever hands the property may pass. Art. 3281. Mortgage established only in authorized cases Mortgage may be established only as authorized by legislation. 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. a sale subject to the suspensive condition of financing is not a contract until the condition is fulfilled. However, if a person gives a check and says wait a few days to cash it, then there was no condition and the sale is complete on consent if the check bounces, it is not a condition. Ownership transfers when the buyer gives the seller the check. The seller can seek dissolution or sue for the contract price A buyer can waive a condition for his benefit. Ex. Credit sale for buyer‟s benefit, but decides to pay in cash. This is okay and the buyer can waive it and the sale is complete. Compare to a sale subject to view or trial where ownership is not transferred until the buyer gives approval. A sale by mail is a sale on approval. Another example is a sale of the air conditioning unit where the buyer had 3 days to approve. The contract did not become perfect until the buyer gave his approval. Conditional sales are traditionally disfavored under LA law. The title remained with the seller until the whole price or an agreed on portion was paid. If the buyer didn‟t make just one payment, then the seller could repossess. Our courts said this was merely a credit sale and ownership transferred on consent. We now have the lease of movables act which allows conditional sales to foster business. The lessor reserves title. When a lessee defaults, the lessor can sue for accelerated payments for the whole term and the lessee can keep possession OR the lessor may seek dissolution, recover possession and any stipulated damages found in the contract. The Superdome scoreboard was no consistent with the lease of movables act, but the court decided on equitable grounds. 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. 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. 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. 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 Art. 1773. Time for fulfillme nt 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. Art. 1774. Time for fulfillme nt 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 pending. Likewise, fulfillment of the condition does not impair the right acquired by third persons while the condition was pending. 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. CONFORMITY Art. 2603. Obligation to deliver conforming things The seller must deliver to the buyer things that conform to the contract. Things do not conform to the contract when they are different from those selected by the buyer or are of a kind, quality, or quantity different from the one agreed. Art. 2605. Rejection of nonconforming things by the buyer A buyer may reject nonconforming things within a reasonable time. The buyer must give reasonable notice to the seller to make the rejection effective. A buyer's failure to make an effective rejection within a reasonable time shall be regarded as an acceptance of the things. Art. 2606. Buyer's acceptance of nonconforming things A buyer who, with knowledge, accepts nonconforming things may no longer reject those things on grounds of that nonconformity, unless the acceptance was made in the reasonable belief that the nonconformity would be cured. he may later reject on other grounds like redhibition Art. 2607. Buyer may accept part of things delivered Out of a quantity of things delivered by the seller, the buyer may accept those things that conform to the contract and form a commercial unit and may reject those that do not conform. The buyer must pay at the contract rate for any things that are accepted. Art. 2608. Merchant buye r's duty upon re jection of things When the seller has no agent or business office at the place of delivery, a buyer who is a merchant and has rejected the things must follow any reasonable instructions received from the seller with respect to those things. If the seller gives no such instructions, and the things rejected are perishable or susceptible of rapid decline in value, the merchant buyer must make reasonable efforts to sell those things on the seller's behalf. In all instances of rejection, a buyer who is a merchant must handle the rejected things as a prudent administrator. Art. 2609. Purchase of substitute things by the buyer When the seller fails to render the performance required by a contract of sale of movable things, the buyer may purchase substitute things within a reasonable time and in good faith. In such a case the buyer is entitled to recover the difference between the contract price and the price of the substitute things. The buyer may recover other damages also, less the expenses saved as a result of the failure of the seller to perform. Art. 2610. Cure of nonconformity Upon rejection of nonconforming things by the buyer, the seller may cure the nonconformity when the time for performance has not yet expired or when the seller had a reasonable belief that the nonconforming things would be acceptable to the buyer. In such a case the seller must give reasonable notice of his intention to cure to the buyer. Art. 2611. Resale by the seller When the buyer fails to perform a contract of sale of movable things, the seller, within a reasonable time and in good faith, may resell those things that are still in his possession. In such a case the seller is entitled to recover the difference between the contract price and the resale price. The seller may recover also other damages, less the expenses saved as a result of the buyer's failure to perform. Unless the things are perishable or subject to rapid decline in value, the seller must give the buyer reasonable notice of the public sale at which the things will be resold, or of his intention to resell the things at a private sale. PROMISE OF SALE OPTIONS Art. 2620. Option to buy or sell An option to buy, or an option to sell, is a contract whereby a party gives to another the right to accept an offer to sell, or to buy, a thing within a stipulated time. An option must set forth the thing and the price, and meet the formal requirements of the sale it contemplates. the option must be for a specified time in order for it to be valid there is a 10 year limit on options for immovables with an exception for contracts of periodic performance like in the case of a lease. Max time for a lease of property is 99 years 5 for movables Art. 2621. Acceptance, when effective; option turns into contract to sell; rejection The acceptance or rejection of an offer contained in an option is effective when re ceived by the grantor. Upon such an acceptance the parties are bound by a contract to sell. Rejection of the offer contained in an option terminates the option but a counteroffer does not. Art. 2622. Warranty of assignor The assignor of an option to buy a thing warrants the existence of that option, but does not warrant that the person who granted it can be required to make a final sale. If, upon exercise of the option, the person who granted it fails to make a final sale, the assignee has against the assignor the same rights as a buyer without warranty has against the seller. the assignment only guarantees that a right exists, not that the vendor will actually transfer the thing. o the assignee can get the money back he paid for the option o he may not recover damages CONTRACT TO SELL Art. 2623. Bilateral promise of sale; contract to sell An agreement whereby one party promises to sell and the other promises to buy a thing at a later time, or upon the happening of a condition, or upon performance of some obligation by either party, is a bilateral promise of sale or contract to sell. Such an agreement gives either party the right to demand specific performance. A contract to sell must set forth the thing and the price, and meet the formal requirements of the sale it contemplates. this specifically contemplates specific performance. Where a seller refuses to sell, the buyer seeks ownership under specific performance a bilateral promise to exchange is valid, you can sue for specific performance just like in a contract to sell. in the promise to sell, possession does not transfer until the execution of the writing?? in a sheriff‟s sale the mere adjudication does not transfer title. You still need a contract of sale. in the event a contract to sell falls through because of a problem like error of cause, any terms that existed in the contract of sale are not valid because no contract was ever concluded. a contract to sell does not include the right to insurance as an accessory right Art. 2624. Deposit, earnest money A sum given by the buyer to the seller in connection with a contract to sell is regarded to be a deposit on account of the price, unless the parties have expressly provided otherwise. If the parties stipulate that a sum given by the buyer to the seller is earnest money, either party may recede from the contract, but the buyer who chooses to recede must forfeit the earnest money, and the seller who so chooses must return the earnest money plus an equal amount. When earnest money has been given and a party fails to perform for reasons other than a fortuitous event, that party will be regarded as receding from the contract. parties must stipulate that the money is earnest you can‟t get earnest and specific performance. You get one or the other inability to sell is different from flat refusal. The seller should return double when he refuses. Simple earnest for things like cloudy title unless the parties specified specific performance. In that case, double earnest. when there is a penalty stated for the seller who does not perform then it is earnest. If no sanctions, then deposit and the buyer can seek damages or specific performance there is no earnest money in options. You are bound. RIGHT OF FIRST REFUSAL Art. 2625. Right of first refusal A party may agree that he will not sell a certain thing without first offering it to a certain person. The right given to the latter in such a case is a right of first refusal that may be enforced by specific performance. same time limits that apply to options apply to right of first refusal the right of first refusal must conform to the same formalities for the sale of immovable property the public records doctrine applies the difference between an option and a right of first refusal is that in a right of refusal, if the seller ever decides to sell than the buyer gets first shot. In the case of the option, the buyer gets to decide when he wants to buy. there is also a difference between a right of redemption and a right of first refusal. The buyer must sell back when the vendor wants the property back through redemption, but in the right of first refusal, the holder cannot exercise until the owner is ready to sell. The pawn market is an example of a situation where there is a right of redemption Art. 2626. Terms of offe red sale The grantor of a right of first refusal may not sell to another person unless he has offered to sell the thing to the holder of the right on the same terms, or on those specified when the right was granted if the parties have so agreed. Ex: Lit grants K a right of first refusal on a piece of immovable property. David offers Lit 10K. if Lit is willing to sell, he must first make the offer to K at the same price. She has 30 days to decide because it is immovable. A movable would be 10 days. You can also have this where you offer the right of first refusal for the market price for the thing at the time of the offering. The parties have to agree to this term. this is distinct from an option which is good for a certain period of time and the contract is unilateral. When the buyer exercises the option is it bilateral. Here the buyer makes the decision. The right of first refusal has no specified time. The buyer can only buy if the owner first decides to sell. The buyer may never demand that he sell. Now there is a 10 year limit on a right of first refusal. Art. 2627. Right of first refusal, time for acceptance Unless otherwise agreed, an offer to sell the thing to the holder of a right of first refusal must be accepted within ten days from the time it is received if the thing is movable, and within thirty days from that time if the thing is immovable. Unless the grantor concludes a final sale, or a contract to sell, with a third person within six months, the right of first refusal subsists in the grantee who failed to exercise it when an offer was made to him. Ex. Lit grants to Eric the right of first refusal for 10 years. Lit offers Eric the property for $50K Eric declines. 6 months elapse and the property is still not sold. Eric still has the right of first refusal. Art. 2628. Time limitation for option and right of first refusal An option or a right of first refusal that concerns an immovable thing may not be granted for a term longer than ten years. Nevertheless, if the option or right of first refusal is granted in connection with a contract that gives rise to obligations of continuous or periodic performance, an option or a right of first refusal may be granted for as long a period as required for the performance of those obligations. option must have a term there is a 5 year limit on options for movables Art. 2629. Effect against third pe rsons An option, right of first refusal, or contract to sell that involves immovable property is effective against third persons only from the time the instrument that contains it is filed for registry in the parish where the immovable is located. An option, right of first refusal, or contract to sell that involves movable property is effective against third persons who, at the time of acquisition of a conflicting right, had actual knowledge of that transaction. Art. 2630. Indivisibility of right The right to exercise an option and the right of first refusal are indivisible. When either of such rights belongs to more than one person all of them must exercise the right. Art. 1877. Fortuitous event that has made pe rformance impossible in part When a fortuitous event has made a party's performance impossible in part, the court may reduce the other party's counter performance proportionally, or, according to the circumstances, may declare the contract dissolved. Art. 1832. Written form require d by law When the law requires a contract to be in written form, the contract may not be proved by testimony or by presumption, unless the written instrument has been destroyed, lost, or stolen. if the writing is destroyed, you can use parole testimony it does not have to be written in paper an endorsement on the back of the check is not sufficient for a writing. You need something that is more formal and creates fewer ambiguities all parties to the transfer should sign, but they do not need to do the actual writing themselves Rule of Equal Dignities: if the sale requires a writing, then the mandate authorizing the agent to transact the sale must be in writing Art. 1839. Transfer of immovable prope rty A transfer of immovable property must be made by authentic act or by act under private signature. Nevertheless, an oral transfer is valid between the parties when the property has been actually delivered and the transferor recognizes the transfer when interrogated on oath. An instrument involving immovable property shall have effect against third persons only from the time it is filed for registry in the parish where the property is located. there MUST be delivery in order to have confession under oath. No delivery, too bad an authentic act constitutes full proof of the agreement between the parties, their heirs and successors by universal or particular title Art. 1848. Testimonial or othe r evidence not admitted to dis prove a writing Testimonial or other evidence may not be admitted to negate or vary the contents of an authentic act or an act under private signature. Nevertheless, in the interest of justice, that evidence may be admitted to prove such circumstances as a vice of consent, or a simulation, or to prove that the written act was modified by a subsequent and valid oral agreement. this rule exists for the stability of title o parol evidence is beyond the act when the fact to be established adds an additional term to the agreement that is not found in the act itself o a co-owner may also prove that the other co-owner never gave him his share other evidence: you can‟t use another writing either? there are exceptions to the parole evidence rule to show o that the writing was not effective between the parties fraud can be proved by parole evidence but you must have a written contract first unless the fraud was in one of the parties saying that they didn‟t need a writing. In a revocatory action, the creditor may use parol to to prove that the person was trying to keep creditors from seizing the property and bring back property into the debtor‟s patrimony. However, the property has to be within the person‟s patrimony to start off with. simulation error unlawful cause o modification by an oral act: parties can dissolve a contract to sell immovable property without a writing. This goes for dissolution of other contracts that require a writing as well. You can use parol evidence to prove the dissolution. Lit disagrees but says it is good law. o You can use parol to interpret ambiguous contracts: eeking out title is a form of interpreting ambiguous titles. Parol may be used to correct a description of a piece of land because you are not varying or negating the contents of the writing. However, there must be a substantial description of the affected property in order to admit parol evidence. Sufficient descriptions include the Judie Lewis Place or 80 acre tract alongside your 160 acre tract, all my property in Lafourche parish Insufficient: received as payment on place and certain lands in St. Tammany Parish o You can use testimonial proof to establish title to movables Art. 1846. Contract not in excess of five hundred dollars When a writing is not required by law, a contract not reduced to writing, for a price or, in the absence of a price, for a value not in excess of five hundred dollars may be proved by competent evidence. If the price or value is in excess of five hundred dollars, the contract must be proved b y at least one witness and other corroborating circumstances. Art. 2652. Sale of litigious rights When a litigious right is assigned, the debtor may extinguish his obligation by paying to the assignee the price the assignee paid for the assignment, with interest from the time of the assignment. a right is not litigious before a suit is instituted Lit sues David for $1,000. Rachel pays Lit $500 for the right that Lit has to sue David. Rachel moves to be substituted. David can buy the right from Rachel for $500 plus interest and put an end to the litigation. You can‟t escape redemption by only assigning a portion of your litigious right. The value of the redemption is based on the value of the assignment, not the value of the claim. It‟s a fixed sum, not an expectation of recovery. After learning of a transfer of a litigious right, you must promptly make your intention to redeem known. officers of the court may not acquire litigious rights. However, if you are an attorney you may acquire it for payment of your professional services? Check on this?? There is a Rule of Professional Conduct that prohibits a lawyer from acquiring a proprietary interest in the c/a or subject matter of the litigation he is conducting for the client. You can enter into a contingency fee contract for a percentage of the recovery, but you may not take a present interest in the claim. A right is litigious, for that purpose, when it is contested in a suit already filed. Nevertheless, the debtor may not thus extinguish his obligation when the assignment has been made to a co-owner of the assigned right, or to a possessor of the thing subject to the litigious right. Art. 2653. Assignability prohibited by contract; exceptions A right cannot be assigned when the contract from which it arises prohibits the assignment of that right. Such a prohibition has no effect against an assignee who has no knowledge of its existence. Art. 2654. Documents evidencing the right The assignor of a right must deliver to the assignee all documents in his possession that evidence the right. Nevertheless, a failure by the assignor to deliver such documents does not affect the validity of the assignment. When a right is assigned only in part, the assignor may give the assignee an original or a copy of such documents. THINGS THAT MAY BE SOLD Art. 521. Lost or stolen thing. One who has possession of a lost or stolen thing may not transfer its ownership to another. For purposes of this Chapter, a thing is stolen when one has taken possession of it without the consent of its owner. A thing is not stolen when the owner delivers it or transfers its ownership to another as a result of fraud. note the distinction between stolen and transfer of ownership by fraud o stolen means the thing is taken from the owner without his consent o stolen does not mean obtained by fraud. Bouncing checks are fraud, but it is still and sale and ownership transfers as long as the 3P is in good faith and purchases for a fair price. Art. 522. Transfer of owners hip by owne r under annullable title. A transferee of a corporeal movable in good faith and for fair value retains the ownership of the thing even though the title of the transferor is annulled on account of a vice of consent. Lit sells to one eye Joe due to error, fraud or duress. Joe then sells to a good faith purchaser. The purchaser retains possession. Had Joe still been in possession, Lit could have gotten his thing back. Art. 523. Good faith; definition. An acquirer of a corporeal movable is in good faith for purposes of this Chapter unless he knows, or should have known, that the transferor was not the owner. if the acquirer has notice of the facts that would put a reasonably prudent man on notice, then he has a duty to investigate. He cannot claim good faith unless he makes an inquiry a thing was stolen and sold to a 3P. The 3P was in good faith and bought for a fair price. There was some evidence that he might not have been in good faith. He had no duty to investigate the serial numbers even though they were scraped off. The original owner had to pay the price if he wanted it back. On the other hand in a case where the 3P is not in good faith, he is not protected and the original owner does not have to pay the purchase price. In the case of the used car where the dealer had reason to be suspicious because the seller who had purchased the car the previous day, was not in good faith and thus was not protected. Original owner did not have to pay the 3P car dealer. You do not have to have a title certificate to be in good faith. Ownership transfers without the certificate, but the title may not be merchantable. You can sue for the title certificate. However, possession of title is an indicia of ownership. If a dealer pays a reasonable price and gets endorsement of the title certificate he is in good faith and the original owner must pay. o LA RS: document of title will convey ownership if it is delivered to someone with actual authority to ship, store or sell and the original owner acquiesced in the procurement by the depositor of the document of title. A pick up order is not a document that suffices to transfer ownership. If the seller never relinquishes the title certificate, the fraudulent intermediary never gets possession. Art. 524. Recovery of lost or stolen things. The owner of a lost or stolen movable may recover it from a possessor who bought it in good faith at a public auction or from a merchant customarily selling similar things on reimbursing the purchase price. The former owner of a lost, stolen, or abandoned movable that has been sold by authority of law may not recover it from the purchaser. this article only applies to public auctions or merchants who customarily sell such things. It does not apply to sheriff‟s sales Art. 525. Registered movables. The provisions of this Chapter do not apply to movables that are required by law to be registered in public records. BONA FIDE PURCHASER DOCTRINE (Common law) a vendee who obtains a thing by a vice of consent, such as error, fraud or duress acquires only voidable title which the vendor may attack in equity. Upon transfer by the vendee to a bona fide purchaser, the voidable title is made good. if the innocent purchaser is in good faith and gives valuable consideration, his title is superior to the original vendor if the original vendor only intends to transfer possession, not ownership to the vendee, that vendee cannot pass title to a 3P and the original vendor can assert his title. However, if the original vendor may be precluded from asserting his title if he made an express or implied representation that the person in possession was the owner or had the authority to sell. PUBLIC RECORDS DOCTRINE Art. 2442. Recordation of sale of immovable to affect third parties The parties to an act of sale or promise of sale of immovable property are bound from the time the act is made, but such an act is effective against third parties only from the time it is filed for recordation according to the laws of registry. sales that are not recorded are null via a vis third parties. If the sale is not recorded, the 3P prevails. The basis of recordation is publicity. This holds for mortgages as well as sales. You cannot raise secret equities against a 3P buyer on good faith. A secret equity does not cover fraud on the pub lic records. You can prove that. Erroneous indexing does not effect the validity of the act. the act has to be valid-notarial act with the signatures of the witnesses Public Interest Doctrine: you can rely on the absence in the public records even if you have Knowledge/are aware of the purchase o you cannot prove fraud just because a person has actual knowledge of an unrecorded act. o Seeking a title exam does not destroy good faith if you fail to find something in the public records- in this situation, actual notice is important. o If you know of a lease, but the lease is not recorded, you will prevail as the 3P unless you were a party to the act. o Two important exceptions: heirs and spouses acquire an interest in property by operation of law even without recordation. Heirs rights are effective against 3P‟s without recordation. heirs are not 3P‟s, they stand in the shoes of the seller. If the seller could not claim there was no sale, then the heirs may not do so either if a person is a witness to an authentic act, he is not considered a 3P who can rely on the fact that the act was not recorded if there is a counter letter and the 3P was someone who was involved in drafting the counter letter, they are not protected as a 3P. In the case of a married couple, if a spouse renounces the right to concur in the AEL of immovable property, the renunciation must be recorded. Ordinarily, need consent of both to AEL. If filed, one spouse can sell alone validly. If renunciation not there, then 3P knows that needs both spouses to acquire validly. If there, can buy from the spouse in control. Marriage records, birth records and death records are not filed. Voluntary separations not filed. Matrimonial agreements concerning immovable property need to be filed Judgments of divorce and separation need to be filed. Recording is a simple way to protect yourself from a 3P. o Take the case of a renunciation filed and then later a divorce occurs but is not filed. This means 1 spouse has right to concur. The divorce makes them co-owners and so you need consent of both. Since the divorce is not recorded, the 3P has the right to rely on that recorded renunciation and can acquire the property validly through consent of the managing spouse. A declaration of marital status in an act of sale through a notary is presumed to be correct. The status has to be included in the act of acquisition for the presumption to be effective. Notaries must insert the marital status in all acts they pass. The act cannot be recorded without this declaration. Note: you do not have to include marital status in an act under private signature. 3P‟s may acquire rights based on the declaration in the act. A recorded simulation is valid. A donee is not a 3P protected by the records because no value is paid. However, even if no price is paid in a simulation and it is really a donation, then the 3P is protected. If a counter letter is recorded you can rely on it. If it is not, then too bad. Options, Rights of First Refusal and contracts to sell must be recorded. In the case of a recorded lease that contains an option, if the grantee exercises that option, that needs to be recorded as well. The 3P has no duty to peruse the records. Assignments of rights need to be recorded as well. For example even if an original lease is recorded and the lessee assigns the right to another, the assignment must be recorded in order for the 3P to acquire the property along with the lease. If a succession includes a testamentary trust to which immovable property was transferred, then that transfer must be recorded as well. Exception, if a seller grants a lease on a piece of property but doe not record, but later sells it an recites the encumbrance in the act of sale, the 3P steps into the shoes of the lessor. The 3P may not ignore the encumbrance. Notice: o lack of notice renders the sale a nullity. o filing of a suit does not constitute notice for a 3P. You must file a notice of lis pendens in order to prevail over a 3P. Hypo: A sues B for property. A files notice of lis pendens. B sells to C before the conclusion of the suit. A will prevail, because C had notice in the public records. If A did not file notice, then C prevails. Actual notice on the part of C or the filing of the suit alone will not affect C as a 3P. o the request notice statute was unconstitutional. You have to follow Mennonite. You have to use ordinary diligence by going through the public records to find people with an interest in the property subject that has been seized and will be sold pursuant to a writ of fifa. Actual notice is not required, only means as reasonably certain as actual notice. o To prevail when you don‟t get notice, you have to prove actual market price and if you had notice you would have been able to buy the property o A corporation is not the same as any member, but if you give notice to the president, then that is sufficient notice. §2721. Filing in office of parish recorder A. No sale, contract, counter letter, lien, mortgage, judgment, surface lease, oil, gas or mineral lease, or other instrument of writing relating to or affecting immovable property shall be binding on or affect third persons or third parties unless and until filed for registry in the office of the parish recorder of the parish where the land or immovab le is situated. Neither secret claims or equities nor other matters outside the public records shall be binding on or affect such third parties. the recording has effect from the time if is filed in the proper office and endorsed by the proper officer. Don‟t give the act of sale to the clerk in the courtroom or anywhere else. Do it right. §2722. Persons protected Third persons or third parties so protected by and entitled to rely upon the registry laws of Louisiana now in force and effect and as set forth in this Chapter are hereby redefined to be and to include any third person or third party dealing with any such immovable or immovable property or acquiring a real or personal right therein as purchaser, mortgagee, grantee or vendee of servitude or royalty rights, or as lessee in any surface lease or leases or as lessee in any oil, gas or mineral lease and all other third persons or third parties acquiring any real or personal right, privilege or permit relating to or affecting immovable property. §2756. Effectiveness of unrecorded acts affecting immovables; effect of subsequent recordation All sales, contracts and judgments affecting immovable property, which shall not be so recorded, shall be utterly null and void, except between the parties thereto. The recording may be made at any time, but shall only affect third persons from the time of the recording. The recording shall have effect from the time when the act is deposited in the proper office, and indorsed by the proper officer. Art. 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. SIMULATION Art. 2025. Definition; simulation and counterletter A contract is a simulation when, by mutual agreement, it does not express the true intent of the parties. If the true intent of the parties is expressed in a separate writing, that writing is a counterletter. Art. 2026. Absolute simulation A simulation is absolute when the parties intend that their contract shall produce no effects between them. That simulation, therefore, can have no effects between the parties. Art. 2027. Relative simulation A simulation is relative when the parties intend that their contract shall produce effects between them though different from those recited in their contract. A relative simulation produces between the parties the effects they intended if all requirements for those effects have been met. Art. 2028. Effects as to third pe rsons Any simulation, either absolute or relative, may have effects as to third persons. Counterletters can have no effects against third persons in good faith. 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. If the contract involves immovable property, the principles of recordation apply. MERCHANTABLE TITLE the buyer is entitled to ownership and a clear title to the thing he purchases. A merchantable title is a title that a reasonable person would accept in the regular course of business. It is not merchantable when it is subject to the threat of substantial litigation. Generally parties make this an express suspensive condition, but it is implied in every sale. Without merchantable title, the sale collapses. The lingering threat of a claim of a 3P gives a possibility substantial litigation making the title non- merchantable. Examples include: o the threat of minors voiding a sale of their property when they come of age because their tutor alienated the property without proper representation o a father sells former community property when his spouse dies. He has a legal usufruct but sells without consent of his children/heirs who have a ½ interest in the naked ownership. Title is non- merchantable. o building restricting that might be binding on the buyer o claim of acquisitive prescription o conflicting claims from separate chains of title o Spouse in community sells immovable property without consent o property zoned for a residential but a business is located on the property. Threat from neighbors suing. o neighbors property encroaching on the property you intend to buy makes the property non- merchantable. Even de minimus encroachment makes the title non- merchantable o a prior sale with accessory obligations that have not been fulfilled make the property non- merchantable. This is the example of the developer who was supposed to build a bridge and a road and those obligations were not fulfilled making the title non- merchantable. o A non-recorded leaseholder does not present a substantial threat of litigation and title would be merchantable. OBLIGATIONS OF THE SELLER Art. 2474. Construction of ambiguities respecting obligations of seller The seller must clearly express the extent of his obligations arising from the contract, and any obscurity or ambiguity in that expression must be interpreted against the seller. this is different from common law where the theory is let the buyer beware. Our theory is consistent with good faith Art. 2475. Seller's obligations of delivery and warranty. The seller is bound to deliver the thing sold and to warrant to the buyer ownership and peaceful possession of, and the absence of hidden defects in, that thing. The seller also warrants that the thing sold is fit for its intended use. Art. 2480. Retention of possession by seller, presumption of simulation 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. the forced heir or creditor can attack the transfer. Normally a person claiming simulation has the burden, however, where the seller remains in possession, the seller has the burden of showing that it is not a simulation. DELIVERY Art. 2487. Delivery excused until payment of price and for insolvency The seller may refuse to deliver the thing sold until the buyer tenders payment of the price, unless the seller has granted the buyer a term for such payment. if you are justified in believing that you will lose the price you can withhold delivery in a case where a down payment is due and the buyer does not pay it, the seller is excused from delivery if the buyer fails to pay the price when due, he must reimburse the seller for the expenses incurred in the preservation of the thing during that time when the payment is due and the price is paid Art. 2477. Methods of making delive ry Delivery of an immovable is deemed to take place upon execution of the writing that transfers its ownership. nothing else is needed to show possession once the act of sale is signed if the parties contract for delivery at the act of sale and the buyer wants possession, the seller must give actual possession where the buyer can occupy it. The court can grant an extension of time OR the buyer may get dissolution. Dation en Paiement is a form of sale. The thing you give represents the amount you owe. Delivery is governed by this article and consent alone is enough to qualify as delivery Delivery of a movable takes place by handing it over to the buyer. If the parties so intend delivery may take place in another manner, such as by the seller's handing over to the buyer the key to the place where the thing is stored, or by negotiating to him a document of title to the thing, or even by the mere consent of the parties if the thing sold cannot be transported at the time of the sale or if the buyer already has the thing at that time. delivery is different for movables here the right of possession does not vest the buyer with possession of the thing sold with regard to the 2nd acquirer in good faith. The latter will be preferred if he is given actual possession. creditors of the transferor may seize the thing if it is still in his possession if it is a large amount of goods, handing over the key to the warehouse is sufficient growing crops can be delivered by consent if a thing can be moved even if it is difficult, consent might not be enough like in the case of the large engines Art. 2481. Incorporeals, method of making delivery Delivery of incorporeal movable things incorporated into an instrument, such as stocks and bonds, takes place by negotiating such instrument to the buyer. Delivery of other incorporeal movables, such as credit rights, takes place upon the transfer of those movables. the seller would negotiate promissory notes, shares of stock and bonds to the buyer to make delivery in the case of credit rights, notification suffices for delivery. Hypo: Lit has a credit with Dave. Lit can transfer that right to Ryan by either notifying Dave of the transfer OR Ryan can give Dave notice that he has the right to collect. Art. 465. Things incorporated into an immovable. Things incorporated into a tract of land, a building, or other construction, so as to become an integral part of it, such as building materials, are its component parts. Art. 466. Component parts of buildings or other constructions Things permanently attached to a building or other construction, such as plumbing, heating, cooling, electrical or other installations, are its component parts. Things are considered permanently attached if they cannot be removed without substantial damage to themselves or to the immovable to which they are attached. Art. 2461. Inclusion of accessories The sale of a thing includes all accessories intended for its use in accordance with the law of property. the test is whether the thing can be easily removed without damage to the property. A window unit is not an accessory Neither is a chandelier curtains are not accessories Make sure you do not get confused about things that sometimes go with the sale through the will of the parties not because they are an accessory. in the case of incorporeals-the sale of a promissory note that is secured by a mortgage. The mortgage is an incorporeal immovable accessory that goes with the sale. Art. 2491. Immovables, extent of delivery The seller must deliver to the buyer the full extent of the immovable sold. That obligation may be modified in accordance with the provisions of the following Articles. Art. 2492. Sale of immovables at a price per measure If the sale of an immovable has been made with indication of the extent of the premises at the rate of so much per measure, but the seller is unable to deliver the full extent specified in the contract, the price must be proportionately reduced. If the extent delivered by the seller is greater than that specified in the contract, the buyer must pay to the seller a proportionate supplement of the price. The buyer may recede from the sale when the actual extent of the immovable sold exceeds by more than one twentieth the extent specified in the contract. this is a sale based on price per acre the buyer is entitled to an adjustment regardless of how much more or less is conveyed note-the buyer may recede only if the actual conveyance exceeds by 1/20 what is stated in the contract Art. 2494. Sale of immovable for lump price When the sale of an immovable has been made with indication of the extent of the premises, but for a lump price, the expression of the measure does not give the seller the right to a proportionate increase of the price, nor does it give the buyer the right to a proportionate diminution of the price, unless there is a surplus, or a shortage, of more than one twentieth of the extent specified in the act of sale. When the surplus is such as to give the seller the right to an increase of the price the buyer has the option either to pay that increase or to recede from the contract. the land sold is within a certain parameter, but with a lump price if one boundary is missing, the sale falls under this article, not per aversionism and you get a price adjustment Art. 2495. Sale of a certain and limited body or of a distinct object for a lump price When an immovable described as a certain and limited body or a distinct object is sold for a lump price, an expression of the extent of the immovable in the act of sale does not give the parties any right to an increase or diminution of the price in case of surplus or shortage in the actual extension of the immovable. this is a sale per aversionism and there is no right to a price adjustment. The sale conveys all the land within those boundaries stated it is without regard to the number of acres because the actual measure is less important than the whole. even if measurements are given it does not effect the general rule there has to be an overt misrepresentation to entitle the buyer to dissolution. Like the sale says 400 acres, but really conveys only 89. Art. 2497. Restitution of price and expenses in case of rescission When the buyer has the right to recede from the contract the seller must return the price, if he has already received it, and also reimburse the buyer for the expenses of the sale. Art. 2498. Prescription of actions for supplement or diminution of price or for dissolution The seller's action for an increase of the price and the buyer's actions for diminution of the price or dissolution of the sale for shortage or excessive surplus in the extent of the immovable sold prescribe one year from the day of the sale. WARRANTY AGAINST EVICTION Art. 2475. Seller's obligations of delivery and warranty. The seller is bound to deliver the thing sold and to warrant to the buyer ownership and peaceful possession of, and the absence of hidden defects in, that thing. The seller also warrants that the thing sold is fit for its intended use. Art. 2500. Eviction, definition, scope of warranty The seller warrants the buyer against eviction, which is the buyer's loss of, or danger of losing, the whole or part of the thing sold because of a third person's right that existed at the time of the sale. The warranty also covers encumbrances on the thing that were not declared at the time of the sale, with the exception of apparent servitudes and natural and legal nonapparent servitudes, which need not be declared. If the right of the third person is perfected only after the sale through the negligence of the buyer, though it arises from facts that took place before, the buyer has no claim in warranty. encumbrances that are covered under the warranty (not declared at time of sale) o leases o chattel mortgages o a pipeline servitude is a non-apparent servitude apparent servitudes o doesn‟t have to be declared and is excluded from warranty o A mineral lease serves same function an apparent servitude because you can see drilling activity. natural servitudes are not covered o servitude of drain legal non-apparent servitudes o to keep buildings in good condition and right of passage an encroaching fence is a partial eviction, not a hidden defect attorneys fees and non-pecuniary damages are not allowed the seller cannot exclude his own acts that cause eviction from the warranty. o an example is where the buyer fails to record and the creditors of the buyers seize the property. Even though it is the buyer‟s job to record, the seller could have prevented the seizure by endorsing the promissory notes to the creditor rather than letting them seize the property. negligence of the buyer in allowing acquisitive prescription to vest title is not covered in warranty eviction can be less than being totally dispossessed. The danger of losing all or part is sufficient for eviction. Art. 2502. Transfer of rights to a thing A person may transfer to another whatever rights to a thing he may then have, without warranting the existence of any such rights. In such a case the transferor does not owe restitution of the price to the transferee in case of eviction, nor may that transfer be rescinded for lesion. Such a transfer does not give rise to a presumption of bad faith on the part of the transferee and is a just title for the purposes of acquisitive prescription. If the transferor acquires ownership of the thing after having transferred his rights to it, the after-acquired title of the transferor does not inure to the benefit of the transferee. after acquired title o the seller has a duty to convey clear ownership. Where a seller acquires clear title after the sale, the buyer is bound to accept the title if he has not started judicial proceedings against the seller. He has the option of rejecting or accepting after litigation has begun. o this doctrine does not work in the case of quit claim deeds. It has the same effect as being aware of the danger of eviction and buying at his peril o a vendor who obtains title should not be able to evict his own vendee even one without warranty if he acquires title after the sale. Art. 2503. Modification or exclusion of warranty, seller's liability for personal acts, restitution of price in case of eviction The warranty against eviction is implied in every sale. Nevertheless, the parties may agree to increase or to limit the warranty. They may also agree to an exclusion of the warranty, but even in that case the seller must return the price to the buyer if eviction occurs, unless it is clear that the buyer was aware of the danger of eviction, or the buyer has declared that he was buying at his peril and risk, or the seller's obligation of returning the price has been expressly excluded. In all those cases the seller is liable for an eviction that is occasioned by his own act, and any agreement to the contrary is null. The buyer is subrogated to the rights in warranty of the seller against other persons, even when the warranty is excluded. even if the warranty is excluded, the evicted buyer can get a return of the sale price unless the exceptions in the article are met o buyer was aware of the danger of eviction o buyer declared that he was buying at his risk o seller‟s obligation to return the price has been expressly excluded in the case of full warranty, the buyer‟s knowledge is not relevant-he can still get return of the purchase price. However, he can‟t get damages. The only difference between sale with and without warranty is damages. There are no damages for a sale without warranty. Ordinarily in a sale with warranty a buyer can get ret urn of purchase price and damages. if the sale is without warranty, the buyer can get a return of the purchase price o unless the buyer is aware of the danger/have actual knowledge (constructive knowledge is not enough and o he stipulates that he is buying without warranty. This amounts to buying and your peril and risk. o or the sellers obligation to return the price is excluded. no warranty and no comeback or recourse eviction occasioned by the seller‟s own act can be fraud. if that is the case, the seller is liable even if the warranty is excluded. Any agreement to the contrary is null. joint sellers are joinly liable for the return of the purchase price, but they are solidarily liable for damages if the chain of title is circular, the obligation in warranty can be extinguished by confusion because subrogation applies subrogation is broad enough to cover claims that the seller had in contract against a builder. Buyer gets subrogation even of the warranty is excluded quit claim deed is the same as buying at your peril and risk. o The buyer transfers whatever present actual rights they have to the property, but what they might have in the future o if there is a quit claim deed in the records, you should make an inquiry outside the records because the transaction is suspicious o this does not go against the public records doctrine because the public records doctrine is negative. You rely on what is not in the records because a document in the records might be forged Art. 2506. Rights of buyer against seller in case of eviction A buyer who avails himself of the warranty against eviction may recover from the seller the price he paid, the value of any fruits he had to return to the third person who evicted him, and also other damages sustained because of the eviction with the exception of any increase in value of the thing lost. no attorneys fees in eviction can‟t get an increase in value of the thing lost ex. Lit sells property to Eric for $3,000. Eric resells it to Dave for $4,100. Dave sues and gets rescission because he already has an interest in the property. Eric can only get the $3,000 price he paid, not the increase that he sold it to Dave for. Buyer paid $750 for property. Heirs claim they own 7/8 interest. Buyer pays them off. He sues seller. Buyer can only get 7/8 of $750 because that is what he lost. Art. 2507. Restitution of full price despite deterioration, deduction of damage when benefit to buyer A seller liable for eviction must return the full price to the buyer even if, at the time of the eviction, the value of the thing has been diminished due to any cause including the buyer's neglect. Nevertheless, if the buyer has benefited from a diminution in value caused by his own act, the amount of his benefit must be deducted from the total owed to him by the seller because of the eviction. ex. if the buyer removes a marble fireplace and sells it, the price he got is deducted from the sale price of the property Art. 2509. Reimbursement to buyer for useful improvements, liability of seller in bad faith A seller liable for eviction must reimburse the buyer for the cost of useful improvements to the thing made by the buyer. If the seller knew at the time of the sale that the thing belonged to a third person, he must reimburse the buyer for the cost of all improvements. the improvement has to be useful, the buyer can be reimbursed for the cost. o A gazebo is a useful improvement if the seller is in bad faith, he has to reimburse for all the improvements whether useful or not. o where a house was built on top of the pipeline servitude and the seller knew of the servitude, he had to pay for the cost the buyer expended to build the house Art. 2511. Partial eviction, rights of buyer When the buyer is evicted from only a part of the thing sold, he may obtain rescission of the sale if he would not have bought the thing without that part. If the sale is not rescinded, the buyer is entitled to a diminution of the price in the proportion that the value of the part lost bears to the value of the whole at the time of the sale. buyer can get rescission OR dimunition selling property where part of it is clearly owned by another is a partial eviction even in a sale per aversionism if a buyer mitigates his damages by settling with the neighbors over encroaching property and acquires more property, the buyer can still recover. Typically, in eviction you get less than you paid for. the buyer can recover less than the average price per acre when he is evicted from part where different parts of a large tract have different values. Art. 2512. Warranty against eviction from proceeds The warranty against eviction extends also to those things that proceed from the thing sold. this applies to fruits and crops Art. 2513. Scope of warranty in sale of succession rights In a sale of a right of succession, the warranty against eviction extends only to the right to succeed the decedent, which entitles the buyer to those things that are, in fact, a part of the estate, but it does not extend to any particular thing. Art. 2517. Call in warranty, failure of buye r to call seller in warranty, suit to quiet possession A buyer threatened with eviction must give timely notice of the threat to the seller. If a suit for eviction has been brought against the buyer, his calling in the seller to defend that suit amounts to such notice. A buyer who elects to bring suit against a third person who disturbs his peaceful possession of the thing sold must give timely notice of that suit to the seller. In either case, a buyer who fails to give such notice, or who fails to give it in time for the seller to defend himself, forfeits the warranty against eviction if the seller can show that, had he been notified in time, he would have been able to prove that the third person who sued the buyer had no right. the buyer should give notice of the threat of eviction to the seller notice to defend the suit is sufficient the seller must be able to prove that he could have shown that the 3P had no right in order for the warranty to be forfeited the court allowed the vendee plaintiff- vendees to recover when they cured the title by paying the creditors of the judicial mortgage arising from the debt of one of the vendors even though no notice was given. There was no way that the vendor could deny the judicial mortgage. Art. 2557. Eviction and threat of eviction as grounds for suspension of payment A buyer who is evicted by the claim of a third person may withhold payment of the price until he is restored to possession, unless the seller gives security for any loss the b uyer may sustain as a result of the eviction. A seller who, in such a case, is unable or unwilling to give security may compel the buyer to deposit the price with the court until the right of the third person is adjudged. Also the buyer may deposit the price with the court, on his own initiative, to prevent the accrual of interest. A buyer may not withhold payment of the price when the seller is not liable for a return of the price in case of eviction. Art. 2560. Payment of the price before disturbance of possession A buyer who paid the price before being evicted of the thing may not demand that the seller return the price or give security for it. Art. 2482. Things not in possession of seller When at the time of the sale the seller is not in possession o f the thing sold he must obtain possession at his cost and deliver the thing to the buyer. this happens in the case of the broker who is selling goods. He must obtain possession and the deliver to the buyer Add 2483 Lit orders 100 shirts from Dave, his regular supplier who packages them and sends them to a carrier. Seller pays for the order to be packaged. the buyer pays for picking it up if it is not to be delivered to a particular place Add 2484 Art. 2485. Buyer's rights upon default, damages When the seller fails to deliver or to make timely delivery of the thing sold, the buyer may demand specific performance of the obligation of the seller to deliver, or may seek dissolution of the sale. In either case, and also when the seller has made a late delivery, the buyer may seek damages. where the buyer‟s main cause was the occupancy of the garage apartment, the court ordered dissolution when the buyer could not turn over the property free of the tenant occupying the apartment. the buyer can get specific performance and damages when the seller does not perform the obligation to deliver. The damages in one case were the amount of rent the buyer would have received from the rental of the property. The court awarded damages for mental inconvenience in a case where a couple had to spend their honeymoon is a leprosy hospital when the house they intend to occupy was not completed. if a party to a sale does not show at the closing, you do not automatically get dissolution. You have to send a notice of non-judicial dissolution and allow the other party to fix a different date. There usually must be a putting in default unless it would be useless as in a situation where the other party tells you, I am not going to perform. You can write in an express dissolution clause to avoid this. if there is no term for delivery it should be a reasonable time. The term can be established subsequent to the sale. Add 2489 Art. 2642. Assignability of rights All rights may be assigned, with the exception of those pertaining to obligations that are strictly personal. The assignee is subrogated to the rights of the assignor against the debtor. Art. 2643. Assignment effective from the time of knowledge or notice The assignment of a right is effective against the debtor and third persons only from the time the debtor has actual knowledge, or has been given notice of the assignment. If a partial assignment unreasonably increases the burden of the debtor he may recover from either the assignor or the assignee a reasonable amount for the increased burden. Art. 2644. Performance by debtor before knowledge of assignment When the debtor, without knowledge or notice of the assignment, renders performance to the assignor, such performance extinguishes the obligation of the debtor and is effective against the assignee and third persons. Art. 2645. Accessories included in assignment of right The assignment of a right includes its accessories such as security rights. Art. 2646. Warranty of existence of debt, solvency of debtor The assignor of a right warrants its existence at the time of the assignment. The assignor does not warrant the solvency of the debtor, however, unless he has agreed to give such a warranty. the warranty must be express because there is no implied warranty in the assignment of a right? Where does this apply? in the case of a mineral lease where the assignor did not have a recorded lease, the assignee was allowed to recover. They have the same rights as an ordinary lessee. There is a warranty applies to the sale of debts and incorporeal rights. Art. 2648. Scope of warranty of debtor's solvency An assignor who warrants the solvency of the debtor warrants that solvency at the time of the assignment only and, in the absence of agreement to the contrary, does not warrant the future solvency of the debtor. the parties can stipulate to this Art. 2649. Assignor's knowledge of the debtor's insolvency; effects When the assignor of a right did not warrant the solvency of the debtor but knew of his insolvency, the assignee without such knowledge may obtain rescission of the contract. Art. 2650. Warranty in assignment of succession rights A person who assigns his right in the estate of a deceased person, without specifying any assets, warrants only his right of succession as heir or legatee. REDHIBITION Art. 2520. Warranty against redhibitory defects The seller warrants the buyer against redhibitory defects, or vices, in the thing sold. A defect is redhibitory when it renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect. The existence of such a defect gives a buyer the right to obtain rescission of the sale. A defect is redhibitory also when, without rendering the thing totally useless, it diminis hes its usefulness or its value so that it must be presumed that a buyer would still have bought it but for a lesser price. The existence of such a defect limits the right of a buyer to a reduction of the price. redhibition does not apply to contracts to sell or incorporeals like assignment of rights when a seller assigns a note to a lending institution and the bank/credit co. reserves the rights that the seller has, then the buyer can get redhibition. There was a contrary solution where the car dealer seller assigned the note to GM and the buyer could not get redhibition. encumbrances do not give rise to a claim for redhibition redhibition does not apply to building contracts, you have a remedy in breach warranty against redhibitory devices can only be avoided by a clearly express waiver things that give rise to a claim for redhibition: o field infected with poisonous weeds o machines that do not work properly/lemon automobiles o susceptibility of a house to flooding o termite infestation o leaking roof o beware of situations where the buyer should have been aware- like apparent termite damage or rusty gutters, or cracks in the foundation Art. 2521. Defects that are made known to the buyer or that are apparent The seller owes no warranty for defects in the thing that were known to the buyer at the time of the sale, or for defects that should have been discovered by a reasonably prudent buyer of such things. the standard is that of a reasonably prudent buyer. For example, he must make more than a casual observance of the thing if it takes consulting an expert to discover the defect, then the defect is not apparent Art. 2522. Notice of existence of defect The buyer must give the seller notice of the existence of a redhibitory defect in the thing sold. That notice must be sufficiently timely as to allow the seller the opportunity to make the required repairs. A buyer who fails to give that notice suffers diminution of the warranty to the extent the seller can show that the defect could have been repaired or that the repairs would have been less burdensome, had he received timely notice. Such notice is not required whe n the seller has actual knowledge of the existence of a redhibitory defect in the thing sold. Art. 2524. Thing fit for ordinary use The thing sold must be reasonably fit for its ordinary use. When the seller has reason to know the particular use the buyer intends for the thing, or the buyer's particular purpose for buying the thing, and that the buyer is relying on the seller's skill or judgment in selecting it, the thing sold must be fit for the buyer's intended use or for his particular purpose. If the thing is not so fit, the buyer's rights are governed by the general rules of conventional obligations. the buyer will get a remedy in breach rather than redhibition if the thing is not fit for the purpose which the buyer intended it to be used for and the seller was aware of that purpose or where the seller represents that the thing contains a particular feature buyer may seek damages and dissolution the seller does not owe warranty in of fitness for the thing to be used for a particular purpose with the buyer intends to use it as part of a secret manufacturing process. this is like the sale of the foil for the potato chip bags. it was not fit for the intended use and the buyer got remedy in breach Art. 2529. Thing not of the kind specified in the contract When the thing the seller has delivered, though in itself free from redhibitory defects, is not of the kind or quality specified in the contract or represented by the seller, the rights of the buyer are governed by other rules of sale and conventional obligations. this is where the thing is not of the grade of excellence that the buyer needed this can also like the case of the quarter horse that could not be registered- it was not a hidden defect. It was not of the quality specified in the contract. Art. 2530. Defect must exist before delivery The warranty against redhibitory defects covers only defects that exist at the time of delivery. The defect shall be presumed to have existed at the time of delivery if it appears within three days from that time. Art. 2531. Liability of seller who knew not of the defect A seller who did not know that the thing he sold had a defect is only bound to re pair, re medy, or correct the defect. If he is unable or fails so to do, he is then bound to return the price to the buyer with interest from the time it was paid, and to reimburse him for the reasonable expenses occasioned by the sale, as well as those incurred for the preservation of the thing, less the credit to which the seller is entitled if the use made of the thing, or the fruits it has yielded, were of some value to the buyer. A seller who is held liable for a redhibitory defect has an action against the manufacturer of the defective thing, if the defect existed at the time the thing was delivered by the manufacturer to the seller, for any loss the seller sustained because of the redhibition. Any contractual provision that attempts to limit, diminish or prevent such recovery by a seller against the manufacturer shall have no effect. you cannot limit, diminish or prevent a seller‟s right to recover from the manufacturer a national distributor was imputed the same knowledge of the redhibitory defects as the manufacturer the seller who builds the house or makes renovations can be regarded as a manufacturer Art. 2532. Return of the thing; destruction of the thing A buyer who obtains rescission because of a redhibitory defect is bound to return the thing to the seller, for which purpose he must take care of the thing as a prudent administrator, but is not bound to deliver it back until all his claims, or judgments, arising from the defect are satisfied. If the redhibitory defect has caused the destruction o f the thing the loss is borne by the seller, and the buyer may bring his action even after the destruction has occurred. If the thing is destroyed by a fortuitous event before the buyer gives the seller notice of the existence of a redhibitory defect that would have given rise to a rescission of the sale, the loss is borne by the buyer. After such notice is given, the loss is borne by the seller, except to the extent the buyer has insured that loss. A seller who returns the price, or a part thereof, is subrogated to the buyer's right against third persons who may be liable for the destruction of the thing. Art. 2534. Prescription A.(1) The action for redhibition against a seller who did not know of the existence of a defect in the thing sold prescribes in four years from the day delivery of such thing was made to the buyer or one year from the day the defect was discovered by the buyer, whichever occurs first. (2) However, when the defect is of residential or commercial immovable property, an action for redhibition against a seller who did not know of the existence of the defect prescribes in one year from the day delivery of the property was made to the buyer. B. The action for redhibition against a seller who knew, or is presumed to have known, of the existence of a defect in the thing sold prescribes in one year from the day the defect was discovered by the buyer. C. In any case prescription is interrupted when the seller accepts the thing for repairs and commences anew from the day he tenders it back to the buyer or notifies the buyer of his refusal or inability to make the required repairs. Art. 2537. Judicial sales Judicial sales resulting from a seizure are not subject to the rules on redhibition. Art. 2538. Multiple sellers, multiple buyers, successors The warranty against redhibitory vices is owed by each of multiple sellers in proportion to his interest. Multiple buyers must concur in an action for rescission because of a redhibitory defect. An action for reduction of the price may be brought b y one of multiple buyers in proportion to his interest. The same rules apply if a thing with a redhibitory defect is transferred, inter vivos or mortis causa, to multiple successors. multiple buyers must concur for redhibition however, each buyer can sue for a reduction in price in proportion to his interest Art. 2540. Redhibitory vice of one of several matched things sold together When more than one thing are sold together as a whole so that the buyer would not have bought one thing without the other or others, a redhibitory defect in one of such things gives rise to redhibition for the whole. Art. 2541. Reduction of the price A buyer may choose to seek only reduction of the price even when the redhibitory defect is such as to give him the right to obtain rescission of the sale. In an action for rescission because of a redhibitory defect the court may limit the remedy of the buyer to a reduction of the price. to determine the price reduction, look at the difference between the purchase price and the price of the thing with the defect. you can also get the cost of the repair Art. 2545. Liability of seller who knows of the defect; presumption of knowledge A seller who knows that the thing he sells has a defect but omits to declare it, or a seller who declares that the thing has a quality that he knows it does not have, is liable to the buyer for the return of the price with interest from the time it was paid, for the reimbursement of the reasonable expenses occasioned by the sale and those incurred for the preservation of the thing, and also for damages and reasonable attorney fees. If the use made of the thing, or the fruits it might have yielded, were of some value to the buyer, such a seller may be allowed credit for such use or fruits. A seller is deemed to know that the thing he sells has a redhibitory defect when he is a manufacturer of that thing. the seller must be in bad faith-knows of the defect (actual or constructive knowledge) for the buyer to get attorneys fees. No attorneys fees for a seller in good faith there is a presumption of knowledge when the seller is the manufacturer damages have been awarded for loss in the value of the crop, the price, the expenses of the sale no non-pecuniary damages unless the thing sold was specifically for enjoyment, taste like hardwood floors. The court also awarded them when raw sewage flooded the home. Art. 2548. Exclusion or limitation of warranty; subrogation The parties may agree to an exclusion or limitation of the warranty against redhibitory defects. The terms of the exclusion or limitation must be clear and unambiguous and must be brought to the attention of the buyer. A buyer is not bound by an otherwise effective exclusion or limitation of the warranty when the seller has declared that the thing has a quality that he knew it did not have. The buyer is subrogated to the rights in warranty of the seller against other persons, even when the warranty is excluded. if the warranty against redhibition is excluded, the terms must be clear, unambiguous and brought to the attention of the buyer. the buyer can still sue the manufacturer for redhibition even if the warranty against the seller is excluded.? OBLIGATIONS OF THE BUYER Art. 2549. Obligations of the buyer The buyer is bound to pay the price and to take delivery of the thing. the seller can resell the goods to mitigate his damages and get the difference between the sale price and the contract place Art. 2550. Time and place of payment of price Payment of the price is due at the time and place stipulated in the contract, or at the time and place of delivery if the contract contains no such stipulation. Art. 2553. Interest on price The buyer owes interest on the price from the time it is due. Art. 2555. Liability of the buyer who fails to take delivery A buyer who fails to take delivery of the thing after a tender of such delivery, or who fails to pay the price, is liable for expenses incurred by the seller in preservation of the thing and for other damages sustained by the seller. Art. 2555. Liability of the buyer who fails to take delivery A buyer who fails to take delivery of the thing after a tender of such delivery, or who fails to pay the price, is liable for expenses incurred by the seller in preservation of the thing and for other damages sustained by the seller. Art. 2557. Eviction and threat of eviction as grounds for suspension of payment A buyer who is evicted by the claim of a third person may withhold payment of the price until he is restored to possession, unless the seller gives security for any loss the buyer may sustain as a result of the eviction. A seller who, in such a case, is unable or unwilling to give security may compel the buyer to deposit the price with the court until the right of the third person is adjudged. Also the buyer may deposit the price with the court, on his own initiative, to prevent the accrual of interest. A buyer may not withhold payment of the price when the seller is not liable for a return of the price in case of eviction. Art. 2560. Payment of the price before disturbance of possession A buyer who paid the price before being evicted of the thing may not demand that the seller return the price or give security for it. Art. 2561. Dissolution of sale for nonpayment of price If the buyer fails to pay the price, the seller may sue for dissolution of the sale. If the seller has given credit for the price and transfers that credit to another person, the right of dissolution is transferred together with the credit. In case of multiple credit holders all must join in the suit for dissolution, but if any credit holder refuses to join, the others may subrogate themselves to his right by paying the amount due to him. If a promissory note or other instrument has been given for the price, the right to dissolution prescribes at the same time and in the same period as the note or other instrument. the right to sue for dissolution is transferable you cannot get damages and dissolution even if there is no lien on the sale of an immovable, a seller can still get dissolution when there was a series of promissory notes with staggered maturity, prescription on the whole starts to run when the buyer defaults on the first Art. 2562. Dissolution of sale of immovables for nonpayment of price; extension of time for payment When an action is brought for the dissolution of the sale of an immovable and there is no danger that the seller may lose the price and the thing, the court, according to the circumstances, may grant the buyer an extension of time, not in excess of sixty days, to make payment, and shall pronounce the sale dissolved if the buyer fails to pay within that time. When there is such a danger, the court may not grant the buyer an extension of time for payment. even when there is an express clause for dissolution in the contract, the buyer still has additional time to pay as long as the seller has not given notice that he is availing himself of the claim or has not filed suit for dissolution. Art. 2563. Payment of price after expiration of term but prior to default When the contract of sale of an immovable expressly provides for dissolution in case of failure to pay the price, the buyer still has the right to pay, in spite of the express dissolution clause, for as long as the seller has not given the buyer notice that he avails himself of that clause or has not filed suit for dissolution. Art. 2564. Dissolution of sale of movables If the thing is movable and the seller chooses to seek judicial dissolution of the sale because of the failure of the buyer to perform, the court may not grant to the buyer any extension of time to perform. sale of movables are not recorded. The seller reserves the right to dissolve as long as the thing remains in the hands of the vendee. There is no right to dissolve from a subvendee. However, if the sale was made on credit, the original seller can get a privilege that the subvendee owes to the original vendee. LESION Art. 2589. Rescission for lesion beyond moiety The sale of an immovable may be rescinded for lesion when the price is less than one half of the fair market value of the immovable. Lesion can be claimed only by the seller and only in sales of corporeal immovables. It cannot be alleged in a sale made by order of the court. The seller may invoke lesion even if he has renounced the right to claim it. no lesion in a simulation there must actually be a price paid the right to lesion is heritable and assignable even if you have knowledge that the sale price was lesionary, you can still get rescission even if part of the sale price is a donation, the seller can still get lesion in a K of exchange you can also make a claim for lesion-this is so even if there is an exchange of an immovable for a movable. In that case, the party who gave the immovable is the party who can claim lesion. The movable has to be worth more than ½ the value of the immovable Art. 2590. Time of valuation for determination of lesion To determine whether there is lesion, the immovable sold must be evaluated according to the state in which it was at the time of the sale. If the sale was preceded by an option contract, or by a contract to sell, the property must be evaluated in the state in which it was at the time of that contract. Art. 2591. Option of buyer to supplement price When a sale is subject to rescission for lesion the buyer may elect either to return the immovable to the seller, or to keep the immovable by giving to the seller a supplement equal to the difference between the price paid by the buyer and the fair market value of the immovable determined according to the preceding Article. Art. 2592. Lesion, return of fruits by buyer and payment of interest by seller If the buyer elects to return the immovable he must also return to the seller the fruits of the immovable from the time a demand for rescission was made. In such a case, the seller must return to the buyer the price with interest from the same time. If the buyer elects to keep the immovable he must also pay to the seller interest on the supplement from the time a demand for rescission was made. Art. 2594. Lesion, action against vendee who has resold the immovable When the buyer has sold the immovable, the seller may not bring an action for lesion against a third person who bought the immovable from the original buyer. In such a case the seller may recover from the original buyer whatever profit the latter realized from the sale to the third person. That recovery may not exceed the supplement the seller would have recovered if the original buyer had chosen to keep the immovable. Art. 2595. Peremption of action for lesion The action for lesion must be brought within a peremptive period of one year from the time of the sale. Art. 2596. Lesion, action against vendee who has granted a right on the immovable When the buyer has granted a right on the immovable to a third person, rescission may not impair the interest of that person. The seller who receives back the immovable so encumbered is entitled to recover from the buyer any diminution in value suffered by the immovable because of the right of the third person. That recovery may not exceed the supplement the seller would have recovered if the buyer had not encumbered the immovable and had decided to keep it. Art. 2597. Condition in which property is returned to seller; reimbursement of buyer for improvements When rescission is granted for lesion the seller must take back the immovable in the state it is at that time. The buyer is not liable to the seller for any deterioration or loss sustained by the immovable before the demand for rescission was made, unless the deterioration or loss was turned into profit for the buyer. The seller must reimburse the buyer for the expenses of the sale and for those incurred for the improvement of the immovable, even if the improvement was made solely for the convenience of the buyer. Art. 2599. Buyer's right of retention pending reimbursement The buyer may retain possession of the immovable until the seller reimburses the buyer the price and the recoverable expenses. Art. 2600. Divisibility of action in lesion among joint sellers and successors, joinder If more than one seller concurred in the sale of an immovable owned by them in indivision, or if each of them sold separately his share of the immovable, each seller may bring an action for lesion for his share. Likewise, if a seller died leaving more than one successor, each successor may bring an action for lesion individually for that share of the immovable corresponding to his right. LEASE Art. 2669. Lease or hire, definition. Lease or hire is a synallagmatic contract, to which consent alone is sufficient, and by which one party gives to the other the enjoyment of a thing, or his labor, at a fixed price. Art. 2670. Essential elements of lease. To the contract of lease, as to that of sale, three things are absolutely necessary, to wit: the thing, the price, and the consent. Art. 2671. Price, necessary and permissible elements. The price should be certain and determinate, and should consist of money. However, it may consist in a certain quantity of commodities, or even in a portion of the fruits yielded by the thing leased. Art. 2672. Determination of price by third person. The price, notwithstanding, may be left to the award of a third person named and determined, and then the contract includes the condition that this person shall fix the price; and if he can not or will not do it, there is no lease. The contract would be null if the price were left to be fixed by a person not designated. Art. 2673. Kinds of lease. There are two species of contracts of lease, to wit: 1. The letting out of things. 2. The letting out of labor or industry. Art. 2674. Lease of things. To let out a thing is a contract by which one of the parties binds himself to grant to the other the enjoyment of a thing during a certain time, for a certain stipulated price which the other binds himself to pay him. Art. 2675. Lease of labor or industry. To let out labor or industry is a contract by which one of the parties binds himself to do something for the other, in consideration of a certain price agreed on by them both. Art. 2676. Kinds of lease of things. The letting out of things is of two kinds, to wit: 1. The letting out houses and movables. (Lease for rent) 2. The letting out predial or country estates.* (farming lease) Art. 2677. Lessor and lessee, definitions. He who grants a lease is called the owner or lessor. He to whom a lease is made is called the lessee or tenant.* Art. 2678. Lease of corporeal things. All corporeal things are susceptible of being let out, movable as well as immovable, excepting those which can not be used without being destroyed by that very use. Art. 2679. Lease of incorporeal things. Certain incorporeal things may also be let out, such as a right of toll, and the like; but there are some which can not be the object of hire, such as a credit. Art. 2680. Lease of right of servitude. A right of servitude can not be leased separately from the property to which it is annexed. Art. 2681. Lease of thing belonging to another. He who possesses a thing belonging to another, may let it to a third person, but he can not let it for any other use than that to which it is usually applied. Art. 2682. Warranty by lessor of property of another. He who lets out the property of another, warrants the enjoyment of it against the claim of the owner. Art. 2683. Form of lease, written or verbal. Leases may be made either by written or verbal contract. Art. 2683.1. Commission owed to third party; inclusion in written lease Whenever a commission is owed by the lessor to a third party for perfecting the lease of immovable property, the amount of the commission and to whom it is owed shall be clearly stated in the written lease agreement. Art. 2684. Agreed duration of lease. The duration and the conditions of leases are generally regulated by contract, or by mutual consent.* Art. 2685. Presumed duration of lease of house, where no time specified. If the renting of a house or other edifice, or of an apartment, has been made without fixing its duration, the lease shall be considered to have been made by the month. Art. 2686. Notice of termination when no agreement as to duration. The parties must abide by the agreement as fixed at the time of the lease. If no time for its duration has been agreed on, the party desiring to put an end to it must give notice in writing to the other, at least ten days before the expiration of the month, which has begun to run. Art. 2687. Presumed duration of lease of predial estate, where no time specified. The lease of a predial estate, when the time has not been specified, is presumed to be for one year, as that time is necessary in this State to enable the farmer to make his crop, and to gather in all the produce of the estate which he has rented. Art. 2688. Reconduction of lease of predial estate by continued possession after expiration of term. If, after the lease of a predial estate has expired, the farmer should still continue to possess the same during one month without any step having been taken, either by the lessor or by a new lessee, to cause him to deliver up the possession of the estate, the former lease shall continue subject to the same*clauses and conditions which it contained; but it shall continue only for the year next fo llowing the expiration of the lease. Art. 2689. Reconduction of lease of house or room by continued possession after expiration of term. If the tenant either of a house or of a room should continue in possession for a week after his lease has expired, without any opposition being made thereto by the lessor, the lease shall be presumed to have been continued, and he can not*be compelled to deliver up the house or room without having received the legal notice or warning directed by article 2686. Art. 2690. Security of original lease inapplicable to reconduction. In the cases provided for in the two preceding articles, the security which may have been given for the payment of the rent shall not extend to the obligations resulting from the lease being thus prolonged. Art. 2691. Notice of termination as precluding reconduction. When notice has been given, the tenant, although he may have continued in possession, can not pretend that there has been a tacit renewal of the lease. Art. 2692. Obligations arising from nature of contract. The lessor is bound from the very nature of the contract, and without any clause to that effect: 1. To deliver the thing leased to the lessee. 2. To maintain the thing in a condition such as to serve for the use for which it is hired. 3. To cause the lessee to be in a peaceable possession of the thing during the continuance of the lease. Art. 2693. Delivery and necessary repairs. The lessor is bound to deliver the thing in good condition, and free from any repairs. He ought to make, during the continuance of the lease, all the repairs which may accidentally*become necessary; except those which the tenant is bound to make, as hereafter directed.** Art. 2694. Lessee's right to make repairs upon lessor's failure. If the lessor do not make the necessary repairs in the manner required in the preceding article, the lessee may call on him to make them. If he refuse or neglect to make them, the lessee may himself cause them to be made, and deduct the price from the rent due,*on proving that the repairs were indispensable, and that the price which he has paid was just and reasonable. Art. 2695. Lessor's liability for damages from vices and defects. The lessor guarantees the lessee against all the vices and defects of the thing, which may prevent its being used even in case it should appear he knew nothing of the existence of such vices and defects, at the time the lease was made, and even if they have arisen since, provided they do not arise from the fault of the lessee; and if any loss should result to the lessee from the vices and defects, the lessor shall be bound to indemnify him for the same. Art. 2696. Lessor's liability for eviction of lessee. If the lessee be evicted, the lessor is answerable for the damage and loss which he sustained by the interruption of the lease. Art. 2697. Total or partial destruction of thing during lease. If, during the lease, the thing be totally destroyed by an unforeseen event, or it be taken for a purpose of public utility, the lease is at an end.*If it be only destroyed in part, the lessee may either demand a diminution of the price, or a revocation of the lease. In neither case has he any claim of damages.