Scalise -Obligations Spring 2006
I. OBLIGATIONS IN GENERAL
o Generally-something law or morals command person to do which is made effective by
imposition of sanction for failure to comply.
o LA CC 1756 technical def- Legal relationship whereby a person (obligor) is bound to
render perf in favor of another (obligee)
obligee is entitled to demand from obligor a certain performance.
More than merely "duty"
o Legal bond that links right to duty
o Obligation- (Personal/credit right) one end of oblig. Rqmt of active and passive subj.
Relative b/c holder's right is only enforceable against obligor (must be
determinate # of persons)
Does NOT entail right to of pursuit or right of preference
Holder only able to seize property that is in patrimony of debtor/obligor
All holders of credit-right against same debtor are equal
If secure oblig. w/ real right (=accessory) then right of preference arises (ex. Loan
2. 3 elements of Oblig:
Legal Bond linking subjects (vinculum juris)- a legal tie that is expression of the parties' will
o Distinguishes legal oblig from moral oblig
3. Subjects involved (2+):
Obligor- party subjected to perf/Under oblig. "Duty" determines how party must behave to render
expected perf. Passive Subj
Obligee- has right which entitles him to demand perf. Of duty by obligor. Active subj
Every oblig must contain a duty, but not every duty (ex. Charity) does not amount to obligation.
Duty must be related to definite and particular perf to be oblig. General duties, although have
legal conseq, are not technically oblig.
Patrimonial right- right that has purpose of satisfaction of creditor's econ needs by means of perf
that debtor must render.
o Has $$ pecuniary value
o Voluntary refusal to satisfy right results in creditor seeking spec perf or damages via state
action to compel perf
o Legal relation is technically oblig when it gives obligee a credit-right. Oblig remains same
even if creditor transfers oblig and/or obligor substitutes another person.
o Diff from institutional oblig (ex. Spousal or parent/child) where parties' duties are
regulated accd to social norms.
Institutional oblig have no patrimony and are non-transferable. Generally much longer duration
Subjective approach- True obj of oblig is perf/act that creditor expects and debtor must render-
not necessarily "thing"
Acts of debtor that constitute perf are intended for satisfaction of creditor's need(s)- this may be
accomplished by rendering a "thing", svc, forfeiture of right, etc.
1756: Performance (object) may consist of giving, doing or not doing something.
Obligations to GIVE- obligor binds himself to transfer ownership of "thing" or grant real right in
thing to obligee.
Must be performed simultaneously w/ act from which it arises
Ex) Obligor must manufacture object b/f can transfer ownership of object to
obligee. Oblig to give as soon as object is manufactured.
Very rare in CC b/c in most instances transfer or giving of real right occurs by
exg of consents
Entails accessory obligations : 1. to deliver thing 2. to preserve and care for thing
Obligations to DO- obligor binds himself to carry out/execute an "act" or series of acts such as
manuf or svc, as opposed to transferring real right
Rqmt of positive act of obligor
Actual Involvement in Perf by obligor may be essence of oblig (essential) OR
indifferent to obligee (contractor subcontracts work to be performed for obligee)
Strictly personal- only obligor that is party in K may render perf of obligation.
Breach resulting in damages rather than spec perf.
Obligations NOT TO DO- obligor binds himself to abstain from undertaking certain course of
action that otherwise has legal right to do.
Obligee's remedy for nonperf may be destruction of whatever obligor did in
violation of oblig.
Breach by obligor results in injunction rather than spec perf.
4. Rqmts of valid K
Salles v. Stafford Inc. LASC 1931 p. 8
IMPTC: If contract made w/o vices of consent, it is not to be interfered w/ by court unless
wholly ascertainable or against public policy.
II. SOURCES OF OBLIG
1. Source- particular juridical act or fact susceptible of creating a legal relationship b/t obligor and
2. Modern sources: Juridical Acts and Facts
o distinction impt esp b/c of diff prescriptive periods. 1 yr for torts and 10 yrs for Ks
o Juridical Act- manifestation of will meant to have legal effects (K). Voluntary human
action w/ intent giving rise to legal conseq.
o Multilateral- 1+ person. Ex) Contract. Jurid Act is relationship b/t parties, not
paper which is instrument.
o Unilateral- 1 person. One party that wants legal conseq of act. Ex) Will. Legal
conseq take effect in future, upon death.\
o Juridical Fact- event which in itself brings about legal effects. Lacks intent element
(negligence causing damage) and/or arises from natural occurrence (death)
o Involuntary- Natural occurrence. Ex) Birth of child brings about juridical relation
b/t child and parent and creates juridical effects of parents' responsibility of
support. Ex) Death brings does not give rise to juridical relation b/c not 2+
persons involved but does bring about juridical effect in estate.
o Voluntary- may desire event itself but not necessarily the legal consequences.
Illicit- Tort or Negligence
Licit- ex) unjust enrichment - one party gives another economic benefit
w/o rqmt under contract and person receiving benefit does not
1. ARTICLE 1927 – Consent
A contract is formed by the consent of the parties established through offer and acceptance.
Unless the law prescribes a certain formality for the intended contract, offer and acceptance may
be made orally, in writing, or by action or inaction that under the circumstances is clearly
indicative of consent.
Unless otherwise specified in the offer, there need not be conformity between the manner in
which the offer is made and the manner in which the acceptance is made
2. Meeting of the Minds rqmt
Subjective approach- inquiry to mental intent of parties ex) Conduct
Objective approach- outward manifestation of consent to agmt. Ex) Written terms of contract
LA has mixed approach b/c internal, subjective desires are primary imptc. Objective external
terms will be reviewed if there are vices of consent/mistake in any part of contract formation.
3. Expressing Consent:
By Words: Express consent
o Oral or written
o Must be taken as a whole, in context for meaning
o However, if context shows affirmative promise made in manner lacking serious intent, no
By Conduct: Implied consent by action/inaction
o Evidenced by party's acts rather than words is matter of presumption that may or may not
be est by law.
o If not est by law, presumption of consent left to court.
o More difficult b/c court must determine if party's action or inaction is consent
o Ex) when seller makes delivery of goods to buyer and buyer accepts goods- oblig created
b/c buyer impliedly consents to contract.
o If no law providing clear presumption of consent based on silence, circum must be very
clear to est presumption that silence=expression of consent. May be est by previous
transactions, trade practice, etc.
o Parties may expressly agree that silence will function as consent for specified trans.
o In case of doubt Silence does not function as consent
o Ex) If lease expires and lessor remains inactive and lessee remains in possession of
leased thing, give rise to renewal of contract.
LA Milk Producers Asc.Inc v. Southland Corp. LAAC 1977 p.26
IMPLIED CONSENT BY ACTION/INACTION
Facts: Ongoing written communication b/t buyer and seller over K terms. Each claims their terms
were last and are effective.
Merchant pricelist is not offer, but rather K formed when buyer places orders for goods accd to
o Merchant sending pricelist is expression of intention to negotiate on its terms if sent to
o Non-merchant's pricelist implies no such intention.
D's Grumbling not suff to change terms b/c did not state specific terms so inoperable offer. If D
had specified qty and price on their terms in letter would have been operable offer.
P's letter stating specific qty and D's acct of milk delivery formed K.
Illinois Central RxR v. Int'l Harvester LASC 1979 p.30
CONSENT BY SILENCE
IMPTC: Silence and Inaction can be modification of terms and/or consent- but not the
Silence=consent only when law says so OR in absence of law when court says so accd to subj interp of
parties' intent. Not presumption.
III. OFFER AND ACCEPTANCE
Def- unilateral declaration of will that a person (offeror) addresses to another (offeree) whereby
the offeror proposes to the offeree the conclusion of a contract.
o Offer can be verbal, written, or action and express or implied
Tacid offer/acct- ex) merchant on his own will sends goods to buyer and contract
formed w/ buyer's acct of delivery of goods.
A. Rqmts of Offer
o Offeror must have intent to legally bind himself upon Offeree's acct./enter a contract
Intend legal ramifications to result from offer
Some relationships do not contemplate legal consequences (social/family)
Determined by circum of individual cases
o Offeror must have serious intent
Parties do not make stmts in jest
In LA subjective test of parties' intent
o Offer must be expressed to offeree
Unilateral declaration of will made to person intend to give opportunity to accept
o Offer must be :
Precise- terms covered must be sufficiently clear to where contract may be formed.
Complete- must cover all necessary terms. Specifying object and price are necessary
o Offer must be firm
Offeror's intent to complete contract by a "yes"/assent of offeree.
Absent this intent, "offer" is only invitation to negotiate
B. Offers to the Public, Ads and Invitations to Negotiate:
o In absence of special circum, ad proposing certain goods for sale at certain price are invitation to
negotiate which may be acct or rejected by offeror, NOT true offer.
o In LA, generally only ads for prizes, rewards, and contests are considered offers. Exception:
o ARTICLE 1944 – Offer of reward made to the public
An offer of a reward made to the public is binding upon the offeror even if the one who performs
the requested act does not know of the offer.
upon commencement of performance (1939)
by completed performance (1940)
by silence (1942)
North Central Utilities, Inc. v. Walker Community Water System, Inc. LAAC 1987 p.48
D alleged to be "public entity" in ads soliciting contractor bids. P met all rqmts specified in D's ad
and was low bidder. D did not award P job and P sues for damages.
P argues that ad should be construed as offer and K formed should be forced to comply w/ public
bid laws requiring taking of lowest bid. D contends that not public entity and not subject to public
Issue: Is D's ad an offer such that P's bid is acct and completes contract formation?
o For proposal to qualify as an offer, it must reflect intent of offeror to give other
party the right to conclude contract by assent. If intent not present, then only
invitation to negotiate/willingness to accept offers from others
o In case, ad does not cover essential elements of offer AND does not manifest offeror's
intent to be legally bound
iii. Duration of the Offer
A. Irrevocable Offer
Expires w/I prescribed time or reas time if no time specified
ARTICLE 1928 – Irrevocable Offer
An offer that specifies a period of time for acceptance is irrevocable during that time.
When the offeror manifests an intent to give the offeree a delay within which to accept, without
specifying a time, the offer is irrevocable for a reasonable time.
Cmt B- An offeror who specifies a time for acct which is too long under circum is
not bound beyond a reasonable time
This creates oblig. on part of offeror b/c of his unilateral declaration of will
Even if no time specified for acct, offeror may be bound not to revoke for
reasonable time if manifested intent or implied by offeror to give offeree delay w/I
which to acct
"reasonable time"- fact matter determined by court/jury in indiv circum and nature
of proposed K
1. Acceptance/Revocation of Irrevocable Offer
Acct effective when received by offeror
Reasoning that places risk of transmission on offeree so that in event of acct letter lost in mail the
offeror is protected against surprise of K formed w/o his knowledge.
Rule for irrevocable offers b/c offeror not in position to take back offer-oblig to hold offer open.
Offeror bound not to revoke irrevocable offer from specified time b/c knowledge of offeree that will
remain open, which means that offeror can revoke if revocation is by faster means than notice of
period of irrevocability and b/f offeree acquires such knowledge that offer irrevocable .
Offeror can condition offer that specifies time for acct. by stating that offer subj to revocation at
any time so offeree not misled to rely on irrevocable offer.
ARTICLE 1929- Expiration of irrevocable offer for lack of acceptance
An irrevocable offer expires if not acct. w/I the time prescribed in the preceding article.
Expiration relieves the offeror of the need to revoke. If an offer has expiration
and the offeree acct. after then, the acct. will be deemed a new offer.
ARTICLE 1934 – Time when acceptance of an irrevocable offer is effective
An acceptance of an irrevocable offer is effective when received by the offeror.
"received"- Art 1938 : written acct is received when it comes into possession of
the addressee or of a person authorized by him to receive it, or when it is
deposited in a place the addressee has indicated as the place of this or similar
communications to be deposited.
Ex) offeror's secretary's bin- offeror may not know of acct but offeror bears risk here b/c
his duty to look out for mail.
A. Revocable Offer
o Expires w/I reas time
ARTICLE 1930 – Revocable offer- General Rule in LA
An offer not irrevocable under Civil Code Article 1928 may be revoked before it is accepted.
Cmt B: Strong fact situation is necessary in order to imply irrevocable offer for
any substantial length of time.
Does not specify a period of time for acct, or when does not otherwise manifest
intent to give offeree delay w/I which to acct may be revoked b/f acct.
1. Acceptance/Revocation of Revocable offer
o Acct effective upon transmission of offeree- Places risk of transmission on offeror
o Reasoning that b/c offer may be revoked at any moment b/f acct, LA Law protects
offeree by allowing him to rely on assumption that K is formed at moment b/f reception.
o Revocation effective when received by offeree, prior to acct
o LA law recognizes freedom of offeror, not yet bound by contract that can be formed only
when offer acct.
o Reasonableness of manner of acct is subjective Ct determination based on local practice, prior
o Ex) email: unreasonable manner of acct for offers for immovables (real estate transactions). May
be reasonable if offer made by email or if offeror indicated that email was acceptable means of
o Email: If unreasonable means then effective upon knowledge, receipt, ???. Unresolved
ARTICLE 1931 – Expiration of revocable offer
A revocable offer expires if not accepted within a reasonable time.
Remember: Revocation and Expiration are diff!!
An offer expires by the death or incapacity of the offeror or the offeree b/f it has
Offers are NOT heriable. Bind indiv parties only. Death and
incapacity invalidate offers.
ARTICLE 1935 – Time when acceptance of a revocable offer is effective
Unless otherwise specified by the offer or the law, an acceptance of a revocable offer, made in a
manner and by a medium suggested by the offer or in a reasonable manner and by a reasonable
medium, is effective when transmitted by the offeree.
Transmission?- No LACC def but Art 1935 Cmt C: "what constitutes an effective
transmission under this Art is to be determined by Cts accd to business
ARTICLE 1937 – Time when revocation is effective
A revocation of a revocable offer is effective when received by the offeree prior to acceptance.
Risk placed upon offeror recognizing the fragility of offeree
ARTICLE 1938 – Reception of revocation, rejection, or acceptance
A written revocation, or acceptance is received when it comes into the possession of the
addressee or of a person authorized by him to receive it, or when it is deposited in a place the
addressee has indicated as the place for this or similar communications to be deposited for him.
Prior dealings may indicate acceptable place(s) for communication to be
deposited (ex. Email)
Oral revocations/acct n/a under LACC. Oral revocations are effective when
"received" accd to doctrine. Reasoning by analogy that if verbally tell or leave on
answering machine then same as depositing in mail box.
A. How is Offeror's intent to give offeree delay determined? Ct determination of reasonable time
when no time specified in irrevocable contract?
1. Nature of Contract
o Gratuitous - OR- Onerous
Less time rqd for gratuitous (for benefit of offeree) than onerous where offeree's
acct binds him to render perf.
o Nature of object impt b/c if offer involving in fluctuting mkt (stocks) shorter time frame
necessary than for offer involving less volatile mkt (immovable property).
Promise for Promise? - OR- Promise for act?
o More time rqd for offer to render technical svcs than for offer to buy/sell consumer goods
2. Situation of the Parties
o Face to face?- OR- At a distance?
o Medium of Communication?
o Prior dealings?
3. Circum of the Case
Everything else that may influence intent of offeror?
Meyers v. Burger King LAAC 1993 p. 52
Terms of K to remain open for "at least 45 days"
"at least 45 days" is not specified time so Ct decides what is reasonable under circum.
Ct interprets that 45 days is min and thus what is reasonable amt of time after that for offer to be
D's allowing P to begin work 46 days after P's offer is D's tactic acct via beg perf w/I reasonable
W.M. Heroman and Co. v. Saia Electric LAAC 1977 p. 54
Facts: D sub contractor submits bid to P gen contractor, who in turn used the bid for job. After P
awarded job, D withdraws and forces P to hire another sub to do work at much higher price.
Issue: ? Is D sub's bid binding, making D liable to P for higher cost of another bid?
Decision: Yes. An unreas time b/t sub's offer and gen's acct by getting job had not elapsed and D
o Customary that sub's bids are irrevocable and Ct find's D's bid irrevocable "until such bid
by the gen to the owner has been declined or project had been abandoned, provided
unreasonable time had not elapsed."
o Determination of reasonable time in circum:
How long is reasonable?
3 mths in this case b/t sub's bid (offer) and owner's award of job (acct)
but this is reas in circum considering the substantial nature of project and
evid that project was proceeding toward realization
Why protect the gen (offeree)?
Modern view that sub's bid irrevocable, protecting offeree/gen.
Could view that K is conditioned upon acct by owner of gen's bid thus K
formed only at beg of perf. Thus protecting sub rather than gen.
iii. OPTION CONTRACTS
ARTICLE 1933 Option Contracts
An option is a contract whereby the parties agree that the offeror is bound by his offer for a
specified period of time and that the offeree may accept w/I that time.
Actually option is K that contains a promise to make another K later. Thus binds only offeror.
Major Diff b/t:
Option Contract :______________
K- mutual consent
Does NOT expire at death
Can be assigned
Rqmt of specified time period
(or attached w/ another K
Which has specified time.
Ex. Lease w/ option to buy )
Favor interpretation in favor
Of Offeree's right to acct after
Option Contract______________and Irrevocable Offer:
Acct is effective upon reception by the offeror
? Why would offeree pay for option when can derive same benefit from irrevocable offer for free?
o Offeree in better position in option K than irrevocable offer b/c mutual consent already
exists whereas in irrevocable offer it is just a proposition of offeror w/o any consent of
o Option K gives rise to contractual oblig of offeror not to revoke offer during specified time
VS. Irrevocable offer gives rise to legal oblig of offeror not to revoke during time
stipulated by offeror or reasonable time in circum.
A. Cause in Option K:
o Offeror in option K requires the offerees' acct of promise not to withdraw the offer. This
acct implies the Offeree's promise to give thought to the offer and reach a decision. This
implied promise that makes promisee's acct relevant, since option K would not otherwise
be valid legal transaction.
B. Consent in option K
If offeree gives offeror anything in return for benefit of delay in acct, then offeree's consent is
If offeree fails to give anything for benefit, then offeree's consent may be tactic
C. Object in Option K: Time allowed to offeree in order to decide whether to enter final K w/ offeror.
D. Rejection of Option K w/I specified time:
B/c term is stipulated for offeree's benefit the offeree has privilege to avail himself of full length of
term or not. If make rejection b/f deadline offeree is renouncing the term.
B/c term is resolutory, offeree's rejection relieves offeror of oblig to not revoke w/I term.
E. Counter offer of Option K w/I specified time:
If Offeree's intent implies a rejection of org offer- look to terms of counterproposal to ascertain
whether implication of rejection of org offer is necessary OR if can imply that offeree is attempting
to modify deal w/o extinguishing Offeree's right to acct org offer if offeror rejects modification.
W/ option K, favor interpretation that allows survival of Offeree's right to acct after
rejection/counter offer is diff from irrevocable offer
iii. Right of First refusal
Def: Promise whereby promisor obligates himself to give the promisee a first choice to make
certain transactions should the promisor ever decide to make the transaction.
In option K, offeror is Unconditionally bound if offeree chooses to acct.
While giver of right of first refusal is Conditionally bound b/c all giver promised is to make offer to
the promisee IF giver should decide to make a certain transaction. Dependent on giver's will.
Terms not necessarily as certain as the terms rqd in option K. (re: price not usually included in
right of first refusal)
Right of first refusal usually written doc (like option K)
Oblig to give Right of first refusal to holder of right is enforceable provided it has legal cause.
o Period allowed to promisee for exercise of right of first choice- Not rmqt
o If no specified period, then right of first refusal expires after reasonable period of time
o Period allowed to promisee for exercise of right of first choice- Not rmqt
o If no specified period, then right of first refusal expires after reasonable period of time
o Period during which the giver of right is bound not to finalize a trans w/ 3rd party w/o
offering same trans 1st to holder of right- 10 yr liberative prescription for contracts begins
from moment the promisee's action arises; = moment when promisor makes an offer to
3rd party or otherwise manifests his intention to sell w/o making offer first to promisee.
Ex) right of refusal to promissee if promisor decides to sell house. Promisor
decides to sell home and puts home on mkt as opposed to giving promisee right
of first refusal as previously negotiated. Promisee has 10 yrs to sue for breach
Glover v. Abney LASC 1926 p.61
Facts: P claims that D when alive, created option K to sell land w/I 5 yrs. D died b/f expiration of
5 yrs and P wants to exercise option to acct. against D's heirs.
Issue: Did D make agmt (option) or irrevocable offer?
Decision: An irrevocable offer exists b/c Abney did not agree and thus no option K. Irrevocable
offer expires at death of party.
iv. MANNER / MEDIUM
As "master of his offer" offeror may name special manner for acct. So offeree wanting to acct
must do so in manner prescribed by offeror.
Absent such specified manner, Acct may be conveyed in any reasonable manner and medium.
o Express acct is always reasonable- oral/written
o Implied acct MAY be reasonable if offeror clearly realizes that acct of that offer- by
o Acct by same medium as offer itself was made is reasonable
o If offer by fast means of communication and acct by slow means then may not be
o If law prescribes certain formality for validity of K, an acct that concludes such K must
comply w/ that formality.
Ex) Valid donation only via authentic act, thus acct by donee only by authentic
Art. 1936. Reasonableness of manner and medium of acceptance
A medium or a manner of acceptance is reasonable if it is the one used in making the offer or one
customary in similar transactions at the time and place the offer is received, unless circumstances
known to the offeree indicate otherwise
A. Timing of K formation impt b/c:
o If changes in legislation surrounding K, if retroactive law, dates of K formation may be
o Prescription purposes- prescriptive periods may be based on dates of K formations. If
have COA must file w/I prescriptive period
o Revocatory action- impt in creditor/debtor relationship b/c if K formed/debt incurred b/f
transfer of assets, creditors can still seize assets although not in hands of debtor any
B. OVERTAKING ACCT W/ REJECTION:
irrevocable offer- b/c acct effective upon receipt it IS POSSIBLE if offeror receives rejection prior
to receiving acct. Reasoning that if offeree overtakes acct w/ rejection, then offeror is in no worse
position than would have been if offeree allowed offer to expire.
revocable offer- Since acct is effective upon transmission then any later rejection could only
become effective after acct has already become effective. NOT POSSIBLE (even physically) b/c
subsequent rejection has no effect.
C. OVERTAKING REJECTION W/ ACCT:
Irrevocable offer- b/c acct and rejection effective upon receipt, effect must be given to msg
received first, regardless of which was transmitted first.
Revocable offer- Since acct effective upon transmission and rejection is effective upon receipt,
effect is given to msg received first. This reflects intent of the parties b/c offeror obviously intends
to contract b/c did not revoke AND offeree obviously intends to contract b/c despite earlier
rejection, made effort to acct.
Either way, if offeree's attempt to overtake rejection w/ acct fails, the subsequently received acct
functions as counter offer.
D. ACCT BY PERFORMANCE:
ARTICLE 1939 – Acceptance by performance
When an offeror invites an offeree to accept by performance and, according to usage or the
nature or the terms of the contract it is contemplated that the performance will be completed if
commenced, a contract is formed when the offeree begins the requested performance.
If offeror instructs offeree to indicate acct by acts other than words OR invites acct by either
promise or perf OR is silent concerning manner of acct, offeree may choose to render perf as
acct w/o making promissory acct.
If offeror invites acct by perf and accd to terms or usage it is contemplated that perf will be
completed if commenced, a K is formed when the offeree begins the requested perf.
Offeree's intent must be to complete perf he has commenced. Beg perf is implied promise to
render full perf.
Once offeree begins perf a K is formed and offeror cannot revoke offer
E. ACCT ONLY BY COMPLETED PERFORMANCE:
ARTICLE 1940 – Acceptance only by completed performance-
When, according to usage or the nature of the contract, or its own terms, an offer made to a
particular offeree can be accepted only by rendering a completed performance, the offeror cannot
revoke the offer, once the offeree has begun to perform, for the reasonable time necessary to
complete the performance. The offeree, however, is not bound to complete the performance he
The offeror's duty of performance is conditional on completion or tender of the requested
These are rare cases. Usually acct is by beg perf.
o Ex) Contract to paint portrait or build house.
Beg perf does not imply offeree's promise to complete perf. b/c cannot guarantee complete perf.
Offeree beg perf does not bind offeree to complete perf
Once offeree begins perf, offeror cannot revoke offer for reasonable time necessary to complete
perf. (option K comes into existence when offeree begins perf)
F. NOTICE OF COMMENCEMENT OF PERF
Art. 1941. Notice of commencement of performance
When commencement of the performance either constitutes acceptance or makes the offer
irrevocable, the offeree must give prompt notice of that commencement unless the offeror knows
or should know that the offeree has begun to perform. An offeree who fails to give the notice is
liable for damages.
Prompt notice of comm. of perf by offeree if parties at a distance or if offeror can not immediately
learn when perf begins. Applies whether beg. Perf =acct or makes offer irrevocable.
No notice rqmt where offeror should know that perf by offeree has begun (ex. Prior dealings)
Notice is NOT rqmt for K formation or irrevocable offer, but if offeree fails to give notice then liable
for damages offeror may suffer due to lack of notice.
If offeree beg perf w/o notice and offeror attempts to revoke offer, a notice given by offeree at that
moment renders attempted revocation ineffective.
G. ACCT BY SILENCE
Art. 1942. Acceptance by silence
When, because of special circumstances, the offeree's silence leads the offeror reasonably to
believe that a contract has been formed, the offer is deemed accepted.
Exceptional circum -Usually by past dealings b/t parties or designated by doctrine in particular
May be matter of law where law states that silence is valid acct in certain situation
o Ex) lease w/ fixed term that is reconducted. Acct by silence valid by law.
Art. 2721. Reconduction
A lease with a fixed term is reconducted if, after the expiration of the term, and without
notice to vacate or terminate or other opposition by the lessor or the lessee, the lessee
remains in possession:
(1) For thirty days in the case of an agricultural lease;
(2) For one week in the case of other leases with a fixed term that is longer than a week;
(3) For one day in the case of a lease with a fixed term that is equal to or shorter than a
H. ACCT MUST CONFORM TO THE OFFER
Art. 1943. Acceptance not in accordance with offer
An acceptance not in accordance with the terms of the offer is deemed to be a counteroffer
MIRROR IMAGE RULE
Gen Principle: Effective acct must conform to terms of offer for mutual consent to exist. (Modern
approach to have flexible interp to adapt to modern business trans.)
o K for Sale: K is perfect upon mutual consent to price and "thing." Once these agreed
upon by parties K is formed, even in absence of time for pymt, delivery term, or other
o K for Lease: K is perfect upon mutual consent to "thing to be let out" and rent to be paid
for its use. Lack of term concerning duration or time when rent is due does NOT render
parties' consent to essential terms ineffective.
If offer, besides essential terms, also contains matters of detail essential or not, acct only valid if
complies w/ ALL terms in offer.
If acct limits, conditions, or modifies the offer, is new offer which gives org offeror right to
withdraw org offer.
If offeree clearly acct org offer but also contains proposal(s) for offeror to modify or reconsider the
org terms of offer, then NOT counter offer and do NOT PREVENT K formation.
If acct by perf is invited or expected, offeree's lack of conformity to org offer may be counter offer
OR breach of intended K (depending on prior dealings).
Ex) if offeree ships non-conforming goods but states to offeror that shipment is only
accommodation then may not be breach.
Time when Lack of Conformity Discovered:
o B/f beg perf by either party: K still executory b/c parties only exchange of messages that
purport to convey their consent
o After beg perf by either party: K exists if parties' intent to be bound by K. May assume
offeror consented to modified terms from org offer OR parties intended law to fill gaps in
Ryder v. Frost LASC 1848 p. 85
IMPTC: Acct by Implied Consent
Facts: P is seeking to enforce a promise he alleges D made to him. D promised (offered) in
writing to give $500 to aid P in satisfying debt. As acct, D wanted P to settle the claim against
them as former business partners. D wanted ACT from P.
Implied Irrevocable offer w/o time period meaning that offer must stay open for reasonable amt of
Ps implied consent by ACT of settling claim is Acct of offer
o No rqmt that offeree give notice of completion of perf, only of commencement.
Commencement is sufficient to put offeree on notice of acct.
o Ds offer received by P approx 1 mth b/f completed perf.
o Period b/t offer and acct is reasonable.
Cardinal Wholesale Supply, Inc. v. Chaisson LAAC 1987 p.87
IMPTC: Ex of attempted Implied Consent that does not work
Facts: D co's written offer to P waived rqmt of written acct. P refused offer to extend credit, but
did not communicate rejection (or acct), and kept written offer. 2 yrs later P extended credit to
newly owned D co.. 8 yrs later, P sought to enforce terms stipulated in written offer against org
owners of co.
Ct holds that Implied acct not sufficient b/c no evid that offer intended to bind org owners to co's
debt after sale or that effectiveness of offer was dependent upon Ps acct at some indeterminate
time in future.
Written Waiver of notice of acct is not valid b/c cannot form K w/o offer and acct. Signed waiver
given by D w/ expectation that acct would be Ps perf.
No acct b/c P did not extend credit til 2yrs later, when co under new ownership. P did not acct
offer for purpose it was intended.
Ambrose v. M & M Dodge Inc. LAAC 1987 p.89
Imptc: Effective Revocation overtaking Acct
Facts: D sent P written T/C settlement lacking specific term. P signed written T/C. B/f sending
docs to D, P learned from phone convo w/ D that D rejected specified term. P withdrew consent
to T/C and cancelled all signed written docs. D seeks to enforce T/C settlement.
Ct decides: Acct never received by D in manner prescribed by law for K formation requiring
Signed docs were never notarized OR received by offeror.
Acct had to be in writing; oral acct not effective for K formation in this case
Never effective acct of offer b/c written acct only effective when rcd by offeror or deposited in
place designated by offeror.
"reception theory"- acct of offer takes effect at moment its communication reaches the offeror.
Evertite Roofing v. Green LAAC 1955 p.90
IMPTC: Acct by Beg Perf ? And reasonable period for irrevocability of offer
Facts: P Roofer expressly states in written doc/solicitation of offer that the K is binding upon Ps
beg perf and not subj to cancellation. D offered to purchase roofing svc from P by signing doc
containing work terms and price. 7 days after D made offer, P loaded up trucks and drove 40
miles to Ds home. P arrived and D had allowed another to perform work. P seeks to enforce K.
Ct decision Ps loading of truck and transporting to Ds work site is beg perf suff to acct offer w/I
Impliedly irrevocable doc, but states no expiration period, then irrevocable for reasonable time.
(Even if was revocable, would be rqd to remain open for reas time)
All Ps acts were in pursuance of job for D, in accd w/ this particular K. Ps loading truck and
driving to site are beg perf. (1939)
Scalise: CT did not apply art 1941 here. But if had, burden would have been upon Evertite to
prove that did not give notice b/c Green should have known that they had begun perf.
vi. COUNTEROFFER AND REJECTION
A. Counteroffer- new offer addressed by offeree to offeror of an org offer involving the same matter
and proposing terms that are diff from those in org offer. Offeree reveals intention to continue
o Rejection of org offer
o Counteroffer=K only if offeror acct terms of counteroffer
B. Rejection- manifestation of offeree's intent to reject made and is effective when rcd by offeror.
Effective rejection ends offeree's ability to acct.
Reply to offer that is not acct NOT always counteroffer or rejection; may be
clarification/modification not manifesting offeree's intent to reject and does not terminate ability to
acct Determined by circum, wording, prior dealings, etc.
Rodrigue v. Gebhardt LAAC 1982 p.96
IMPTC: Mirror Image Rule
Facts: P made offer to sell house. D made counter offer, which P rejected. P made 2nd offer w/
specified terms and expiration period. After expiration, D acct w/ diff terms.
Agmt of essential terms of price and "thing" but disagreement on manner of pymt. Purported acct
is actually counter offer, effective only w/ Ps acct.
Ct says Ds modification is irrelevant b/c offer expired b/f acct. Ds written acct had to be received
b/f expiration of Ps offer.
If legal rqmt of form, that must be followed for binding K.
W/o legal rqmt of form, parties are free to express their acct in any manner and to choose to
make their K in certain form even where no legal rqmt.
Art. 1839. Transfer of immovable property
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.
Writing rule for immovable is evidentiary and cautionary function.
Art. 1947. Form contemplated by parties
When, in the absence of a legal requirement, the parties have contemplated a certain form, it is
presumed that they do not intend to be bound until the contract is executed in that form
This legal presumption is est in interest of priv parties, thus is rebuttable
Breaux Bros Construction Co. v. Asc Contractors, Inc. LASC 1954 p.99
Form contemplated by parties
Oral K b/t parties where agreed from the start that K terms would be reduced to writing. P alleges
breach of oral K.
LASC: No valid K b/c part of bargain that K effective when in writing.
No legal rqmt that K of this nature be reduced to writing and verbal K for svcs is suff for formation.
But, accd to ART 1947 neither party was bound and no final consent of parties until K reduced to
writing and signed by both parties.
Also no certainty as to price which is further proof that no K formed.
Barchus v. Johnson LASC 1922 p.103
Legal Form Rqmt for sale of immovable
Written Option K describing land and fixed price. P had option to purchase land w/I 30 days. P
verbal acct w/I 30 d and written acct after 30 d.
Accd to LACC, all option Ks for real estate must be in writing and tendered to offeror b/f expiration
of time specified.
Ps acct by phone not valid and written acct was after expiration so no K formed.
ARTICLE 1966 – No obligation without cause
An obligation cannot exist without cause.
Oblig includes more than just K
ARTICLE 1967 – Cause defined; detrimental reliance
Cause is the reason why a party binds himself.
A party may be obligated by a promise when he knew or should have known that the promise
would induce the other party to rely on it to his detriment and the other party was reasonable in so
relying. Recovery may be limited to the expenses incurred or the damages suffered as a result of
the promisee’s reliance on the promise. Reliance on a gratuitous promise made without required
formalities is not reasonable.
Cmt A: Cause defined in terms of "reason" rather than "motive" for purpose of
enhancing imptc of judicial discretion in characterizing an oblig as enforceable.
(Reason is more objective-Motive is more subjective). Inc. detrimental reliance
as additional ground for enforceability.
Cmt B: Reason is closer than "motive" to the approach taken by modern
contemporary French doctrine which speaks of cause in term of but (an end or
Cmt C: Cause is NOT consideration. Reason why party binds himself need not
be to obtain something in return or to secure an adv for himself. An obligor may
bind himself by gratuitous K that is may obligate himself for benefit of other party
w/o obtaining adv in return. (ex. Donation)
i. General Principles
A. 2 Theories of Cause:
Objective theory: look at transaction externally; what would reasonable person believe to be the
Subjective theory: Internal motivation for entering transaction; more individualistic approach; may
overlap or even be same w/ objective cause
LA is generally objective theory of cause unless one of the parties knew or should have known of
other party's cause
B. Rqmts for "Cause":
True- cannot be intentionally false (blatant lie where purport to have cause when do not;
simulation OR relative simulation) or unintentionally false.
o ARTICLE 1968 – Unlawful cause
The cause of an obligation is unlawful when the enforcement of the obligation would produce a
result prohibited by law or against public policy.
A. Art. 1910. Gratuitous contracts
A contract is gratuitous when one party obligates himself towards another for the benefit of the
latter, without obtaining any advantage in return.
Ex) Donation inter vivos
Art. 1467. Methods of acquiring or disposing gratuitously
Property can neither be acquired nor disposed of gratuitously, unless by donations inter vivos or
mortis causa, made in the forms hereafter established.
Inter vivos- b/t living persons
Mortis causa- after death so not K; in testament
Art. 1540. Donations effective from date of acceptance.
A donation inter vivos shall be binding on the donor, and shall produce effect only from the day of
its being accepted in precise terms.
The acceptance may be made during the lifetime of the donor by a posterior and authentic act,
but in that case the donation shall have effect, with regard to the donor, only from the day of his
being notified of the act establishing that acceptance
Art. 1469. Donation mortis causa, definition.
A donation mortis causa (in prospect of death) * is an act to take effect, when the donor shall no
longer exist, by which he disposes of the whole or a part of his property, and which is revocable.
Unilateral juridical act. Not K!
B. Donation Inter Vivos (b/t living persons)
Art. 1468. Donation inter vivos, definition.
A donation inter vivos (between living persons) * is an act by which the donor divests himself, at
present and irrevocably, of the thing given, in favor of the donee who accepts it
K whereby donor divest himself….Cause exists.
Irrevocably- means irrevocable w/o cause. Accepted grounds for revocation for
cause in Art 1559.
1. FORM RQMTS FOR DONATIONS:
Art. 1536. Donation of immovables or incorporeals, form required.
An act shall be passed before a notary public and two witnesses of every donation inter
vivos of immovable property or incorporeal things, such as rents, credits, rights or
actions, under the penalty of nullity
Authentic Act Rqmt!
Exceptions for incorporeal movables- donations of negotiable
instruments/checks and certificated stock to encourage efficient
commercial trans.(in LARS Title 9)
Art. 1833. Authentic act
A. An authentic act is a writing executed before a notary public or other officer authorized
to perform that function, in the presence of two witnesses, and signed by each party who
executed it, by each witness, and by each notary public before whom it was executed.
The typed or hand-printed name of each person shall be placed in a legible form
immediately beneath the signature of each person signing the act.
B. To be an authentic act, the writing need not be executed at one time or place, or
before the same notary public or in the presence of the same witnesses, provided that
each party who executes it does so before a notary public or other officer authorized to
perform that function, and in the presence of two witnesses and each party, each
witness, and each notary public signs it. The failure to include the typed or hand-printed
name of each person signing the act shall not affect the validity or authenticity of the act.
C. If a party is unable or does not know how to sign his name, the notary public must
cause him to affix his mark to the writing
Act under signature duly acknowledged is NOT exception to
authentic act rqmt for donations!!
2. THE MANUAL GIFT
Art. 1539. Manual gift.
The manual gift, that is, the giving of corporeal movable effects, accompanied by a real
delivery, is not subject to any formality
Corporeal movable- physical thing that is not real estate/land.
o Exception to authentic act rqmt b/c otherwise giving any kind of gift would require
authentic act and would impede gratuitous gifts.
o No formality other than delivery is rqd to make a valid manual gift
o Cash is corporeal moveable where manual gift is sufficient-no form rqmt
o Donee of manual gift must show by strong and convincing proof that the donor had intent
to irrevocably divest himself of "thing" and that delivery was made.
3. DONATIVE INTENT
o Donative intent- intention to benefit the donee by way of liberality. Must be proved by
donee if contested by interested parties in thing (ex. Forced heirs of the donor)
Substantive rqmt of all gratuitous transfers. External circum that evidences donative
4. Test for donation classification
To determine is something is Donation ask ?:
o Did he deplete his patrimony?
o Did he obligate himself for the benefit of another w/o getting anything in return?
o Did he bestow a liberality?
o If answ is yes, then must be made by authentic act accd to Art 1536.
5. 3 donations inter vivos: PURELY GRATUITOUS, ONEROUS AND REMUNERATIVE
Art. 1523. Gratuitous, onerous and remunerative donations; definitions.
There are three kinds of donations inter vivos:
The donation purely gratuitous, or that which is made without condition and merely from
The onerous donation, or that which is burdened with charges imposed on the donee;
The remunerative donation, or that the object of which is to recompense for services
Art. 1524. Onerous donation.
The onerous donation is not a real donation, if the value of the object given does not
manifestly exceed that of the charges imposed on the donee.
donor gives something to donee and donee is oblig/has charge to do
something in future in exchange
Art. 1525. Remunerative donation.
The remunerative donation is not a real donation, if the value of the services to be
recompensed thereby being appreciated in money, should be little inferior to that of the
Informal promise or manual gift made in compensation for svcs or perf
of donee in past
Art. 1526. Onerous and remunerative donations, when rules applicable.
In consequence, the rules peculiar to donations inter vivos do not apply to onerous and
remunerative donations, except when the value of the object given exceeds by one-half
that of the charges or of the services
Value of thing > 1.5 x $$ value charges imposed or svc rendered
Ex) land value $10 > $6 value of svcs. Rules of donations inter vivos
Ex) land value $10 > $8 value of svcs. Rules of onerous K applies
If does not meet threshold, then onerous K rules apply b/c value of svcs
exceed or are so similar to value of object given that really not gratuity
o Onerous and Remunerative are "Mixed" Donations/K b/c involve some charge. Treated
o Nat Oblig and Remunerative Donations both fit categories of being owed by particular
person to another on basis of past relationship (not whole world) AND are susceptible to
pecuniary evaluation. However, not leg intent to make theses the same accd to
o Remunerative donations usually involve family/close relationships VS. Nat. Oblig such as
fulfillment of past debt, do not.
Art. 1761. Effects of a natural obligation
A natural obligation is not enforceable by judicial action. Nevertheless, whatever has
been freely performed in compliance with a natural obligation may not be reclaimed.
A contract made for the performance of a natural obligation is onerous.
Succession of Lawrence LAAC 1995 p.116
IMPTC: Rules for onerous Ks govern onerous and remunerative donations as long as value of
object < 1.5 x value of svcs.
Facts: Lawrence manifested many times while alive intent for his nephew Jones to get his $$. Had
nephew as alt payee on 3 bank accts which were never drawn on. Made informal doc signed by notary
that nephew to get prop. No form rqmts met.
Gift not pure gratuity b/c Jones greatly assisted Lawrence for 35 yrs by providing labor. Svcs
valued at $172000
Value of Bank accts does not exceed 1/2 value of svcs ($172000) so donation governed by
onerous K rules
Ct finds that values almost equal so no donative intent.
Alternate Theory LAAC did not address: Delivery aspect of donation.
o Bank acct is incorporeal moveable which requires authentic act to donate
o If view it as cash instead, then only need delivery b/c manual gift of corporeal moveable
o Jurisprudence says do not actually even need delivery.
o But in case neither authentic act OR delivery
Art 1468: Donations Inter vivos are irrevocable (exceptions Art 1559)
Art 1469: Donations mortis causa are revocable until death
Art. 1559. Causes for revocation or dissolution
Donation inter vivos are liable to be revoked or dissolved on account of the following causes:
1. The ingratitude of the donee;
2. The non-fulfillment of the eventual conditions, which suspend their consummation;
3. The non-performance of the conditions imposed on the donee;
4. The legal or conventional return.
Suspensive condition- K dependent upon occurrence in future and condition not met so
donation not effective and object returned to donor
Legal return- law specifies legal grounds for revocation
Conventional return- in donation form donor specifies that if donee dies b/f donor, object
will be returned to donor
Art. 1560. Revocation for ingratitude
Revocation on account of ingratitude can take place only in the three following cases:
1. If the donee has attempted to take the life of the donor;
2. If he has been guilty towards him of cruel treatment, crimes or grievous injuries;
3. If he has refused him food, when in distress.
Most cases on #2. b/c more ambiguous terms
Ingratitude is very subjective type of situation esp w/ family relationships
Perry Jr. v Perry Sr. LAAC 1987 p.121
Parents donates stocks to adult son. Son agrees to sell stock back to bank and has Parents sign
as guarantors. Son orders Parents' prop to be seized when Parents cannot fulfill oblig b/c of
bankruptcy. Parents seek to revoke donation of stock on grounds of ingratuity.
Jrs ingratitude in seizure of parent's property is sufficient cause under Art 1559 (ingratitude of
donee) for revocation of donations accd to 1560 (grievous injury)
Ct greatly expands what grievous injury includes. Circum of case are highly unusual.
7. OTHER GRATUITOUS CONTRACTS
a. Innominate K
Thielman v. Gahlman LASC 1907 p.123
IMPTC: Innominate K. Case of alleged donation, subject to attack for lack of form, which is
actually a valid onerous K
Facts: P claims 1/5 interest in prop that was transferred to D thru act of sale. P claims that this is
neither valid sale or donation. "warranty deed: claims to transfer immovable prop for $1 and
other good and valuable consideration."
a. Evid shows that donee (D) would provide life-long svcs for donor and that $1 was never
even paid. Donor actually only transferred naked ownership of prop instead of full
ownership b/c donor retained usufruct of prop until death.
Here price greatly out of proportion to thing sold-would support case that sale of
plantation for $1 is not a sale, though it may be donation in disguise. (Art 2464)
Parties did not intend this to be a sale, although purported to be a sale. Relative simulation b/c
parties want doc to have legal effects and prop to be transferred in recognition of exg b/t parties.
Every transfer of prop which has for its "consideration" an oblig of maintenance is to be regarded
as a donation.
Possible classifications of trans:
Sale? No. $1 not a sale and was not even paid. No price specified so no sale. May be donation
Gratuitous Donation? No. Made under priv signature, not authentic act so does not meet form
Onerous Donation? No. Would require comparative valuation of thing given and oblig imposed.
Perspective valuation depends on length of donor's life. Here value of svcs exceed 2/3 value of
object given so not governed by donation rules b/c not really gratuitous element. No authentic act
to meet form rqmts for donation either.
Onerous K? Yes. Transfer of naked ownership in return for promise to care. Adv in exg for
o Rules of donation n/a.
o Risk D took in entering K was extent of perf he was obligated to render, depending on
donor's time of death.
Innominate K? Yes.
o Look at party's cause. Here subj intent of parties involves no liberality at all to suggest
o Ct said D oblig himself for onerous adv b/c facts that donor traveled long distance to see
D about exg. This suggests a bargain or exg element. Bargained for promise makes
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. 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.
Cmt B: Simulated sale may be valid donation if form rqmts for donation are met.
b. Charitable Subscriptions
o Both LA College and Baptist Hospital are terrible examples of LASC recharacterizing obviously
unenforceable donation inter-vivos b/c lacking authentic act as onerous K for policy reasons.
o Still gratuitous K in "others" category that does not require all form rqmts of donations inter-vivos.
o IMPTC: Charitable Subscriptions are enforceable b/c of policy reasons that want to encourage
subscriptions and party may rely on that promise.
c. Debt of Another Party
Flood v. Thomas LASC 1827 p.132
IMPTC: Debt of another (3rd party) IS sufficient cause to support K of surety, or promise to pay it.
Facts: P creditor wants to enforce Ds promise to pay the debt of 3rd party owed to P. No
authentic act, only recognition of agmt is informal memo. D says no cause b/c intended to bestow
liberality upon 3rd party, not P.
What is diff b/t surety and promise to pay?
o Promise of surety is subj to suspensive condition. Suretyship is gratuitous K and
accessory K under Art .
o Promise to pay is not subj to any suspensive condition b/c oblig to P already existed from
Ps previous perf to 3rd party.
Art. 3035. Definition of suretyship
Suretyship is an accessory contract by which a person binds himself to a creditor
to fulfill the obligation of another upon the failure of the latter to do so.
Art. 1913. Principal and accessory contracts
A contract is accessory when it is made to provide security for the performance of an
obligation. Suretyship, mortgage, pledge, and other types of security agreements are
examples of such a contract.
When the secured obligation arises from a contract, either between the same or other
parties, that contract is the principal contract
In this case, Ds promise to pay P org creditor is perfect from beginning, not subj to an condition
b/c perf creating org oblig already rendered.
Ds promise to P org creditor is something that was already due to P and thus Onerous K.
In context where agmt to pay debt of 3rd party, ONLY enforceable if in writing. Not rqd to be
authentic act, but oral evid of agmt is not sufficient.
d. Invalid Onerous K but Valid Donation
D'Orgenoy v. Droz LASC 1839 p.134
IMPTC: Invalid onerous K but valid Donation inter vivos supported by authentic act. Transfer of
P claim that agmt under authentic act that Ds ancestor was to sell land to Ps ancestor. Thus prop
not heirable b/c sold while Ds ancestor alive. Facts indicate that past relationship b/t parties in
D claim that inherited land from ancestor b/c invalid sale b/c no price term.
Transfer b/t Ds ancestor and Ps ancestor is NOT valid sale b/c seller did not receive any adv in
Motive of Ds ancestor was gratuitous. Although characterized as sale by parties, untrue cause of
sale disguising valid cause of donation. (1970, 2025 & 2027)
Gratuitous donation b/c no evid of past svcs actually rendered by P for onerous donation. Valid
donation inter vivos b/c executed by authentic act.
o Art. 1970. Untrue expression of cause
When the expression of a cause in a contractual obligation is untrue, the obligation is still
effective if a valid cause can be shown.
o Art. 1969. Cause not expressed
An obligation may be valid even though its cause is not expressed.
8. ABSENCE OF CAUSE
Art. 1966. No obligation without cause
An obligation cannot exist without a lawful cause
A. Cause absent when:
o "Thing" that is object of K for sale is destroyed (b/c buyer cannot acquire something that
o Gift made in contemplation of future event and event does not occur (suspensive
o Oblig contracted as result of violence, threats, or duress. (b/c not expression of party's
o Party already bound to oblig refuses to perform unless counterperformance is increased
(paying party has no reason to promise more for perf already owed to him. Cause exists
if paying party voluntarily offers to pay more as incentive.)
B. Cause partially absent when:
o "Thing" that is object of K for sale is perished only in part at time of sale (buyer choice:
free himself of oblig or accept reduced oblig)
US Fidelity and Guaranty Co. v. Crais LAAC 1930 p. 138
IMPTC: Motive for entering K is immaterial so long as it is supported by legal or valid
Facts: P insur co. paid Bank's claim for loss due to employee's embezzlement.
o Employee entered restitution K w/ P to avoid prosecution, this K co-signed by D
o P seeks to enforce promise by D co-signor to pay
o D arg that restitution K is w/o cause.
Decision: No valid cause and null K b/c P's entry into restitution K w/ thieving employee did not
relieve either party of existing oblig.
Even if sole motivation of D co-signor was to prevent employee's prosecution not enforceable b/c
P did NOT give up any legal right which it might have had under its insur K w/ Canal Bank as
result of entering K w/ D.
o P prev oblig to pay Bank under insurance K for amt of loss resulting from embezzlement.
Restitution K only oblig P to pay Bank exact amt of loss due to employee's acts, so no
P also did NOT give up legal right to prosecution against employee and was not in position to
prevent employee from crim prosecution by State.
o If P had given up legal right to prosecution or released employee from debt, would have
been valid cause.
9. FAILURE OF CAUSE
Art. 1911. Commutative contracts
A contract is commutative when the performance of the obligation of each party is correlative to
the performance of the other
Art. 1912. Aleatory contracts
A contract is aleatory when, because of its nature or according to the parties' intent, the
performance of either party's obligation, or the extent of the performance, depends on an
CMT E: K may be aletory not only b/c of nature, but also b/c of intention of
Cause in aletory K is "hope"
If K communicative, if one party's perf becomes impossible then other party's oblig fails Ex) if
"thing" that is object of lease is destroyed during lease term, lessee's oblig to pay ends.
If K aleatory, if one party's perf becomes impossible then other party's oblig does not necessarily
fail b/c parties entered oblig w/ expectation rather than certainty of advantages.
Does risk have to be contemplated to be assumed by party in K?
o W/ aletory K party usually assumes reasonable risk. Does not usually assume
extraordinary events as standard rule. Unless K expressly states otherwise.
Carpenter v. Williams LAAC 1983 p. 144
Ds employer demanded he move closer to work. D entered purch agmt to buy Ps house. D told
P that employer's demand was reason for entering K.
Employer rescinded order and D refused to buy Ps house. P seeks to enforce agmt.
Ct stated that when employer rescinded order, Ds cause for entering K failed and K null. (Scalise:
Ct would have likely enforced agmt, if P unaware of Ds subjective cause for entering K.)
Losecco v. Gregory LASC 1901 p. 145
K : P orange merchant entered K to buy all D orange farmer's crop for 2 yrs.
o "all oranges trees may produce"…."Purchaser assumes all risk."
o Price= $8000. (1/2 down pymt and 1/2 after 2nd crop)
Orange trees destroyed in freeze b/f 1st yr production of oranges.
P claim that K of future things (communicative) is null for failure of cause (oranges) and sues to
reclaim $4000 down pymt
D claim that K of hope (aletory) does NOT fail for lack of cause and that P owes him $4000
balance as K stipulates
Ct looks to intent of parties
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
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
Assumption of Risk: LASC says P assumed risk to object of K, oranges. P did not purchase trees
and risk not extended to inclusion of life of trees.
o K analogous to lease of trees to produce oranges in yrs named.
o P stood to take all chances on foreseen accidents only. Acts of God not included.
o Destruction of trees means object of K is destroyed.
o Ps cause for entering K was orange grove which P expected to yield crop; when grove
ceased to exist cause of K failed.
o D warranted the continued existence of his trees in agmt.
LASC decision: When object of K destroyed, P had right to recede from K and D bound to make
restitution for down pymt.
10. UNLAWFUL CAUSE
Art. 7. Laws for the preservation of the public interest
Persons may not by their juridical acts derogate from laws enacted for the protection of the public
interest. Any act in derogation of such laws is an absolute nullity
CMT B: cannot contract for things that are against good morals or are prohibited by law.
Art 1968: Unlawful Cause
Cause of oblig is unlawful when the enforcement of oblig would produce a policy prohibited by
law or against public policy.
Illegal- forbidden by law
Immoral- runs counter to moral stds of community
Against public policy- contrary to values recognized as paramount by community
Art 1968 allows for Ct subjective eval of parties' motives
A. Reasons for unlawful cause:
o Against moral stds of community (re:"state")
o Against state public policy
B. K w/ unlawful cause are absolute nullity:
Art. 2030. Absolute nullity of contracts
A contract is absolutely null when it violates a rule of public order, as when the object of a contract is illicit
or immoral. A contract that is absolutely null may not be confirmed.
Absolute nullity may be invoked by any person or may be declared by the court on its own initiative.
o Any party or Ct may declare absolute nullity b/c against public policy to allow K to be
o May NOT be confirmed b/c do not want parties to ratify something against public policy
Art. 2033. Effects
An absolutely null contract, or a relatively null contract that has been declared null by the court, is
deemed never to have existed. The parties must be restored to the situation that existed before
the contract was made. If it is impossible or impracticable to make restoration in kind, it may be
made through an award of damages.
Nevertheless, a performance rendered under a contract that is absolutely null because its object
or its cause is illicit or immoral may not be recovered by a party who knew or should have known
of the defect that makes the contract null. The performance may be recovered, however, when
that party invokes the nullity to withdraw from the contract before its purpose is achieved and also
in exceptional situations when, in the discretion of the court, that recovery would further the
interest of justice.
Absolute nullity may be raised as a defense even by a party who, at the time the contract was
made, knew or should have known of the defect that makes the contract null
Side Note: Although LA Crim Code prohibits "gambling", LA considers casinos "gaming" in
technical sense b/c LA grants license for casinos to legally "game."
o But gambling at poker game at personal residence is LEGAL as long as host is not
making profit. But if one player gets IOU from another player and refuses to repay
gambling loan, K intimately involved in gambling is against public policy and is
unenforceable b/c unlawful cause. Public policy concern that incurring debt beyond their
means to gamble.
o However, refusal of patron to repay casino for marker K whereby casino grants patron
markers to "game" at casino is enforceable K in LA CT b/c gaming is favored industry in
LA to support tourism. (Scalise says that rationale that markers are not related to
unlawful cause is crazy!)
Lamy v. Will LAAC 1962 p.155
K: P loans D $150 for gambling cash. D wins and only pays P back $15, refuses to pay balance
of debt. P sues for balance.
D raises defense of absolute nullity although he knew of unlawful cause, under 2033
Decision: K absolute nullity.
o Art. 2983. Actions for payment of gaming debts and bets.
The law grants no action for the payment of what has been won at gaming or by a bet,
except for games tending to promote skill in the use of arms, such as the exercise of the
gun and foot, horse and chariot racing.
And as to such games, the judge may reject the demand, when the sum appears to him
o Art. 2984. Actions for recovery of payments made on gaming debts and bets.
In all cases in which the law refuses an action to the winner, it also refuses to suffer the
loser to reclaim what he has voluntarily paid, unless there has been, on the part of the
winner, fraud, deceit, or swindling.
Art 2033: P cannot recover his performance if knew or should have known defect making K null.
o No exception allowing P to recover b/c P knew $$ used for gambling and did not
withdraw b/f purpose was achieved and this is not exceptional situation. D not entitled to
recover $15 for same reasons.
o Must have clean hands in order to recover!
Cause of this K was to loan/receive $$ to use for gambling.
o Not creation of natural oblig (Art 1761) b/c accd to Art 1762 cmts renders gambling debt
Ks invalid as public policy
Lauer v. Catalanotto LAAC 1988 p.156
Facts: P entered joint venture K whereby D would use $10000 gamble and parties would split
P/L. D wins and P sued to enforce gambling K. D filed reconventional demand for repayment of
separate loan to P for $1300.
Decision: P cannot recover for gambling debt. D awarded reconventional demand for $1300 loan
To be const prohibited gambling K, must be mutual illegal intent to gamble and the intent of one
party not communicated to other will not nullify agmt.
Ds reconventional demand honored b/c D did not know what P using loan $$ for (gambling) and
was indep innocent party in trans for which P requested the loan (gambling).
o Distinguishable from Lamy where loan is ancillary to gambling and against public policy.
McMahon v. Hardin LAAC 1929 p. 158
Facts: P is P.I. who is hired by D to investigate her husband's adultery. Parties agreed that Ps
compensation conditioned upon his providing suff evid leading to successful divorce.
Decision: Ct says K is absolute nullity b/c offends public policy of promotion of marriage &
prevention of divorce.
Even today, Ks contingent upon getting divorce, or thing against public policy, is unlawful cause
Today justification for pymt of attorney fees for divorce are that debt to attorneys incurred during
marriage thus will come out of settlement b/t parties and attorneys must be paid for svcs.
Gravier's Curator v. Carraby's Executor LASC 1841 p.162
Ds $$ loan to P, secured by Ps prop, was purportedly act of sale whereby Ds would hide prop
from Ps creditors-who sought to seize prop.
Ps cause: 1) K as security to secure monetary loan from D. D to sell prop and give profit to P,
less amt of loan. 2) to hide prop from Ps creditors.
This makes K a relative simulation (vs. absolute simulation)
o 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
o 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
Cause #1:Not against public policy
Cause #2: Contrary to public policy b/c fraudulant. LACC provides that:
K is absolute nullity b/c supported by unlawful cause thus subsequent K for proceeds of sale of
prop D to pay to P are unenforceable.
Preference to possessor D b/c each party had equally unclean hands.
None of 2033 exceptions apply in case
Schwegmann v. Schwegmann LAAC 1983 p.170
Agmt b/c co-habitants for domestic svc in exg for sex are unenforceable b/c such agmts are
against public policy -illegal prostitutional purposes.
SECTION 5: DETRIMENTAL RELIANCE
Art. 1967. Cause defined; detrimental reliance
Cause is the reason why a party obligates himself.
A party may be obligated by a promise when
he knew or should have known that the promise would induce the other party to rely on it to his
the other party was reasonable In so relying.
Recovery may be limited to the expenses incurred or the damages suffered as a result of the
promisee's reliance on the promise.
Reliance on a gratuitous promise made without required formalities is not reasonable.
o Art incorporated DR as additional ground for enforceability. DR has role in determining
enforceability of promises.
o CMT E: Ct may grant damages other than spec perf to disappointed promisee, and may
even limit damages thus granted to expenses actually incurred. CT has discretion in
deciding a remedy. Gen damages are much less than those designated in Art 1986
(spec perf) and 1995 (loss sustained and profit (which may exceed expense incurred))
o CMT F: Reliance on gratuitous promise not reas if promise made w/o rqd authentic form.
However, promise to make disposition mortis causa is enforceable against promisor's
estate when formal disposition is not made-ie: where promise made in return for
counterperf requested by promisor. Edinburgh case
A. Impt notes:
Impt factor that inclines Ct to find reasonably communicated implied acct that concluded a binding
K: In reliance on offer or promise, promisee took action that would result in his detriment unless
the promise enforced.
o No liab unless damage and no damage unless promise is susceptible of inducing
reliance, and promisee actually relies to his detriment.
DR IN LA LAW: arguably DR not essential function in LA law b/c any promise that could be
enforced by DR could also be enforced via other manner in law. DR gives Cts more direct alt
approach to enforcing reas reliance by one party to their detriment when no expression of subj
intent of parties.
Wherever found that promise enforceable on grounds of DR = unilateral gratuitous innominate K
o Unilateral gratuitous K perfectly enforceable as long as proper form. Problem arises if
form rqmts not met, yet one party perf in reliance, considered unreas reliance.
Evidentary function of authentic act impt rqmt of enforceable donation.
o But b/c difficult to determine parties' intent or doubt of alleged implied acct raises ? of
whether any type of K existed b/f party acted in reliance on promise.
o EX) CONSTRUCTION Cases: Cts enforce sub contractor bids if sub attempts to pull out
b/c gen reasonably relied to his detriment on sub's offer in formulating project bid.
B. 3 elements to estoppel:
o Representation by conduct or word
o Justifiable reliance
o Change in one's position to one's detriment
Lamb v. Lamb LAAC 1984 p.178
Hebert v. McGuire LAAC 1984 p.179
Dr sues patient D for unpaid surgery bill.
D claim that Dr. office caused loss of insurance b/c Dr's agent failure to file her insurance claim
as agreed to do AND failure to notify D of outstanding bill b/f too late for collection from D's insur
If Dr's agent made patient promise b/f surgery then part of enforceable onerous K under Art 1967
b/c patient reasonably relied on promise.
BUT if promise made after surgery, then gratuitous promise which estoppel would reasonably
Either way promise enforceable even if no reliance b/c gratuitous unilateral K was created b/f D
D reasonable in relying on promise. CT uses DR in its auxiliary funct to find alt grounds for
Regardless, Dr only liable for 80% of bill b/c insurance would have only covered 80% in first
Edinburgh v. Edinburgh LAAC 1988 p.179
P and D were married at time entered K to repair house and pay mortgage in return for house
owner's promise to give house to parties in will. D perf repairs and paid mortgage during
marriage. After divorce, owner died and left house to P wife only.
P Wife sued for title and D husband countersued for value of svcs rendered during marriage and
1/2 interest in house.
Promise was onerous K from beginning and thus enforceable b/c bargained for exg of house for
svcs. Promisor got benefit of bank not foreclosing on mortgage in his name and Promisee's got
benefit of living in house that they would later own.
Promise made in return for counterperf requested by promisor so not gratuitous donation.
(enforceable despite last line of Art 1967 b/c cmt F)
Alt method for enforcement: D proved 3 rqmts of DR and entitled to recover$$. (DR used in
auxiliary function to enforce otherwise enforceable K)
1. D assumed financial responsibility in verbal and subsequent written K
2. D under no oblig to assume responsibilities but did so in reliance upon owner's promise
that he would inherit 1/2 interest.
3. D paid mortgage and assumed cost of repairs
Kethley v. Draughon Business College LAAC 1989 p180
D school requested that P teacher teach a 2nd course. P consented but realized at payday that
no extra pay for 2nd course. D claims no express agmt to extra pay.
Ct: K rescinded. Ct found implicit in promise was Ps reasonable expectation of more $$ than
teaching only 1 course and enforceable under Art 1967. P incurred some detriment in
preparation to teach course in reliance on Ds request. P entitled to damages
o See Art 1967 cmt E:
o Alt method for enforcement: Onerous K from beginning where terms are implied based
on external facts. Offer of school to teach another class (implied promise to pay more).
Acct- P begins teaching course. (implied acct)
Martin v. Schluntz LAAC 1991 p.181
Facts: Parties entered verbal lease agmt whereby D was to lease apt at discounted rate for 3 yrs.
Parties intended to reduce lease to writing but never executed written K. 3 mths later, D gave
notice that vacating apt. P sues for breach of LT K and seeks damages for repairs to apt, lost
rent for 3 mths after Ds vacancy, and differential for lower rent charged to another tenant.
Since no written form, no lease K, thus P not entitled to damages for Ds breach.
Mth to mth lease existed for 3 mths D occupied apt.
P proved DR for $50 per month for 3 mths D occupied apt b/c:
o Parties orally agreed that LT lease- specified price and "thing"-apt.
o P permitted D discounted rent upon Ds representation that LT lease.
o $50/mth is forfeiture P sustained by not renting at higher price. (suffered no detriment for
P awarded $150 DR and repair supply and labor expense. (Ct used DR in its auxiliary funct to
enforce otherwise legally enforceable promise)
ALT ARG w/o DR: W/o written lease K, legal presumption of mth to mth lease w/ oral agmt.
Rqmt for lease is the rent price and thing, oral agmts are enforceable. Written inst is only
memorialization of lease terms here and parties did not intend to only be bound by written lease.
Here parties agreed that lease duration would be "extended lease. " B/c P gave $50/mth
discount contingent upon D occupying and paying rent for "extended time." P arg that existing
oral lease is enforceable, D breached by not leasing for "extended time" and P entitled to
damages for amt of discount per month and repair costs. (would throw in DR as alternative b/c
will have ltd damages.)
IV. CAPACITY- (not in book)
Art 27 General Legal Capacity
All natural persons enjoy general legal capacity to have rights and duties
Art 28 Capacity to Make Juridical Acts
A natural person who has reached age of majority has capacity to make all sorts of juridical acts,
unless otherwise provided by legislation
Art. 1918. General statement of capacity
All persons have capacity to contract, except unemancipated minors, interdicts, and persons
deprived of reason at the time of contracting
Exceptions for incapacity to protect such parties unable to understand the nature
of his actions and to secure transactions.
A. EXCEPTIONS TO CAPACITY
1. Incapacity of exercise- can hold right on one's own but must exercise right through representative
Ex) exceptions to Art 1918- unemancipated minor, interdict, and PDR at time of K.
Minors can be emanicpated by notorial act, marriage, and judicial
Art 1918 cmt. B- PDR all varieties of derangement ; maladies affecting
intelligence; habitual drunkenness; drunkenness causing loss of reason; drug
o Art. 389. Full interdiction
A court may order the full interdiction of a natural person of the age of majority, or an
emancipated minor, who due to an infirmity, is unable consistently to make reasoned
decisions regarding the care of his person and property, or to communicate those
decisions, and whose interests cannot be protected by less restrictive means.
2. Incapacity of enjoyment- Not total b/c would negate personhood altogether. Precluded from
acquiring certain rights.
o 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.
Cannot buy right to a claim for litigation.
B. NULLITY AND CAPACITY
Art. 2029. Nullity of contracts
A contract is null when the requirements for its formation have not been met.
cannot have valid K w/o capacity of both parties
Nullity may be absolute or relative
Once nullity declared its effect is retroactive and K never existed
Art. 2030. Absolute nullity of contracts
A contract is absolutely null when it violates a rule of public order, as when the object of a
contract is illicit or immoral. A contract that is absolutely null may not be confirmed.
Absolute nullity may be invoked by any person or may be declared by the court on its own
Any party or Ct may declare absolute nullity b/c against public policy to allow K to
CANNOT be confirmed b/c do not want parties to ratify something against public
Art. 2031. Relative nullity of contracts
A contract is relatively null when it violates a rule intended for the protection of private parties, as
when a party lacked capacity or did not give free consent at the time the contract was made. A
contract that is only relatively null may be confirmed.
Relative nullity may be invoked only by those persons for whose interest the ground for nullity
was established, and may not be declared by the court on its own initiative.
May be confirmed or rescinded after declaration of relative nullity
Person w/ interest- person w/ incapacity or guardian of person w/ incapacity may
invoke relative nullity b/c protection operates in their favor
Art. 2032. Prescription of action
Action for annulment of an absolutely null contract does not prescribe.
Action of annulment of a relatively null contract must be brought within five years from the time
the ground for nullity either ceased, as in the case of incapacity or duress, or was discovered, as
in the case of error or fraud.
Nullity may be raised at any time as a defense against an action on the contract, even after the
action for annulment has prescribed.
Art. 1919. Right to plead rescission
A contract made by a person without legal capacity is relatively null and may be
rescinded only at the request of that person or his legal representative
Relative nullity in K context
Exceptions in Art 1921-1925
Ex) unemancipated minor enters retail trans buying product. Parent
does not approve of sale and requires minor to return product.
Art. 1920. Right to require confirmation or rescission of the contract
Immediately after discovering the incapacity, a party, who at the time of contracting was
ignorant of the incapacity of the other party, may require from that party, if the incapacity
has ceased, or from the legal representative if it has not, that the contract be confirmed or
Art. 1923. Incapacity of unemancipated minor; exceptions
A contract by an unemancipated minor may be rescinded on grounds of incapacity
except when made for the purpose of providing the minor with something necessary for
his support or education, or for a purpose related to his business
Broad interpretation of these exceptions to recission
support- generally includes food shelter and clothing
Related to business- trade/craft minor gains income from (artist)
Art. 1924. Mere representation of majority; reliance
The mere representation of majority by an unemancipated minor does not preclude an
action for rescission of the contract. When the other party reasonably relies on the
minor's representation of majority, the contract may not be rescinded.
Applies to everything else not related to support, education, or business
Ex) Purchase of beer w/ fake ID. Mere representation to merchant is not
enough to rescind K. Must be reasonable reliance by minor on
representation cannot rescind.
Art. 1925. Noninterdicted person deprived of reason; protection of innocent contracting
party by onerous title
A noninterdicted person, who was deprived of reason at the time of contracting, may
obtain rescission of an onerous contract upon the ground of incapacity only upon
showing that the other party knew or should have known that person's incapacity
ONLY applies to onerous K where both parties must get adv in exchange
b/c K is relative nullity.
N/a to gratuitous K b/c unable to donate when incapacitated.
Art. 1477. Capacity to donate, mental condition of donor
To have capacity to make a donation inter vivos or mortis causa,
a person must also be able to comprehend generally the nature
and consequences of the disposition that he is making
V. APPLYING THE THEORY OF CAUSE
1. NATURAL OBLIGATIONS
Art. 1760. Moral duties that may give rise to a natural obligation
A natural obligation arises from circumstances in which the law implies a particular moral duty to
render a performance
Art. 1762. Examples of circumstances giving rise to a natural obligation
Examples of circumstances giving rise to a natural obligation are:
(1) When a civil obligation has been extinguished by prescription OR discharged in bankruptcy.
(2) When an obligation has been incurred by a person who, although endowed with discernment,
lacks legal capacity.
(3) When the universal successors are not bound by a civil obligation to execute the donations
and other dispositions made by a deceased person that are null for want of form:
Although civ oblig is no longer enforceable, nat oblig still exists b/c have moral
duty whereby injured another or contracted w/ another and have not fulfilled
When person acquires capacity has moral duty to fulfill oblig
Even if will null b/c did not meet form rqmts, univ successor has moral oblig
CMT B: THIS ART IS NOT EXCLUSIVE. THESE AND OTHER CIRCUM MAY ARISE TO LEVEL
OF ENFORCEABLE NAT OBLIG IF FELT TOWARD PARTICULAR PERSON
A. General Principles
Natural oblig operates as the cause of an oblig. It serves the purpose of holding as
onerous, and therefore valid, an act that would be invalid if it were gratuitous.
o When person feels moral duty so strong toward another that duty becomes an
element of clearly identifiable relation called nat oblig.
o Obligee may not enforce perf, but obligor may promote his nat oblig to a civil
Perf the oblig out of own free will in which case obligor may no longer
reclaim that perf b/c obligee now has right to keep it
Giving obligee a promise that obligor will render perf, in which case
obligee acquires a right to demand that perf.
o Remunerative Donations not w/I category of Nat oblig b/c RD may be b/t family
members and obligor may have mixed motives
RQMTS FOR TURNING MORAL DUTY INTO NAT OBLIG: (inclusive)
o Duty must be felt toward a particular person and not toward all persons in
general (toward legal person- not toward geo area)
o Person involved truly feels that he owes debt to another such that his conscience
will not be satisfied unless duty fulfilled
o Duty susceptible to pecuniary valuation $$
o Recognition that brings nat oblig into existence and simultaneously makes it a
o Fulfillment must not impair public order (ex. No asc w/ gambling , etc.-b/c would
impair theory unlawful cause)
Ex) Prescribed Debt- when debtor's civ oblig is extinguished by prescription, he is still morally bound to
pay his debt.
o In paying creditor, debtor is neither paying debt that he does not owe NOR perf an oblig
that does not bind him, BUT is discharging a true debt. Nat oblig shows that no unjust
enrich b/c creditor receiving something already owed to him.
o If debtor promises to pay debt to creditor, not donation or gift, but onerous K and thus
promise enforceable even w/o form rqmts. Nat oblig shows that cause makes new K
Thomas v. Bryant LAAC 1994 p.190
EX. Of Moral oblig becoming enforceable Nat Oblig.
D stepfather signed promissory note to P real dad to pay kids medical expenses. D refuses to
pay and P seeks to enforce agmt as nat oblig.
D had mp civil or legal duty to pay- but D signing promissory note is donation entered legally
binding promise to pay. Cause = nat oblig.
B/c D entered K voluntarily to benefit and bestow liberality upon stepson, not the father, not
Rqmts for Nat oblig:
o Moral duty to particular person? Yes. D thought duty owed to stepson specifically. (But
technically b/c stepson was 21+ the parent-child relationship is much more ltd.)
o D felt so strongly that he truly believed he owed a debt? Yes.
o Duty Susceptible to pecuniary evaluation? Yes. Object of Ds perf, 1/2 cost med bills $$
o Recognition that transforms moral duty to nat oblig? Yes. D executed note= recognized
his nat oblig by promising to perf
o Fulfillment of duty would not impair public order? Yes. Paying for rehab is lawful.
ALT ARG: D made promise to P father, but D nat oblig to stepson, not P. Onerous K b/c D
derived benefit of having stepson recover from addiction and P benefited from assistance in pymt
for son's treatment. Art 1761, does not require that promise be made to one that oblig is owed -
so K is onerous and enforceable under K.
Wartman v. French LAAC 1982 p.193
Facts: Ex-wife seeks to enforce transfer made to her by her ex-husband for immovable prop.
o Cause: Transfer result of husband's affairs and interest in getting quick divorce.
o Transfer of $4500 house for $10 "and other consideration" is not true sale but relative
Decision: Reparation for breach of marital duty of fidelity is cause for perfectly enforceable nat
Transfer done by private act of sale for transfer of immovable is sufficient for enforceable
onerous K. (1839 Public Rcds Doctrine)
But if donation, act under private signature is not suff b/c authentic act rqmt for donations to be
Nat oblig cannot be enforced by lawsuit, but if Husband voluntarily performs then may promote
nat oblig to onerous K by:
o Moral duty to particular person? Yes. husband owed moral duty of fidelity in marital oblig
to his wife only, which he breached.
o D felt so strongly that he truly believed he owed a debt? Yes. Truly felt duty to give her
reparations to relieve his conscience.
o Is this subj to $$ value? Although no civil remedy for breach of fidelity duty, tort law
allows for loss of consortium damages. Ds interest in house worth $4500 is $$ value.
o Recognition transforming nat oblig to civil oblig? Yes. Act of transferring house.
o Fulfillment of duty would not impair public order? ??? Is against public order here to have
cause for oblig of getting quick divorce. Thus absolutely null onerous K and not legally
ART 98: Mutual Duties of Married Persons- fidelity, support, and assistance. Not legally
enforceable, but gives rise to moral oblig.
Alt Reasoning for same result: Cause for transfer (to get quick divorce) is against public policy so
if onerous K then absolute nullity. Under Art 2033 exceptions, even absolutely null K may be
enforced if parties knew or should have known, perf will not be recovered. Since wife already
received house, husband could not get it back thus same result.
Art. 1761. Effects of a natural obligation
A natural obligation is not enforceable by judicial action. Nevertheless, whatever has been freely
performed in compliance with a natural obligation may not be reclaimed.
A contract made for the performance of a natural obligation is onerous.
"freely perf"- perf of nat oblig not induced by fraud or duress; does not mean free
from error, but if perf in error of law or fact by obligor then not recoverable
"onerous"- cause not gratuitous b/c in fulfillment of nat oblig
Art 1758-effects of gen civil oblig are judicially enforceable and n/a w/ nat oblig
K made for perf of nat oblig is ONEROUS K. Must meet rqmts of valid K.
o Capacity, consent, object, valid lawful cause.
o Obligor's words MUST clearly manifest intention to bind himself.
Onerous K b/c obligor's intent is not to make a gift to obligee but that he rather intends to pay a
debt he feels he owes (nat oblig)
o Obligee gains benefit of satisfying conscience that moral oblig is fulfilled (very
subjective!!) and depletes patrimony
o Obligor gains benefit of compensation for debt owed to him, that is not otherwise legally
Thus no need to comply w/ form rqmts and revocation rqmts, etc. for donations. Onerous K not
subj to donation rules.
LASC precedent that in case of prescribed debt:
o Debtor must make promise that is clear, distinct, unequivocal, and constituted of words
which in natural context expressly identify the debtor's recognition of the debt and
manifest a clear, present intention to bind himself to renewal of specific debt.
o Promise cannot be expressly or directly implied simply from conduct recognizing debt
(making partial pymt) and/or expression of hope or intention to pay debt is not sufficient.
Ex.) Turning moral oblig to nat oblig-continued:
If debtor voluntarily perf, he may not avail himself of his own error- if made promise in belief that
still bound by civil or natural debt.
If debtor's promise to perf induced by fraud of 3rd party then debtor's perf is not recoverable from
creditor. BUT if fraud, debtor may recover damages from fraudulent 3rd party. (b/c creditor has
not unjustly enriched.)
If debtor only pays portion of prescribed debt to creditor, creditor cannot demand balance.
Particular perf rendered by debtor does not imply promise to perf balance.
Service Finance Co. of BR v. Daigle LAAC 1977 p.198
Scalise says no bright line for nat oblig vs. onerous K and the facts of this case illustrate this.
Difficult to definitely come to conclusion of either.
Facts: D's debt to P secured by mortgage of Ds furniture. D goes into bankruptcy as defense to
Ps attempt to collect. P claims that after Ds bankruptcy filing, D orally affirmed the debt and
promised to continue pymt. D made 3 mthly pymts to P after bankruptcy filing
Decision: Onerous K b/c valid offer by obligor and obligee's acct to support agmt to pay. Nat
oblig not judicially enforceable.
D told P after bankruptcy hearing, that if P would not seize furniture in mortgage, then D would
recommence pymts on debt in a specific month (offer). Based on assurances, P agreed to
refrain from seizure (acct).
Pymts by D after bankruptcy not recoverable b/c freely performed, but partial pymt not implication
of promise or enforceable by P that D pay balance.
Stoll v. Goodnight Corp LAAC 1985 p.200
Facts: P employee for D corp who accepted customer check w/ forged signature. Check
o P viol employee manual requiring employee to consult manager when doubt of validity of
o D advised P to cover the check ($800). P did and 2 wks after reimbursement, D fired P.
o P sues D to recover amt of reimbursement claiming pymt of thing not due.
Decision: Ps pymt was voluntary perf of natural oblig and is not recoverable. Ps error caused D
loss and created nat oblig.
Ps pymt obviously arose from strong "duty of conscience" (not coercion)=cause of nat oblig that
distinguishes it from gratuitous donation
Not duress suff to vitiate free perf b/c empl at will K- thus Ds threat to fire not duress.
No allegation of fraud
Error does not effect free perf.
Alt theory: P claims Detrimental reliance that relied upon employer's vague stmt as being promise
to retain her if she pays, and promise to fire her if she does not pay. Timing b/t Ps pymt and firing
of 2 weeks supports arg that related events. Arg that not reasonable reliance since empl at will
employer may have fired P later on for another reason.
3. REMISSION OF DEBT
Article 1792 – Remission by one obligee
Remission of debt by one solidary obligee releases the obligor but only for the portion of that
ARTICLE 1888 Express or Tactic Remission
Remission of debt by an obligee extinguishes the obligation. That remission may be express or
Remission of Debt- voluntary abandonment/forgiveness of debt by creditor, in whole or in part, which
extinguishes oblig of debtor and rights of creditor to extent of forgiveness. Bilateral act by which an
obligee releases an obligor from performance. Usually only in family relationships.
Rqd to be Tactic or Express
o TACTIC (no words expressly renouncing debt) obligee manifest in clear way that their
juridical act is intended to be remission.
o Article 1889 Presumption of remission
Obligee's voluntary surrender to obligor of instrument evidencing the oblig gives
rise to a presumption that the obligee intended to remit the debt. (tacit remission)
o EXPRESS (orally or in writing).
Art 1890 Remission effective when communication is received by obligor
Remission of debt effective when obligor receives communication from obligee.
Acct of remission is always presumed unless the obligor rejects the remission w/I
Acceptance of Remission:
o Presumed b/c debtor has nothing to lose!!
o Remission is bilateral K requiring offer and acct, not unilateral act.
Rejection of Remission:
o Debtor may reject either expressly (oral or written) OR Tacticly (by rendering perf of debt
that creditor receives) w/I reasonable time.
o Creditor entitled to refuse perf by debtor after reasonable time lapse since offer of
Revocation of Remission:
o Creditor may not revoke offer of remission once communicated to debtor
o Creditor may validly revoke offer of remission b/f communication. (may overtake offer if
revoke by faster means of communication)
Remission as Gratuitous K (or Onerous K?)
o Gratuitous- principle view that remission is act of generosity by creditor which constitutes
liberality b/c depleting creditor's patrimony.
Requires legal capacity to donate/acct donation of both parties.
Inter vivos NOT Subject to donation form rqmts b/c only indirect liberality.
Remission still subject to substantive rqmts donation: revocation, collation
Valid w/ any writing under priv signature, express declaration of creditor, and/or
tactic act by creditor.
Must be "express and special"- act the effect of which is to occur w/I lifetime of
If obligee intends remission to take place at or upon his death, must be in form of
last will or testament. (b/c donation mortis causa)
o Onerous- Only requires legal capacity to alienate debt on part of creditor. Donation and
gratuity rules n/a. K rules apply
ex) Novation. Substitution of new oblig in place of old oblig.
Creditor remits old debt in return for debtor binding himself to new debt.
Ex) Transaction/Compromise- each party gives up something. Mutual consent
If creditor accepts perf by debtor in place of pymt for debt is not
remission, but T/C.
Hicks v. Hicks LASC 1919 p.210
Facts: Ds mother sold him plantation by authentic act for $10000 payable in 20 annual notes of
o Notes #2-7: Mom indorsed notes w/o date made w/ notary "cancelled for svcs rendered
to me which I acknowledge as equivalent of case." and then returned to D months b/f her
o D still owes 13 notes of $500 on prop. D claim previous notes are valid remission w/ no
Decision: Remission of debt b/c no evid that D was transferred ownership of prop by donation.
Since debt b/t parties, Mom's gratuitous release of D is remission that depletes her patrimony.
(would be donation if no debt existed)
Notes were org titles under priv signature which est oblig represented by them. Thus tactic
remission effective and irrevocable when Mother Creditor surrendered notes to D debtor, who
acknowledged receipt. (Art 1890)
No form rqmt b/c remission of debt completely effective w/I creditor's lifetime. No evid that
remaining 13 notes were remitted!! D still owes for balance.
Hurley v. Hurley LASC 1920 p.213
Facts: P father was title holder of land and sold to D son for note payable in 5 yrs and mortgage
o P delivered note to D for remission of debt on condition that D take care of him for
remainder of Ps life.
o P seeks to reinstate note due to Ds ingratitude.
o D claim that acct of remission
Gratutious, Onerous, OR manual gift???
NOT REMISSION b/c not gratuitous since forgiveness of debt conditioned upon obligor
Onerous K/Donation determined by whether value of note > 1.5 x value of svcs rendered. (LASC
did not valuate-but either way P reinstates debt)
Onerous Donation: P relieved of oblig for any of these reasons: donation revocable due to
ingratitude of son (1559), donation revocable b/c P did not fulfill condition imposed on donation
(1559) and No form rqmt for donation so invalid.
Scalise: IN REALITY!!!: Promissory Note is Negotiable Instrument which is exception to donation
form rqmt rules, where considered transferred endorsement which does not require authentic act.
Jamison v. Ludlow LASC 1848 p.215
Facts: D owed P $$. P written agmt to accept half of Ds org debt. D pays half then D voluntarily
agrees to pay balance. and P creditor request pymt of other half and D refuses to pay balance.
Art 1762 circum giving rise to nat oblig: debt voluntarily discharged by creditor to the express
circum giving rise to nat oblig where debt extinguished by prescription.
A fortiori should apply here, D should be bound to pay balance of debt b/c nat oblig in context of
remission same as in context of prescription- where debtor manifested intent to pay to creditor.
4. TRANSACTION OR COMPROMISE
Art. 3071. Transaction or compromise, definition.
A transaction or compromise is an agreement between two or more persons, who, for preventing
or putting an end to a lawsuit, adjust their differences by mutual consent, in the manner which
they agree on, and which every one of them prefers to the hope of gaining, balanced by the
danger of losing.
This contract must be either reduced into writing or recited in open court and capable of being
transcribed from the record of the proceeding. The agreement recited in open court confers upon
each of them the right of judicially enforcing its performance, although its substance may
thereafter be written in a more convenient form
o Generally, error is not grounds to rescind T/C.
o Exception to this when error is so significant that there is no cause for est K.
A. RQMTS FOR TRANSACTION/COMPROMISE:
1. Existence of litigation
o Extra-judicial- in prevention of beginning litigation
o Judicial - active dispute- b/f final judgment.
o After final judgment but b/f available appeal taken.
2. Intention of putting end to litigation
3. Reciprocal concession of the parties
o Onerous- Not rqd that sacrifices of parties be equal.
Parties rqd to have contractual capacity to alienate
o Synallagmatic- both parties obligated under K.
o Consensual- writing rqmt for evidentiary purposes not formality rqmt.
B. Diff b/t Remission and T/C:
T/C- has aletory quality b/c
o Rules for Ks apply. (capacity, cause, mutual consent, object)
o Onerous (vs. communicative) - one party gets benefit of no litigation expense and other
party gets reward and both get benefit of resolution.
o Each party has 2 causes:
Each wants to end lawsuit
Each has renouncement of other party as reason why he obligates himself. (each
party takes risk in hope that getting better deal)
Remission- sacrifice is made by only one party. Gratuitous K.
C. Accord and Satisfaction doctrine:
If debtor's pymt for amt admittedly due (undisputed amt) coupled w/ condition that the lesser pymt
is full settlement, is accd and satisfaction provided bona fide dispute over balance of claim.
(Meyers v. Acme LASC)
Creditor must accept lesser pymt as settlement. Creditor's acct of offer must be by informed
consent. (Harmon v. Simon LAAC 1993)
Creditor must fully understand that if pymt is acct, the claim is deemed paid in full- no longer right
to claim. (Antoine v. Elder LAAC 1971)
T/C and Accd. and Satisfaction are used synonymously, implies that valid T/C may be effected
thru mechanism of Accd and Satisf. (Hancock LAAC 1973)
SCALISE SAYS: LA USES ACCD AND SATIS SYNONYMOUSLY W/ T/C. LA HAS NOT
IMPORTED CMN LAW ACCD AND SATIS WHICH LOOKS AT CONSIDERATION.
Meyers v. Acme Homestead Asc. LAAC 1931 p.219
Facts: P shareholders seeking undisputed amt of $13000 and disputed amt of $1000. D Bank
sends check to P for $13000 w/ "In full settlement" on reverse. P endorses check and writes "all
rights rsvd" on reverse and cashes check. P seeks disputed amt $1000. D claims T/C settling
Decision: Ps failure to communicate rejection of offer constitutes acct of compromise and
settlement of entire debt.
Ds tendering of undisputed amt created offer w/ condition that pymt was settlement and not
Offer by debtor gives creditor specific right to consent to full satisfaction of debt by acct. check
OR reject the check and retain rights under prior agmt.
P acct offer of settlement when cashed check -regardless of writing w/ "all rights rsvd" which does
not clearly communicate rejection. In order to reject, P would have to return check and sue for
RTL Corp. v. Manuf's Enterprise, Inc. LASC 1983 p.225
Facts: Dispute arose b/t parties over calculations in invoice and P proposed that D pay
undisputed amt and leave disputed amt for negotiations. D sent P check for undisputed amt
reading "pymt in full" as C/T offer
o P contacted D and insisted that check be considered only partial pymt. D silent.
o P signed and deposited check but endorsed w/ "partial pymt"
o 3 mths of dispute followed
LASC: Ds C/T offer for NOT acct by Ps deposit of check.
o Even if D silent to Ps insistence that only partial pymt (rejection of org offer and counter
offer), under circum silence implies assent. (Art 1927)
o D withdrew condition of T/C when D allowed Ps to consider check partial pymt.
o Parties subsequent negotiations on disputed amt indicate that they did not consider
check as final settlement of amt, regardless of silence as consent issue!!
Diff from Myers, b/c in RTL P expressly rejects Ds offer that check for partial pymt constitute C/T
and accord and satisfaction of debt
VI. VICES OF CONSENT
ARTICLE 1948 – Vitiated consent
Consent may be vitiated by error, fraud, or duress.
Error- results from a person's subjective belief
Duress- esp. through violence, is objective
Fraud- is both subjective intent and objective misrep or oppression of truth.
Lesion- 4th vice of consent only applicable to sales. Reason that the injury and remedy in lesion is diff than in
error, fraud, and duress. K is not considered relative nullity. The remedies are diff b/c lesion implies an error or
imposition based on a fixed formula.
ARTICLE 1951 – Other party willing to perform
A party may not avail himself of his error if the other party is willing to perform the contract as
intended by the party in error.
ARTICLE 1952 – Rescission; liability for damages
A party who obtains rescission on grounds of his own error is liable for the loss thereby sustained
by the other party unless the latter knew or should have known of the error.
The court may refuse rescission when the effective protection of the other party’s interest requires
that the contract be upheld. In that case, a reasonable compensation for the loss he has
sustained may be granted to the party to whom rescission is refused.
ARTICLE 1949 – Error vitiates consent
Error vitiates consent only when it concerns a cause without which the obligation would not have been
incurred and that cause was known or should have been known to the other party.
"known"- non excusable error.
"should have known"- goes to whether excusable error or not
CMT C: Relief for error only granted when other party knew or should have known that
matter affected by error was CAUSE of party in error in consenting to bind himself.
CMT D: Granting of relief for bilateral error presents no problem b/c K may be rescinded
b/c mutual misunderstanding at the time of contracting or b/c misinformed b/c of 3rd
When bilateral error then theoretically no meeting of minds, but granting relief to
party in error will unjustly injure the other party if innocent. Yet if other party
knew or should have known the matter affected by error was cause why other
party in error entered K, relief may be granted.
CMT E: Principle cause, rather than ancillary motive, is that cause w/o which the contract
would not have been made. Error as to any of principal cause(s) is suff to vitiate consent
to rescind K.
ARTICLE 1950 – Error that concerns cause
Error may concern a cause when it bears on the nature of the contract, OR the thing that is the
contractual object or a substantial quality of that thing, OR the person or the qualities of the other party,
OR the law, OR any other circumstance that the parties regarded, OR should in good faith have
regarded, as a cause of the obligation.
o Must meet 1949. Art 1950 is generally illustrative, not exclusive list of errors that may
o CMT D: Under this art, relief may be obtained when, intending to contract w/ certain
person or person of certain quality or character, a party has given his consent to a K w/ a
diff person, or w/ person who lacks the intended quality/character.
o CMT E: Relief obtainable if party makes error of law that goes to cause of entering K.
Error of law is excusable. Ignorance of law is NOT!
o CMT G: relief for error only granted if meets 1949 that error vitiates consent when
concerns principal cause.
o CMT H: Transaction/compromise may not be rescinded for error of law
NO CASES ON FOLLOWING EFFECTS OF ERRORS BUT IMPT:
ARTICLE 1951 – Other party willing to perform
A party may not avail himself of his error if the other party is willing to perform the contract as
intended by the party in error.
ex) in Univ Iron Works case hypo, if gen contractor had allowed sub to only do
AC work then sub not permitted to claim error and rescind K b/c the AC work was
the sub contractor's org cause in entering K. K enforceable for AC work.
will be "meeting of the minds" where previously was not if other party is willing to
perform K as intended by party in error.
n/a if error is inexcusable
ARTICLE 1952 – Rescission; liability for damages
A party who obtains rescission on grounds of his own error is liable for the loss thereby sustained
by the other party unless the latter knew or should have known of the error.
The court may refuse rescission when the effective protection of the other party’s interest requires
that the contract be upheld. In that case, a reasonable compensation for the loss he has
sustained may be granted to the party to whom rescission is refused.
CMT E: Ct will consider whether error is excusable or inexcusable to determine if
should grant rescission, and if Ct rescinds, whether do compensate party not in
Really ltd to unilateral error.
ex) A buys tract of land from B. A builds house on tract and lives there. Later, B
realizes that actually sold tract 1 which is considerably larger than tract 2 which
he believed he was selling to A. Ct will not rescind K b/c party A has relied on
what K states, regardless of what B believed to be true. However, B may be
entitled to $$ for diff b/t value of tracts and B did not know of error.
ex) in Fur case, furrier knew of lady's cause and her error, thus furrier not entitled
to damages for any losses sustained by making coat rejected by lady b/c did not
meet her specs.
1. General Principles
Error- false representation of reality resulting from ignorance of existence of something that
exists OR from wrong belief in existence of something that does not actually exist.
Error can be in fact or in law
If consent prompted by error does not express party's true will then ineffective b/c party does not
truly intend to consent.
Error (purely subjective) alone is insuff to nullify K. Must concern cause and was known/should
have been known to other party.
2. Steps for compromise in case of Error:
Examine circum to see how party made error.
Was error excusable or inexcusable?
Has the other party changed his position and how substantial is the change?
Did the party seeking rescission investigate b/f entering into the K? (Art 1952)
Was this erroneous party's conduct reckless or negligent?
Examine what other party knew or should have known and whether he had some ability to help
party in error.
Did other party know the cause of the party in error?
If knew of the cause, then he is guilty of fraud ?(accd to 1953)
Did the other party have duty to take reas precautions to prevent error?
ON EXAM ? : ALWAYS DO ERROR ANALYSIS TO DETERMINE IF EXCUSABLE OR
INEXCUSABLE ERROR. REGARDLESS OF WHETHER EXCUSABLE OR INEXCUSABLE,
ALWAYS TO FRAUD ANALYSIS W/ ART 1953-1958. If conclude that error went to cause suff to
be error that vitiates consent, then will be suff for fraud as "circum that subst influences consent."
1953. If conclude the NOT error as to cause, may still be fraud b/c error may be to
circum that subst influences consent if meet bad motive elem.
1954. est whether relationship of confidence. IF yes then not necessary for party in
error to investigate (excusable error). IF not relationship of confidence then necessary for
party in error to investigate (inexcusable error)
Oil City Realty v. Bordelon LAAC 1988 p.236
Facts: Buyer entered into purch agmt and gave Seller $1000 deposit to buy house and lot w/
intention of adding onto house. Buyer arranged w/ contractor for addition b/f entering K. Just b/f
closing date Buyer learned of phys servitude on lot that would not allow space for addition, so
Buyer backed out. Seller seeks damages for having to sell house at reduced rate on mkt.
Buyer cannot invalidate K for error b/c did not communicate cause and cannot be presumed that
Seller should have known of cause.
Error assumed: Ct assumes that Buyer thought lot to be free of servitudes, so "thing" that Buyer
contracted for was diff from what thought when entering K.
Nature of trans would not lead to presumption that Seller knew of Buyer's cause and not apparent
Seller should have known servitude would interfere.
o DIFF FROM CARPENTER V. WILLIAMS (P.144) WHERE SELLER OF HOUSE KNEW
THAT BUYER'S PRINCIPLE CAUSE WAS PROXIMITY TO WORK (objective cause).
So, K RESCINDED B/C FAILURE OF CAUSE, WHICH SELLER WAS INITIALLY
AWARE OF. In this case, there is an absence (not failure) of cause which vitiated
consent based on subjective cause which was not manifested to seller.
2. MUTUAL ERROR
Easiest to undo!!
Situations of Mistake and effect on K:
o Mutual mistake/Bilateral error- K may be annulled at request of either party. Reformation
available as remedy to meet parties' true intent.
o Unilateral error + bad faith of one party- relief may be granted to party in error
o Unilateral error + good faith of other party- relief not usually granted b/c would unjustly
injure innocent party.
Mutual misunderstanding- Diff from mutual error-but same result of choice of reformation to
reflect true intents. Misunderstanding when each party gives diff meaning to same ambiguous
terms in K (written or oral). Thus K lacking mutual consent when parties had diff meanings in
BOP for mutual mistake is on party seeking the reformation to prove bilateral error
Calhoun v. Teal LASC 1901 p.240
P sold D land both believed to be 250 acres. Upon survey found that actually 200 acres. P
deeded D 50 acres for diff.
D subsequently sold land to 3rd party 200 acres. Upon new survey found previous survey to be
wrong. Thus D really had 50 extra acres in org tract.
P claim that entitled to return of 50 acres or value b/c previous grant to D was result of her error
proceeding from mistake in belief in existence of that which did not.
D claim that honestly believed only 200 acres and did not $$ profit from extra acres b/c only sold
price for 200 acres.
LASC: D required to return 50 acres or value of to P. GF of both parties and mutual error where
org survey was principle cause for K
Wilson v. Levy LASC 1958 p.242
Deed to tranfer prop wrongly included land which D did not intend to sell and P never intended to
buy. P seeking $$ damages for Ds failure to deliver land described in deed. D seeking to reform
deed to omit the disputed land.
Decision: When mutual mistake, is reformation is available as a remedy. Parties can reform K to
reflect true intent.
DIFF FROM CALHOUN WHERE PARTIES' MUTUAL ERROR RESULT OF 3RD PARTY INFO
VS. WILSON WHERE MUTUAL ERROR ONLY OCCURING AS RESULT OF INVOLVED
Saunders v. NO Public Svc. Inc. LAAC 1980 p.243
P injured by D in wreck. P saw shady Dr who misdiagnosed P. P and D entered T/C for $100.
P actually really hurt and needs $$ for treatment. P seeking rescinding of T/C and damages.
D claim that Dr's erroneous opinion is not error of fact which invalidates compromise.
DECISION: Mutual mistake of fact as to the principal cause for parties' consent to enter K renders
o 3rd party Dr's info served as principal cause for both parties in entering T/C. Both parties
relied on erroneous info that real medical exam by 3rd party Dr.
o CT stated that invalid T/C b/c based on mutual error and neither party would have settled
dispute if had known initial Dr exam to be erroneous.
Lyons Milling Co. v. Cusimano LASC 1926 p.245
D sent order to P for "telegram flour fob Lyon, KS freight allowed"
o D ordered flour from Lyon mill due to specific grade manuf there. D agreed to pay freight
from Lyon to ensure flour from Lyon mill.
P received order believing that D wanted "telegram" flour regardless of mill origin and filled order
of "telegram" flour manuf at diff mill.
o P interpreted order as D willing to pay freight from Lyon, regardless of where flour
D refused acceptance of lesser grade flour b/c rqd higher grade flour from Lyon mill.
o D in GF in refusing non-complying shipment b/c specific grade rqd for Ds production,
refusal not just pretext to avoid K.
Error w/ regard to thing that is object of K does not invalidate K, unless error bears upon
substance or substantial quality of thing. Here it does!! Mutual misunderstanding of K term where
no meeting of the minds so no consent to form valid K.
Ouachita Air Conditioning, Inc. v. Pierce LAAC 1972 p.246
P sues D for price of Amana AC unit and installation. D says K is null b/c of error as to type of
unit D wanted (York). D seeks by way of reconventional demand the value of AC unit P removed,
or wants org unit returned.
Ct says this is error as to subst qualities (brand of unit) that was Ds principal cause w/o which D
would not have entered into K.
o cause evidenced by Ds conduct of replacing Amana unit w/ York unit anyway.
o BUT, P in GF did not know that brand of AC was Ds cause, and CT presumes that P
should have known b/c Ds org unit was York.
Ct says P has specialized knowledge in industry and had oblig to ask D if wanted
o BUT, D contacted P for unit and P dealt exclusively in Amana units
o All D had to do was tell P that he wanted only a York unit, but D did not!
Decision- Ct excuses Ds failure to tell P of objective cause b/c D initially phoned York svc
repairmen who then transferred D to P (previous York dealer turned Amana dealer). P
should have known that Ds cause was brand of unit. Mutual misunderstanding of oral K.
o Alternate analysis for same result using Art 1949:
2 independent errors of parties involved so no meeting of the minds. Thus no
consent and K null under 1927 (rqmts for K)
Difficult to argue this analysis, b/c not obvious that P should have known what
type of unit D wanted. So if K null under 2033 then parties will be restored to
their positions b/f K.
3. UNILATERAL ERROR
a. Excusable v. Inexcusable Error
o Inexcusable error- not specifically in LACC. Best in Art 1952 Rescission; liab for
damages Cmt D: LA Cts have granted relief when error found excusable and refused it
when error found inexcusable. In case of doubt as to error of cause of one party, Ct lean
heavily in favor of one seeking to avoid loss and against one seeking to obtain gain.
Deutschmann v. Std Fur Co. LAAC 1976 p.249
fur coat case- unilateral error
Identity of Error: ERROR AS TO SUBSTANTIAL QUALITY OF THING
P seeks annulment of K. P put down deposit for fur and wants $$ reimbursed on basis that she
returned the coat. P claim that K should be rescinded for error as to the substantial quality of the
thing (Art 1950 cmt C).
o P knew what quality of fur she wanted and P gave D specific stmts of her cause.
o BUT P in error b/c wanted fur that impossible to make, yet P did not realize that.
o So, specified quality of fur=CAUSE w/o which P would not have obligated herself
o When coat not meeting specs complete by D, P sent it back. (it came back again and P
still did not want it!)
What was Ds knowledge? Did D know or should have known of cause w/o which P would not
have obligated herself? YES.
D received verbal notice from P of very specific quality of fur P wanted in particular coat.
D as expert, D knew P could not get coat w/ Ps specs and had oblig to explain to P that
impossible- but failed to do so
o Seller SHOULD know when buyer wants all of these specifics that is exactly what P
o D knew of error, but did not tell P.
D KNEW that quality/specifics of fur was Ps cause for entering K w/o which P would not
have obligated herself
Was Ps error excusable?
Ct must weigh seller's suppression of truth v. buyer's faulty assumptions.
P buyer seemed to know a lot about fur coats…..So, why couldn't she figure out that specifics
could not be met?
D seller knew of error, so cannot recover anything; D did not mislead P, just suppressed the truth
(less than ordinary fraud) when no evid that D motive to gain adv or deprive P.
CT finds seller's actions worse than Ps so grants P remedy of return of deposit $$.
o P not entitled to any more under 1952. If had won on fraud claim, under 1958 P would be
entitled to attorney's fees.
VERY DIFFICULT TO DISTINGUISH B/T OUACHITA AC (MUTUAL MISUNDERSTANDING) AND
DEUTSCHMANN CASE (UNILATERAL ERROR). Cts more likely to rescind K based upon mutual
misunderstanding than unilateral error. Remedy is the same either way. No bright line b/c no
LACC articles on either one. Must rely on 1949 as grounds for recission.
o Ouachita- D should have known. error to subst quality of thing which was Ps principal
o Deutschmann- D DID know of quality of subst of thing was Ps principal cause. Error of
which vitiates consent so invalid K.
Marcello v. Bussiere LASC 1973 p.251
Error as to nature of business. (closest case where error could be classified as fraud. Ex of how Ct
hesitant to find fraud.)
Facts: Ds purchase Ps bar and also purchase lease from P.
o Bar had been leased 6mths prior and liquor license revoked.
o Ds assumed bar closed for repairs when Ds looked at bar (actually permanently shut
down-P withheld this info).
o P told Ds that she knew of no reason why Ds could not obtain liquor license
o P seeks to enforce K, claiming unpaid rent for entire term of the lease.
o D claim that K unenforceable for either error or fraud. D seeks annulment and
reconventional demand for purchase price and damages for renovations performed.
Decision: Ct rules for Ds. Allows Ds recovery for purchase price b/c proved error, but not renovations b/c
failed to prove fraud.
Identity of the error: Error as to substantial nature of object (Art 1950)
Ct found that P made misrepresentation in telling D believed they could obtain liquor license is
Is this error as to object? YES! Ds entered purchase K w/ cause that would open bar ~which
requires obtaining liquor license.
Is it cause for Ds entering K w/o which would not have obligated themselves? YES! If Ds had
know that would not been able to obtain license, would not have purchased bar, b/c would not be
able to operate bar.
Was cause known to P? YES!
o Seller P knew Ds sought to invest their savings to run a business in their retirement. P
allegedly promised to get Ds a liquor license. P claimed that knew of no reason why Ds
could not get license.
Is this a case of fraud? NO! (Hard to believe this is not fraud!!)
Ds BOP that P actually knew that city would never grant a license to est fraud. Ct says evid insuff
to est fraud about business being closed b/c seller made no misrepresentations about closure- Ds
Error is always alternative to fraud.
What was Ps knowledge? Did he know or should he have known of cause w/o which P would not have
obligated herself? YES
P knew that D buying lounge to operate as bar. P knew of the reason as to why the business
was closed, P was very culpable. Also impt that P knew having license essential for operating
Was Ds error excusable?
Ct must weigh Buyer Ds lack of knowledge and investigation v. Seller Ps knowledge of why
business was closed and telling Ds could get license
Could D have investigated? Ds being out of towners and new to business- prob not
ALTERNATIVE ANALYSIS W/ SAME RESULT: UNJUST ENRICHMENT
IN BOTH DEUTSCHMANN AND MARCELLO, PROVED THAT OTHER PARTY KNEW OF ERROR
AND KEPT SILENT. THIS MEANS OTHER PARTY KNEW OF PRINCIPLE CAUSE.
CH Boehmer Sales Agency v. Russo LAAC 1958 p.255
P sues to recover $200 paid under option K (1933), P claims annulment and wants his perf
restored (2033) b/c he was in error.
Identity of the Error: as to substantial nature of object
P purchased an option to buy a piece of prop for $200. P intended to expand prop and operate
commercial non-gas station business
Statutes prevented land from being used for any commercial purpose other than gas station.
P was in error as to the zoning statutes.
Zoning status is usually an error of law but error of fact here b/c statute ultimately affects the
object of K such that the error is an object w/o which P would have not obligated himself.
Did D know or should have he have known of the cause w/o which P wouldn't have obligated himself?
D KNEW that P wanted to use the prop for commercial purposes and that he wanted to expand it.
So D knew of Ps cause.
Did D know that the zoning statute would not allow any expansion other than use?
o Not apparent that D knew of error. D did not necessarily know that zoning statutes
would inhibit Ps cause from prevailing. While D knew of cause, did not necessarily know
that zoning statutes would prohibit Ps from operating business.
o this is why Russo diff from Bordelon where party definitely knew of error regarding
servitude prohibitions but did not know party's cause for entering K.
Not fraud b/c that would require party know of error and go thru w/ K.
Was Ps error excusable?
Was it excusable for Ps not to investigate?
o Maybe, since prop was already being used as gas station
Ct notes that this was a Sat when K was entered into, so courthouse closed and they could not
investigate zoning statutes.
P knew of Ds cause and should have helped them ensure that it occurred.
Ct really believed seller knew of zoning status which would not allow Ps cause to fruition.
Thus, D knew of error. Ct granted relief to P.
Universal Iron Works Inc. v. Falgout Refrigeration, Inc. LAAC 1982 p.258
Facts: P solicited D to submit subbid for project. P received Ds bid 30 min b/f project bid due. P admitted
that never mentioned extent of project to D. Parties had 2 yrs. previous trans. P had never perf heating or
ventilation work for D b/f, only AC work
o D subcontractor submitted lowest bid to do AC work for Gen Contractor P, which was
used in Gen's bid for big project. P awarded project. Upon notice of job and after many
discussions, D sub told P gen that would not be able to perform AC work due to
architectural specs. As result of subs withdrawal, Gen P rqd to have work perf by alt
contractor at higher price.
o P claim for $$ damages for diff b/t Ds bid and price paid to alt contractor. and $$ amt for
penalty P may have to pay for late completion of job
o D claim that only gave P "ballpark figure" on AC work not including heating and
ventilation work and was not intended to be a binding bid.
Error? Yes. Error as to the substantial nature of the object
Ct stated that D was unaware that P wanted more than A/C work when submitting sub-bid (Ps
cause). Factual finding rqd b/c D testified that he was unaware of these facts and P failed to
prove that D knew or should have known. (BOP on party alleging)
o When D gave bid, did not have specs for project, thus could not have known that more
than A/C work needed.
o P could not prove that D knew that more than A/C work was in bid, as P intended it to be.
o Thus no meeting of the minds. This constitutes error.
o Regardless of parties' previous trans, P still failed to prove Ds knowledge.
Excusable error of D? Yes
o D had no reason to know that bid was for more than just AC work.
o Ds unilateral error (that K created oblig to do AC work only) vitiated consent and
prevented formation of K b/c error as to nature of K
(Note:If were using revised LACC 1949 and 1950 would be required to show that D knew or should have
known of cause and the error concerns the cause. This would have been subjective error of K, but failure
to show that D knew/should know, would not rescind K b/c would be inequitable. Could make arg that Ds
bid was so low that P should have known that bid was only for AC work and thus meets both prongs of
1949 and K should be rescinded.)
S'Port Great Empire Broadcasting Inc. v. Chicoine LAAC 1988 p.262
Oral agmt that D would get 3 speaking arrangements per week for 13 wks- when in fact only
spoke 14 times (vs. 39 guaranteed)
Written K available, but neither party actually read K, which contained no guarantee of 39
D claim that K null b/c he was in error
Ct stmt on oral agmt: Under 1848, parole evid rule, testimony may not be introduced to vary the terms of
K. Written K was meant to contain the contents of agmt.
Identifying the error:
D was in error.
Was it cause w/o which he wouldn't have obligated himself? Probably. D is new chiropractor in
town who wants to advertise and esp wants to speak often b/c of nature of his business. (more so
than retailer at least)
This is the cause w/o which D would not have obligated himself b/c he did not get 25 speaking
arrangements that he thought he would get.
Did P know or should have known of the cause w/o which D wouldn’t have obligated himself? NO!
NO! P did not, nor should he have known of the error as to the cause b/c D signed a written K
that does not guarantee the # of speeches.
P did know of cause that D wanted exposure and advertising. Art 1949 met.
A party can know of the cause and not know of the error as to the cause…Obviously
knowing of an error as to the cause makes the party much more culpable
Is Ds error excusable? NO!
NO. Ds error in not reading the K is not excusable. K text available and clear, but D failed to read
Ct rules for P, finding party in error D more culpable.
Signature on written doc est oblig:
o Snell v. Sawmill- signatures to oblig are not merely ornaments!
o Gross v. Brooks- Ct refused to nullify sale of land alleged to be based on error where
notary informed semi-literate party of nature of act, so presumed that no ambiguity.
o South Central Telephone Co v. McKay- in absence of fraud, party signing doc presumed
to know its terms and cannot avoid oblig by claiming that did not read doc
o Citizens' Bank of LA v. James- Bank note enforceable where Ds error of judgment as to
value of prop which he agreed to buy. May nullify K if error of fact about existence of
thing or its identity/quality which is obj of K. Error of subjective value not listed in Art
1950 as suff for rescission.
D. CAUSE CONCERNED IN ERROR
1. Error as to the Person (or qualities of person)
Bischoff v. Brothers of the Sacred Heart LAAC 1982 p.267
Facts: Ps job app asked if married and if practicing catholic. P checked both boxes. P offered
job and signed empl K to teach religion.
o After signing K, D school found that P actually divorced and remarried, which is not
allowed in catholic church.
o D revoked K and P sued.
o D claim that P intentionally hid material facts which if known, D would not have executed
o P claim that did not lie on appl w/ intent to deceive. And that withholding of divorce ok b/c
personal bkgrd and w/o bearing on professional qualifications to be employed. No school
policy that precluded from teaching other subjects besides religion if divorced.
Decision: At time of Ps checking boxes on appl, created error as to the person. (Art 1950 Cmt D).
P knew of error as to Ds cause and K null.
Identity of error: Error as to the quality of the person
Meets Art 1950 b/c Ps marital status is subst quality in circum given D is catholic school and
religion teacher position.
Did P know or should have known of the cause w/o which D would not have obligated himself?
o Ds hiring person to teach religion class-implies that must be person of good morals
o P knew of Ds cause- P admitted that did not disclose divorced-remarried status b/c knew
D would not hire him!
P has higher culpability as practicing catholic and academic training bkgrd, as
opposed to lay person, that should have known of Ds cause that religion teacher
could not be divorced
o P knew of error- P knew the completed appl implied that he was in accd w/ catholic
doctrine and that D believed that to be so.
Was Ds error excusable? YES!
o Weighing of culpability: D could have just further inquired as to what P checked on appl
vs. Ps intentionally not telling.
o Ct finds Ps not telling is more culpable than Ds duty to investigate
La Crosse v. Christian Academy 2004- Applicant puts on empl application that does not use
alcohol but in reality is alcoholic!! Ct says error as to quality of the person suff under Art 1950
and 1949 to rescind K.
Delpit v. Young LASC 1899: "Mistake as to the person" n/a to nullifying marriage K where party
makes mistake as to other's character, etc.
2. Error as to the Nature of the K
Wise v. Prescott LASC 1963 p.272
P injured in car wreck caused by D.
P sues D and Ds insurance Co. for personal injury sustained.
Ds shady Ins Co agent goes to P and offer's P $105 w/I 24 hrs of wreck. P accepts $105 and P
signed release of D and Ins co from future liab.
D is ins agent who goes to Ps home w/I 24 hrs and does not reveal asc w/ ins co.
Agent says $$ offer is gift from D and signed doc is thanks to D
D says signed doc will not affect Ps case
P signed doc, but could not see to read it.
D claim of exception of res judicata on basis of T/C previously reached by parties.
P claim T/C is null b/c of error as to the "matter in dispute" (Ct says same as "nature of K" in Art
Identify the error: Error as to the nature of the K
P believed $105 was gift from D and that signed doc was receipt for a gift, not rush release which
is T/C that would affect her case.
Obvious from diff in amt of jury award $11000 and $105 from T/C that P did not know she was
Did D know or should have known of cause w/o which P wouldn't have obligated herself? YES!
D not only knew of error, but caused error by making P think she was signing receipt when
actually a T/C.
D should have known that Ps belief that signing receipt as opposed to release was her cause.
Was Ps error excusable? YES.
Compared w/ Snell that signatures to oblig are not mere ornaments. And if cannot read doc
should have someone read it to you.
o BUT, P couldn't see w/o glasses, was on pain meds, etc.
o P did not ask friend taking care of her to read doc out loud.
Diff from S'Port Great Empire Broadcasting Inc. b/c P here could not read release b/f signing,
where P in Chicoine just neglected to
Ct balancing test of culpability (sympathy factor is huge here) : Ps failure to have doc read out
loud to her b/f signing vs. Ds blatenly lying to P about his identity and object of K signed.
Ps error which would normally have been inexcusable is outweighed by Ds gross
culpability and misrepresentation of whole manner.
IMPT: Analysis w/ new 1949
prong 1)This error went to Ps cause b/c P would not have signed if had known that really rush
prong 2) D should have known that P believed signing receipt and not release, which is Ps cause.
3. Error in the Substance of the K
o Very "thing" that contracting for
Voitier v. Antique Art Gallery LAAC 1988 p. 276
Facts: Painting dealer and buyer both believed to be org work of particular artist. Upon buyer's
purchase of painting at auction, art expert confirmed that not org work as advertised. P seeks to
recover all cost from D claiming that error as to nature of thing that would not have entered oblig
Art 1950- mistake of particular artist of painting is error as to substance of K
Art 1949- prong 1- YES! Obvious from facts that P only wanted painting from particular artist,
thus this was principal cause for entering K. Also supported by substantial amt $$ paid for
o prong 2- D knew that Ps cause was to buy authentic painting. HOWEVER, D did not
know of error b/c D did not know painting fake
Decision: Ct rescinds K on basis that error of cause as to nature of object of K accd to 1950.
o Diff from Citizens: Here mutual error as to the artist of painting which dramatically
changes value of obj of K. VS. In Citizen's error is purely over value of prop. This Ct
approach diff from citizens b/c stated that value is a fact b/c can be est and value is a
matter of judgment. (ex. aesthetic value diff for diff people.)
4. ERROR OF LAW
Art. 5. Ignorance of law
No one may avail himself of ignorance of the law
NOT EXCUSE!!- public records doctrine
Error may be excuse
a. Notes on Error of Law:
o Error of Law as grounds for nullity of K is permitted b/c party to K invoking this vice does
so in order to seek nullification-thereby eliminating both disadv and also the adv he might
have derived from that K.
o For Ks, invalidating force of error of law is not based on
misunderstanding/misinterpretation of law per se, but instead is based on concept that
such error has led party into erroneous understanding of intended object of K
o T/C not subj to nullity for error of law b/c parties' interp of law is often principal cause of
parties settling w/ T/C. To allow party to attack T/C for same reason that entered it there
would be contradiction in terms. T/C also favored by LA Cts and policy.
Hill v. Hill LASC 1931 LASC p.282
Facts: P widowed husband and D kids entered partition agreement whereby parties settled
dispute over 20 acre tract caught in succession.
o P took surface rights to 20 acres for rest of his life (not entitled to min rights)
o Ds took land itself retaining mineral rights, subj to Ps usufruct
K stipulation that all parties consent to lease of land for oil production and drilling of well w/I 90
days and royalties would be paid to Ds as owners
When 1st well drilled accd to lease, produced gas in large qty
Thus Ps surface rights to land are much less valuable than Ds mineral rights.
P claim error of law b/c induced to T/C by misrep as to entitlement of his half of the land in
succession, which was principal cause for entering T/C..
Laws surrounding this dispute very complicated and LASC states that laws which P might well
have had doubt about
T/C made for purpose of avoiding litigation cannot be annulled for error of law. T/C meant to
prevent further ? of law in dispute and often entered into b/c of ambiguity in law.
Decision: LASC says no COA b/c accd to 1950 T/C is not grounds for rescission for of error of
Cts very hesitant to recognize fraud where error is more appropriate, although BOP is only
preponderance of evid est by circum evid. If bringing claim, P should bring both fraud and
error b/c error is always appropriate alternative to fraud.
ARTICLE 1953 – Fraud may result from misrepresentation or from silence
Fraud is a misrepresentation or a suppression of the truth made with the intention either to
obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud
may also result from silence or inaction.
mental element- intent to obtain unjust adv or cause loss or inconvenience to
active element- party's action of misrep or suppression of truth induces other
party into error to enter K.
loss/inconvenience- not usually $$ loss. Not always=other party's unjust adv (ex.
concerns a circum that subst influences consent OR that induced error.
Cts allow leeway for puffery in commercial advertising, despite fact that may
seem to meet elements of fraud.
ARTICLE 1954 – Confidence between the parties
Fraud does not vitiate consent when the party against whom the fraud was directed could have
ascertained the truth without difficulty, inconvenience, or special skill.
This exception does not apply when a relation of confidence has reasonably [objectively] induced
a party to rely on the other’s assertions or representations. B/c relationship such that party w/
lesser knowledge relies on party w/ specialized knowledge to look out for their best interest.
Even in fraud the party in error has responsibility to do investigation to ascertain
the truth. Exception where fiduciary duty.
Fiduciary relationship- one party's has specialized knowledge and b/c other party
in lesser/vulnerable position in comparison the party w/ specialization has duty to
look for best interests of lesser party.
Parties w/ unequal bargaining power usually mean fiduciary relationship- BUT
ARTICLE 1955 – Error induced by fraud
Error induced by fraud need not concern the cause of the obligation to vitiate consent, but it must
concern a circumstance that has substantially influenced that consent.
CMT B: Error is element of fraud. Unlike simple error, an error as to value
induced by artifice may constitute fraud.
Gives Ct lower std for fraud than error b/c bad motives on part of one party
No rqmt that other party knew or should have known of error/cause (as w/ error)
b/c usually party has actually deliberately caused error .
As long as error as to thing that subst influenced consent, not necessarily the
principal cause, may be fraud.
Correlates w/ Art 1954- ? of whether party was purely induced OR did party fail to
investigate, which means induced by own judgment?
Usually fraud must be by contracting party, but accd to 1956 may vitiate consent
if fraud by 3rd party
ARTICLE 1956 – Fraud committed by a third person
Fraud committed by a third person vitiates the consent of a contracting party if the other party
knew or should have known of the fraud.
Victim of fraud committed by 3rd party is not bound if other party, thru ignorance
of fraud should have known of it.
CMT C: In the proper case, injured party may recover damages from 3rd person
who committed fraud.
ARTICLE 1957 – Proof
Fraud need only be proved by a preponderance of the evidence and may be established by
CMT C: Fraud must be proved by one who alleges fraud, but b/c of nature of
fraud it sometimes must be inferred from existence of highly suspicious
conditions or events. (circum evid suff. b/c very unlikely that will have clear and
direct evid of fraud)
Preponderance of evid is suff!! (no rqmt of BRD, etc.)
In order to prove fraud, evid must be conclusive (strong evid of fraud) perhaps
b/c fraud is quasi-delict, which broadens scope of Ds liability for damages.
ARTICLE 1958 – Damages
The party against whom rescission is granted because of fraud is liable for damages and attorney
CMT B: Damages include loss sustained and full damages including profit, $$
damages, and attorney's fees
Fraud has more sever punishment than simple error
Griffing v. Atkins LAAC 1941 p.287
Diamond ring/jewelry store appraisal case
Facts: D layman found diamond ring outside. D had no idea it was valuable and had it appraised.
o Appraiser told D ring was defective and of no value. No actual stmt of $$ value given.
o Owner of store present at time and told D worth $130. Owner was going to offer D $130,
but decided not to.
o P another jewelry store worker overheard convo about ring and offered $130 for it and D
acct. P obtained loan to buy. (P had professional knowledge of gems and believed value
to be at least $500)
o D claims nullity of K of sale due to fraud/deceit. D claims to be in error as to the value of
thing b/c led to believe ring only worth $100 and P had specialized knowledge such that
at time of sale P knew real value. D seeks under 2033 to rescind the sale and be placed
back in org position. (wants ring back b/c already gave P $$ back and P refused to return
ISSUE: ? Does P, as employee of jewelry store, have fiduciary or quasi-fiduciary duty to D since
P present entire time when events transpired?
Decision: P had quasi fiduciary duty to D which P violated by fraud!! D entitled to ownership of
ring and all attorney costs.
1953: active elem- P suppressed truth b/c knew ring worth at least $500 but only offered $130,
since P in quasi fiduciary capacity. D only went to store for appraisal and not for sale. So Ps
fraudulent offer induced D to sell.
o mental elem-Clearly P had intent to obtain unjust adv by obtaining ring he believed to be
worth at least $500 for only $130
Appl of Art 1954: D could have gone elsewhere to get appraisal w/o burden BUT when relation of
confidence, injured party does not have to go elsewhere SO ? of whether everyone in store was
in relation of confidence to Sims?
o Appraiser and Owner clearly in relation of confidence to Sims = fiduciary duty
While neither gave any technical stmt of value, but reference to big flaw meant to
D that ring was of no more value than they offered him and parties knew this!!
o P in quasi fiduciary relationship w/ D b/c P not consulted and personally never made any
misrepresentations. P only offered to pay $130- suppression of truth b/c P knew higher
Ps offer "sight unseen" suggest fraud b/c P w/ knowledge of gems- would not
offer $$ for ring unless thought had great value
P obtained loan
P obviously not interested in buying ring til store owner decided not to buy it and
offered same amt as owner did.
These circum that P suggest P acting fraudently
Ps suppression of truth led Sims into error of fact = fraud.
Ps fraud was not active but passive b/c failed to disclose info which he was in justice and equity
bound to disclose to the other party to the K who was not on equal footing w/ him.
Alternate analysis w/ same solution:
1953: Misrep were made by Owner (told Sims ring only worth $130)
1954: Sims was in relationship of confidence w/ Owner (customer seeking valuation from
jewelry store owner)
1956: 3rd party Owner committed fraud (misrep of value by which P knew to be false)
D relied on Owner's assertion and misrep in agreeing to sale w/ P
CMT C: injured party may have action against 3rd party directly.
Did P know or should have known of fraud/misrep of value?
YES! P knew b/c Owner had offered Sims $130 for ring. P obviously overheard convo
since exact amt he offered, thus P aware of Owner's misrep of truth b/c Owner knew ring
worth at least $500.
Orr v. Walker LASC 1959 p.297
Bad neighbors scheme case.
Facts: P seeks to annul a deed that transfers strip of prop to D claiming the deed is relatively null
for fraud. P only agreed to sell D prop b/c believed D to be true owner of adjacent lot via fake
Decision: Error at time K made is that D showed P a fake deed which purported to convey Tally's
land to D. This is error of fact b/c led P to believe that D owned Tally's land which he did NOT!
fake deed is absolute nullity simulation w/o legal effect.
1953. active element- D guilty of misrep b/c deed was false and D said sale was for his
benefit when he knew really for benefit of 3rd party
mental element- Ds intent to cause P loss or inconvenience, not unjust adv. Here Ps inconvenience was
ED and inconvenience of dealing w/ neighbor who he hated. No rqmt that $$ loss of injured party.
1954. ??? whether met. P could have ascertained truth elsewhere by having deed
examined by attorney or checking public records.
o Does this qualify as being difficult/inconven or requiring special skill? Prob not- but more
difficult than going to another jewelry store in Griffing
1955. Ps error of fact induced by Ds misrep which subst influenced his consent. It
influenced cause w/o which P would not have and entered K.
Overby v. Beach LASC 1951 p.300
Facts: D advertised sale of apts w/ amt of legally collectible rents. P wanted to buy apts as
investment and rqd Ds to give written warranty of legally collectible rents.
o Parties executed authentic act to effect of written purch agmt and warranty.
o After sale, P learned that max rent advertised by D were above legally collectible amt.
P claim that principal cause of her entering K was investment- that the warranty of prices sellers
Babins quoted her in writing were legally collectible and would remain so from and after act of
sale. P claim if knew rents were not legally collectible, P would not have entered K. P seeks
recission of sale on basis of misrep.
1953-Misrep of fact of legal amt of rent apts were actually generating at time agmt made, not as
to value of thing…
1954-Excusable error. No evid that P could have conveniently obtained info from Fed authority.
AND P could reasonably rely on seller D - Scalise says only b/c of written warranty that is
legally binding provided by D. Est warranty/warrantor relationship. In ordinary
buyer/seller relationship not fiduciary relationship of confidence.
1955-Ps princ cause for entering K was amt of legally collectible rents b/c investment prop. Ds
misrep of max rents in warranty leads to Ps error going to cause.
o (not even rqd that error as to princ cause for fraud, but here it is grounds for rescission on
ARTICLE 1959 – Nature
Consent is vitiated when it has been obtained by duress of such a nature as to cause a
reasonable fear of unjust and considerable injury to a party’s person, property, or reputation.
Age, health, disposition, and other personal circumstances of a party must be taken into account
in determining reasonableness of the fear.
objective factor- must be reasonable fear
subjective factors- take into acct those pers circum to determine if reasonable
fear under circum (not character)
ONLY duress if affects person (phys viol), prop, or reputation.
TEST FOR DURESS: take objective reasonable man + man in the pers circum of
case = reas under circum
ARTICLE 1960 – Duress directed against third persons
Duress vitiates consent also when the threatened injury is directed against the spouse, an
ascendant, or descendant of the contracting party.
If the threatened injury is directed against other persons, the granting of relief is left to the
discretion of the court.
Basis of duress here is the fear that is perfectly reasonable when threat made
against family. Irregardless of whether threat made directly to family member or
to party alleging duress about family, as long as injured party knows of threat to
ARTICLE 1961 – Duress by third persons
Consent is vitiated even when duress has been exerted by a third person.
ARTICLE 1962 – Threat of exercising a right
A threat of doing a lawful act or a threat of exercising a right does not constitute duress.
A threat of doing an act that is lawful in appearance only may constitute duress.
ex) cannot be liable for duress for refusing to donate money to organization that
desperately needs funds.
ex) not duress if threaten to sue someone who already have COA against
ARTICLE 1963 – Contract with party in good faith
A contract made with a third person to secure the means of preventing threatened injury may not
be rescinded for duress if that person is in good faith and not in collusion with the party exerting
ARTICLE 1964 – Damages
When rescission is granted because of duress exerted or known by a party to the contract, the
other party may recover damages and attorney fees.
When rescission is granted because of duress exerted by a third person, the parties to the
contract who are innocent of the duress may recover damages and attorney fees from the third
same damages as fraud- deliberate nature of duress requires party exerting
duress to pay other's attorney's fees
1. Duress vs. Fraud and Error:
o All are vices of consent
o bright line rule- must be party exerting duress upon another party to be recognized
as duress. (cannot be self induced fear)
o w/ fraud and error there is objective error of mistake of fact; injured party unaware of
mistake at time K formed.
o w/ duress, party's consent not freely given b/c other party is threatening; injured party
knows what is going on at time it occurs
Cooder v. Oteri LASC 1882 p.306
Facts: D held responsible for theft of Ps $$ and D had affair w/ Ps wife. Parties executed notes
and mortgage under authentic act for Ds pymts to P. D threatened to kill P for affair. P seeks to
annul on grounds that made through fear of Ds threats.
LASC: P not induced into entering K by any real fear of viol to himself or family and thus valid K
b/c not of serious nature of duress to vitiate consent.
o Ds threats made in outrage over suspected adultery and were not serious and were
never followed by any attempt to follow thru.
o At time of note execution, parties had made amends- no actual, imminent fear
o Ds notice to P via letter from legal counsel seeking redress for adultery and accomplice
w/ theft of Ds $$ is legal right.
Wilson v. Aetna Casualty & Surety Co. LAAC 1969 p.309
Facts: P injured when hit by Ds client's car. D insur agent offered $5000 T/C. (occurred 4.5 mths after
incident- so diff from Wise case)
o Ps Dr told him to accept T/C and avoid timely and expensive litigation. (This not 3rd party
duress b/c Dr. merely giving opinion, plus D agent knew nothing about Dr's advice. - Not
misrep of truth by Dr b/c only opinion, not legal expert.)
o P claim that release invalid b/c :
o Did not know pers injury claim worth more than $5000 amt of T/C.
o External circum- Vitiated consent b/c of viol/duress of external circum (P not able to pay
med expenses on own) AND misinformation from 3rd party that lawyer could not help
him. (no claim of fraud or threat by D insurance agent)
o D claim that this is not vice of consent recognized to annul T/C.
Issue: ? Was Ps consent in entering T/C to release D from all liab for Ps personal injury vitiated
Decision: NO! Ps consent voluntary b/c no element of threatening of Ps person or prop to
constitute duress vitiating consent.
ARTICLE 3079 Recission for error, fraud, or violence
T/C may be annulled for fraud, viol, error of fact as to princ cause for making K, as to person w/
whom made, or as to subj matter of dispute.
K invalidating duress must proceed from fear of force or viol which eliminates
freedom of consent.
Actor must perform an exterior act which gives rise to duress
NOT rescinded for error of law or lesion.
Only strong econ duress for P to accept T/C, DOES NOT constitute grounds for rescission.
Although P did have reas fear of unjust and considerable injury, was due to external circum of P,
out of Ds control.
Adams v. Adams LAAC 1987 p.312
Facts: Parties entered community prop settlement entered whereby wife got $$ and Willy got
house and all debts.
o P wife claim that D husband threatened to file bankruptcy and make P assume 1/2 debts,
which P had no way of paying, and if P did not accept comm prop settlement and not
Decision: P failed to prove a reasonable fear of unjust/great injury to her person to constitute
duress as grounds for rescinding T/C.
Ds threat to file bankruptcy and cause P to assume 1/2 debt is NOT duress b/c threat of doing
lawful act or exercising right is not duress (Art 1962)
1959-D did cause P reasonable fear of injury- but $$ injury and not unjust b/c filing bankruptcy is
w/I Ds legal right
o exercise of legal right exemption from duress b/c of policy reasons that it is favored to
enter licit Ks as opposed to illicit means to settle dispute
Jordan v. City of BR LAAC 1988 p.317
Ct suggest that if circum are more personal, Ct may permit rescission for duress by 3rd person even
though no threat of viol.
P forced to sign K w/ police releasing police and wrecker lot from any claims in order for P to
o P sues for duress b/c did not want to consent to release b/c police had "forgotten" about
hold on Ps car and caused storage fees to accumulate.
This is case of duress exercised by 3rd party (police) suff to rescind both K w/ wrecker svc to pay
for storage fees and release form w/ police.
CT said P clearly did not consent to release b/c given no alternative but to sign release in order to
get his car back suff for duress.
Accd to Art 1963: Ct will not allow rescission for duress exercised by 3rd party if party in K did
not collude w/ 3rd party making threats b/f hand OR if party in K is in good faith. While fear is the
basis for duress and may be reasonable to injured party, not equitable to hold unknowing party
liable for 3rd party acts.
VII. OBJECT OF CONTRACT
A. SECTION 1: GENERAL PRINCIPLES OF OBJECT OF K
ARTICLE 1971 – Freedom of parties
Parties are free to contract for any object that is lawful, possible, and determined or determinable.
ARTICLE 1972 – Possible or impossible object
A contractual object is possible or impossible according to is own nature and not according to the
parties’ ability to perform.
Possible/Impossible- very high std.
(Scalise side note ?? will this std be loosened due to such huge natural disaster that makes
many Ks absolutely impracticable. Poverty of party not grounds for impossibility. LA has
never dealt w/ this std on great scale of priv party Ks objects being drastically altered. Esp.
"Impossible"- absolutely cannot be done- regardless of burden on either party.
Impracticability is not a factor.
Must be lawful as to cause in order to be lawful to object. (ex. illicit drug deals)
May be unlawful as to statutory law and/or public policy
IMPT b/c : no matter how costly or onerous the object is party may be obligated
to perform as long as it is possible- regardless of whether practical.
ARTICLE 1973 – Object determined as to kind
The object of a contract must be determined at least as to its kind.
The quantity of a contractual object may be undetermined, provided it is determinable.
Must have mutual consent as to the kind of object
may be the performance itself OR may be "thing" (ie:$$, house, land, etc.)
ARTICLE 1974 – Determination by third person
If the determination of the quantity of the object has been left to the discretion of a third person,
the quantity of an object ids determinable.
If the parties fail to name a person, or if the person named is unable or unwilling to make the
determination, the quantity may be determined by the court.
ex) caterer hired to furnish wine for party. Host needs "as much wine as is
necessary for 25 people" and leave qty amt of wine up to caterer. Caterer does
not specify amt b/f perf. Amt determinable. So object is suff determined as to
kind although qty is undetermined, but determinable.
ARTICLE 1975 – Output or requirements
The quantity of a contractual object may be determined by the output of one party or the
requirements of the other.
In such a case, output or requirements must be measured in good faith.
ex) Party agrees to buy all the oranges that crop produces in 1 yr.
ex) Party agrees to buy all the flour that it requires for production in 1 yr.
ARTICLE 1976 – Future things
Future things may be the object of a contract.
The succession of a living person may not be the object of a contract other than an antenuptial
agreement. Such a succession may not be renounced.
CMT B: K for succession of living person is null, even if made w/ that person's
consent. Antenuptial agmts constitute an exception.
Art. 2328. Contractual regime; matrimonial agreement.
A matrimonial agreement is a contract establishing a regime of separation of property or
modifying or terminating the legal regime. Spouses are free to establish by matrimonial
agreement a regime of separation of property or modify the legal regime as provided by
law. The provisions of the legal regime that have not been excluded or modified by
agreement retain their force and effect.
CMT C: in 1870 LACC, mat agmt was part of species of marriage=antenuptial K.
Marriage K=antenuptial agmt.
Art. 2329. Exclusion or modification of matrimonial regime.
Spouses may enter into a matrimonial agreement before or during marriage as to all
matters that are not prohibited by public policy.
Spouses may enter into a matrimonial agreement that modifies or terminates a
matrimonial regime during marriage only upon joint petition and a finding by the court that
this serves their best interests and that they understand the governing principles and
rules. They may, however, subject themselves to the legal regime by a matrimonial
agreement at any time without court approval.
During the first year after moving into and acquiring a domicile in this state, spouses may
enter into a matrimonial agreement without court approval
IMPT: Donation of succession can ONLY be made b/f the marriage.
ARTICLE 1977 – Obligation or performance by a third person
The object of a contract may be that a third person will incur an obligation or render a
The party who promised that obligation or performance is liable for damages if the third person
does not bind himself or does not perform.
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
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
B. Unlawful object diff from unlawful cause b/c:
o w/ object- perf to do something- very thing contracting for is unlawful
o w/ cause- motive for entering K- reason that contract for object is unlawful
o very hard to discern in practice.
ex) Liles case- cause of D is to settle estate; cause of lawyer is to earn living
object for both parties is death of another so that when death occurs K is
Commerce Ins Agency Inc v. Hogue LAAC 1993 p.322
Facts: P executed K of sale to sell D its Book of Business. K declared that Book of Business
attached, but no client list actually attached and no definition of "book of business".
P claim that object of K not specified and thus null.
o B/f execution of agmt parties verbally went over Ps current client list = "book of
business"=object of K.
o Both parties testified that clearly knew what was being transferred in act of sale. - D was
to receive Ps acct list.
o D never actually saw client list, but knew it existed b/c parties had verbally discussed
client premium info
Art 1973- only rqd that object of K be determinant in KIND, qty f K object may be undetermined so
long as it is determinable…
o B/c parties knew KIND of object being sold in K (ie: that Ps client list was book of
business named, but not described in K) K is valid although the writing lacks the detailed
description of the specific object.
Tack amusement Co. Case- not in book:
Exclusivity K terms that D bar owner would exclusively deal w/ P and P would put "some
amusement devices" in Ds bar. D does deal w/ other Cos and puts other products in bar. P sues
for breach of exclusivity K and says Kind is known although qty is not. D defends that object not
specified and no meeting of minds.
Ct says that qty undeterminable b/c description insuff - "some" is not any certain amount.
State v. Lewis LASC 1989 p.323
Error w/ respect to contractual object
D entered plea bargain w/ St whereby D would give St info about another crim investigation and
St would not prosecute D.
Object of K: D's information (keeps D from prosecution; allows St to advance in another
D cause- avoiding prosecution. D agreed to give evid believing he would be immune from
prosecution in other jurisdictions, a guarantee which St had no authority to make
St cause- Get info involving another crime. St believed info concerning other crime would be
available, however D unable to provide such info b/c has no actual knowledge of it.
LASC says mutual error as to object of K accd to 1950.
o Agmt dissolved for failure of cause on both sides b/c both parties entered agmt in belief
that they had bargained for something other than what they were actually to get.
o Scalise says error as to cause is also impt in object context. Object of K can be
future thing. Error as to object goes to the cause. Lack of cause is grounds to
vitiate consent and nullify K.
Liles v. Bourgeois LAAC 1987 p.326
succession of living person may not be object of K- absolute nullity
Facts: Contingency fee K b/t lawyer and his client where fee based on % of client's future
inheritance from her mother. D attempting to have her mother declared an interdict and lawyer
was supposed to assist her in obtaining max amt from mother's estate upon mother's death.
o D claims that K unenforceable under LA law; no contention that P failed to perform duties
Object exist here, it is a future right ~ however, exception to 1976 b/c future thing cannot be
succession of living person
Since K unenforceable, lawyer not entitled to any pymt accd to K
Quasi contractual remedy- Under unjust enrichment theory, lawyer entitled to pymt figured by
quantum meruit based on judge determination of proper amt.
Motive behind LACC prohibition of succession of living person being object of K was immorality of
parties speculating on deaths of another; OR danger of non-relatives having obtained an interest
in death of living person, considering to hasten its commission.
Daigle v. Clemco Industries LASC 1993 p.329
LASC held imptc of parties' freedom to contract w/ respect to future objects and liberty to enter
T/C to avoid future litigation on all types of controversy, including contingency or uncertain future
LASC held enforceable provision in K b/t wife of injured person and D. K executed prior to
husband's death (which resulted from injury caused by D) wife released D from future liab for
C. THIRD PARTY BENEFICIARY
Art. 1978. Stipulation for a third party
A contracting party may stipulate a benefit for a third person called a third party beneficiary.
Once the third party has manifested his intention to avail himself of the benefit, the parties may
not dissolve the contract by mutual consent without the beneficiary's agreement.
3rd party's manifestation of intent to accept benefit does not have to be express.
Art. 1979. Revocation
The stipulation may be revoked only by the stipulator and only before the third party has
manifested his intention of availing himself of the benefit.
If the promisor has an interest in performing, however, the stipulation may not be revoked without
Art. 1980. Revocation or refusal
In case of revocation or refusal of the stipulation, the promisor shall render performance to the
Art. 1981. Rights of beneficiary and stipulator
The stipulation gives the third party beneficiary the right to demand performance from the
Also the stipulator, for the benefit of the third party, may demand performance from the promisor.
CMT B: b/c of ever increasing imptc of 3rd party beneficiary Ks, Ks bind only the
parties unless they have stipulated otherwise.
Art. 1982. Defenses of the promisor
The promisor may raise against the beneficiary such defenses based on the contract as he may
have raised against the stipulator.
1. Discerning whether 3rd party beneficiary K:
? How do we know that this K in which the obj stipulated is for 3rd party?
1. It depends on cause of contracting party. Did parties intend to confer benefit upon a 3rd
Promisor makes agmt w/ promisee stipulator to render perf which benefits 3rd
? How do we recognize which Ks are 3rd party beneficiary Ks?
1. Look to reason why promisee stipulator wants to obligate himself to benefit a 3rd party
(accd to 1967)? Must examine relationship b/t promisee stipulator and the 3rd party
2. There are 2 types of relationships b/t promisee and 3rd party beneficiary indicating that
promisee intended to confer benefit upon 3rd party:
i. Legal relationship : Existence of legal relationship b/t promisee and 3rd party
involving an oblig owed by promisee to 3rd party which perf of the promise by
promisor will discharge.
Art. 1821. Assumption by agreement between obligor and third person
An obligor and a third person may agree to an assumption by the latter of an
obligation of the former. To be enforceable by the obligee against the third
person, the agreement must be made in writing.
The obligee's consent to the agreement does not effect a release of the obligor.
The unreleased obligor remains solidarily bound with the third person.
"3rd person"- promisor
"obligee"- 3rd party beneficiary
3rd party beneficiary's consent does not release the promisee
stipulator. Under 1886, this is imperfect delegation b/c stipulator
is not totally relieved. Ex of perfect delegation is a novation
(includes acct of new debtor and release of old debtor)
Art. 1822. Third person bound for amount assumed
A person who, by agreement with the obligor, assumes the obligation of
the latter is bound only to the extent of his assumption.
The assuming obligor may raise any defense based on the contract by
which the assumption was made.
promisor only bound to 3rd party beneficiary to extent of
agmt w/ promisee
Since promisee stipulator and promisor are solidarily liab, certain conseq
1. Each party is liab for the whole
2. A suit against one party interrupts prescription for the other
3. If one party pays, he can sue other party for indemnification
ii. Factual relationship: Existence of factual relationship b/t promisee and 3rd party
beneficiary where: (not exclusive list of factors)
1. There is possibility of future liab either personal (judgment can be
rendered against him) OR real (judgment against prop) on the part of the
promisee to the beneficiary against which perf of the promise (by
promisor) will protect the former (promisee) from future liab.
EX) Construction K: K existed where owner contracted w/ gen contractor
to build residence. ? if bond or not? If bond, then other party, the surety,
would pay if gen contractor failed to pay sub contractors. Subs have no
legal relationship w/ owner, but DO have factual relationship w/ him.
Factual relationship whereby owner (promisee stipulator) and subs (3rd
party beneficiary). Owner protected from future liab or lien against prop
in event that gen contractor defaults. So, owner has good cause for
2. Securing an advantage for 3rd person may beneficially affect the
promisee in a material way.
3. There are ties of kinship or other circum indicating that a benefit by way
of gratuity was intended. IE: to bestow a liberality.
EX) Life insurance policy. Promisee owner contracts w/ promisor ins co.
to benefit the 3rd party beneficIary. This is only factual relationship w/
purpose of bestowing a liberality on 3rd party. Accd to 1979 cmt C : life
ins is not governed by these articles b/c policy holder is allowed to
change the beneficiary at will.
Diff from not allowing contingency fees for successions
of living person b/c
Pelican Well & Tool Supply Co. v. Johnson LASC 1940 p.332
o Reddit/Gray assigned min lease to D Pundt. In supp agmt to org K, Parties agreed that D
would get time extension w/I which to accept title and D would pay balance of purchase
price IF D would pay certain debts of Reddit/Gray to creditor P Pelican.
3rd party beneficiary- Pelican
o 3 mths after org title, D had not acct title to prop, but D had paid $8300 of K price to P.
obvious that D wanted extension to acct title and pay consideration for lease
obvious that Ps wanted there outstanding debt paid
o D claim that Ps lack COA b/c Ks terms failure to list Ps by name and no written evidence
of Ds debt to 3rd parties make K unenforceable
o LASC says supp agmt is inc into org K and enforceable against D.
Andrepont v. Acadia Drilling Co. Inc. LASC 1969 p.334
K Terms: P had oral lease w/ owner to grow soybean crops on Ps prop. D, oil and gas
lessee, granted written lease by owner under condition that D assumed responsibility for
all the damages D caused to Ps crops. Written K b/t owner and D fails to name P.
Subsequent modification of K terms broadened Ds responsibility.
o Concern of promisee stipulator (owner) that lessee promisor (D Oil Co) will be
responsible for damages caused by Ds operations. So, owner knew of Ps farm
lease, and did not want prop damaged.
o P is 3rd party beneficiary.
o Ds operations damaged Ps crops and P seeks recovery from D.
o D claim that P not named as beneficiary in Ds written lease K.
Relationship b/t stipulator (owner) and 3rd party beneficiary (P): LEGAL OBLIGATION
Although oral farm lease b/t owner and P not recorded, lease is binding b/t them.
Owner has oblig to maintain peaceable possession of the prop- not peaceable
when D destroys Ps crop
Owner obligated when fails to maintain Ps peaceable possession and is subj to
Art 1821- Owner bound to pay P unless D pays damages to P.
However, 1821 did not exist at this time, so court found factual relationship to enforce K.
Not necessary for factual K if legal K under 1821.
FACTUAL OBLIGATION ANALYSIS:
Relationship b/t owner and P farm land lessee was suff to support inference that
possibility of future liab either personal or real on part of owner to farm lessee
against which the Ds perf of promise by protect owner. (obvious b/c of condition
of lease K b/t owner and D oil and gas lessee)
? How did P manifest intention to acct advantage in his favor? P filed suit!! That is suff to
indicate acct of the benefit made in your favor.
3. INCIDENTAL BENEFICIARIES
o Incidental Beneficiary- party who though having an interest related to a K b/t other
parties, is NOT a 3rd party beneficiary in K and who does not have an action arising from
Wagner & Truax Co. Inc. v. Barnett Enterprises, Inc. LAAC 1984 p.341
o Facts: D owns prop and listed prop w/ numerous real estate agents thru agmts. Ds first
listing agent Farnsworth had K terms that agent could work w/ other brokers to promote
lease and if prop sold w/I 1 yr after termination of listing K b/t D and Farnsworth,
Farnsworth entitled to 7% commission. Farnsworth is affiliated w/ P. P then solicited
potential lessor, but no lease executed. Ds 2nd listing agent procured lease w/ same
lessor w/I 1 yr of termination of K w/ 1st listing agent Farnsworth. D paid 2nd agent 1%
and nothing to Farnsworth or P.
o P claim that entitled to commission from sale. (D settled w/ Farnsworth and paid
commission to him)
o Ct holds that NO stipulation pour autrui in favor of P :
o Stipulated benefit to 3rd party must be contemplated by the parties at time K
o At time D and Farnsworth entered into listing K, Farnsworth did not know who, if
anyone he would be affiliated w/ and could not have contemplated eliciting a
promise from D to confer benefit upon P.
o Although K stipulated right of Farnsworth to affiliate other brokers, no way to
know who and obvious that D did not promise Farnsworth to pay P commission.
o D promised only to pay Farnsworth commission to procure lease of prop.
o Benefit in favor of the 3rd party may not be merely incidental to agmt in dispute. While
Ds promise to pay Farnsworth may have incidentally benefitted P, it is only b/c
Farnsworth is obligated to split commission w/ P in separate K. NOT stipulation for 3rd
party in this K.
3. ACCEPTING THE BENEFIT
o Main effect of 3rd party's acct of benefit is to put an end to org parties' power of
o Consequences that follow acct:
o beneficiary does not have to have legal capacity at moment of K, but must have
legal capacity at moment of acct.
o beneficiary may acct even after the death of stipulator
o benefit may be acct by beneficiary's heirs
o beneficiary's rights exist as of the time of the K rather than from time of acct.
(effectively retroactive acct)
Vinet v. Bres LASC 1895 p.346
o Facts: Assumption of mortgage indebtedness. Weems sold immovable to Wooten.
Wooten sells same immovable to D Bres- condition of sale that extension of note pymts
to Weems for Ds assuming Wooten's debts to Weems. Weems dies b/f acct of benefit
Promisor- D Bres
3rd Party Beneficiary- Weems
o Issue: ?3rd party beneficiary K? YES. Language of sale clearly shows that D promisor
has assumed oblig and 3rd party beneficiary is explicitly mentioned in K terms.
Acct of benefit by 3rd party beneficiary?
o B/c notes 4.5 mth late, est factual evid that note was one which 3rd party beneficiary
gave Promisee/Stipulator an extension. This proves that 3rd party beneficiary knew of
assumption of Promisor D assuming Promisee/Stipulator's debts to 3rd party beneficiary
and that 3rd party beneficiary consented to it.
o Decision: Ct expresses concern that there may be lack of evid that beneficiary actually
acct. However, acct by beneficiary's heirs when they filed suit.
4. RIGHTS OF BENEFICIARY
Bryant v. Stothart LASC 1894 p.349
Assumption of mortgage indebtedness. P sold co. to D thru act of sale requiring that D pay $$
and assume Ps debt to Amer Freehold Mortgage, who was named in K.
o Promisee/Stipulator-P Bryant
o Promisor- D Stothart
o 3rd party Beneficiary- Amer Mortgage Co-
D defaults on note pymts to beneficiary
P seeks to dissolve sale due to Ds default. However beneficiary refuses to release D from debt.
??Issue: Did beneficiary acct the benefit??
Impt of 3rd party beneficiaries acct of benefit accd has preclusive effect of preventing revocation
of K after acct.
Decision: Cannot dissolve K if 3rd party beneficiary has manifested acct of benefit. Manifestation
of 3rd party's acct was its delivery of notice to both P and D of notes as they matured.
Bonnafe & Co. v. Lane LASC 1850 p.351
Assumption of mortgage indebtedness. P sells land to D John Lane. D then sells same land to
E.M. Lane. Act of sale b/t D and EM Lane requires EM to assume Ds debts to P. K does not
specifically name P as 3rd party beneficiary.
o Promisee/Stipulator- D John Lane
o Promisor- EM Lane
o 3rd party beneficiary- P Bonnafe
LASC: Both D John Lane and EM Lane had interest in K and intended P Bonnafe to be 3rd party
beneficiary. (fully contemplated beneficiary-just not listed in K terms)
D John Lane gets his debt paid off.
EM Lane gets benefit of having security interest on this land being relieved w/ pymt of notes.
Jacobs v. Calderwood LASC 1849 p.354
Assumption of mortgage indebtedness. Undisputed that 3rd party named in K and acct benefit. Promisor
defaults on mortgage pymts to 3rd party beneficiary. 3rd party attempts to recover partial amts from both
promisor and promisee to get full amt owed.
LASC: This is not novation, but IS a 3rd party beneficiary K. So, P beneficiary entitled to recover
from both promisor and/or promisee stipulator.
D promisee is solidarily bound w/ promisor so P beneficiary recovers.
5. DEFENSES AVAILABLE TO THE PROMISOR
Union Bank of LA v. Bowman LASC 1854 p.356
Promisor can raise same defenses against 3rd party beneficiary same defenses that may raise
Assumption of mortgage indebtedness. D defaults on note pymts to 3rd party beneficiary. Bank P
seized prop and wants to get personal judgment against Bowman D.
o Promisee/Stipulator- Gayle
o Promisor- D Bowman
o 3rd party beneficiary- P Union Bank
Ds promisor's defense against 3rd party beneficiary -that K of sale w/ promisee/stipulator failed
b/c the stipulator (Gayle) breached warranty of sale. B/c stipulator did not fulfill oblig under K b/c
claimed to have title, but no title and also obtained prop thru fraudulent trans.
Exception of non-performance- P cannot enforce the K b/c promisee/stipulator failed to perform
D. ACT OF ANOTHER
ARTICLE 1977 – Obligation or performance by a third person
The object of a contract may be that a third person will incur an obligation or render a
The party who promised that obligation or performance is liable for damages if the third person
does not bind himself or does not perform.
Tri parte relationship where 3RD Party rqd to "Do something" as opposed to "get something". If
3rd party does not render perf, the stipulator is liable to promisor.
o ex) promisor is only bound if the 3rd party does not satisfy the creditor. Thus never 2
parties bound, only one or other.
Act of Another- promise that another will incur an oblig
3rd party beneficiary K- adv in favor of 3rd party
VIII. CONTRACT INTERPRETATION (not in book)
Art. 1983. Law for the parties; performance in good faith
Contracts have the effect of law for the parties and may be dissolved only through the consent of
the parties or on grounds provided by law. Contracts must be performed in good faith
Art. 1984. Rights and obligations will pass to successors
Rights and obligations arising from a contract are heritable and assignable unless the law, the
terms of the contract or its nature preclude such effects
assignable- org party can transfer rights/oblig to 3rd party; unless otherwise
prohibited in terms of org K
"by its nature"- when right/oblig are so personal to indiv that is org party such that
any other person could not complete K.
ex) Hire particular famous artist to paint portrait- that artist cannot assign
this oblig to any other painter
Art. 1985. Effects for third parties
Contracts may produce effects for third parties only when provided by law
only if 3rd party beneficiary K
Art. 2045. Determination of the intent of the parties
Interpretation of a contract is the determination of the common intent of the parties.
Art. 2046. No further interpretation when intent is clear
When the words of a contract are clear and explicit and lead to no absurd consequences, no
further interpretation may be made in search of the parties' intent
Art. 2047. Meaning of words
The words of a contract must be given their generally prevailing meaning.
Words of art and technical terms must be given their technical meaning when the contract
involves a technical matter
Art. 2048. Words susceptible of different meanings
Words susceptible of different meanings must be interpreted as having the meaning that best
conforms to the object of the contract
Art. 2049. Provision susceptible of different meanings
A provision susceptible of different meanings must be interpreted with a meaning that renders it
effective and not with one that renders it ineffective
Art. 2050. Provisions interpreted in light of each other
Each provision in a contract must be interpreted in light of the other provisions so that each is
given the meaning suggested by the contract as a whole
(Read 2051 and 2052 in ref to 2050)
Art. 2051. Contract worded in general terms
Although a contract is worded in general terms, it must be interpreted to cover only those
things it appears the parties intended to include
Art. 2052. Situation to which the contract applies
When the parties intend a contract of general scope but, to eliminate doubt, include a
provision that describes a specific situation, interpretation must not restrict the scope of
the contract to that situation alone
Art 2053 Nature of K, equity, usuages, conduct of the parties, and other contracts b/t same parties
Art 2054 No provision of the parties for a particular situation
Art 2055 Equity and Usage
Art 2056 Standard - form contracts
In case of doubt that cannot be otherwise resolved, a provision in a contract must be interpreted
against the party who furnished its text.
A contract executed in std form of one party must be interpreted, in case of doubt, in favor of the
ex) std form Ks in which some disparity in bargaining power b/t parties. May be
ex) std form Ks where immense disparity in bargaining power b/t parties-
CMT C: adhesionary Ks in printed form printed by party of superior
bargaining power for adherence or rejection of weaker party. No
bargaining involved or allowed. Raises ? of whether weaker party
actually consented to terms.
May permit weaker party to bring defense of lack of consent to terms
Recent LASC case did not allow arbitration clause in std form K to be
Point of classifying K as adhesionary or not is when against public policy,
gross disparity in bargaining power, take it or leave it basis AND
std form Ks b/t merchants n/a here b/c negotiations over terms and merchants
adopt std form for efficiency. Org K of free discussion.
Art 2057 Contract interpreted in favor of obligor
In case of doubt that cannot be otherwise resolved, a contract must be interpreted against the
obligee and in favor of the obligor of a particular oblig
Yet, if the doubt arises from lack
b/c obligee generally has upper hand
A. Process of K interpretation:
1. Interpretation stops w/ clarity- if written K terms are clear then interpret parties' intent from
that so long as no absurd conseq. (2046)
i. plain reading approach-words given generally acct meaning to interpret parties'
ii. if technical words, then look to industry/trade for technical meanings (2047)
2. If clear K terms but not determinant b/c susceptible of various meanings, and no trade
definitions of terms, then interpret terms as they best conform to object of K (2048)
i. must suppose that parties do not write superfluous terms into K- they intend
terms to have effect. Interpret Ks in way that terms have effect. (2049)
ii. do not read K terms in a vacuum. Read K terms in light of their effect in entire K.
Impt that looking for consent and intent in forming K. (2050)
If K includes general provision, unless contrary intent is evident from K as a
whole, the specified circum in K will be extent of scope and not assumed to be a
"blanket provision" including more general terms. (2051) Application of 2051 is
usually an exclusive list. K cvg ltd to expressed terms.
ex) Exclusive listing-Corporate parties enter K, which includes specific
indemnity provision- for neglect, improper materials, etc. However claim
arises that is not specifically provided for in clause. Ct ruled that since
this claim not in specific enumeration- not covered b/c this enumeration
is manifestation of parties' intent of what should be covered. (Inclusion
of one thing implies the exclusion of all others.)
Application of 2052 is usually illustrative list (include but not ltd to).- read general
catchall provision in light of terms b/f it.
ex) Illustrative Listing- Parties K had general indemnity clause holding one party
liab for only perm total disability. Other party gets injured and has loss of one
hand, but profession requires use of both hands. Insur co says K terms are ltd to
loss of use of both hands. Ct says that given context of Ps profession, P has
been perm totally disabled.
3. In case of doubtful provision (2053) or absence of provision (2054) for situation that has
now arisen. Ct allowed to use: (2053-2055)
i. equity- avoid absurd result and unjust enrichment/adv
ii. usage- pattern of practice that suggest one result or another; industry practice.
iii. custom- that which was in contemplation of parties at time of K formation
iv. use this interp when K terms are not helpful
v. only use when fuzzy, grey areas. If K terms are clear do not apply
4. If above mthds do not work to reveal intent , doubt is resolved by interpreting K against
party that supplied the text. (2056)
IX. DAMAGES AND DELAY
Article 1989 – Damages for delay
Damages for delay are in the performance of an obligation are owed from the time the obligor is
put in default. (ie: moratory damages)
Other damages are owed from the time the obligor has failed to perform. (ie: compensatory
CMT B: Moratory damages presuppose a perf actually rendered, although
delayed. In such case, obj of obligee's recovery is compensation for injury his
interest has sustained b/c of obligor's untimeliness in performing. Compensatory
damages presuppose total or partial non-perf, or defective perf by obligor.
Nevertheless, in case of delay, the obligee may also receive compensatory
Diff that compensatory damages due for absolute failure to perf. Must
make obligee whole for any damages sustained.
Moratory damages for relative non perf- obligee suffers relative damages
for delayed perf
CMT E: There are some special exceptions: the case of mineral rights.
Dissolution of min lease for non-perf requires lessor be put in default even
though the general rule is that putting in default is pre-req to filing suit.
"other damages"- those not for delay-listed in 1994. No rqmt that obligor be put
in default for these damages
Damages for delay restricted by rqmt that obligee put obligor in default. Impt
assumption that obligee received his perf, but was late or obligee still
wants perf plus damages in delay.
Anticipatory breach: total outward refusal of obligor to perf K b/f time limit expires
is absolute breach and obligee not rqd to put obligor in default or to wait for
expiration of term to seek damages.
Article 1990 – Obligor put in default by arrival of term
When a term for the performance of an obligation is either fixed, or is clearly determinable by the
circumstances, the obligor is put in default by the mere arrival of the term. In other cases, the
obligor must be put in default by the obligee, but not before performance is due.
Inclusion of fixed term in K tells that obligee is putting term in K b/c will be
damaged if obligor does not perform w/I term.
CMT B: Obligee not rqd to put obligor in default when K stipulates term for perf
OR when time clearly determinable given circum.
ex) Damages for failure to perf upon arrival of term are compensatory
damages. NOT delay damages.
ex) Bride orders wedding dress from merchant who is advised of date of
wedding. Merchant auto put in default at arrival of wedding date, even if
no date of delivery was expressly stipulated.
If no fixed term, no objective way to determine if obligee is damaged by delay.
Obligor may believe he is reasonable by delaying performance. This is why law
imposes rqmt that obligee put obligor in default.
Article 1991 – Manners of putting in default
An obligee may put the obligor in default by a written request of performance, or by an oral
request of performance made before two witnesses, or by filing suit for performance, or by a
specific provision of the contract.
CMT F: putting in default is not pre req to suit for dissolution b/c article n/a to K
Only necessary to put in default if no fixed term or term not clearly determinable.
Putting in default is request for perf
"specific provision of K"- expiration of term in K
Litvinoff: whether suit for spec perf, or for dissolution, or for damages-
even more so when alternative remedies sought- commencement of any
suit is a proper way to effect a placing of the obligor in default.
Article 1992 – Risk devolves upon the obligor
If an obligee bears the risk of the thing that is the object of the performance, the risk devolves
upon the obligor who has been put in default for failure to deliver that thing.
Putting in default has effect of shifting the risk from obligee back to obligor who
has been put in default.
Article 1993 – Reciprocal obligations
In case of reciprocal obligations, the obligor of one may not be put in default unless the obligor of
the other has performed or is ready to perform his own obligation.
Article 1994 - Obligor liable for failure to perform.
An obligor is liable for the damages caused by his failure to perform a conventional obligation.
A failure to perform results from nonperformance, defective performance, or delay in
Article 2010 - Obligor put in default
An obligee may not avail himself of a clause stipulating damages for delay unless the obligor has
been put in default.
1. General Principles of Delay
a. Failure to perform may result from:
o Not perform
o Render defective perf
o Delay in perf (to such extent that burdens party requiring perf)
b. Act of putting obligor in default is verification that he did not render perf at the time which his oblig
bound him to render it. Pre-req to recovery of damages.
c. Transition of putting obligor in default must be brought about by act of obligee:
o notice given to obligor
o filing suit against obligor-
may be simultaneous w/ obligor's failure to perf, and w/o act of obligee, if :
o law or terms of K provides for such
o to obligor's knowledge, only timely perf would be useful to obligee, or perf is such that
can only be rendered at certain time. (ex. wedding dress sale)
d. In circum that no time for perf specified, if period of time is not determinable, the oblig must be
perf w/I a reas period of time.
o ex) w/ cash sale: clear that buyers oblig to pay price must be perf immediately and
seller's oblig to deliver thing is imm.
o ex) w/ friendly loan: parties to agmt may omit to name a time by or which $$ may be paid
back, but clear that did not intend for immediate pymt from borrower b/c intention that
borrower can use $$ for period of time.
Fiberbond Corp and K-dak, Inc. v. Aetna Ins. Co. LAAC 1991 p.367
relevance of fixed term w/ damages
Construction K w/ ST where contractor to finish job by specified date. Specified amt per day
penalty for each day late.
Contractor 223 days late and ST withheld penalty amt from compensation.
Contractor claim that ST not entitled to damages b/c never put contractor in default. (2010) ST
also caused 197 days of delay-no fault of contractor for those days.
Ct stated that putting in default not rqd for breaches of Ks w/ fixed terms.
o RULE: inclusion of fixed term puts obligor in default from that date forward. So P can
claim damages for delay from the fixed term until the time it took for perf to be completed.
o RULE: When obligee is responsible for some of the delay, the obligor's days of delay will
be reduced by the amt attributed to obligee.
Ct found ST only entitled to delay damages for days solely attributable to obligor's fault in delayed
Electroda Manuf Corp. v. Domed Stadium Hotel, Inc. LAAC 1978 p.369
Hotel D has K to buy electronic system from manuf co. P which will install in hotel when hotel
renovations complete. Pymt to be rendered 30 days after installation. K did not list term limit.
Hotel renovations postponed and P unable to install system.
P incurred $9000 expenses in making system, and only recovered $4000 in junk sale of system.
P sues D for recovery of $$ delay damages. D claim that P never gave notice to put D in default.
CT says in case of delay damages, rqd that obligor be put in default when no fixed term.
Allen v. Steers LASC 1887 p.372
K to store cotton during specified period at std rate per bale.
D refused to store cotton when received from P. P had to make other arrangements to store
bales elsewhere at higher rate
P due compensatory damages under 1989 from time D failed to perform for amt diff in K rate and
amt rqd to pay b/c of Ds breach.
No rqmt that D put P in default b/c not delay/moratory damages since active breach/non-perf.
Here no perf and P does not want perf, so putting in default no pre-req.
o Art 2016 Dissolution w/o notice to perform: when delayed perf would no longer be of
value to the obligee or it is evident that the obligor will not perf, the obligee may regard
the K as dissolved.
B. MANNERS OF PUTTING IN DEFAULT
Moran v. Wilshire Insur. Co. LAAC 1988 p.374
P sues repair shop owner and his insur co for damages resulting from delay in repairing his truck.
D defense that failure to put in default b/c in order for filing of suit to be considered putting in
default Ps suit must be for specific perf, but for delay damages here.
Art 1991: For delay damages must put obligor in default by written request, by oral request, by
filing suit, or by expiration of terms of K.
o does not require specific language to place obligor in default. Purpose of putting in
default is giving notice that obligor responsible for damages suffered by obligee as result
of obligor's delay.
o clearly here Ps suit alerted D that delay in perf is causing P to incurr damages and D was
going to be held liable.
o Ps filing suit while ongoing repairs implies expectation of complete perf, but in meantime
D will be liable.
o Suit not rqd to be for specific perf to constitute putting in default, the allegation of
expectation of perf is suff for putting in default.
Melancon v. TX Co. LASC 1956 p.375
P, lessor, brought suit to cancel mineral lease based on lesee's failure to perf (no pymt of
D claim not put in default b/c P made no formal demand for perf/pymt.
o LASC rejects Ds claim on ground that even if rqd to put default b/c no fixed term, Ps oral
and written request for pymts is suff.
Lessor's royalties are characterized in LA as rent and LACC arts for leases apply.
Rent is lessor's primary motive for K
2054- when no provision for term, doubtful provision interpreted in terms of custom, usage,
Customary Usage for royalties is monthly pymt based on % of amt of mineral produced
o LASC rules that 15 mth delay in royalty pymt w/o valid reason is breach of K.
Article 2013 - Obligee's right to dissolution.
When the obligor fails to perform, the obligee has a right to the judicial dissolution of the contract
or, according to the circumstances, to regard the contract as dissolved. In either case, the obligee
may recover damages.
In an action involving judicial dissolution, the obligor who failed to perform may be granted,
according to the circumstances, an additional time to perform.
Article 2014 - Importance of failure to perform.
A contract may not be dissolved when the obligor has rendered a substantial part of the
performance and the part not rendered does not substantially impair the interest of the obligee.
Article 2015 - Dissolution after notice to perform.
Upon a party's failure to perform, the other may serve him a notice to perform within a certain
time, with a warning that, unless performance is rendered within that time, the contract shall be
deemed dissolved. The time allowed for that purpose must be reasonable according to the
The notice to perform is subject to the requirements governing a putting of the obligor in default
and, for the recovery of damages for delay, shall have the same effect as a putting of the obligor
Diff from putting in default b/c notice to perf states that if obligor does not perf by
certain date, K is dissolved. Putting in default is only request for perf.
"Reas time" will be judges by objective std.
Notice to perf served same way as putting in default:
orally w/ 2 witnesses
Article 2016 – Dissolution without notice to perform.
When a delayed performance would no longer be of value to the obligee or when it is evident that
the obligor will not perform, the obligee may regard the contract as dissolved without any notice to
Obligee may consider K dissolved w/o notice to perf, if under circum, perf is no
longer of value to obligee (K where time is of the essence) OR when evident that
obligor will not perf (Active Breach)
CMT B: Wedding dress ex)
Article 2017 – Express dissolution clause
The parties may expressly agree that the contract shall be dissolved for the failure to perform a
particular obligation. In that case, the contract is deemed dissolved at the time it provides for or,
in the absence of such a provision, at the time the obligee gives notice to the obligor that he
avails himself of the dissolution clause.
Ks where time of the essence and no point in giving notice to perf b/c obligee no
longer wants perf. (wedding dress ex.)
Article 2018 – Effects of dissolution.
Upon dissolution of a contract, the parties shall be restored to the situation that existed before the
contract was made. If restoration in kind is impossible or impractible, the court may award
If partial performance has been rendered and that performance is of value to the party seeking to
dissolve the contract, the dissolution does not preclude recovery for that performance, whether in
contract or quasi-contract.
CMT B/C: partial perf may be substantial, but still under 2014 the part not
rendered hinders obligee. K can be dissolved but obligor can recover under K
ONLY proportionally to his perf actually rendered. Obligee recovers for part not-
CMT D: if less than substantial part is perf and that perf is of value to obligee, the
obligor should be able to recover for value of obligee's enrichment.
CMT E: If part perf of unsubstantial part that is of no value to obligee, obligor is
denied recovery for part perf.
CMT F: partial dissolution of K does not have same conseq of complete and total
ex) Continuous perf- lease; periodic perf- rqmts K
Article 2019 – Contracts for continuous or periodic performance
In contracts providing for continuous or periodic performance, the effect of the dissolution shall
not be extended to any performance already performed.
Is "resiliation" w/ only prospective effect, as opposed to "dissolution" which has
Article 2020 – Contracts made by more than two parties.
When a contract has been made by more than two parties, one party’s failure to perform may not
cause dissolution of the contract for the other parties, unless the performance that failed was
essential to the contract.
Article 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.
Thus b/t obligor and 3rd party, dissolution has no effect.
Article 2022 – Refusal to perform
Either party in a commutative contract may refuse to perform his obligation if the other has failed
to perform or does not offer to perform his own at the same time, if the performances are due
Diff from "not being ready to perf" See Art 1993.
Article 2023 – Security for performance
If the situation of a party, financial or otherwise, has become such as to clearly endanger his
ability to perform an obligation, the other party may demand in writing that adequate security be
given and, upon failure to give that security, that party may withhold or discontinue his own
Article 2024 – Contract terminated by a party’s initiative
A contract of unspecified duration may be terminated at the will of either party by giving notice,
reasonable in time and form, to the other party.
A. General Principles of Dissolution
1. 2 types of dissolution:
Judicial Dissolution- Ct has discretion to allow obligor additional time to perf
Extrajudicial dissolution- "accd to circum" Obligee always prefers this.
Where extrajudicial dissolution, 2nd sent of 2013 n/a and obligor not given
additional time to perf
Whether to grant an additional time to perf depends on following circum (Art 2013 CMT E)
circum of indiv case (LACC)
IMPT: whether perf not rendered by obligor was the cause of obligee's oblig, in
which case obligor's non-perf frustrated the very cause of the K- then dissolution
if obligor's failure to perf not so significant to have deterred obligee from entering
K, had he forseen it, thus obligee granted damages or proportional reduction of
his own damages
Good faith of obligor (LACC)
if fraudulent intent, dissolution operates as sanction for bad faith
fraudulent intent not rqd to produce dissolution
defaulting obligor in good faith will always enjoy sympathy of the court
whether obligor has a valid excuse for his failure (LACC)
extent and gravity of failure to perf (book)
nature of obligor's fault (book)-
surrounding econ circum that may make dissolution opportune or not (book)
if perf still possible, and circum justify obligor's default, Ct may grant additional
extension to perf oblig.
If Ct grants extension, obligor rqd to perf w/I grace period. If obligor does not
perf w/I additional period, no further delay can be granted by Ct and dissolution
2. If one party alleges breach of K, then must litigate claim. One party cannot just dissolve K. Impt
that give breaching party opp to show that non-perf is not breach or that it is just delayed perf.
3. Benefits of Obligee Filing Notice for Perf where no fixed time and no manifestation of refusal to
perf by obligor (Art 2016 n/a):
By filing notice to perf and allowing reas time for perf shifts burden to obligor that time is not reas.
If Ct finds time IS reas, then will not grant obligor further extensions.
Also assists obligee in proving actual breach.
Protects obligee if Ct does grant further extension b/c notice=putting obligor in default. Thus
obligee will get to collect delay damages and compensatory damages for obligor's failure to perf
Protects obligee in case obligor files suit.
Waseco Chemical Co. v. Bayou State Oil Corp. LAAC 1979 p.381
Judge gets to determine the extent and the gravity of the extent of failure to perform
P, lessor, seeks to have min lease cancelled for Ds failure to perf. (D did not operate or develop
lease as reas prudent operator)
D claim that lease should not be cancelled w/o allowing D opportunity to perf oblig as lesee.
CT finds that D failed in its oblig of development of lease for parties' mutual benefit.
o P made many request for Ds perf b/f filing suit. (put in default)
o D not justified in delayed perf b/c no evid of Ds intent to actually execute development at
o Ds failure to perf is of unreas long duration
Simpson v. Simpson LASC 1932 p.384
Indiv party vs. Judicial dissolution- Judicial dissolution is preferred b/c cannot rely on indiv
reasonableness of parties. Judge is objective party that can determine if dissolution really
Facts: Parties entered T/C whereby P gets usufruct for rest of her life and D has naked ownership
and is responsible for maintenance and repairs.
o If D fails to carry out terms, gives damages for P "reversion to her" of prop
o clause that D must be granted 30 days written notice of his exact failures to comply w/
terms for forfeiture may be declared.
o D performs all previously requested repairs. Then does not perf when P request that D
renovate house for modernization accd to inspection which is much higher valuation than
value of house at time of T/C formation. .
o P claims Ds failure to perf
LASC: P had no right to demand that prop be made like new. Only normal repairs contemplated.
K did not require D to repair every single defect and it was Ps responsibility to inform D of
o Judicial dissolution- Ct granted D delay of 90 days to make pending repairs (not
modernization) w/I 90 days.
o Factors: Ds good faith in past of perf oblig; gravity of non-perf: still some repairs, but Ps
demands are above the org terms of K.
Mennella v. Kurt Schon Ltd. US 5th Cir 1992 p.389
Extra judicial dissolution under 2015. Good fact pattern for exam ?
Facts: Agmt for sale of painting that amt to be paid over time. D retained possession of painting.
o Time for pymt stipulated in K, then extended by obligee D.
P only partially paid, then refused to make further pymts and demanded return of
amt already paid.
o After expiration of extension, obligee demands perf in writing "Pay in 5 days or K is
o After 5 days elapsed, obligee wrote again to P obligor and said that considered K
o D did return $$. D obligee sold painting to 3rd party for much higher price~ D makes
o P claim that owned painting at time of sale to 3rd party- so Ds sale was conversion.
Sale or purch agmt?
K interpretation: Ct says this was act of sale (not purch agmt) not dependent upon suspensive
condition b/c D immediately paid commission to salesman. Evid that D not waiting for sale to be
complete upon occurrence of condition. Also, prior dealings of parties in prior sales such that this
case was a sale.
Who owns painting? Was K dissolved?
YES!! Org sale transferred ownership to P at moment that P made down pymt. but upon
dissolution ownership reverts back to D. D had ownership at point of 2nd sale to 3rd party.
o Ps conduct of refusal to pay was active breach.
o One Party's breach allows Non-breaching party options of :
sue to enforce- spec perf
seek delayed perf- grant extension and get moratory damages for delay
judicial dissolution- seek Ct to dissolve it
Put P in default and give reas time for D to perf.
Notice of perf: D gave notice to perf. which specified time extension that if P didn't perf the
obligee D would consider K dissolved. (this is issue of dissolution, not putting in default)
Ps written communication to D refusing to perf is anticipatory repudiation and failure to pay
balance during extension is active repudiation of K.
Extrajudicial dissolution. 2014- Time given must be reasonable, and breach must be
o CT says D prudently waited til P unequivocally refused to perf b/f notifying of dissolution.
o However, actually under 2016, if P manifested refusal to perf, D not rqd to give notice to
Damages- Ct says perfected sale, so D seller only entitled to $$ if can prove injury for breach.
o Here, Ps failure to pay did not injure D at all, b/c actually enabled D to sell painting for 4x
o P entitled to refund of amt paid to D and interest for mths D held $$.
Stevenson v. Lavalco, Inc. LAAC 1996 p.395
P accepted job w/ D corp. and incurred expenses to move to LA for work. Corp paid salary, stock
options, car, insurance, and relocation expense.
Employment at will K (no fixed time)- D Corp fired P after 20 days.
Accd to LACC Art 2747- Employer can terminate for any reason at all and employee hired for
indefinite term has no action against employer for wrongful discharge.
o This is an exception to the general rule that must put in default
o Art 2749- If have empl K w/ certain term and employer fires w/o serious good reason-
then employer liable for damages.
Here P gets nothing!!
B. PARTIAL DISSOLUTION
Town and Country Contractors v. Henderson LASC 1956 p.397
Facts: P seeks to recover full K price which it alleges is due under K w/ D. P was to do certain
remodeling work for D.
o P claim that D signed form which constituted D's acceptance of all work
o D claim that P did not fully perf b/c inferior workmanship.
Ct found that quality of work was insuff, and subst portion would have to be redone.
o There has not been subst compliance w/ K here to entitle P contractor to K price, less
amt of Ds expense to complete job w/ another contractor. (2014 n/a b/c not subst perf)
o P subst breached K and is not entitled to recover under K itself. Ct dissolves K.
o Ds refusal to pay is not breach here. (2022) If D is bound to pay, his duty is non-
contractual in nature- may be quasi K under theory of unjust enrichment for Ps part perf.
For partial perf rendered by P that benefits D, P entitled to damages for amt of unjust
enrichment to D.
D gets nothing here!!
CS Burt Co. v. LaPlace LASC 1894-
Right to dissolve K arises only when things sold are dependent on each other, so that the defect of one
renders the other useless and w/o value. it must appear that the interdependence was the principle
motive of the K.
o ex) sale for horse and saddle. If horse is defective- renders entire K dissolved. However,
if saddle is defective- only set aside sale of saddle, horse sale still valid.
C. OBLIGEE'S READINESS TO PERFORM
These 2 Arts are why Ks are found unenforceable for failure to perf: Art 1993 and 2022 See
Ex) K of sale is bilateral K: Oblig to sell is correlative to oblig to pay. Obligor may not be put in default
unless buyer obligee has perf or is ready to perf oblig. Principle of good faith governs- Party not
damaged by delay unless party was ready to perf or had already perf.
Silverman v. Caddo Gas Co. LASC 1911 p.401
K of sale for Ds delivery of barrels of oil to P.
D claim that P breached K by admitting inability to accept oil delivery. Alt claim that if K not
dissolved, P was in default for not paying for barrels already delivered, thus D could not be put in
default or demand further shipments be acct.
ISSUE: ? Default?
o Ps withholding of pymt due for barrels already delivered did not put D in default-
Withholding $$ is refusal to pay=Ps auto default!
o P not entitled to damages for his own breach.
Electrodata Manuf Corp v. Domed Staduim Hotel Inc LAAC 1978 p.402
Good case for explanation of mthds of putting in default.
Same hotel security system manuf case as above.
For delay damages, rqd that P put D in default. No expiration terms of K or act of P constitutes
putting D in default.
Condition of K that D have building ready for installation b/f P rqd to perf. When suspensive
condition to be perf by obligee, delay in fulfilling condition does not entitle obligor to
damages unless obligee has first been put in default w/ respect to fulfillment of condition.
o obligee's delay in perf, will excuse obligor's reciprocal delay in perf, and may justify the
obligor's refusal to perf when reas time has increased cost or otherwise occasioned a
change in obligor's position. BUT- it does not both excuse ultimate perf and oblige the
obligee to pay for a perf he will not get.
o W/o putting D in default, P not entitled to disregard K and demand pymt for system prior
Ps sale of system for $400 is not commercially reasonable. Ps salvage sale made compliance w/
K impossible on any terms by selling system w/o notifying D, which relieved D of any oblig to pay.
But P no longer able to put D in default b/c P went out of business and is no longer able to perf its
own oblig under K.
P not entitled to ANY damages for cost incurred in manuf system or delay.
XI. SPECIFIC PERFORMANCE
Article 1986 - Right of the obligee.
Upon an obligor's failure to perform an obligation to deliver a thing, or not to do an act, or to
execute an instrument, the court shall grant specific performance plus damages for delay if the
obligee so demands. If specific performance is impractible, the court may allow damages to the
Upon a failure to perform an obligation that has another object, such as an obligation to do, the
granting of specific performance is at the discretion of the court.
Obligee may demand to be put in position it would have been if K had been perf.
CT MUST grant spec perf, unless impractible:
There is usually a 1 time trans w/ minimal restraint on indiv liberties-
Spec Perf Preferred:
"To give"- ex) K of sale where obligor has failed to deliver object
"Not to do an Act"- ex) Obligor promises not to build something
but starts construction anyway. Obligee will have to get
injunction to stop obligor.
"To execute instrument"-
This may involve ongoing rendering of perf that requires Ct supervision
and enforcement. Spec perf may not be practical b/c degree of
involuntary servitude and high risk of defective perf
"To do"-ex) K to render svcs
Impracticable does NOT mean more convenient. Presumption that spec
perf granted, unless impracticable.
Cts discretion is broader for oblig to do- if Ct decides spec perf is too
onerous then may refuse to grant spec perf. Ct uses "impracticability" as
basis for weighing circum.
Article 1987 - Right to restrain obligor.
The obligor may be restrained from doing anything in violation of an obligation not to do.
CMT C: Obligee need not prove irreparable injury to get injunction. Suff that he
prove the obligor who promised not to do something has begun to do it.
3 Stages of injunctions:
Temp restraining order- in LA lasts for 10 days at instance of party
Preliminary injunction- Hearing where the other party given notice. Party
seeking it must prove irreparable injury and prove likelihood that could
win on merits.
Permanent injunction- 4 EVA
Article 1988 - Judgment may stand for act.
A failure to perform an obligation to execute an instrument gives the obligee the right to a
judgment that shall stand for the act.
A. GENERAL PRINCIPLES OF SPECIFIC PERFORMANCE
o in civil law, spec perf is primary favored remedy for the non-perf of an oblig.
o LA Cts evidence mix of civ/cmn law.
Either way, Cts refuse spec perf if inconvenience of enforcing it is out of proportion to
damage sustained by obligee.
Practical problems w/ enforcement and supervision of spec perf.
Ct's hesitancy to force breaching party to perf, due to risk of sub-std perf rendered
o LA jurisprudence that if spec perf is still possible under K, then spec perf will be enforced. If spec
perf cannot be enforced, then breach of K gives rise to damages.
when oblig is to "DO"- ex) execute and signing lease K. Est that Cts cannot physically
compel obligor to "do" but it may decree that lease exists b/t the parties, thereby
when oblig is "NOT TO DO"- ex) Cts may enforce spec perf thru injunction, which may
compel party to do or not to do something.
1. Main diff b/t Civ and Cmn Law Spec Perf:
1. civ law obligee has right to spec perf (cmn law granting of spec perf in Ct discretion only-
2. civ law spec perf regarded as ordinary relief (cmn law spec perf is exceptional and
3. civ law test to determine if spec perf or damages is ? whether perf is still possible? (cmn
law test is adequacy or inadequacy of damages?)
4. civ law is weak in mthds of enforcing perf in specific form (cmn law has strong mthds to
compel perf from resistant D)
2. Impracticable Circum: (illustrated in Weingarten Inc v. Northgate Mall Inc case below)
Impossibility- if seller has sold prop to someone else who was in GF.
No longer in creditor's interest
Continuous Supervision- If K would require constant supervision by Cts like an output/rqmts K of
situation in Wiengarten
Disproportionate cost of actual damage vs . cost of specific perf- In Weingarten P would have
suffered more from new competing mall than from reduced parking
Cost to innocent 3rd parties- new lessees of new building and the mortgage
Girault v. Feutch LASC 1932 p.413
IMPC:Oblig to execute instrument or deliver a thing has spec perf as preferred remedy
K for sale of immovable prop. 10% down pymt. D to receive down pymt upon condition that titles
passed to P.
Principle: Where damages are inadequate relief, the Ct MUST order spec perf. If obligee entitled
to thing, Ct has no discretion about according it to him or not, but is obliged to do so.
In case, P entitled to prop and not Ct discretion to say anything short of this prop will satisfy Ps
demand. (ie: mkt value of prop not same value to P as prop itself is)
where promise of sale or sale partly executed by down pymt of price, Ct must enforce Ps
rights to prop itself. To award mere damages and reject his demand for prop would deny
P his right.
Cellular One v. Boyd LAAC 1995 p.416
IMPTC: Oblig not to do has spec perf as preferred remedy
Ds executed non-compete/solicitation Ks w/ P co. which became effective when Ds terminated
P claim that Ds viol K b/c went to work for competitor- seeking injunctive relief to preclude Ds
Ct ruled that P not rqd to prove irreparable injury to get injunction. Suff that P prove that Ds
breach K for spec perf.
o Usually Ps BOP is only to prove breach of K for spec perf. Unless statutory rqmt
that P show irreparable injury- then not usually this high BOP.
ex) For grant of Temp Restraining Order, party alleging anticipatory breach must
prove that will sustain irreparable injury given circum. B/c if no TRO then tragedy
Tolbert v. Hyatt Mgt LAAC 1986 p.418
IMPTC: Oblig to execute instrument has spec perf as preferred remedy
Parties entered T/C in open Ct.
P now claims error of fact of what particular expenses amt of settlement covered. Error in
entering settlement vitiating consent and that D should have known Ps cause for entering T/C.
(unilateral error-not rqd that other party know of error)
Inexcusable error- P should have known that amt of settlement included ALL cost and fees.
Ct grants spec perf requiring P to execute instrument.
Bonneau v. Blalock LAAC 1988 p.420
IMPTC: Oblig to deliver a thing has spec perf as preferred remedy
Amer Oil assigns interest to Ps via lease K. Ps seek to exercise rights under lease K to buy prop
by giving written notice to Ds.
Ds refused to receive written notices. Finally, oral notice to Ds that Ps exercising right.
Ds refuse to reach agmt for sale
Ps sue Ds for delivery of thing (prop) and Ct grants spec perf.
Weingarten Inc. v. Northgate Mall, Inc. LASC 1981 p. 421
Although spec perf is preferred remedy for "oblig not to do"- if impracticable to order injunction- then
Ct will grant damages
LASC: As general rule, not rqd that obligee must first prove irreparable injury b/f invoking remedy
of spec perf- BUT spec perf will not be granted if impracticable.
P lessor located in D lessee's Mall. Lease K has terms limiting parking, etc. for P and D limited
to expansion of lessors and space (impt b/c parking shortage)
D then significantly expands sq footage of Mall- and P wants to expand building structure also,
but not authorized to do so under lease K.
D refuses to allow Ps expansion- but D does own mall expansion anyway.
P sues for spec perf of prohibiting Ds expansion.(TRO->Prelim. Injunc.->)
At trial on merits, LASC says P did not prove irreparable injury b/c loss of parking is not
P did not get injunction quickly enough- D had already completed construction that previously
promised not to do.
Spec perf is possible (ie: building could be deconstructed) but it would require continuous
supervision by Ct and is impracticable. Ct grants damages.
o D not acting in BF, essentially wanted to benefit all of the tenants (including P) in mall.
Sizeler Property Investors Inc. v. Gordon Jewerly Corp. LAAC 1989 p.426
Although spec perf is preferred remedy for oblig to do- if impracticable to order spec perf-
then Ct will grant damages
Ps predecessor leased commercial prop to subsidiary of D. D became guarantor of subsidiary's
Subsidiary asserted its interests, rights, and title of lease to BCS. Subsidiary remained bound to
D thru guaranty.
BCS, assigned lesee, ceased business operations but continued to pay rent. (primary oblig of
P filed suit against D for breach of "continuous operations" clause in lease K and seeks
Ct grants damages b/c spec perf (injunction) is impracticable b/c would require continuous
supervision of Ct. (1986)
Article 1994 - Obligor liable for failure to perform.
An obligor is liable for the damages caused by his failure to perform a conventional obligation.
A failure to perform results from nonperformance, defective performance, or delay in
Art allows for both compensatory and/or moratory damages depending on
Necessary elements for Obligee to prove He is entitled to Damages:
has suffered damage….
which was caused by….
The fault of the obligor:
nonperf (absolute breach)
defective perf- (may be similar to partial or total non perf-
depending on nature and extent of defect. If such that creditor's
expectation is entirely frustrated then may be total non-perf. If
creditor still receives some benefit despite defect, then partial
delayed perf (relative breach-untimely perf)
Article 1995 - Measure of damages.
Damages are measured by the loss sustained by the obligee and the profit of which he has been
Compensatory damages- Loss sustained is only pecuniary $$ loss, thus diff from
1998 (non-pecuniary loss)
ex) Obligee manuf ties. Obligor agrees to pay $1000 for 50 ties. Obligee spends
$800 making 50 ties. Obligor refuses to pay and breaches K. Loss $1000 = loss
sustained $800 + profit deprived $200
Article 1996 - Obligor in good faith.
An obligor in good faith is liable only for the damages that were foreseeable at the time the
contract was made.
CMT B: Foreseeable Damages are those that may fall w/I foresight of reas man
(objective std)- those that are natural or ordinary.
Damage that is foreseeable is damage that is "probable." Limitation of liab to
foreseen damages alone is keeping w/ notion of K, since liab for unforeseen
damages deprives obligee of expectation that is not common in Ks.
In distinguishing foreseeable from non-foreseeable damages, the Court should
o nature of k
o nature of parties' business
o prior dealings
o other circum related to K and known to obligor
o any special circum made known to obligor by obligee
o Ex) Airline loses luggage of passenger. Airline liable for value of luggage and value of
contents such luggage would reas contain in regular course of events. Not including
extravagant items that are not usually carried in such a manner. Passenger's circum
Article 1997 - Obligor in bad faith.
An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct
consequence of his failure to perform.
CMT B: "bad faith"- obligor in BF if intentionally and maliciously fails to perf his
oblig. Intentional=knowingly. Maliciously=desired conseq.
Obligee must really prove direct cause of damages was obligor's fault. (under
1994 GF, just have to prove damages caused by obligor's fault)
Distinguishing b/t caused and directly caused . Ct discretion.
Direct- necessary conseq of the inexecution of oblig
Indirect- When other factors become involved and lead to further
loss/damage. Point where no longer possible to recognize cause/effect
relation b/t fault and damages.
ex) Sale of diseased cows. Seller knew that cows sick at time of sale
and failed to tell buyer. But many other factors could intervene after sale
to cause buyer to lose entire farm, besides just diseased cows.
Very rare that actually have BF accd to this definition.
Article 1998 - Damages for nonpecuniary loss.
Damages for nonpecuniary loss may be recovered when the contract, because of its nature, is
intended to gratify a nonpecuniary interest and, because of the circumstances surrounding the
formation or the nonperformance of the contract, the obligor knew, or should have known, that his
failure to perform would cause that kind of loss.
Regardless of the nature of the contract, these damages may be recovered also when the obligor
intended, through his failure, to aggrieve the feelings of the obligee.
Article 1999 - Assessment of damages left to the court.
When damages are insusceptible of precise measurement, much discretion shall be left to the
court for the reasonable assessment of these damages.
LA Cts do not award punitive damages unless authorized by special statute (ie:
drunk driving tort cases)
Nominal damages are permitted.
CMT B: Ct has discretion to award amt beyond nominal damages.
Article 2000 - Damages for delay measured by interest; no need of proof; attorney fees.
when the object of the performance is a sum of money, damages for delay in performance are
measured by the interest on that sum from the time it is due, at the rate agreed by the parties or,
in the absence of agreement, at the rate of legal interest as fixed by Article 2924. The obligee
may recover these damages without having to prove any loss, and whatever loss he may have
suffered he can recover no more. If the parties, by written contract, have expressly agreed that
the obligor shall also be liable for the obligee's attorney fees in a fixed or determinable amount,
the obligee is entitled to that amount as well.
Article 2001 - Interest on interest.
Interest on accrued interest may be recovered as damages only when it is added to the principal
by a new agreement of the parties made after the interest has accrued.
A. GENERAL PRINCIPLES OF DAMAGES
1. To get to damages where obligee believes obligor has breached there can be:
Delayed perf - Obligee rqd to put obligor in default to get delay damages. Damages accrue from
time in default until perf.
No perf yet or Defective perf- If still possibility that obligor may still perf and/or that obligor's perf
may still be of value to obligee and obligee wants perf, then obligee can seek spec perf. Obligee
rqd to put obligor in default for delay damages to accrue. Under 2015 rqd that obligee give notice
to perf and reas time for perf b/f K dissolved. Damages will be compensatory also.
o if obvious that obligor will not perf and/or obligor's perf would not be of any value to
obligee, not rqd that obligee put in default or give notice to perf. Compensatory damages.
Whether obligee will be granted spec perf depends on if it is an oblig to deliver, execute
instrument, or oblig not to do. Spec Perf is primary remedy for these, so long as not
In alt to spec perf, obligee may request dissolution of K and compensatory damages for obligor's
If set time term in K and obligor failed to perf, then obligee may consider K dissolved and no rqmt
that obligor be put in default. Then if obligee seeks compensatory damages, Judge has no
discretion to grant extension for perf or make obligee acct obligor's tender of perf
If no time term in K, obligee must give notice to perf and reas time b/f K considered dissolved.
Obligee must be careful to give reas time under 2015 to get benefit of notice to perf putting
obligor in default.
2. Damages can be either :
Moratory (delay)- untimely perf, but still obligee wants perf
Compensatory- defective perf or non-perf (either total or partial)
Factor bearing on ultimate recovery is good/bad faith of breaching party.
B. PECUNIARY DAMAGES
Friedman Iron & Supply Co. v. JB Beaird Co Inc. LASC 1952
IMPTC: LASC ruled that damages measure of valuation factor at time of active breach- not date
FACTS: P claims D breached K to buy scrap steel. P seller was to deliver steel to D buyer b/t
fixed dates ending in June.
D breached in March- b/f arrival of K fixed term.
o D refused to perf b/c steel prices lower than K rate- Active breach so auto dissolution w/o
rqmt of putting in default or notice to perf to obligor
P seeking damages for Ds total non-perf in amt of profit deprived for 3 mths
o P must prove damages caused by Ds non-perf.
o In K for sale for commodity, normal measure of profit derived = mkt price - K price
at date of breach (in case: diff b/t K value $41and mkt value $37).
o Here Ct assumes only place P could alt sell steel was PA. Under K, P sold to D locally
so must acct for shipping.($13/ton)
o Damages= $8662= ($41- ($37-$13)) x 500 tons
ISSUE: At what point should damages be measured?
DECISION: LASC says date of breach!
o D wants measure at date of trial b/c by then mkt price had increased above K price- thus
D would owe nothing
o P wants measure at date of breach b/c mkt price lower than K price
o Speculation on part of buyer is irrelevant here (good faith is overriding basis- no such
thing as efficient breach in civ law)
o Ct does not want to encourage "jockeying" for trial dates in favor of either party.
Obligor in GF, b/c did not act maliciously to harm obligee- rather motivated out of self interest in
Foreseeability to calculate damages:
At K formation, only damages foreseeable were if D had breached at delivery date. Impt b/c price
decreased over K term UNTIL the date of breach.
If allow damage measure on date of breach- give D ability to control breach at period when most
favorable to him.
If allow damage measure at trial date, then P and D would try and line up trial dates favorable to
each. Rights of parties depends on circum at uncertain future date.
LASC's decision gives D the ability to set the date and determine amt of profit P was denied.
Puts all power in Ds field.
Interstate Elec Co v. Adam Elec Co. LASC 1931 p.441
IMPTC: LASC grant of damages when no mkt price for product. Where loss sustained=profit
P acting as middleman in installation K which specified prices. D manuf-> P supplier-> 3rd party
P claim that D viol K by refusing to perf accd to K. P seeking damages.
D in good faith so measure of damages is what was foreseeable at time of K formation.
No mkt price here b/c D was the only manuf of items. So Ct grants lost profit P suffered.
o 3rd party resale price - K price = profit lost by P due to Ds breach
Foreseeable by D at time of K formation b/c D knew that P had resale w/ 3rd party.
Womack v. Sternberg LASC 1965 p.444
Parties had written K to exchange houses. Ps house=$75000. Ds house = $35000. $40000 diff
in values covered by transfer of mortgage supplemented by Ds notes. But no appraisal at time of
K formation; parties determined values.
D refused to go thru and P sued. By time of trial values of houses changed.
o Appraised values at trial: Ps = $61500. Ds = $42500.
Damages measure = diff of mkt values of Ds and Ps homes at time of formation VS. Value of
houses as stipulated in K for exg. (if any Profit was anticipated.)
If combined mkt value of Ds home and notes at time of K formed exceeds value of Ps home; then
diff is the profit that P was deprived of as conseq of Ds breach.
Even if D in bad faith, would only be liable for damages directly caused by breach. Clear that
any damages sustained here were fixed and determinable at time of breach (actual mkt values)-
lost profits here are clearly foreseeable damages.
Fussel v. LA Business College of Monroe LAAC 1988 p.447
FACTS: P suspended from business school for viol of enrollment K. P completed 4 mths of 1 yr
K, but received no class credits. P alleges D breached K by depriving her of education.
Damages designed to put P in position she would have been in had the D not breached the K. Art
1995: loss sustained and profit deprived
CT finds that Ps training was delayed by Ds breach. Pecuniary loss not exactly determined
(although fee bills are approx. indication), so Cts discretion to award damages.
Ct attributed 4 mth delay at mkt rate for business job per mth~ considering mitigation of damages
and net pay= $1500 for profit deprived. Loss sustained=Reimbursment of tuition for 8 mth period
not in school
o Scalise: Ct has lots of flexibility in calculating profit deprived when breach is clear but amt
of damages is not clear and no evid of values.
Folds v. Red Arrow Towbar Sales LAAC 1979 p.449
IMPTC: Rare case where P successful in recovering future lost profits- must be proved w/
Exclusive statewide distribution K whereby P bought $30000 worth of products in exg for
franchise and D was to train Ps employees
D failed to train, and continued to sell products thru other reps in LA. D refused to sell any more
products to P. D also sold prod which P had already paid for but hadn't received.
P sues for lost profit ($$ lost of exclusive dist. for 3 yr period under K) and loss sustained
(merchandise he paid for but never got).
CT discretion b/c breach is certain but amt of damages are uncertain. CT permitted recovery for
lost profit for 1 yr…..Ct said 3 yrs is too speculative
Only reason CT found even 1 yr to be reasonably certain b/c could base upon amt of profit of
another distributor in other parishes for 9 mth period to reasonably calculate what 1 yr profit
would have been for P, then use that amt to project St wide profit for exclusive dist K.
C. MITIGATION OF DAMAGES
Article 2002 - reasonable efforts to mitigate damages.
An obligee must make reasonable efforts to mitigate the damage caused by the obligor's failure
to perform. When an obligee fails to make these efforts, the obligor may demand that the
damages be accordingly reduced.
adjust conflict of interest that otherwise exists when obligee neglects to mitigate
damages and thereby exposes obligor to further liab for conseq resulting from
obligor's failure to perf that were reas avoidable by obligee. (stipulated damages
clause solves this conflict!!)
in contractual context, taking adv of breach is analogous to bad faith b/c (1983)
good faith is superimposed over all Ks.
also in interest of econ efficiency
Weil Construction Co. v. Thibodeaux LAAC 1986 p. 454
IMPTC: What constitutes reas efforts depends in circum of case considering time, knowledge,
opportunity, and expense?
Facts: D built skating rink for P. Water damage caused rink's floor to buckle. P seeks damages
for defective construction.
o P arg that parties did not know of construction defect til suit, thus could not mitigate
Upon recognition of drainage prob, b/f bad floods which caused damages, architect suggested
various alternatives to P of how to prevent flooding. P held $35000 of architect's pymt to do
alternatives but P did not implement any. (more evid of bad faith)
CT finds that standing water is cause of damage, which P could have prevented by using reas
efforts, thus P not entitled to damages.
Application of 2002:
o good faith std- P breached in BF b/c failed to implement alt precautions that knew of and
failure resulted in preventable extensive damages.
o econ efficiency std- if P had paid to fix drainage initially, would have been much less
costly than later cost of damages resulting from flood.
D. FAULT OF THE OBLIGEE
Article 2003 - Obligee in bad faith.
An obligee may not recover damages when his own bad faith has caused the obligor's failure to
perform or when, at the time of contract, he has concealed from the obligor facts that he knew or
should have known would cause a failure.
If the obligee's negligence contributes to the obligor's failure to perform, the damages are
reduced in proportion to that negligence.
obligee must act intentionally and maliciously for BF (same as 1997)
Copeland v. Drury LAAC 1986 p. 456
P leased lot from D. D agreed to fund construction of restaurant in pymt stages. D made 1st
pymt, P did not seriously perf construction. D refused to pay any more. P sued D for damages
for Ds refusal to pay.
Evid shows that after 1st pymt P changed his mind about wanting restaurant on leased lot, so P
ceased construction. Intentional-YES, but malicious-??
Ct finds that Ps bad faith precludes P from getting damages under K. Ps non-perf breached K
prior to Ds refusal to pay.
Philips v. Cromer LAAC 1978 p.457
Default by obligee case. B/c P himself created the delay in perf which prevented timely pymt,
thus not entitled to damages.
4. CONTRACTUAL LIMITATION OF DAMAGES
Article 2004 - Clause that excludes or limits liability.
Any clause is null that, in advance, excludes or limits the liability of one party for intentional or
gross fault that causes damage to the other party.
Any clause is null that, in advance, excludes or limits the liability of one party for causing physical
injury to the other party.
sent 1: non physical injury
sent2: physical injury
"null"- absolute nullity
"gross fault"- proceeds from inexcus neg or ignorance; considered analogous to
public policy prevents indiv from being able to waive liab of breaching party in
case physical injury or non physical injury was intentional.
CMT E: does not govern "indemnity" clauses, "hold harmless" agmts, or other
agmts where parties allocate b/t themselves the risk of potential liab towards 3rd
ex) Ok for indemnity agmt b/t restaurant and janitorial svcs. If slip and fall case
where customer sues janitorial svc, for injury then restaurant is liable to janitorial
svc for all damages janitorial svc rqd to pay to customer.
Roll up Shutters v. South Central Bell Tel LAAC 1981 p. 457
K for Ps purchase of ad in phone book from D. Specifications including a pic of the shutters to be
in ad. When ad printed, pic was upside down.
Ps sues for defective perf (failure to perf). P seeks loss of business/profits as well as damages to
reputation b/c of defective ad.
D claims that K limitation of liab in terms- ltd to cost of ad
Issue: Is K enforceable? YES. P only entitled to amt of stipulated damages in K. No intentional
gross fault or public injury to nullify clause. (2004)
5. PROOF OF DAMAGES
(see Art 1999 above)
Wasco Inc. v. Economic Development Unit, Inc. LAAC 1985 p. 461
IMPTC: Lost profits must be proven w/ reas certainty, BUT may not rest on speculation.
Facts: P entered K to provide D w/ commercial janitorial svcs. K terms rqd D to give 21 days
notice of termination of K. Fire at Ds building and D gave notice of immediate termination.
o P sues for damages for breach of K. P seeks lost profit of 60% (Ps only evid of lost profit:
that had to foreclose on prop b/c of Ds breach which deprived P of revenues to pay
o P must show that loss of profits is more probable than not.
o No presumption that corp will make profit solely b/c existence of K.
P unable to produce fin rcds or any evid of previous profits to provide basis for valuation- and Ps
estimation is not supported by any competent evid.
Decision: No damages awarded.
Diff from Red Arrow: b/c there had some indirect evid as to what lost profits would have been
from comparable dealer.
Diff from Fussell v. Business college: b/c there had tuition bill and trade practice rates as some
indirect evid of lost profits
Southern Plastics Specialities Inc v. Dixie Brewing Co. LAAC 1981 p. 463
IMPTC: just b/c damages difficult do prove (impossible to precisely measure), obligee not
precluded from recovering
Facts: Exclusivity K b/t P retailer of plastic cups and D brewery. P contracted w/ manuf to make
logo cups for D, but did not tell manuf of exclusivity K w/ D. Manuf contracted w/ 3rd party retailer
to sell same logo cups at lower cost. Ds sales of the logo cups declined as result of 3rd party
retailer selling cheaper.
? What are lost profits?
o D had run similar cup sale campaign 3 mts prior- so Ds financial docs evidence w/ reas
certainty of lost profits.
Decision: Ct awards amt of lost profit, as provided by Ps fin docs as evid. (in accd w/ 1999 cmt B-
more than mere nominal damages). Calculating future profits involves speculation b/c no definite
amt since particular K breached.
Hall v. AR/LA Gas Co. LASC 1989 p. 465
Facts: P entered into exclusive gas purch agmt w/ D. P agreed to sell D gas at fixed price. Agmt
that if D purchased gas from 3rd party at higher price, then D would pay P diff b/t K and mkt price.
P sued on grounds that D failed to pay differential for many yrs.
Actual damages arising from breach of K must be proven by preponderance of evid. If
circum or direct evid only, may be suff to constitute preponderance when totality of circum shows
that causation/fact to be proved is more prob than not.
Sufficiency of proof is case-by-case determination. ~ significant CT discretion.
6. STIPULATED DAMAGES
Article 2005 - Secondary obligation
Parties may stipulate the damages to be recovered in case of nonperformance, defective performance, or
delay in performance of an obligation.
That stipulation gives rise to a secondary obligation for the purpose of enforcing the principal one.
o Art purpose to encourage perf of principle oblig. Stipulated damages are 2ndary oblig.
Article 2006 – Nullity of the principal obligation
Nullity of the principal obligation renders the stipulated damages clause null.
Nullity of the stipulated damages clause does not render the principal obligation null.
If K itself is nullified- obviously stip damages clause is null. Not vice-versa!!
Article 2007 - Stipulated damages or performance.
An obligee may demand either the stipulated damages or performance of the principal obligation, but he
may not demand both unless the damages have been stipulated for mere delay.
o So obligee has choice in deciding to enforce stipulated damages clause. Cannot get spec
perf and stipulated (compensatory) damages b/c would be 2x recovery-they are mutually
exclusive. Can still get moratory damages + perf/compensatory damges.
Article 2008 - Failure to perform justified
An obligor whose failure to perform the principal obligation is justified by a valid excuse is also relieved of
liability for stipulated damages.
o "excuse"- impossibility, result of other party- same legal excuses that justify failure to perf
Article 2009 - Obligee not bound to prove damage
An obligee who avails himself of a stipulated damages clause need not prove the actual damage caused
by the obligor's nonperformance, defective performance, or delay in performance.
o CMT D: This art does not prevent D from proving that a P who seeks to avail himself of a
stipulated damages provision actually has sustained no loss. It merely shifts burden from
P to D.
Article 2010 - Obligor put in default
An obligee may not avail himself of a clause stipulating damages for delay unless the obligor has been
put in default.
o Gen rules for delay damages for principle K apply to stipulation clause. This can be
accomplished by fixing a K term, clearly determinable, or by filing suit.
Article 2011 - Benefit from partial performance.
Stipulated damages for nonperformance may be reduced in proportion to the benefit derived by
the obligee from any partial performance rendered by the obligor.
Article 2012 - Stipulated damages may not be modified.
Stipulated damages may not be modified by the court unless they are so manifestly unreasonable
as to be contrary to public policy.
high burden b/c parties allowed to bind themselves to K terms, so long as not
against law/public policy
Stipulated damages clause- rqmt that parties stipulate in advance the sum to be recovered in
case of non-perf, and give rise to 2ndary oblig for purpose of enforcing principal oblig.
Stipulated damages should reasonably approx damages actually suffered by obligee and not be
penal. - MODERN LANGUAGE
Lombardo v. Deshotel LASC 1994 p. 466
Facts: Real estate sale purch agmt where parties stipulated that if purchaser failed/delayed perf,
then seller had right to demand spec perf or keep $1000 deposit. Purchaser refused to perf, seller
sued for spec perf. But seller subsequently sold prop to 3rd party for lower price. Seller
amended complaint to seek CT determination of damages for loss on sale, as opposed to
stipulated damages clause in K.
Decision: LASC held that seller bound by stipulated damages clause in purch agmt.
o CT applied Art 2012 and reasoned that b/c of stipulated damages clause, Seller had no
duty to mitigate damage caused by purchaser's failure to perf. Scalise: do not read this
too broadly. CTs for public policy reasons may impose duty to mitigate in face of
stipulated damages clause to promote econ efficiency.
If spec perf impossible/impracticable- amt of damages determined by:
o Ct, after non-perf est.
o By parties themselves. in stipulated damages clause in K terms.
Nothing in LACC allows obligee to be relieved from oblig under stipulated damages clause,
simply b/c unsuccessful demand for spec perf b/f sought damages. IE: Buyer cannot demand
more than in stipulated damages clause just b/c purchaser refused spec perf
Seller had no duty to mitigate damages (b/c stipulated damages clause), thus principle of
mitigation did not justify seller's resale of prop to 3rd party, stopping of spec pref action, or for
avoiding oblig under stipulation of damages clause.
Lama v. Manale 1950 LASC p. 471
Facts: Written commercial lease K stipulation clause that if lessee remained in apt after
termination of lease, lessee agreed to pay 5x regular rent per day. D remained in apt for 543
days during litigation w/ P. P seeks stipulated damages for entire period.
Decision: LASC held stipulated damages clause enforceable. (pre-2012 decision)
If apply 2012 would clause be enforceable? Not likely. 5x amt of rent per day is contrary to
public policy. Although 2012 does not turn on good/bad faith, suggests that at CTs discretion.
Should have more reasoned approach- stipulated damages is actually substitute for actual
damages and to minimize litigation in having to prove actual damages- not punitive damages.
7. RECOVERY ON QUANTUM MERUIT
(see Art 2054-No provision of the parties for a particular situation and Art 2055- Equity and Usage above)
Quantum Meruit- Contractually based measure of compensation or price of implied K accd to equity. Diff
from cmn law recovery for unjust enrichment which is quasi contractual. W/ quantum meruit, degree of
Ps impoverishment and extent of Ds enrichment are irrelevant.
o Unjust enrichment is moral maxim in Art 2055. This equitable remedy is firmly rooted in LACC,
unlike similar remedy of quantum meruit which is not in LACC.
o 5 rqmts for application of unjust enrichment: ( see below Willis v. Ventrella)
10. Causal relationship b/t enrichment and impoverishment
11. absence of justification or cause for the enrichment or impoverishment
12. absence of any other remedy for enrichment or impoverishment
Morphy, Makofsky, and Masson Inc. v. Canal Place 2000 LASC 1989 p. 472
Verbal construction agmt that did not specify mthd/terms of pymt for engineering svcs. P would
do part of the work D was previously obligated to perf for 3rd party. P did pef work and D did not
P has valid claim on valid oral K which overrides application of unjust enrichment (actio de in rem
o b/c indep contractual remedy in law exists- via oral K. K w/o price term must be
interpreted as requiring reas amt for Ps svcs including actual cost and reas profit.
Appears that 4 rqmts of valid K met. (consent, cause, object, capacity)
At least, this is implied in fact K- where consent implied from facts/circum showing mutual intent
to contract. Just as enforceable as written K.
13. RECOVERY ON OBLIG THAT ARISE W/O AGMT
(ie: delicts, quasi delicts, )
Art. 2292. Management of affairs; definition
There is a management of affairs when a person, the manager, acts without authority to protect
the interests of another, the owner, in the reasonable belief that the owner would approve of the
action if made aware of the circumstances.
trad ex) neighbor puts out fire that caught your house while you are on vacation.
Art. 2294. Duties of the manager; notice to the owner
The manager is bound, when the circumstances so warrant, to give notice to the owner that he
has undertaken the management and to wait for the directions of the owner, unless there is
ex) hurricane approaching while you are on vacation. Neighbor calls you and
asks if you want him to prepare house. Neighbor would not be entitled to recover
if did preparations w/o notice and had time to call and get directions from you.
Art. 2295. Duties of the manager; liability for loss
The manager must exercise the care of a prudent administrator and is answerable for any loss
that results from his failure to do so. The court, considering the circumstances, may reduce the
amount due the owner on account of the manager's failure to act as a prudent administrator
same std that usufructary owes to naked owner.
Art. 2298. Enrichment without cause; compensation
A person who has been enriched without cause at the expense of another person is bound to
compensate that person. The term "without cause" is used in this context to exclude cases in
which the enrichment results from a valid juridical act or the law. The remedy declared here is
subsidiary and shall not be available if the law provides another remedy for the impoverishment
or declares a contrary rule.
The amount of compensation due is measured by the extent to which one has been
enriched or the other has been impoverished, whichever is less.
The extent of the enrichment or impoverishment is measured as of the time the suit is brought or,
according to the circumstances, as of the time the judgment is rendered.
equitable institution- thus person enriched is not to make profit
A. GENERAL PRINCIPLES OF NEGOTIORUM GESTIO
Negotiorum Gestio- mgt of affairs of another
In civ law, if 3rd party volunteers perf/svc then may be entitled to recovery-imposes oblig upon
person assisted to compensate volunteer.
o in cmn law= officious intermeddler not entitled to recovery. Never incurs oblig upon
person helped, except under unjust enrichment. Suggest that may be burdening person
Although often asc w/ gestor's act motivated by desire to render svc to principal whose affair is
managed, this motivation is not rqd.
Only rqmts : Gestor be aware of the fact that he is attending to another's business, and not
motivated to benefit another (besides principal) or himself.
RECOVERY IS DIFF!! NO RQMT OF UNJUST ENRICH FOR GESTOR TO RECOVER UNDER
NEGOTIORUM GESTIO. SINCE GESTOR INCURS EXPENSE, IS ENTITLED TO DAMAGES,
EVEN IF PRINCIPAL IS NOT BENEFITTED BY PERF.
Standard Motor Car Co v. St Farm Insur. LAAC 1957
IMPTC: This case applies old law. New law Art 2294 requires that if not emergency, gestor give
notice to principal b/f attending to affair.
P car repair shop's worker got in wreck while test driving customer's car. D Insur Co's client was
sole cause of wreck. P paid for repairs and seeks recovery from D as insurer of tortfeasor.
CT- Ps paying for repairs is satisfaction of 3rd party tortfeasor's oblig to Ps customer for damages
to customer's car.
P attended to "affair" of D tortfeasor's oblig- meets rqmts of negotiorum gestio- that person
(gestor) manage, of his own accord, the "affair" of another (the principal)
Willis v. Ventrella LAAC 1996 p. 478
Parties executed hunting lease whereby P allowed Ds to hunt on his land, pay $2000 + prop
taxes, maintain roads on prop and do 120 hrs of bulldozer work "at direction of lessor".
P complained to D that D was not in accd w/ lease terms. P sought spec perf (injunction) and $$
for damages to prop.
Ct says invalid lease b/c no price term.
o price not certain or determinable b/c dozer work is not ascertainable since at complete
discretion of parties.
o Ct does not find any other available remedies other than unjust enrichment. (ie: no
contractual remedy available b/c no valid K)
2055 was not in effect at time of events in case. But 5 rqmts met here.
o Ds enriched by benefit of hunting rights on Ps prop for 3 yrs
o P was impoverished by loss of revenue from leasing prop at mkt value
o Ps loss was directly related to Ds gain- P could not lease prop to another when he
believed he had validly leased prop to Ds.
o No lawful lease, so no legal cause for enrichment and resulting impoverishment.
o No other remedy at law b/c P could not enforce an invalid lease.
o Fair lease price = $12 / acre mkt rate for area
o Damage for neg maintenance of roads- cost of repair of roads accd to testimony
o NO attorney fees b/c only awarded if authorized by statute or in K terms.
14. NON PECUINARY DAMAGES
(See also Art 1997- Obligor in Bad Faith and Art 1999-Assessment of Damages Left to the Court above)
Article 1998 - Damages for nonpecuniary loss.
Damages for nonpecuniary loss may be recovered when the contract, because of its nature, is intended
to gratify a nonpecuniary interest and, because of the circumstances surrounding the formation or the
nonperformance of the contract, the obligor knew, or should have known, that his failure to perform would
cause that kind of loss.
Regardless of the nature of the contract, these damages may be recovered also when the obligor
intended, through his failure, to aggrieve the feelings of the obligee.
o 2nd sent- breaching party purposely imposed humiliation/anguish upon other party. Then
suff to grant party non-pecun damages.
o ex) mental anguish, suffering, humiliation, ED, etc. Ct must look to quality of suffering-
which has to be pretty serious
o Scalise says esp: dead bodies and wedding dresses.
o CMT A: art new. Now no longer rqd for K to have as its object an exclusive nonpecuniary
o CMT C: K made for gratification of non-$$ loss means one intended to satisfy an interest
of spiritual order (ie: K to create work of art, conduct scientific rsch, or K involving matters
of sentimental value). Thus, obligee may recover damages of moral nature
ex) usually K to buy car is only pecuniary value. But when K to buy antique car
exactly the same as one's dead father-then has sentimental value. Value must
go beyond $$ gain one hoped to get.
o CMT E: mere worry or vexation is not compensable non-pecun. loss
Young v. Ford Motor Co, Inc. LASC 1992 p. 486
IMPTC: LASC applying new vs of 1998 which only requires that significant cause of K have non-pecun.
purpose, rather than exclusive cause.
Must have narrow circum where non-pecun damages allowed, or will be available for literally
Damages for non-pecun loss n/a here b/c nature of K nor facts surrounding K formation
demonstrate that P bought truck from D for significant non-pecun purpose.
Lewis v. Holmes LASC 1903 p. 490
Wedding dress case -LASC applying old vs. of 1998
K for D to make Ps wedding dress and 4 other dresses for Ps trip/wedding on specified date. Ds
perf: wedding dress way too short (defective) and others not made and no attempt to begin perf
(nonperf). P seeks damages for breach and non-pecun loss.
Matter of sentimental value suff for non-pecun loss? YES. Bride had no dresses for trip and
Did obligor know or should have known that his failure to perf would result in loss of that kind?
YES. D knew dates of trip/wedding and D knew that P would suffer non-$$ loss if did not have
Ct awarded P non-pecun damages in amt of $575 for failure to make other dresses and $78 for
price of wedding dress.
Vick v. Natl Airlines LAAC 1982 p. 493
Facts: P passenger's flights got all screwed up-Due to inclement weather. D Airline changed flight
destination en route w/o telling P. Change caused such a delay that P missed her cruise. P
seeks damages for non-pecun. losses due to ED. D claims that ticket ("K") is restricted to ticket
price and alternatively, very nominal damages.
Issue: Was K b/c of its nature meant to satisfy non-pecun interest of "spiritual order"? YES. Ps
vacation pkg trip was bought for 4 day vacation. (much diff from business trip scenario)
Did obligor know or should have known? YES. D knew b/c plane trip was part of Ps pkg.
Breach? YES. P had one agent in airport handling 250 customers. Not equipped for problems
caused by delays.
CT found Ds breach in not informing Ps of changed flight schedule and decision to make
unannounced stops. Awarded Ps $$ for anxiety and inconvenience.
Non - pecun damages granted here b/c Ps purchased non-stop tickets and Ds failure to inform Ps
of change in flights and being "callous" to Ps inconvenience.
Robinson v. Providence Mausoleum Inc. LAAC 1978 p. 496
Ds buried Ps deceased husband in wrong grave. Breach of K to perf oblig to prepare correct site
for burial and less than ideal remedying of error.
P sues for ED for Ds negligence.
Ct refused to award nonpecun. damages above $100 nominal damges b/c no aggravating circum
or dire conseq to P widow due to Ds error.
Nolan v. Commonwealth Natl Life Insur. Co. LAAC 1996 p. 498
General rule that litigant cannot recover attorney's fees except where authrized by statute or K.
P indep contractor made commercial K w/ D employer to solicit applications for life insur policies
written by D. P to get commission but rqd forfeiture of commission if induced any policyholder of
Ds co to relinquish policy.
D in BF tried to avoid oblig to pay Ps commission by falsely asserting P made policyholders drop
when D actually falsified policyholder surveys.
1998. "mere worry or vexation not compensible non-pecun. loss"
Ct stated that Ds BF breach did not raise Ps frustration level any higher than would have if D had
GF breach in fin inability to pay P. So no mental anguish suff to justify non-pecun damages
1997. Get damages for unforeseeable pecuniary damages when BF breach.
o P presented no evid that unforseeable, non-pecun loss suffered.
XIII. KINDS OF OBLIGATIONS
Article 1763 – Definition
A real obligation is a duty correlative and incidental to a real right.
Article 1764 – Effects of real obligation
A real obligation is transferred to the universal or particular successor who acquires the movable
or immovable thing to which the obligation is attached, without a special provision to that effect.
But a particular successor is not personally bound, unless he assumes the personal obligations of
his transferor with respect to the thing, and he may liberate himself of the real obligation by
abandoning the thing.
1st sent- Real right transfers w/ the "thing" (ie: not w/ the person's and their
2nd sent- If particular successor does assume the pers oblig of his transferor, a
3rd party is created and the prop and 3rd party are both bound. When this
happens, the 2 parties are solidarily bound to mortgage. (1821) However, the
thing is susceptible of seizure, foreclosure, etc.
CMT B: real oblig attaches to thing. B/c real oblig is duty incidental and
correlative to real right, and b/c such right may apply to movables and
immovables, real oblig may attach to either.
CMT C: Real oblig passes to subsequent acquirer of thing to which it is attached
w/o need for stipulation to the effect.
CMT D: Particular successor is not bound by pers oblig of his author w/ respect
to the thing, unless he has assumed the oblig by delegation. However, particular
successor does NOT acquire any pers rights that author had w/ respect to the
thing, unless there is stipulation to that effect.
ex) Mortgage- In mortgage, there is right which exists in immovable prop.
Mortgagee has the right. Mortgage is oblig that attaches to prop and is created
by the mortgagor. When prop sold, oblig is transferred even w/o reference to
mortgage in act of sale.
Real Rights- ex) usufruct- usufructary has duties correlative of real right. Naked owner has real
right of abusus over underlying prop.
A. TRANSFER OF REAL RIGHTS
Breaux v. Laird LASC 1953 p. 503
Construction K which is secured by bond which guarantees builder's faithful perf. Purchaser of
construction K from org obligee declares breach for failure to render faithful perf.
o Insur Co claim that purchaser has no personal rights under oblig b/t builder and org
o P claim that the oblig is not personal, but real right attached to prop.
LARS 9:4801- statutory rqmt that construction K be attached w/ bond which guarantees faithful
perf of K and pymt of all subcontractors.
Thus P has right of action for breach accd to statute.
Scalise: this construction K is actually a personal right of parties- but pers right is transferred in
McGuffy v. Weil LASC 1960 p. 505
Chain of title involved w/ immovable prop.
In org act of sale, K terms that prop shall only be used for residential purposes. This K is
However, in subsequent sales the residential restriction is not listed in sales. (these subsequent
parties are particular successors)
Is this residential restriction a real right or oblig?
o this is perfect ex of a building restriction which recorded in an act of sale is a real right
which confers direct and immediate authority over a thing and is good against the world.
The correlative duty is attached in subsequent sales, even if not recorded. The particular
successors do assume the real right of building restriction but the particular successors
are not personally bound by any personal oblig of author, unless specifically assumed.
B. STRICTLY PERSONAL AND HERITABLE OBLIGATIONS
Art. 1765. Heritable obligation
An obligation is heritable when its performance may be enforced by a successor of the obligee or
against a successor of the obligor.
Every obligation is deemed heritable as to all parties, except when the contrary results from the
terms or from the nature of the contract.
A heritable obligation is also transferable between living persons
IE: Transferrable to successors by either party in privity to K.
This is general rule. the exception is when it is strictly personal.
Art. 1766. Strictly personal obligation
An obligation is strictly personal when its performance can be enforced only by the obligee, or
only against the obligor.
When the performance requires the special skill or qualification of the obligor, the obligation is
presumed to be strictly personal on the part of the obligor. All obligations to perform personal
services are presumed to be strictly personal on the part of the obligor.
When the performance is intended for the benefit of the obligee exclusively, the obligation is
strictly personal on the part of that obligee
IE: only enforceable b/t the 2 parties in privitiy of K. not necessarily transferable.
1. Exceptions to general Rule of Heritability (strictly personal oblig factors):
Personal qualities: (duty side-obligor)
o Perf requires Special skill or qualification of obligor- (rebuttable presumption)
o Oblig to Perf Personal services- employment Ks; marriage Ks
o Perf intended for exclusive benefit of obligee
ex) Old lady contracts for dancing lessons. Old lady dies. Is her oblig to pay heritable or strictly
personal? Strictly personal in ref to both parties b/c obligor to provide personal service.
When parties provide that the K is only enforceable against those parties. (not heritable,
assignable, transferable, etc).
Bogart test: Is the nature of this oblig dependent on the personal qualities of the parties??
2. For strictly personal oblig, if one party breaches- Ct will not award spec perf b/c cannot compel
breaching party to physically perform act. Damages will be awarded.
o If litigation over breach of strictly pers oblig, and one party dies b/f dispute resolved, then
litigation ceases since cannot transfer these strictly personal oblig to deceased's heirs.
No one to enforce personal oblig claim against.
Bogart v. Caldwell LAAC 1953 p. 511
Facts: D sells theater to P and non-compete clause in K. D dies. Ds heir now wants to open up
competing movie theater, claiming that non-compete restriction is strictly personal. P arg that
restriction is heritable.
CT gives jurisprudence:
o exceptions to general rule of heritability, are when personal qualities of the person
promising are the promisee's cause for entering the K and where the quality cannot be
supplied by any other, or compensated by pecuniary damages.
o In this case, the personal qualities are not relevant to this K. The cause is monetary
profit, not personal qualities
o Thus K is heritable.
Scalise: Good arg that from text of K here: "that K binding for as long as vendor owns the prop
herein conveyed to him" is strictly personal b/c once D dies, he no longer owns the prop thus not
bound to the restriction. Thus also arg that restriction not heritable.
Laricca v. Laricca LASC 1992 p. 513
Marriage K is source of oblig- strictly personal. Corollary prop rights from community are
Even if strictly pers relationship, w/ corollary rights - Ct have made exception to extend the
principal oblig for short time suff to allow heirs to resolve the underlying prop rights dispute.
C. SIMPLE OR CONDITIONAL OBLIGATIONS
Article 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.
sent 2: "suspensive"- ex) I will sell you my house if you obtain financing. Oblig of
buyer exists even b/f occurrence of condition, yet is not enforceable until buyer
obtains financing. Ancillary condition that buyer will seek to obtain financing in
sent 3: "resolutory"- oblig comes to an end when condition occurs. Ex) I will sell
you oil until price reaches $50/barrel. When oil price > $50 then no more oblig.
CMT E: condition need not be a future event, it can already happen, yet be
unknown to the parties- so long a uncertain
Article 1769 – Unlawful or impossible condition
A suspensive condition that is unlawful or impossible makes the obligation null.
CMT A: If condition is resolutory is unlawful or impossible- Oblig is valid, but
condition is null. Diff reasoning than w/ suspensive condition where entire oblig
and condition are null.
CMT B: An exception to this general ruld is case of an unlawful or impossible
condition attached to donation intervivios or mortis causa. B/c regard suspensive
condition as null- it is excised from K and lawful terms stand.
Ex) IMPOSSIBLE: K: "I promise to transfer ownership of my house if the Empire
St building is moved to Nebraska" This entire oblig is absolutely null and not
really oblig at all. Lack of cause b/c buyer would not have promised to purchase
if he knew he wasn't getting a correlative oblig in return.
Ex) ILLEGAL: K: "I will purchase your house if I can get gambling equip to have
illegal gambling" K is null b/c it encourages illegal activity.
Article 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.
In suspensive condition, the K is enforceable immediately. W/ resolutory
condition, the K is immediately resolved.
Fault=negligently or purposefully preventing enforcement of K.
1. Notes on Simple and Conditional Obligs
Conditions may be implied by law, by nature of K, by previous conduct of parties also. (Art 1768)
Oblig w/o condition is "simple"
Oblig w/ condition is "conditional"
Conditional v. Simple Obligs:
o Enforceability is best distinction-
fulfillment of "conditional oblig" cannot be demanded or enforced
rendering of couter-perf in "simple oblig" can be demanded by obligee and can
be enforced at his initiative
Conditions may depend wholly on chance (not w/i parties' discretion) OR may depend
postetative condition (upon power of 1+ parties- see 1770)
Garig Transfer Inc. v. Harris LASC 1954 p. 517
Suspensive condition: K to transfer a common carrier certificate IF public svc commission
approves deal. At time of K, joint petition had been filed by both parties who were seeking
approval. D withdrew from joint petition. At hearing Commission did not approve BUT had D not
withdrawn, the Commission would have approved of transfer.
Art 1772: Condition would have occurred if not for fault of party w/ interest in preventing
fulfillment of oblig!! Under Art 1772, one who makes promise subj to condition cannot prevent
fulfillment to avoid oblig.
o D didn’t want transfer b/c pers vendetta. D not merely negligent, his actions were
Remedy available: Spec Perf, damages- depends on circum related to the condition.
D. RESOLUTORY CONDITION
Article 1768 – Expressed and implied conditions
Condition may be either expressed in a stipulation or implied by the law, the nature of the
contract, or the intent of the parties.
Article 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.
Article 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
This is impt for prescription purposes. If retroactive- COA at date of K formation,
not at occurrence of condition.
ex) K: "I will provide you w/ supply unless I move to S'port." If obligor moves, the
K is resolved retroactively to date of inception.
2nd and 3rd sentences of 1775 protect the effects of resolved oblig. So, owner
keeps fruits even when K is resolved.
Ex) Servitude is given by a purchaser pending occurrence of a resolutory
condition. Upon fulfillment, the buyer is no longer the owner at the time he gave
the servitude, but the grantee is still protected.
E. CONDITION THAT DEPENDS ON THE WHIM OR WILL OF THE OBLIGOR
Article 1770 – Condition that depends on the whim or 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.
"Whim"- purely potestative condition. Whim is arbitrary decision making by
obligor. Ex) "I will sell you my house if I wish." Thus oblig has not incurred oblig
at all. Failure of buyer's cause and K entirely null.
"Will"- simple potestative condition. Requires weighing of interest by obligor of
external circum. Ex) "I will sell you my house if I move to Paris" It is assumed
that moving to Paris or not will be decided accd to serious reasons and that
obligor will not decide not to move to Paris for the sole reason of deceiving the
other party. More restrictive upon obligor.
CMT E: whim- "unbridled discretion" v. "exercise of considered judgement"- will
CMT F: termination at will clause is not necessarily null if the right to terminate is
exercised in GF. To meet GF rqmt, party exercising right to terminate K at will
should consider not only his own adv, but also disadv to which other party will be
subj due to termination. Termination for purely personal reasons could signal BF.
w/ suspensive condition- obligor not binding himself to anything at all
w/ resolutory - b/c ongoing oblig that will stop when condition occurs. So, if K is
being perf-calling an end to oblig based on external circum requires weighing of
Article 1773 – Time for fulfillment of condition that an event shall occur
If the condition is that an event shall occur within a fixed time and that time elapses without the
occurrence of the event, the condition is considered to have failed once it is certain that the event
will not occur.
Article 1774 – Time for fulfillment of condition that an event shall not occur
If the condition is that an event shall not occur within a fixed time, it is considered as fulfilled once
that time has elapsed without the event having occurred.
The condition is regarded as fulfilled whenever it is certain that the event will not occur, whether
or not a time has been fixed.
reasonable time = depends on equitable principles of trade, industry, past trans,
if apparent that no possibility of condition occurring- the oblig is done.
1. Suspensive v. Resolutory:
Suppose suspensive condition dependent of WHIM of obligee- "I will sell you my house IF you want to
buy it."- not null; perfectly enforceable b/c obligor already consented to basing oblig on obligee's whim.
Gumbel Realty and Securities Co. v. Levy LAAC 1934 p. 529
Lease K: "If building destroyed, rent will suspended until lessor decides whether to reconstruct
building or not".
Obligor=lesee b/c oblig to pay rent.
Simply potestative condition- serious financial considerations of lessor in deciding whether to
rebuild and collect rent pymts or not to rebuild and forfeit rent
IF purely potestative condition dependent of whim of obligee (lessor)- then perfectly enforceable.
(construe K terms: " Lessee will pay rent IF lessor decides to rebuild")
Humble Oil and Refinery Co. v. Guillory LASC 1946 p. 531
Lessor's oblig: " I will pay 1/4 interest in all royalties I receive from leasing my properties if I
choose to lease"= suspensive condition.
Condition does not depend solely on whim of landowner obligor b/c there is weighing of interest in
decision making process.
CT describes the weighing process in terms of what obligor's potential suffering or damage would
be. Must look to seriousness of the act that obligor must perf.
"If I lease"- is substantial; must weight effects of leasing v. not leasing. If obligor leases, then
loses 1/4 interest. If no lease then loses 3/4 profit.
CT says based on obligor's WILL=simply potestative condition!!- involves some inconvenience,
expense, or detriment if condition does not occur.
Natl Safe Corp v. Benedict and Myrick Inc. LASC 1979 p. 534
Exclusive dealings K. K comes up for renewal and is renewed w/ termination "at will" clause. K
does not contain non-solicitation clause.
P purposefully terminates K and solicits employee of D. D sues for breach of K.
Implied condition- that P will not steal employees of distributor D.
Scalise says: Ct would likely find that not breach today b/c did not expressly prohibit employee
Long v. Foster & Asc. Inc LASC 1961 p. 539
Employment K w/ oblig that P employee was to perf svcs for 5 yrs unless employee terminated K.
P worked for 2.5 yrs. Business sold and K assigned to new owner. P fired. P seeks his salary for
rest of K term. D new owner says unenforceable K as purely potestative.
Resolutory condition b/c oblig to perf svcs was unenforceable immediately.
1770 CMT F above.
Ct found condition was "simply potestative" and enforceable. Remedy that if employer is not in
GF, continuation of perf (spec perf) or damages.
F. OBLIG WITH A TERM
Article 1777 – Express or implied term
A term for the performance of an obligation may be express or it may be implied by the nature of
Performance of an obligation not subject to a term is due immediately.
Article 1778 – Term for performance
A term for the performance of an obligation is a period of time either certain or uncertain. It is
certain when it is fixed. It is uncertain when it is not fixed but is determinable either by the intent of
the parties or by the occurrence of a future and certain event. It is also uncertain when it is not
determinable, in which case the obligation must be performed within a reasonable time.
Article 1779 – Term presumed to benefit the obligor
A term is presumed to benefit the obligor unless the agreement or the circumstances show that it
was intended to benefit the obligee or both parties.
When term not specifically designated to benefit either party- presumed that
intended to benefit obligee or both parties.
Article 1780 – Renunciation of a term
The party for whose exclusive benefit a term has been established may renounce it.
This is will is only one person. Thus, if term was to benefit both the obligee and
obligor it may not be renounced. Ex)
Article 1784 – Term for performance not fixed.
When the term for performance of an obligation is not marked by a specific date but is rather a
period of time, the term begins to run on the day after the contract is made, or on the day after the
occurrence of the event that marks the beginning of the term, and it includes the last day of the
term ends at end of amt of time for which it is useful for parties to have
performed- "end of business day"- depends on business type, industry
Article 1785 – Performance on term
Performance must be in accordance with the intent of the parties, or with established usage when
the intent cannot be ascertained.
Term- period of time, the end of which is marked by a future event which is certain to occur
o Suspensive term- in future for which perf is not demandable or enforceable until occurs.
Ex) Student Loan pymts not due til 6 mths after graduation.
o Resolutory term- time in future at which an event is certain to occur. Oblig is effective
from K formation til occurrence. At occurrence, oblig evaporates. Ex) You can use my
car until 5:00 today.
Fixed term- specified
Unfixed term- not specified, but determinable from K terms itself or external circum.
Unfixed, undeterminable term- uncertain. thus oblig must be perf w/I reas time.
Castano v. Belling LAAC 1987 p. 545
P pre-paying her mortgage pymts.
The 30 yr mortgage term benefits obligor- presumed b/c no evid that obligor had entire funds at
Since term in obligor's favor- can renounce term in her favor w/o suffering penalty.
However, if term had benefitted obligee (mortgage co) then could not have renounced term w/o
consent of obligee.
State v. Orkin Exterminating Co. Inc. LAAC 1988 p. 552
K terms: "Rates will not be raised for as long as house remains standing"
This is resolutory unfixed term b/c not specified period but determinable b/c can easily ascertain
when house is no longer standing.
Southern States Masonry Inc v. Jones Construction Co. LASC 1987 p. 554
K b/t gen contractor and sub-contractor "pay when paid clause"
However gen contractor never paid by payee b/c payee went bankrupt.
Unfixed, undeterminable term- dependent upon certain future event (pymt). The term is
undeterminable b/c no way to know when pymt will occur.
Not condition b/c not even contemplated that payee would not fulfill pymt oblig.
CT remedy: Reas time is rqd for pymt to sub contractor. Gen contractor bound to pay sub w/I
reas time- regardless of whether gen actually receives pymt- gen still bound b/c gen contractor
G. CONJUNCTIVE AND ALTERNATIVE OBLIGATIONS
Article 1807 – Conjunctive obligation
An obligation is conjunctive when it binds the obligor to multiple items of performance that may be
separately rendered or enforced. In that case, each item is regarded as the object of a separate
The parties may provide that the failure of the obligor to perform one or more items shall allow the
obligee to demand the immediate performance of all the remaining items.
Article 1808 – Alternative obligation
An obligation is alternative when an obligor is bound to render only one of two or more items of
Article 1809 – Choice belongs to the obligor
When an obligation is alternative, the choice of the item of performance belongs to the obligor
unless it has been expressly or impliedly granted to the obligee.
H. SOLIDARY OBLIGATIONS
Article 1794 – Solidary obligation for obligors
An obligation is solidary for the obligors when each obligor is liable for the whole performance. A
performance rendered by one of the solidary obligors relieves the others of liability toward the
solidarity for obligees when it gives each obligee the right to demand the whole
perf from common obligor.
perf by one obligor extinguishes the entire oblig
Article 1795 – Solidary obligor may not request division; action against one obligor after action against
An obligee, at his choice, may demand the whole performance from any of his solidary obligors. A
solidary obligor may not request division of the debt.
Unless the obligation is extinguished, an obligee may institute action against any of his solidary
obligors even after institution of action against another solidary obligor.
If solidary obligor is sued, he can seek contribution or indemnification by making
3rd party demand against other co-debtors
Article 1796 – Solidarity not presumed
Solidarity of obligation shall not be presumed. A solidary obligation arises from a clear expression
of the parties’ intent or from the law.
Conseq are so serious that solidarity never presumed. Ex) of arising from law is
may arise from declaration of parties' will
ex) when landlord requires lessee to have co-signor on lease K -this expresses
will of solidarity. Landlord may hold either lessee or co-signor liable for entire
ex) 2 persons who committed tort together are each entirely liable for damages
caused by their joint tort. Liability imposed by law art 2324.
Article 1797 – Solidary obligation arising from different sources
An obligation may be solidary though it derives from a different source for each obligor.
Article 1798 – Obligation subject to condition or term
An obligation may be solidary though for one of the obligors it is subject to a condition or term.
Active solidarity- exists among creditors or obligee
Passive solidarity- exists among debtors or obligors
Either way, is adv for creditor b/c: when active allows one of many creditors to demand and
receive whole debt owned by creditor AND when passive, allows creditor of oblig owed by many
debtors to demand and receive whole debt from any of its debtors, although one called upon to
pay whole debt is not sole debtor.
1. CONSEQUENCES OF SOLIDARITY:
Article 1799 – Interruption of prescription
The interruption of prescription against one solidary obligor is effective against all solidary
obligors and their heirs.
filing suit is interruption
putting debtor in default is interruption- if put
Article 1801 – Defenses that solidary obligor may raise.
A solidary obligor may raise against the obligee defenses that arise from the nature of the
obligation, or that are personal to him, or that are common to all the solidary obligors. He may not
raise a defense that is personal to another solidary obligor.
personal defense- lack of capacity
based on nature of oblig- lack of lawful cause, valid consent, etc.
cmn to all obligors- prescription defense
Article 1802 – Renunciation of solidarity
Renunciation of solidarity by the obligee in favor of one or more of his obligors must be express.
An obligee who receives a partial performance from an obligor separately preserves the solidary
obligation against all his obligors after deduction of that partial performance.
Renunciation of solidarity (co-debtors) bear risk of insolvency and will be
responsible for the whole
Partial pymt on acct is not remission
Renunciation is expression by obligee that obligor is released from solidary
character of oblig and will be relieved of his portion. The effect is that the obligee
can collect the rest from the co-debtors independently.
Why would obligee want to do this? He wouldn't!! Rare that have solidary co-
Co-debtor will want T/C so he won't have to worry about any of remaining
debtors becoming insolvent. Creditor will want renunciation but usually
debtor/obligor holds out for T/C.
Remember: must examine the instrument. Is it a T/C or remission (family
relationships) OR renunciation of solidarity?
Article 1803 – Remission of debt to or transaction or compromise with one obligor
Remission of debt by the obligee in favor of one obligor, or a transaction or compromise between
the obligee and one obligor, benefits the other solidary obligors in the amount of the portion of
Surrender to one solidary obligor of the instrument evidencing the obligation gives rise to a
presumption that the remission of debt was intended for the benefit of all the solidary obligors.
T/C- obligee bears risk of insolvency
Article 1804 – Liability of solidary obligors between themselves
1)Among solidary obligors, each is liable for his virile portion. If the obligation arises from a
contract or a quasi-contract, virile portions are equal in the absence of agreement or judgment to
the contrary. If the obligation arises from an offense or quasi-offense, a virile portion is
proportionate to the fault of each obligor.
2)A solidary obligor who has rendered the whole performance, though subrogated to the right of
the obligee, may claim from the other obligors no more than the virile portion of each.
3)If the circumstances giving rise to the solidary obligation concern only one of the obligors, that
obligor is liable for the whole to the other obligors who are then considered only as his sureties.
2ND sent- obligor that pays whole debt is ltd to recovery of perf from previous
solidary obligors in proportion to their virile shares. What if insolvent??
3rd sent- Even though from debtor's perspective the other obligors are his
sureties, as to the obligee the obligors are NOT his sureties. The oblig to obligee
is NOT conditional- it is a simple oblig to perf the whole oblig.
Article 1806 – Insolvency of a solidary obligor
A loss arising from the insolvency of a solidary obligor must be borne by the other solidary
obligors in proportion to their portion.
Any obligor in whose favor solidarity has been renounced must nevertheless contribute to make
up for the loss.
2nd sent- solidary obligor who has been renounced is still at risk
If T/C w/ solidary obligor rather than renunciation, then oblig reduced by
compromiser's portion (not amt of T/C). The rest is responsibility of remaining
Ex) $4000 Note. G paid $1000 as compromise, but his portion is $2000. Oblig
reduced by amt of Gs portion. The remaining portion ($2000) is S's responsibility.
What if S were to become insolvent after Gs compromise? Then obligee's bad
luck! Obligee bears the burden of insolvency. So, apparent that very impt
distinction b/t renunciation of solidarity (1802) v. T/C (1803)
Gauthier v. Scott LAAC 1976 p. 578
2 instruments executed by P and D.
o 1 was a simple promissory note binding them in as solidary co-debtors
o 2 was a continuing guarantee (surety) so that the obligee would allow a corp to borrow
$18000. P and D guaranteed the repayment. The parties expressly oblig themselves in
solido (remember not presumed)
Instrument 1: As conseq, the business and P and D are solidary co-debtors by virtue of the
continuing guarantee. P pays the note and the balance of the loan (perf of whole by one solidary
obligor). P seeking recovery of 1/2 the note from D.
o Since oblig arises from K, the presumption is that the virile share is equal unless
otherwise provided. Thus, P is subrogated against D and entitled to recover from D his
1/2 portion. (art 1804)
Instrument 2: As to guarantee, Ct concludes P is entitled to recover from D 1/3 of the balance
paid by P to the obligee. This pymt subrogated P to the rights of the obligee but he could only
recover each co-Debtor's portion.
Art 3055 and 3056 govern the relationship of surety to the obligee and if more than one surety
Did P and D signing the guarantee become co-sureties? Is the principal debtor, the one whose
affair the oblig concerned, the business?
o YES!! the business is the principal obligor and P and Ds guarantee that the business
loan will be paid. Rather than contracting a conditional surety, which most people do, P
and D bound themselves in solido-simple oblig for the whole perf. ( P and D both equally
were signing to pay the loan in the event the principal obligor (the business) defaulted.)
So ex) of the last paragraph of 1804. The oblig really only concerns the principal obligor
(the business) and P/D are acting as sureties for the business.
How much is P entitled to recover from D? 1/2 as provided for in 3055. Had P sought it from the
Co (principal obligor) how much would P have been able to recover? All of it - Indemnification.
Why didn't P do this? P afraid principal insolvent.
XIV. EXTINCTION OF OBLIGATIONS
A. Payment or Perf in General
Art. 1854. Extinction by performance
Performance by the obligor extinguishes the obligation
Art. 1855. Performance by a third person
Performance may be rendered by a third person, even against the will of the obligee, unless the
obligor or the obligee has an interest in performance only by the obligor.
Performance rendered by a third person effects subrogation only when so provided by law or by
Art. 1862. Place of performance
Performance shall be rendered in the place either stipulated in the agreement or intended by the
parties according to usage, the nature of the performance, or other circumstances.
In the absence of agreement or other indication of the parties' intent, performance of an obligation
to give an individually determined thing shall be rendered at the place the thing was when the
obligation arose. If the obligation is of any other kind, the performance shall be rendered at the
domicile of the obligor
Edwards Motor Co. v. State Farm LAAC 1957 p. 597
Not lease K b/c does not specify amt or time/place to be paid. And no evidence that P ever
demanded rent pymt from D.
D rendered pymt after maturity, but prior to default and filing of suit, so P has no grounds to
cancel lease for non-pymt.
Ct could have found solidary relationship either by depositary or tortfeasor relationship (can
recover from Ds tortfeasor) but Ct did not.
Perf effects subrogation only when provided by law or agmt (1855)
Ct says does not exist in case, but P may have action thru quasi-K (negotiorum gestio).
Generally, if 3rd person is not subrogated once he has performed, quasi K may permit 3rd person
Abry Bros Inc v. Tillman LASC 1964 p. 599
Unrecorded written construction K b/t parties for Ps work on Ds prop. Ds checks for pymt
returned and P seeks balance of K price.
P claim that Ds acct of checks constituted pymt and discharge of debt, whether worthy checks or
Parties intent not that checks to serve as absolute pymt:
o D transferred check to P checks blank endorsement (not w/o recourse)
o When P notified of bank's denial of checks, P personally picked checks up and attempted
delivery (suggesting Ps feeling of continuing oblig)
Art. 1825. Definition
Subrogation is the substitution of one person to the rights of another. It may be conventional or
Usually occurs when: 1 party pays another party's debt.
Art. 1826. Effects
When subrogation results from a person's performance of the obligation of another, that
obligation subsists in favor of the person who performed it who may avail himself of the action
and security of the original obligee against the obligor, but is extinguished for the original obligee.
An original obligee who has been paid only in part may exercise his right for the balance of the
debt in preference to the new obligee. This right shall not be waived or altered if the original
obligation arose from injuries sustained or loss occasioned by the original obligee as a result of
the negligence or intentional conduct of the original obligor.
Once As rights against C are subrogated to B- then As rights are extinguished,
but the obligation and accessory right still exists w/ respect to newly subroated B.
Art. 1827. Conventional subrogation by the obligee
An obligee who receives performance from a third person may subrogate that person to the rights
of the obligee, even without the obligor's consent. That subrogation is subject to the rules
governing the assignment of rights
CMT C: Notice rqmt to obligor- b/c practically obligor must know who to pay
CMT F: No writing rqmt. May be oral or implied by circum
Art. 1828. Conventional subrogation by the obligor
An obligor who pays a debt with money or other fungible things borrowed for that purpose may
subrogate the lender to the rights of the obligee, even without the obligee's consent.
The agreement for subrogation must be made in writing expressing that the purpose of the loan is
to pay the debt
Art. 1829. Subrogation by operation of law
Subrogation takes place by operation of law:
(1) In favor of an obligee who pays another obligee whose right is preferred to his because of a
privilege, pledge, mortgage, or security interest;
(2) In favor of a purchaser of movable or immovable property who uses the purchase money to
pay creditors holding any privilege, pledge, mortgage, or security interest on the property;
(3) In favor of an obligor who pays a debt he owes with others or for others and who has
recourse against those others as a result of the payment;
(4) In favor of a successor who pays estate debts with his own funds; and
(5) In the other cases provided by law.
1. Two types of Subrogation:
a. Conventional Subrogation
By Obligee: can happen at any time and no writing rqmt- treated as asgt of rights. (1827)
o Carries w/ it an implied warranty as to the existence of the debt.
o the subrogee (one who has performed) is subrogated to all of the rights of the original
obligee, regardless of what he paid. This is what distinguishes conventional subrogation
from legal subrogation.
o ex) Debtor (obligor) owes $100000 to Bank (obligee). 3rd party decides to pay Bank
3rd party enters agmt w/ Bank to conventially subrogate Bank's rights to 3rd party
(no writing rqmt)
effect: 3rd party able to enforce debt against org debtor.
By Obligor- requires much more formality (1828)
o occurs when obligor borrows money to perf an oblig and his purpose is to subrogate the
lender to the rights of the obligee against him (obligor), even w/o the obligee's consent.
To be sure that the intent of the borrower and lender be to subrogate, the agmt must be
IN WRITING and expressing that the purpose of the loan is to pay a debt.
o No consent necessary for subrogation of other party's rights.
o ex) A loans B $$ to pay off debt to C. C and B enter written agmt that B subrogates C
rights to A.
b. Legal Subrogation (1829)
In favor of obligee who pays another obligee whose right is preferred to his b/c of a privilege,
pledge, mortgage, or security interest-
o ex) when A takes out mortgage on house for $80000 w/ Bank 1. A takes out 2nd
mortgage on house for $20000 w/ Bank 2. Bank 1 has preferred creditor status. Bank 2
can pay Bank 1 for 1st mortgage and be subrogated to the better creditor status.
o ex) gen contractor hires subs. Subs have laborers who do work. If owner of land doesn't
pay gen, sub not paid, laborers not paid. However, Law gives the laborers a lien on the
property that was subj of construction contract as security for laborers' wages. Law gives
protection that laborers will get their wages. However, law does not create security for
gen contractor. So gen contractor will often pay laborers wages due- then gen contractor
is subrogated to laborers' legal lien against prop only for amt that laborers owed. This
allows gen contractor to have better creditor status against owner via lien on prop.
In favor of purchaser of movable or immovable prop who uses the purchase $$ to pay creditors
holding any privilege, pledge, mortgage, or security interest on the prop.
o If owner of house has 2 outstanding mortgages. If owner pays off mortgagee 1 then
owner is subrogated the mortgagee's 1 rights. This gives owner protection against
mortgagee 2, b/c owner will have higher creditor status than mortgagee 2. In foreclosure
and sheriff's sale, Mortgagee 2 will only get amt above that owner (w/ mortgagee 1's
rights) is legally entitled to in foreclosure.
In favor of obligor who pays debt he owes w/ others OR for others and who has recourse against
those others as a result of the pymt
o "w/ others" ex) solidary co-debtors (obligors). When single co-obligor renders entire perf
to obligee. Single obligor rendering perf is subrogated to rights of the obligee and is
entitled to recover from each of remaining co-obligors in amts of their virile shares.
o "for others" ex) B owes A $1000. C, D, and E are co-sureties. C surety pays entire amt
of Bs debt $1000 to A. Thus C is subrogated of As rights and has rights against co-
In favor of an heir w/ benefit of inventory who pays debts of the estate w/ his own funds
o Scalise said do not worry about this one.
In a legal subrogation such as assumption by 3rd party (1821) the subrogee can only recover to
the extent of the perf. He may not recover more by invoking conventional subrogation. An agmt
cannot give more than allowed by legal subrogation.
2. How is Subrogation Diff from 3rd party beneficiary K?
o ex #1) A owes B $1000. A and C engage in separate K where C owes A $1000. A tells
C to just pay B the $1000 to satisfy debt.
o This ex #1) is 3party beneficiary K. B is not party in privity to K b/t A and C.
o Not conventional subrogation b/c no written K w/ express intent to subrogate C to Bs
rights against A.
Wilkin v. Dev Con Builders Inc LAAC 1989 p. 613
Municipality construction K w/ D builders. D secured public works bond. D became insolvent and
unable to pay suppliers.
P agreed to invest in Ds co and pay off Ds suppliers to allow D to continue construction accd to K.
P borrowed $$ from Watkins. P rendered pymt to suppliers.
o promissory note that P repaid when D paid under construction K
o P had each supplier execute subrogation agmt subrogating to P all of their right to file
D abandoned construction and P sought to perfect liens
P sued Eastern bond co to collect lien $$ and Eastern went bankrupt. P joined Eastern's Insur Co
P claim that should be able to collect $$ on liens via conventional subrogation w/ suppliers and
promissory note w/ Ds co
org obligor- Ds co
org obligees- suppliers
??Proper subrogation of P??
B/c subrogation notes w/ suppliers represented debt owed to P and were executed prior to pymt
of suppliers, evidence that funds expended for pymt to suppliers intended to be repaid to P.
P did not pay suppliers w/ own funds (b/c borrowed from Watkins) Thus, P did not perf oblig
himself he cannot claim effects of subrogation by perf.
Alternatively, P arg that he advanced $$ to Ds co, org obligor, in order for Ds co to perf oblig
Bierhorst v. Fruthaler LASC 1956 p. 619
Purchaser's house seized after sale by judicial mortgagees and was to be sold. The creditor of
seller (not current owner) was seizing.
P purchaser wants price back and wants higher privilege in settlement than mortgagees.
P purchaser claims that he was subrogated to the creditors rights when he took the purchase
price to pay off the 1st and 2nd mortgages on the house
LASC: Act of sale was for "cash" Purchaser, not seller, used funds to pay off the mortgage
creditors thus purchaser was subrogated and could recover the pruchase price first.
Decuri v. Carnes LASC 1931 p. 620
Obligee Carnes w/ higher creditor preference was resisting pymt by other obligee Decuir b/c Carnes did
not want Decuir to be subrogated to his rights.
If obligee C has 1st and 3rd mortgages on land, if acct pymt from the other obligee D then would
bequeath D of higher ranking
Art. 1879. Extinguishment of existing obligation
Novation is the extinguishment of an existing obligation by the substitution of a new one.
Art. 1880. Novation not presumed
The intention to extinguish the original obligation must be clear and unequivocal. Novation may
not be presumed.
Art. 1881. Objective novation
Novation takes place when, by agreement of the parties, a new performance is substituted for
that previously owed, or a new cause is substituted for that of the original obligation. If any
substantial part of the original performance is still owed, there is no novation.
Novation takes place also when the parties expressly declare their intention to novate an
Mere modification of an obligation, made without intention to extinguish it, does not effect a
novation. The execution of a new writing, the issuance or renewal of a negotiable instrument, or
the giving of new securities for the performance of an existing obligation are examples of such a
CMT C: Must be substantial change in rqmts of K to be novation. At least one of
basic elements of org oblig must be altered in order to be novation. IE: object,
¶ 2- Parties can make anything they want a novation so long as express intent to
¶ 3- supplementary rule-"mere modification"- alteration in interest rate, term
expiration. Not presumed to be novation
Art. 1882. Subjective novation
Novation takes place when a new obligor is substituted for a prior obligor who is discharged by
the obligee. In that case, the novation is accomplished even without the consent of the prior
obligor, unless he had an interest in performing the obligation himself.
diff from 3rd party beneficiary K (where org oblig still exists- org obligor not
relieved of liablity)
W/ novation org oblig is extinguished and org obligor has no further liability.
Novation must be expressed intent to novate!!
1. Definition- extinguishment of an existing oblig by the substitution for a new one. Must be existing
org oblig in order to novate it!! It is NOT the transference of an oblig b/c completely extinguishes
the org oblig!! Novation is not presumed. The intention to extinguish the org oblig must be clear
o if org K is conditional: if suspensive condition the oblig is not enforceable til condition
occurs. Oblig does exist in interim b/t formation and occurrence of condition -it can be
basis for novation
o if org K is moral oblig: Once natural oblig is acknowledged, it becomes an enforceable K-
it can be basis for novation
2. Rqmts for Novation:
Clear and unequivocal expression of intent to novate
Substantial alteration to org K
3. 2 types of novation:
o Objective novation (1881)
o Subjective novation (1882)