Obligations I

Front 1

Where do the words "civil law" come from?

Back 1

It refers to the laws of a city. It originated in Rome and spread through western Europe. LA's code is based off of the French civil code and some Spanish law.

Front 2

Where do the words "common law" originate?

Back 2

They refer to the laws of England. They come from the judges in England who began to recognize a customary law that had spread all over England as opposed to a particular region.

Front 3

What are the three irreducible characteristics of a mixed jurisdiction?

Back 3

1) Specificity of Mixture: A legal system built upon both common law and civil law principles.

2) Quantitative and Psychological: Presence of dual elements is obvious to an observer and acknowledged by observers and actors.

3) Structural: Civil Law dominates private law while Common Law dominates public law.

Front 4

Why did LA retain a Civil Law system?

Back 4

Only 13% of the Louisiana population in 1812 was American. Creoles issued a manifesto requesting that Louisiana retain a law (civil law) that the majority of Louisianans understood, and Governor Claiborne eventually acquiesced. The transitional cost of switching to an entirely new legal system would have been immense.

Front 5

The mixture of jurisdictions divides people into 3 camps. describe them.

Back 5

o Purists – resist common law influence
o Pollutionists – those who are indifferent to the civil law or those who actively change the civil law to common
o Pragmatists – views the mixture as an inevitable process that permits the judge or legislator to blend the best of both worlds to create better rules than either system could offer on its own

Front 6

describe the timeline of the origin of the LA civil code

Back 6

- 1808 – First Codification
- 1812 – Louisiana becomes a state in the Union
- 1825 – Second codification, drafted by Livingston, Derbigny, and Moreau-Lislet;
- 1870 – The LA Civil Code was technically revised (eliminated slavery provisions); and this revision survived into the 20th century.
- 1960s – Substantive Revisions still underway

Front 7

three characteristics of the civil code

Back 7

 (1) Authoritative: comes from the legislature
 (2) Complete: (logical, coherent, and complete) Exclusive over a certain subject matter, no gaps
 (3) Simplicity: directed at citizens so that they know their rights

Front 8

Obligations; Definition

Back 8

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

Front 9

Sources of Obligations

Back 9

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

Front 10

General Effects

Back 10

An obligation may give the obligee the right to:
1) Enforce the performance that the obligor is bound to render;
2) Enforce performance by causing it to be rendered by another at the obligor's expense;
3) Recover damages for the obligor's failure to perform, or his defective or delayed performance.

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

Front 11

Good faith

Back 11

Good faith shall govern the conduct of the obligor and the obligee in whatever pertains to the obligation.

Front 12

Moral Duties that may give rise to a Natural Obligation

Back 12

A natural obligation arises from circumstances in which the law implies a particular moral duty to render a performance.

Front 13

Effects of a Natural Obligation

Back 13

- 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.

Front 14

Examples of Circumstances giving rise to a Natural Obligation

Back 14

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.

Front 15

Real Obligation; Definition

Back 15

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

• A real right is a right in a thing that can be held against the world.
• Real Obligations are those obligations incurred as a result of ownership or possession of a thing burdened by a real right.

Front 16

Effects of Real Obligation

Back 16

- 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.

Front 17

Heritable Obligation

Back 17

- 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.

Front 18

Strictly Personal Obligation

Back 18

- 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.

Front 19

Suspensive and Resolutory Condition

Back 19

- 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.

Front 20

Expressed and Implied Conditions

Back 20

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

Front 21

Unlawful or Impossible Condition

Back 21

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

Front 22

Condition that depends on the whim or the will of the Obligor

Back 22

- 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.

Front 23

Obligee's Right Pending Condition

Back 23

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

Front 24

Fault of a Party

Back 24

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.

Front 25

Time for fulfillment of Condition that an Event shall Occur

Back 25

- If the condition is that an event shall occur within a fixed time and that time elapses without the occurrence of the event, the condition is considered to have failed.
- If no time has been fixed for the occurrence of the event, the condition may be fulfilled within a reasonable time.
- Whether or not a time has been fixed, the condition is considered to have failed once it is certain that the event will not occur.

Front 26

Time for fulfillment of Condition that an Event shall NOT Occur

Back 26

- 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.

Front 27

Effects Retroactive

Back 27

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

Front 28

Contract for Continuous or Periodic Performance (resolutory condition)

Back 28

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

Front 29

Obligation to Give

Back 29

An obligation whereby the obligor binds himself to transfer to the obligee the ownership of a thing or to grant him some other real right in a thing. It is performed simultaneously with the act from which it arises.

Front 30

Obligation to Do

Back 30

An obligation whereby the obligor binds himself to carry out or execute an act, or a series of acts, other than the transferring of a real right, such as making or manufacturing something or rendering a service.
• Essential feature: The obligor may not be compelled to perform.

Front 31

Obligation Not to Do

Back 31

An obligation whereby the obligor binds himself to abstain from an undertaking a certain course of action.
• Essential feature: In case of nonperformance, the obligee’s remedy may consist in the destruction of whatever the obligor has done in violation of the obligation.

Front 32

Definition of Contract

Back 32

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

Front 33

Unilateral Contracts

Back 33

A contract is unilateral when the party who accepts the obligation of the other does not assume a reciprocal obligation.

Front 34

Bilateral or Synallagmatic Contracts

Back 34

A contract is bilateral, or synallagmatic, when the parties obligate themselves reciprocally, so that the obligation of each party is correlative to the obligation of the other.

Front 35

Onerous Contracts

Back 35

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

Front 36

Gratuitous Contracts

Back 36

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

Front 37

Commutative Contracts

Back 37

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

Front 38

Aleatory Contracts

Back 38

A contract is aleatory when, because of its nature or according to the parties' intent, the performance of either party's obligation, or the extent of the performance, depends on an uncertain event.

Front 39

Nominate and Innominate Contracts

Back 39

- Nominate contracts are those given a special designation such as sale, lease, loan, or insurance.
- Innominate contracts are those with no special designation

Front 40

Rules Applicable to all Contracts

Back 40

All contracts, nominate and innominate, are subject to the rules of this title.

Front 41

Rules Applicable to Nominate Contracts

Back 41

Nominate contracts are subject to the special rules of the respective titles when those rules modify, complement, or depart from the rules of this title.

Front 42

Rules Applicable to all Kinds of Obligations

Back 42

The rules of this title are applicable also to obligations that arise from sources other than contract to the extent that those rules are compatible with the nature of those obligations.

Front 43

Option Contracts

Back 43

An option is a contract whereby the parties agree that the offeror is bound by his offer for a specified period of time and that the offeree may accept within that time.
(b) An option under this Article is distinguishable from an irrevocable offer (CC Art 1928) An option is a veritable contract that may be assigned and that gives rise to rights and obligations that devolve upon the parties' heirs when not personal to the parties. An irrevocable offer is not assignable, and under CC Art 1932, it expires at the death of either the offeror or the offeree.
(c) The offer contained in an option contract expires upon the death or incapacity of the grantor if the circumstances show that that offer, if accepted, would have given rise to an obligation personal to the grantor; it expires upon the death or incapacity of the grantee if the obligation arising from the proposed contract would have been personal to the grantee. It expires upon the death or incapacity of either if the circumstances show that the proposed obligation would have been personal to both.

Front 44

Deposit; Definition

Back 44

A deposit is a contract by which a person, the depositor, delivers a movable thing to another person, the depositary, for safekeeping under the obligation of returning it to the depositor upon demand.

Front 45

Nature of the Deposit Contract

Back 45

The contract of deposit may be either onerous or gratuitous. It is gratuitous in the absence of contrary agreement, custom, or usage.

Front 46

Deposit; Formation of the Contract; Delivery

Back 46

The formation of a contract of deposit requires, besides an agreement, the delivery of the thing to the depositary.

Front 47

Deposit; Diligence and Prudence Required

Back 47

- When the deposit is onerous, the depositary is bound to fulfill his obligations with diligence and prudence.
- When the deposit is gratuitous, the depositary is bound to fulfill his obligations with the same diligence and prudence in caring for the thing deposited that he uses for his own property.
- Whether the deposit is gratuitous or onerous, the depositary is liable for the loss that the depositor sustains as a result of the depositary's failure to perform such obligations.

Front 48

Use of the Thing Deposited

Back 48

The depositary may not use the thing deposited without the express or implied permission of the depositor.

Front 49

Return of the Thing Deposited

Back 49

The depositary is bound to return the precise thing that he received in deposit.

Front 50

Delivery of Value Received

Back 50

When the thing deposited is lost or deteriorated without any fault of the depositary, the depositary is nevertheless bound to deliver to the depositor whatever value the depositary received as a result of that loss, including the proceeds of any insurance.

Front 51

General Statement of Capacity

Back 51

All persons have capacity to contract, except unemancipated minors, interdicts, and persons deprived of reason at the time of contracting.

e Minors (under 18);
e Interdicts; generally an adult who is so deprived of reason that court has taken away his civil rights;

e Person Deprived of Reason; the CC doesn’t specify why deprived, so it’s not limited to insanity; could be alcohol, a stroke, an addiction to substances; it’s broader than any psychiatric term and could be just temporary (like a blackout).
- maladies affecting intelligence;
- habitual drunkenness;
- drunkenness causing loss of reason;
- drug sedation;
- senility;

Front 52

Right to Plead Rescission

Back 52

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.

Front 53

Absolute Nullity vs. Relative Nullity

Back 53

• 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.
e A contract to commit murder is an absolute nullity.
• 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, or ratified. 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.
• Relative nullity can become valid.
e Minor enters into contract; that contract may be ratified/confirmed by legal representative; or confirmed by the minor when he becomes an adult.

Front 54

Absolute Nullity of Contracts

Back 54

- 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.

Front 55

Relative Nullity of Contracts

Back 55

- 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.

Front 56

Effects of Nullity

Back 56

- 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.

Front 57

Nullity of a Provision

Back 57

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

Front 58

Rights of Third Party in Good Faith (nullity)

Back 58

- Nullity of a contract does not impair the rights acquired through an onerous contract by a third party in good faith.
- If the contract involves immovable property, the principles of recordation apply.

Front 59

Right to Require Confirmation or Rescission of the Contract

Back 59

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

• This gives a merchant, who immediately discovers the incapacity, the opportunity/chance to force a choice on behalf of the buyer without capacity – either (1) to confirm the contract, or (2) to pretend it never existed, with the parties being restored as if it never happened.

Front 60

Rescission of Contract for Incapacity

Back 60

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

e Minor enters into contract to buy car and gains possession of it and then has an accident in which the car is destroyed; minor (or his legal representative) seeks rescission and reimbursement, but there’s nothing to give back to the dealer. What damages does the dealer get?

• Comment to CC Art 1921: the “consideration” (or car in this example) must be restored if it has been used for the benefit of the incapable person. As determination of what is beneficial depends so much upon specific facts, whenever restoration in kind is impossible or impracticable, it is preferable to allow the court to grant the other party compensation commensurate with the benefit the incapable party has derived from the other's performance. That solution is fair and in keeping with the approach taken by modern codes.

• The test is determining whether or not the incapable person (minor) received a “benefit” from the other party’s performance; the word benefit implies that there’s something that you gained from the use of that thing. So if you joy-ride in the car for 30 minutes, there’s nothing that comes out of it; there needs to be something that remains; a residual benefit. So, a minor who wrecks the car like this would not have to give anything in return; otherwise, we wouldn’t be protecting minors; we’re protecting the minors against their own immaturity.

Front 61

Fully Emancipated Minor

Back 61

A fully emancipated minor has full contractual capacity.
e Marriage, and Notarial Acts accomplish emancipation.

Front 62

Incapacity of Unemancipated Minor; Exceptions

Back 62

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.

• As such, a minor can validly contract for necessities for his support. Does this include food? Shelter? Transportation? Other needs? The merchant is also protected when he is selling necessities to the minor.

Front 63

Mere Representation of Majority; Reliance

Back 63

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

• If a minor falsely tells a merchant that he is of age, this by itself, does not affect the possibility of rescission.
• However, if the merchant reasonably relies in good faith on the minor’s claim of majority, then it cannot be rescinded.
e Merchant asks for ID; the minor shows a fake ID; and the merchant reasonably believes it to be real.

Front 64

Person Deprived of Reason; Protecting Innocent Party by Onerous Title

Back 64

A non-interdicted 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.

• This gives rise to a relative nullity; the non-interdicted person may seek rescission.

Front 65

 Evident vs. Not Evident Insanity

Back 65

• There is a distinction between:
1) Insanity that is evident, or if not obviously evident, at least susceptible of being known by those who bargain with the incapable person; and
2) Insanity that can be concealed to the point of deceiving the untrained.
 In this latter situation, the innocent party deserves the protection of the law against what can be termed a “misrepresentation of sanity.”

• When dealing with insanity as a reason for incapacity, the logic is that the other party can defend against rescission based on if he knew or should have known that the insane person was insane/incapacitated. This knowledge can come from any means – facts, reasonable knowledge, appearance, nature of contract, etc. (CC Art 1925)

• Relative Nullity is automatic for a minor, but it’s not automatic for a person deprived of reason.

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

Front 66

Attack on Non-Interdicted Decedent's Contracts

Back 66

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

If a non-interdicted insane person dies and his heirs/estate wish to attack some disposition he made before he died, the burden of proof is on the heirs/estate; they have a limited opportunity to rescind. The heirs can only rescind their non-interdicted decedent’s contract in these circumstances:
1) When the contract is gratuitous;
2) If the contract itself shows/evidences a lack of understanding; incorrect testimony, etc.
3) If the contract was made within 30 days of his death;
4) Or when application for interdiction was filed before death.
When this is the case, the standard for rescission would be whether the merchant “knew or should’ve known” of the incapacity to contract.

Front 67

A Minor’s Incapacity in other Countries

Back 67

Germany (and other European Systems)
- No child, regardless of the circumstances, can have legal capacity under the age of 7. Ratification is not even possible for children under 7.
- Between the ages of 7 and 18, the person has some sort of minimal capacity but not full capacity (can spend pocket money on contracts); and these contracts can be ratified.
France
- Must show 2 things in order to rescind:
1) That the person’s age is below 18; if you’re below a certain age, there’s no capacity; and
2) That the transaction was to their economic disadvantage (lesion); this is incapacity based on lesion; it is necessary to show that the incapacitated person is not getting an unfair economic disadvantage. Thus, the contracts are nonetheless binding unless you can show an economic injury – a lesion, an economic disadvantage.
e If minor buys a car and pays fair value and there is no patrimonial loss, then no economic disadvantage… this is different in LA because we don’t inquire into lesion; we simply say: if below a certain age, then minor is incapable…

Front 68

Consent

Back 68

- 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.

Front 69

Irrevocable Offer

Back 69

- An offer that specifies a period of time for acceptance is irrevocable during that time.
- When the offeror manifests an intent to give the offeree a delay within which to accept, without specifying a time, the offer is irrevocable for a reasonable time.

• An offeror who specifies a time period for acceptance, which happens to be too long under the circumstances, is only bound for a reasonable time.

Front 70

Expiration of Irrevocable Offer for Lack of Acceptance

Back 70

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

• “expires” seems to mean that the offer is no longer open for acceptance, period. However, the argument can be made that once the irrevocable offer expires, a revocable offer still exists, for which an acceptance can then be binding. (Palmer doesn’t agree with this argument however.)

Front 71

Revocable Offer

Back 71

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

Front 72

Expiration of Revocable Offer

Back 72

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

Front 73

Expiration of Offer by Death or Incapacity of Either Party

Back 73

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

Front 74

Time when Acceptance of an Irrevocable Offer is Effective

Back 74

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

• If there is an irrevocable offer, the acceptance is effective upon receipt by the offeror within the period stated or reasonable time.

Front 75

Time when Acceptance of a Revocable Offer is Effective

Back 75

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

• This is the mailbox rule (upon transmittal).
• The risk of transmission is placed on the offeror.
• What constitutes effective transmission is to be determined by the courts according to business practices.
• The offeror has the burden/responsibility of setting or stating a particular method of communication.

Front 76

Reasonableness of Manner and Medium of Acceptance

Back 76

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.

Front 77

Time when Revocation is Effective

Back 77

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

• Acceptance of irrevocable offer = upon receipt.
• Acceptance of revocable offer = upon dispatch.
• Notice of Revocation = upon receipt by offeree (must be prior to his acceptance).
- Obviously, notice of revocation only applies with revocable offers.

Front 78

Reception of Revocation, Rejection, or Acceptance

Back 78

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

• This Article supports a “reception theory” rather than a “knowledge theory;” it is dispositive whether it was physically sent there, as opposed to the offeror actually knowing it’s there.

Front 79

Acceptance by Performance

Back 79

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

• Ever-Tite Roofing is a prime example of this principle.
• If the offeree doesn’t communicate that he is accepting, but he begins to perform, he has accepted, provided that the offeror made acceptance by performance an option in the offer.

Front 80

Acceptance Only by Completed Performance

Back 80

- 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 has begun.
- The offeror's duty of performance is conditional on completion or tender of the requested performance.

Front 81

Notice of Commencement of Performance

Back 81

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.

Front 82

Acceptance by Silence

Back 82

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

• Silence is normally not an acceptable form of acceptance, but it can be when there are special circumstances.
e If the parties set it up by contract – that the parties agree that silence will renew the contract, (renewal of a lease), then silence means renewal/acceptance of renewal. There are also other circumstances where, because of the nature of the contract (renewal of a contract), silence can be seen to imply an acceptance.

Front 83

Acceptance Not in Accordance with Offer

Back 83

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

• This is the Mirror Image Rule.

Front 84

Offer of Reward made to the Public

Back 84

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.

• This is that not significant, but interesting; this is different from the common law rule which insists upon knowledge of the offeree before he can claim the reward.

Front 85

Revocation of an Offer of Reward made to the Public

Back 85

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

Front 86

Performance by Several Persons

Back 86

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

Front 87

Form Contemplated by Parties

Back 87

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.

• In this situation, Form trumps Substance:
- If the parties contemplated that the agreement would be notarized when final, it will not be final until notarized, even though the law doesn’t normally require such formality, and even though an mutual agreement was actually reached.

Front 88

 How to Answer Questions Re: Offer and Acceptance:

Back 88

1) First, decide who is the offeror and who is the offeree;
2) Second, look at the sequence after the offer? What comes first? Acceptance or revocation?
3) Third, is the offer revocable or irrevocable?

Front 89

Contract Interpreted in Favor of the Obligor

Back 89

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 obligation. Yet, if the doubt arises from lack of a necessary explanation that one party should have given, or from negligence or fault of one party, the contract must be interpreted in a manner favorable to the other party, whether the obligee or obligor.

Front 90

Additional Terms in Acceptance of Offer to Sell a Movable

Back 90

- An expression of acceptance of an offer to sell a movable thing suffices to form a contract of sale if there is agreement on the thing and the price, even though the acceptance contains terms additional to, or different from, the terms of the offer, unless acceptance is made conditional on the offeror's acceptance of the additional or different terms. Where the acceptance is not so conditioned, the additional or different terms are regarded as proposals for modification and must be accepted by the offeror in order to become a part of the contract.
- Between merchants, however, additional terms become part of the contract unless they alter the offer materially, or the offer expressly limits the acceptance to the terms of the offer, or the offeree is notified of the offeror's objection to the additional terms within a reasonable time, in all of which cases the additional terms do not become a part of the contract. Additional terms alter the offer materially when their nature is such that it must be presumed that the offeror would not have contracted on those terms.

Front 91

Nullity of Contracts

Back 91

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

 General Requirements for Contract Formation are:
 capacity
 consent
 cause
 object

Front 92

• Cause

Back 92

• Cause is about the purpose for which a party enters into a contract; Cause is the reason why someone obligates himself; you can’t have an obligation that has no supporting reason for its existence. The cause must be intended and lawful.
e When someone buys a car, the seller is obligated to deliver the car. But, what happens if the car is destroyed before the delivery? He is not obligated to deliver the car. But what determines why the buyer does not still have to pay or be refunded? The answer is the cause, which lies in the reciprocity concept: the “objects” of the contract were the car and the payment for money, and so the buyer no longer is obligated to pay if the car is destroyed. The cause of the buyer to contract is defeated because the cause is to get the car; if the car no longer exists, then the cause to contract now has error.

Front 93

Three Functions of CAUSE

Back 93

(1) To Protect what parties really intended; when they make mistakes, you can protect the mistaken party; when there is a simulated cause, the court can determine the true cause.

(2) To Classify the contracts/agreements so the law can attach the consequences necessary for that classification.

(3) To Protect the Public (or 3rd persons); this is the lawful cause. As in the Schwegman case, the lover (never married) should be entitled to compensation once her lover died because she helped him maintain his business, etc This was their agreement, but the court said that this agreement was unlawful, because non-marital agreements should not be construed to be marital agreements.

Front 94

No Obligation without Lawful Cause

Back 94

An obligation cannot exist without a lawful cause.

Front 95

Cause Defined; Detrimental Reliance

Back 95

- 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 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.

Front 96

Unlawful Cause

Back 96

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

Front 97

Cause Not Expressed

Back 97

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

Front 98

Untrue Expression of Cause

Back 98

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

Front 99

Gratuitous, Onerous and Remunerative Donations; Definitions

Back 99

There are three kinds of donations inter vivos:
1) The donation purely gratuitous, or that which is made without condition and merely from liberality;
2) The onerous donation, or that which is burdened with charges imposed on the donee;
3) The remunerative donation, or that the object of which is to recompense for services rendered.

Front 100

Onerous Donation

Back 100

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.

Front 101

Remunerative Donation

Back 101

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 gift.

Front 102

Onerous and Remunerative Donations, when Rules Apply

Back 102

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 (the gift) exceeds by one-half that of the charges or of the services.


 Policy behind CC Art 1526:
• When the value of the charges are not so great in comparison to the gift, then the gift predominates, and you need notarial form for it to be valid.
• But, when the value of the charges are close in comparison to the gift, then there is no real gift, and you don’t need notarial form.

Front 103

Error that Concerns Cause

Back 103

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

Front 104

Parol Evidence not Admitted to Disprove a Writing

Back 104

Testimonial or other evidence may not be admitted to negate or vary the contents of an authentic act or an act under private signature. Nevertheless, in the interest of justice, that evidence may be admitted to prove such circumstances as a vice of consent, or a simulation, or to prove that the written act was modified by a subsequent and valid oral agreement.

Front 105

Detrimental Reliance

Back 105

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.

Requirements for Detrimental Reliance:
 Promise
 Party making promise knew or should’ve known that promise would induce other party to rely
 The other party in fact relied
 Reliance was reasonable

Front 106

 Is cause the same thing as detrimental reliance?

Back 106

(NO)

• Cause is the psychological reason to make a promise. You determine cause to protect the contracting wills of the parties.
• Detrimental Reliance is a type of reaction to a made promise. In this way, these 2 concepts are very different.
• Promissory Estoppel, developed in Common Law, was created to create a substitute for consideration; to enforce a promise in the absence of consideration given, based on the fact that one party had detrimentally relied on the promise even though consideration was not given. These were the roots a to why promissory estoppel was created, but since then, the doctrine has grown to mean more than a substitute for consideration.

Front 107

The courts have discussed 3 theories for cases where there is detrimental reliance:

Back 107

1) Equitable Estoppel
2) Promissory Estoppel
3) Delictual – a determination of whose fault it was – this in terms of tort.

Front 108

Freedom of Parties

Back 108

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

Front 109

 Lawful:

Back 109

Just like illicit cause, the performance itself has to be lawful;
e contraband/illegal substances
 There is a distinction between things in and out of commerce (Things out-of-commerce include drugs, body parts, and stolen goods).

Front 110

 Possible:

Back 110

It must be possible at the time of the contract.
e An agreement to sell a book that is out of print is perhaps not possible.
 (see CC Art 1972 – it is the nature of the object, not the party’s ability to perform)

• Possibility may exist on a material level: whether the object actually/tangibly exists on a material level; if it doesn’t exist, then the object is not possible.
• Possibility can also exist on a legal level. If the object is in commerce, then it is possible; if the object is out of commerce (public land), then the object is not possible. Although, this also goes to the legality of the object, probably more so than “possibility” of the object.

Front 111

 Determined/Determinable examples

Back 111

e Promise to sell “an animal” is not determinable/determined. Or, if an obligor promises to deliver a “dog,” then that is not determined; he could deliver any dog, and the dog could be a stuffed animal.
e Percentage lease (rent depends on amount of gross receipts) is determinable later.
e Also, if an obligor promises to deliver some wine but doesn’t specify the quantity, then he could deliver only a droplet of wine. But, if the quantity is not specified but it can nonetheless be determined by the subjective intentions of the parties, then the quantity is determinable, and the object is thus determinable.
 If the buyer buys something (wine) and before delivery, the thing is demolished (the wine bottles are smashed), whose burden is it to compensate the other person? In most cases, the burden is on the seller; he has the obligation to deliver non-demolished wine bottles.
e The price for a taxi ride is the object of the cab driver’s contract to provide service, but the price is not determined until the ride is over; thus, the object (the payment) is determinable and is thus valid.
e Outputs/requirement contracts are determinable, but depends on the good faith of the parties.
e Franchise agreements: In France, franchise agreements are sometimes struck down, finding that since prices can be imposed by the will of the franchisor, it is unfair that franchisor retains such power.

Front 112

 In a bilateral contract, where there are 2 obligations, there are 2 separate objects of the obligations.

Back 112

(1) Obligations to Give – the object of the obligation is a “thing” (to be given)
(2) All other Obligations – the object of the obligations is an “act” (to be done or not done)
• One is accustomed to say that the obligation to give has a thing as its object, while the object of all the others is an act. Basically, this is not true. The object of an obligation to give is an act to be accomplished by the debtor, that is, the giving or transfer of the ownership, which is a juridical act; it is this act which is really the object of the obligation; as to the thing (movable or animal, house or land), on which it is exercised, that is in reality nothing but the matter. If therefore one considers the thing as the direct object of the obligation, it is by a sort of ellipsis, in understanding the nature of the juridical act (transfer of ownership or creation of a real right) as being accomplished on the thing. With this reservation, we will do as all the world does, and from now on speak of “things” which are the object of obligations to give, and “acts” which are the object of other obligations.

Front 113

Possible or Impossible Object

Back 113

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

• Impossibility is an objective consideration, meaning that no one can do it;
• If something is possible, only not within my ability to perform, then this a subjective problem and not impossible. If someone else can do it, then it is not impossible.
e the boat that we are selling has been destroyed; this does not mean impossibility, because someone else can sell them a boat.

Front 114

Object Determined as to Kind

Back 114

- 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 be definite at least as to the kind of thing it is.
• At the time of the formation of the contract, if the object is undetermined, but it can still be determined later, then this the object is still determinable.
e I will sell you all of my land. If this is said in the contract, but we never describe how much land there is, it can nonetheless be determined.

Front 115

Determination by Third Person

Back 115

- If the determination of the quantity of the object has been left to the discretion of a third person, the quantity of an object is determinable.
- If the parties fail to name a person, or if the person named is unable or unwilling to make the determination, the quantity may be determined by the court.

Front 116

Output or Requirements

Back 116

- 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.

Front 117

Future Things

Back 117

- 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.

e The case with the hope of the orange crops is a perfect example of this.
e The reason the succession of a living person cannot be the object of a contract is b/c that would often make people want to hasten the death of someone in order to get their succession money to pay back loans, etc. – this would be against public policy.
e Commercial sales are frequently sales of future thing: this is so especially in the case of orders sent to manufacturers, who at the time of acceptance, often do not have the products they engage to deliver within a given delay, and often do not even have the raw materials necessary for their manufacture.

Front 118

Obligation or Performance by a Third Person

Back 118

- The object of a contract may be that a third person will incur an obligation or render a performance.
- The party who promised that obligation or performance is liable for damages if the third person does not bind himself or does not perform.

Front 119

Five requirements for Unjust enrichment:

Back 119

1) There must be enrichment;
2) There must be impoverishment;
3) There must be a connection between the enrichment and impoverishment;
4) There cannot be any valid juridical act justifying the enrichment (i.e., no contract); this means there is no justification for the enrichment.
5) There must be no other remedy at law available

Front 120

Vitiated Consent

Back 120

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

Front 121

Error Vitiates Consent

Back 121

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.

e If you buy a house with gutters that you think are 20 years old, but then you find out they are actually 25 years old. The question is whether the 5 year difference really would have mattered when you were contracting to buy the house. If it wouldn’t have, then there is no error.

• You can only vitiate consent through error when there is error as to a principal cause; and the other party knew or should’ve known about that cause.
• There may be more than one principal cause.
e A judge may see little difference between a cause and the cause.
• A contract tainted by error is a relative nullity; the agreement is not automatically revoked by the lack of consent, but rather is voidable by the parties.
• The cause must be known; you can’t have a “secret” cause.
e I go buy a horse because in my mind my horse is dead, but I don’t tell the seller that I’m buying the horse because I think mine is dead; I can’t ask to rescind if it turns out that I was wrong and my horse is alive.

Front 122

Error that Concerns Cause

Back 122

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.

Front 123

Causes of Malignant Hyperthermia

Back 123

simultaneous use of inhalation anesthetics (except N2O) and succinylcholine.

Front 124

Rescission; Liability for Damages

Back 124

- 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.

• Under this Article, damages are only allowed when there is an error on one side (unilateral), not when there is mutual error.
e If you made the mistake, but the other side didn’t make your error, this error is unilateral. You can have rescission, but you probably have to compensate the other side so they aren’t harmed by their reliance (the reliance damages might be so great that you don’t want to rescind anymore).
 The court might to refuse rescission because it may be impossible to compensate in damages.

Front 125

Fraud may result from Misrepresentation or from Silence

Back 125

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.

• This does not suggest that there must be a monetary loss.
e Where an angry neighbor used a strawman to buy land his neighbor wouldn’t sell, it was fraud even though the transaction was at fair price, because it affected the cause.

Front 126

Confidence between the Parties

Back 126

- Fraud does not vitiate consent when the party against whom the fraud was directed could have ascertained the truth without difficulty, inconvenience, or special skill.
- This exception does not apply when a relation of confidence has reasonably induced a party to rely on the other's assertions or representations.

Front 127

Error Induced by Fraud

Back 127

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

• So, the target of fraud is broader than that of error; there is no need to show that fraud induced error as to a principal cause, but that it went to something that influenced the consent.

e If a car salesman fraudulently claims that a used car was once owned by a celebrity, then that my induce the buyer to buy the car, even though that isn’t the main cause of the buyer; the main cause is to obtain a car, but that fraudulent claim nonetheless has a substantial influence over the buyer, inducing him further to buy the car.

Front 128

Fraud committed by a Third Person

Back 128

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.

This is different than when there is duress; there is fraud here only if you knew that the 3rd party was fraudulent.
e If the contracting party did not know and shouldn’t have known about the fraud, then you can’t sue the fraudulent 3rd party in contract, but you can sue that person in tort.

Front 129

Proof

Back 129

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

• Court’s have usually required strong and conclusive evidence, or evidence which proves fraud beyond unreasonable doubt. This is a lower standard than what it used to be; before, proof of fraud needed to be “clear and convincing,” but now, evidence must only be “strong and conclusive.” This is because fraud should be viewed just like the other vices of consent.

Front 130

Damages (fraud)

Back 130

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

Front 131

Nature of Duress

Back 131

- 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.

Front 132

Duress directed Against Third Persons

Back 132

- 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.

e What if it’s directed to your fiancé or your best friend? These are included in “other persons” and are up to the discretion of the court. What about your dog? Again, the court has discretion.

Front 133

Duress By Third Persons

Back 133

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

e Shot-gun marriages.
e Kidnappers of your son demand that you pay a donation to a separate cause

Front 134

Threat of Exercising a Right

Back 134

- 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.

e A celebrity shoplifts, and doesn’t want it to be let out, and you make her sign a contract for a lot of money so that you won’t tell people.

• The legitimacy of the threat is essential to duress. Also, there must be a connection between the threat and the consent to contract.

Front 135

Contract with Party in Good Faith (duress)

Back 135

A contract made with a third person to secure the means of preventing threatened injury may not be rescinded for duress if that person is in good faith and not in collusion with the party exerting duress.

e A contract for of loan made for the purpose of paying ransom cannot be rescinded for duress if the lender is in good faith.

Front 136

Damages (duress)

Back 136

- 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 person.

• Damages including attorney fees are never awarded, unless stipulated by law. Each side normally pays their own. The fact that attorney fees damages are stipulated here is presumably an effort to deter unlawful behavior (fraud, duress).
• These threats must come from some person, not from a hurricane, or government threat, etc.

Front 137

 While Non-Performance is Unitary, Remedies are divided into:

Back 137

1) Specific Performance;
2) Dissolution;
3) Putting in Default;
4) Damages;

Front 138

Definition of Dissolution:

Back 138

It is said that a contract is “resolved” when it is destroyed retroactively by a cause other than the initial nullity. This retroactive abrogation of a Contract that the law recognizes as valid cannot take place except with the express or tacit consent of the parties; it is impossible to attribute to it another cause. The resolution assumes that the parties have given their conditional consent to the contract but withdrawn in advance in view of a determined eventuality: when such eventuality is realized, the contract is resolved.

Front 139

Obligee’s Right to Dissolution

Back 139

- 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.

Front 140

• Judicial Dissolution

Back 140

The obligor may be granted additional time to perform, this is at the court’s discretion in light of the circumstances (i.e., good faith of the obligor, whether obligor has valid excuse for his failure, etc.)

Front 141

• Non-Judicial Dissolution:

Back 141

This has to be made in accordance with CC Art 2016; availability of non-judicial dissolution depends on the circumstances; comment example: such as when neither party has performed and it is clear that one will not, the other may declare the contract dissolved.

Front 142

Importance of Failure to Perform

Back 142

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.

• This limitation applies to both types of dissolution.
• There can be no dissolution if:
1) the obligor has substantially performed, and
2) the part not rendered does not substantially impair obligee’s interest.
e If I’ve painted 80% of your house, you can’t dissolve the contract, provided that the 20% not painted does not substantially impair your interests.
• There are cases when you cannot have dissolution. When a contractor has already performed a substantial part of the performance, then the contract cannot be dissolved. If a contractor tries to sue on the contract and he hasn’t performed a substantial part of the performance, then the contract is dissolved and the contractor can only get damages for how he enriched the homeowner.

Front 143

Dissolution After Notice to Perform

Back 143

- Upon a party's failure to perform, the other may serve him a notice to perform within a certain time, with a warning that, unless performance is rendered within that time, the contract shall be deemed dissolved. The time allowed for that purpose must be reasonable according to the circumstances.
- The notice to perform is subject to the requirements governing a putting of the obligor in default and, for the recovery of damages for delay, shall have the same effect as a putting of the obligor in default.

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

Front 144

Dissolution Without Notice to Perform

Back 144

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

• When time is of the essence, or when the obligor has communicated an intention not to perform, the contract can be dissolved without giving notice.
• Thus, dissolution can occur without a prior putting in default in these types of situations.

Front 145

Express Dissolution Clause

Back 145

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.

• When there is an express provision, there is automatic dissolution
• Thus, here, there’s no need to give notice or to put into default.

Front 146

Effects of Dissolution

Back 146

- Upon dissolution of a contract, the parties shall be restored to the situation that existed before the contract was made. If restoration in kind is impossible or impracticable, the court may award damages.
- If partial performance has been rendered and that performance is of value to the party seeking to dissolve the contract, the dissolution does not preclude recovery for that performance, whether in contract or quasi-contract.

• The main effect (or purpose) of dissolution is to restore parties to original position
• If dissolution is impossible/impracticable, damages can be awarded.

• Partial Performance: (for purposes of dissolution)
 A buyer of a quantity of things, of which only part has been delivered, may keep that part, paying for it, and may seek dissolution plus damages for the unperformed portion of the contract.
 If dissolution takes place before a substantial part of the performance has been rendered, the obligor, if that performance is of value to the obligee, is entitled to recover the equivalent of the obligee’s enrichment. If the partial performance was of no value to the obligee, the obligor is not entitled to recovery (use the enrichment test).

Front 147

Contracts for Continuous or Periodic Performance

Back 147

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

• Thus, this does not apply retroactively.

Front 148

Contracts made by More than Two Parties

Back 148

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

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

Front 149

Rights of Third Party in Good Faith

Back 149

- Dissolution of a contract does not impair the rights acquired through an onerous contract by a third party in good faith.
- If the contract involves immovable property, the principles of recordation apply.

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

e Immovable Property: If A sells to B and it is recorded; B does not pay A; then B sells it to C; C ought to have been able to rely on an assumption that that B had paid A.

Front 150

Refusal to Perform

Back 150

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

• This is the “defense of nonperformance.” (exceptio non adimplete contractus)

Front 151

Security for Performance

Back 151

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

Front 152

Contract Terminated by a Party's Initiative

Back 152

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.

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

Front 153

Four Factors for Determining whether Dissolution is an appropriate Remedy

Back 153

1) The extent and gravity of failure to perform alleged by the complaining party;
2) The nature of the obligor’s fault;
3) The good or bad faith of the parties involved; and
4) The surrounding economic circumstances that make the dissolution opportune or not.

Front 154

Redhibition:

Back 154

: the Law of Sales, this is the principle that if you sell something with a latent defect (i.e., not apparent to the naked eye) you can get your money back; a remedy for contracts of sale for non-apparent defects in the sold thing. Redhibition is the reverse of caveat emptor.
e You buy a TV, and there’s some defective wire in the inside of the TV that prevents it from working properly. This is a non-apparent defect, and thus, the remedy could be redhibition.

• The lower court awarded redhibition but this was wrong because for redhibition to be an available remedy, you need a latent defect and bad faith.

• The difference between suing for dissolution and suing for breach of contract is that in suing for dissolution, you ask to be put in the position that you’d be in if the contract had never been made; whereas, in suing for breach of contract, you essentially concede that you are in the position you are in, but you are asking for damages to be provided for non-performance.
• Usually, the terms redhibition and rescission are used in the same context.

Front 155

Right of the Obligee (specific performance)

Back 155

- Upon an obligor's failure to perform an obligation to deliver a thing, or not to do an act, or to execute an instrument, the court shall grant specific performance plus damages for delay if the obligee so demands. If specific performance is impracticable, the court may allow damages to the obligee.
- 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.

Front 156

 Specific Performance is separated into two categories:

Back 156

1) Specific Performance that shall be granted by the court, and
2) Specific Performance that is at the discretion of the court.

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1) Mandatory Specific Performance:

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• Specific Performance is necessary when there is failure to give, or failure not to do, or failure to execute an instrument.
• This includes Delay Damages if obligee demands them.
• Delay Damages are not compensatory damages, and so they may be awarded along with specific performance; this does not equate to a double recovery.

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2) Permissive Specific Performance:

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• Specific Performance is merely allowable upon a failure to perform obligation to do.
• The discretion of the court is consistent with the principle that the obligor’s personal freedom ordinarily may not be encroached upon.
• French Law: The initial interpretation of Napoleonic Code, favored damages in most instances of breaches of to do contracts.
- French commentator: One argues that forced execution should be permissible when it can be realized without violence on the person doing the act.
• “Substituting” Specific Performance: If a 3rd person could do the job instead, then the 3rd person should do, and the obligor will pay the difference (all of this with court approval).
• French Rule: Forced execution can be ordered in contract to do when it is possible.
- Impossibilities:
e Material Impossibilities: If the object is damaged, irreparable, lost or stolen, or cannot be delivered.
e Moral Impossibilities: You cannot compel an artist to execute a painting/portrait.

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Right to Restrain Obligor

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

• An obligee may be allowed to undo, at the obligor’s expense, anything done in violation of the obligation; there is no need to prove irreparable injury (because this is a test coming from the common law and shouldn’t be imported here).

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Judgment may Stand for Act

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A failure to perform an obligation to execute an instrument gives the obligee the right to a judgment that shall stand for the act.

e If someone refused to deliver papers showing your ownership, the court doesn’t need to force the delivery of the papers, the judgment of the court can stand for the act.

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Four basic differences between Common law and civil law as to Specific Performance:

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Civil Law v. Common Law
The creditor has a right to SP v. SP is at the discretion of the courts.
SP is considered ordinary relief. v. SP is exceptional.
The test for SP is whether enforcement is possible (morally and materially) v. The test for SP is the adequacy of the damages.
Traditionally weak in enforcement measures. v. There are strong mechanisms available to compel such performance

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When may a party want to ask for specific performance?

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• When their interest cannot be satisfied by damages;
• When the object of the contract is a unique object that cannot be easily replicated or satisfied by giving damages (ex. antique painting).

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The “myth” of specific performance in civil law systems:

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• Specific performance is not often granted in these systems, even though the “myth” is that it is readily granted. In these systems, either the courts are actually hesitant to grant it, or plaintiffs rarely seek it.

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Surrogate Performance

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Surrogate performance is neither specific performance or damages. It is in between the two. Specific performance is properly defined when the only person who can deliver the performance is the ∆, not a 3rd person. Another consideration is that if a 3rd person can deliver the performance, then that performance is probably not unique, and specific performance would likely not be the appropriate remedy anyway.

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Delay Damages

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 Delay Damages requires that the party be put in default.
 If someone performs, but it’s late, you cannot get compensatory damages.
 But, you can get compensatory damages if there is injury caused by the delay.

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Putting in Default

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 You must put the party in default if you want to get delay damages.
 This gives knowledge to the other side, and
 Shifts the Risk of Loss to the other party.

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Damages for Delay

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- Damages for delay in the performance of an obligation are owed from the time the obligor is put in default.
- Other damages are owed from the time the obligor has failed to perform.

• Important: If you’re late in putting the obligor into default, you may end up getting very little in delay damages.
• Moratory damages presuppose a performance actually rendered, just delayed. The object of the obligee’s recovery is compensation for the injury he has sustained because of the obligor’s lateness in performing.
• You can get delay damages and damages for defective performance. There is no need to put the obligor in default to recover for defective performance.

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Obligor Put in Default by Arrival of Term

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When a term for the performance of an obligation is either fixed, or is clearly determinable by the circumstances, the obligor is put in default by the mere arrival of that term. In other cases, the obligor must be put in default by the obligee, but not before performance is due.

• Notice (or putting in default) is not needed if the term for performance is fixed, or term is clearly determinable (e.g., wedding dress).
• In all other cases, it is still necessary to put the other party in default.

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Manners of Putting in Default

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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.

Ways to put the obligor in default:
 written request
 oral request before 2 witnesses
 filing suit for performance
 specific provision in the contract

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

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Risk Devolves Upon the Obligor

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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.

• The risk of loss shifts to the obligor.

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Reciprocal Obligations

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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.

• Reciprocal obligations are those that arise from bilateral contracts.
• Basic good faith notion: you can’t in good faith put the obligee into default if you are not ready to accept the performance requested.

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Obligor Liable for Failure to Perform

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

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Measure of Damages

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

• Loss sustained (positive loss; value of the performance) and profits deprived (negative loss).
• Common law damages: reliance, restitution, expectations; Civil law doesn’t classify damages like this, but they fit in nonetheless.

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Obligor in Good Faith

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

• Foreseeable Damages: Those that fall within the foresight of the reasonable man; take into account:
 the nature of the contract,
 the nature of the parties’ business,
 their prior dealings,
 and all other circumstances related to the contract and known to the obligor.

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Obligor in Bad Faith

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

• Bad Faith: Intentionally and Maliciously failed to perform his obligations.

e Potier classic example: a Farmer buys farm animals to cultivate his farm. The animals had a deadly contagious disease at the time of the sale, and the seller knew it. The other farm animals catch the deadly disease and die. He does poorly in that crop season because he had no animals for cultivation, and he ends up going broke and having to foreclose the mortgage on his farm. He wants to hold the seller of the diseased animals liable for the loss of the animals and for the loss of the farm. However, Potier establishes that the farmer should not be able to hold the seller liable for the loss of the farm because it is not a necessary consequence of the selling of the diseased animals. The farmer could have done a lot of other things that attributed to him losing the farm. Also, there is a requirement of the farmer to mitigate damages. The loss of the farm is too remote from the sale of diseased animals.

• So, here we see that even when there is an obligor in bad faith, he is only liable for damages that are a direct consequence of his failure to perform. (CC Art 1997)

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Damages for Non-Pecuniary Loss

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- 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.

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Assessment of Damages Left to the Court

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

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Delay Damages Measured by Interest; No need of Proof; Attorney Fees

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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 R.S. 9:3500. 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.

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Interest on Interest

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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.

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Reasonable Efforts to Mitigate Damages

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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.

e If you rent an apartment and the ceiling has a whole in the roof, and the rainwater can get through, and rainwater is leaking onto your Persian rug, it is easy and reasonable either to move the rug and/or put a bucket under the leak.

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Obligee in Bad Faith

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

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Clause that Excludes or Limits Liability

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- 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.

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For consequential damages to be awarded:

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• It must be well-proven – this is sometimes difficult.
• These damages depend on the difference of good faith and bad faith of the church.

 Bad Faith:
If the church is in bad faith, the church has to pay for any damages resulting from the breach – this means damages that are a “direct consequence” of the breach – that the dismissal by the church had a causal connection to the consequential damages. For bad faith (CC Art 1997) there has to be malicious or intentional breach.

 Good Faith:
Whereas, if the church was in good faith, they only have to pay for the foreseeable damages.

 There is a distinction between foreseeeability and direct causation.