Obligations Outline

TITLE III OF BOOK IIIOBLIGATIONS IN GENERAL

Defn. of OBLIGATIONS – law dealing with proprietary rights in personam

In personam -- [Latin term which means “against a person” – thus, we are dealing with an area of law regarding personal rights and interests of the parties]

ARTICLE 1756 – Obligations regards the legal relationship between persons.

There are specific terms for the persons involved in an obligation:

OBLIGOR: person bound to render a performance [Also known as DEBTOR and PASSIVE PARTY]

OBLIGEE: a person to whom an obligation is owed [Also known as CREDITOR and ACTIVE PARTY]

ARTICLE 1757 – There are two sources of obligations:

1. Contracts (or other declarations of will)2. Law (in this case it does not matter if there is a contract – a person will be

held to this obligation because it is a matter of law)

ARTICLE 1758 – This Article regards the rights of the parties of the obligation

OBLIGEE: 1. Rt. to enforce performance obligor is bound to.2. Rt. to enforce performance causing it to be done by another

at the obligor’s expense.3. Rt. to recover damages for obligor’s failure to perform or

for defective or delayed performance.

OBLIGOR: 1. Rt. to obtain proper discharge when performed in full.2. Rt. to contest obligee’s actions when obligation is

extinguished or modified by legal actions.

Note: These relationships are to be governed by GOOD FAITH [this includes the following elements 1) honest in belief or purpose; 2) faithfulness to one’s obligation; 3) absence of intent to defraud].

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NATURAL OBLIGATIONS

Arise from circumstances in which the law implies a particular moral duty to render a performance.

ARTICLE 1761 – These obligations are not enforceable by law, but what has been performed in compliance with a natural obligation cannot be reclaimed.

A contract made for the performance of a natural obligation is onerous.

Onerous [Done or given in return for something of equivalent value.]

KINDS OF OBLIGATIONS

1. Real obligations2. Strictly personal and heritable obligations3. Conditional obligations4. Obligations with a term5. Obligations with multiple persons6. Conjunctive and alternative obligations7. Divisible and indivisible obligations

1. Real Obligations

These obligations are incurred as a result of ownership or possession of a thing burdened by a real right.

Real right [A right that is connected with a thing rather than a person.]

Characteristics:

a. Transferable to person who acquires the thingb. Person who acquires the thing is not bound by the personal obligations

of previous owner (unless chooses to assume those obligations)c. May abandon thing and liberate self of the real obligation

2. Strictly personal and heritable obligations

Heritable obligation [Performance may be enforced by a successor of the obligee or against a successor of the obligor.]

Strictly personal obligation [Performance can be enforced only by the obligee or only against the obligor.]

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NOTE: All obligations are deemed to be heritable unless:

a. Nature of contract say differently; orb. Contrary results from the terms of the contract.

3. Conditional obligations

This refers to obligations that are dependent upon an uncertain event.

A condition may be implied in several ways: 1) stipulation; 2) implied by law; 3) the nature of the contract; or 4) the intent of the parties (in this case, it cannot be unlawful)

THERE ARE TWO TYPES OF CONDITIONAL OBLIGATIONS:

1. Suspensive – If the obligation is not enforced until uncertain event occurs. Cannot be based on whim of obligor.

2. Resolutory – If obligation is immediately enforceable, but comes to end when uncertain event occurs. If based on whim of obligor, must be done in good faith.

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

Regarding time frames for conditional obligations:

For an event which shall occur:

1. If condition to occur within a fixed time and time elapses without the event, condition fails.

2. If no time frame for event, condition may be fulfilled within a reasonable time frame.

For an event which shall not occur:

1. If an event is not to occur within a time frame, the condition is considered fulfilled once time has elapsed without the event occurring.

2. Condition is fulfilled whenever certain that the event will not occur if there is a time frame or not.

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The fulfillment of a conditional obligation is RETROACTIVE to inception of obligation, but does not 1) impair validity of acts of administration duly performed by a party; 2) impair ownership of fruits produced; or 3) impair rights acquired by a third person while the condition was pending.

4. Obligations with a term

Term [A period of time that can be certain or uncertain for the performance of an obligation.]

a. Certain term – Time frame is fixed.b. Uncertain term – Time frame is not fixed, but is determinable by 1)

intent of the parties or by 2) the occurrence of a future and certain event. If event not determinable, then obligation must be performed within a reasonable time period.

If term not fixed, term begins on day after the contract is made or day after the occurrence of event that marks beginning of term.

NOTE: Whatever the term is, IT IS PRESUMED TO BENEFIT THE OBLIGOR (unless otherwise specified).

If there is no term, performance is due immediately.

Term of an obligation is considered to be nonexistent if the obligor is insolvent (this must be judicially declared).

Rights of the parties:

(Rights of the obligee refer only to situations where the obligor has not provided the promised security or if the security provided is insufficient)

Security [Collateral given or pledged to guarantee the fulfillment of an obligation]

OBLIGEE: 1. Rt. to require obligor to perform the obligation immediately 2. Rt. to require sufficient security to be provided

OBLIGOR: 1. May complete performance before end of term (no duress)

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5. Obligations with multiple persons

THERE ARE THREE TYPES OF OLBIGATIONS BETWEEN MULTIPLE PERSONS

1. Several obligations –

a. Several obligors owe a separate performance to one obligeeb. OR one obligor owes a separate performance to several

obligees

2. Joint obligations –

a. Several obligors owe together just one performance (No obligor is bound for the whole performance)

b. OR one obligor owes one performance for several obligees (but no obligee is entitled to the whole performance)

There are two characteristics of joint obligations:

Divisible joint obligations [Each joint obligor is bound to perform and each joint obligee is entitled to receive only his portion.]

Indivisible joint obligations [Joint obligors or obligees are subject to the rules governing solidary obligors or solidary obligees.]

3. Solidary obligations –

a. Each obligee has the right to demand the whole performance from the common obligor

b. Each obligor is liable for the whole performance.

SPECIFICALLY FOCUSING ON SOLIDARY OBLIGATIONS:

A solidary obligor may not request a division of the debt

An obligee may demand the whole performance from any of his solidary obligors and can bring action against any solidary obligor

A performance rendered by one of the solidary obligors relieves the others of liability toward the obligee

Regarding damages – the law considers that what is done by one soldiary obligor is done by the others – thus, if there is a failure to perform by one obligor, then all obligors are liable (obligors not at fault may seek remedies against obligor at fault)

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If an obligee accepts partial performance from one obligor, it still retains its rights for action against the remaining solidary obligors for the balance of the obligation

REGARDING LIABILITY OF SOLIDARY OBLIGORS BETWEEN THEMSELVES

Each solidary obligor is responsible for virile portion

Virile portion [An amount that an obligor owes jointly and severally with another]

Virile portions are equal unless otherwise noted by contract If an obligation arises from an offense or a quasi-offense, virile

portions are proportionate to the fault of each other (Unless, the circumstances concern only one of the obligors – then that obligor is liable for the whole to the other obligors)

If one solidary obligor performs whole obligation, he may claim from the other obligors no more than their virile portions

A loss that is the result of the insolvency of a solidary obligor must be borne by the other solidary obligors in proportion to their portion.

6. Conjunctive and alternative obligations

Conjunctive [Key term: AND] [The obligor is bound to multiple items of performance. The items of performance may be separately rendered or enforced.]

Alternative [Key term: OR] [The obligor is bound to render only one of two or more items of performance. The choice of which obligation is going to be performed lies with the obligor. This cannot be performed in parts (i.e., no do half of one obligation and half of another obligation).]

7. Divisible and indivisible obligations

Divisible [Even if the obligation is a unit, it may be divided.]

Indivisible [Obligation cannot be divided.]

STOP HERE AND REVIEW! THERE ARE SEVEN TYPES OF OBIGATIONS. WHAT ARE THEY? NAME SOME KEY CHARACTERISTIC OF EACH

BEFORE MOVING FORWARD IN NOTES!

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TRANSFER OF OBLIGATIONS

There are two main methods of transferring obligations:

1. Assumption2. Subrogation

Assumption [A third person may agree to assume obligor’s obligation.]

Characteristics of assumption:

1. To be enforceable by the obligee this must be done in writing.2. Third person and original obligor are bound in solidarity.3. Third person is bound only to the extent of his assumption.

Subrogation [A substitution of one person to the rights of another. As an example to further explain this concept consider the following: An original creditor can be paid with funds from a third person who is foreign to the debt or can be paid directly by the debtor with funds from a third person. When this is done, the obligation subsists in favor of the third person.]

Characteristics of subrogation:

1. Person who performs obligation for the original obligor may avail himself of the action and security of the original obligee against the obligor. This may occur without the obligor’s consent.

2. If obligor borrows money to pay a debt, he may subrogate the lender to the rights of the obligee without the obligee’s consent. This must be done in writing to prove that the money was borrowed to pay the debt.

PROOF OF OBLIGATIONS

The parties must prove:

1. Existence of an obligation; and2. Nullity, modification or extinction of an obligation.

Know difference between private signature and authentic act.

Confirmation [A contract which was subject to be avoided is rendered valid and binding. There is express confirmation and tacit confirmation. Regarding express confirmation, it must contain or identify the substance of the obligation and evidence the intention to cure its relative nullity. Tacit confirmation may result from voluntary performance.]

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Ratification [The confirmation of a previous act done either by the party himself or by another. It is a declaration whereby a person gives his consent to an obligation incurred on his behalf by another without authority. There is express ratification and tacit ratification. Regarding express ratification, a party must evidence an intention to be bound by the ratified obligation. Regarding tacit ratification, a party accepts benefit of the obligation.]

IMPUTATION OF PAYMENT

Imputation of payment [The act of applying or directing payment to principal or interest.]

An obligor who owes several debts to an obligee has the right to impute payment to the debt he intends to pay. This is confined to obligations to pay money or to give fungible things.

Fungible [Regarded as commercially interchangeable with other property of the same kind.]

An obligor MAY NOT do the following regarding imputation of payment:

1. Impute payment to a debt not yet due (without obligee’s consent)2. Impute payment to the principal when interest is due

Payment is imputed as follows (in the following steps):

1. Basis of whether a particular debt is due;2. According to whether it bears interest;3. According to whether it is secured;4. According to the date on which it became due;5. If all the above factors are equal, then payment must be imputed to

all of the debts proportionally.

TENDER AND DEPOSIT

Tender [An unconditional offer of money or performance to satisfy a debt or obligation. Is valid when performed according to nature of the contract.]

Deposit [Act of giving money or other property to another who promises to preserve it or to use it and return it in kind.]

Notice given to obligee that obligor is ready to perform has same effect as tender when:

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1. Obligor knows that obligee will refuse performance; or2. Object of performance is the delivery of a thing or money to a

place other than obligee’s domicile.

If the obligee fails to accept the tender when followed by deposit to the order of the court, produces all the effects of a performance.

IMPOSSIBLITY OF PERFORMANCE

Fortuitous event [An event that could not have been reasonably foreseen at time contract was made.

OBLIGOR NOT LIABLE WHEN:

1. Failure to perform is caused by a fortuitous event. When the entire performance becomes impossible due to a fortuitous event, the contract is dissolved.

OBLIGOR IS STILL LIABLE WHEN:

1. When he or she assumed the risk of such a fortuitous event;2. A fortuitous event occurs after he or she is in default; or3. If it is the obligor’s fault that the fortuitous event occurred.

NOVATION

Novation [The extinguishment of an existing obligation by the substitution of a new one. NOTE: If a substantial part of the original performance is still due, it is not a novation.]

Novation is not presumed. It must be stated clearly.

SUBJECTIVE NOVATION – a new obligor is substituted for a prior obligor who is discharged by the obligee. (This is called a subjective novation because it concerns the parties or the “subjects” of the obligation.)

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SUBJECTIVE NOVATION v. STIPULATION POUR AUTRUI

Subjective Novation:

An obligee consents to the extinction of obligation by original obligor.

Stipulation pour Autrui:

The obligee is a third party with regard to the agreement between the original and new obligor. Thus, the original obligor is not released.

REMISSION OF DEBT

Remission [A cancellation or extinguishment of all or part of a financial obligation.]

Remission of debt occurs when the obligor receives the communication from the obligee.

NOTE: Do not confuse the release of real security given for performance of an obligation with remission of debt. Release of real security given for performance does not give rise to a presumption of remission of debt.

COMPENSATION

Compensation occurs by operation of the law when two persons owe to each other sums of money or quantities of fungible things identified in kind, and those sums or quantities are liquidated and presently due.

COMPENSATION TAKES PLACE REGARDLESS OF THE SOURCES OF OBLIGATIONS. It may also take place by agreement of the parties even when the requirements for compensation by operation of the law are not met.

Surety [A person who is primarily liable for the payment of another’s debt or the performance of another’s obligation.]

1. Compensation between obligee and principal obligor extinguishes the obligation of a surety.

2. Compensation between obligee and surety does not release obligation of the principal obligor.

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CONFUSION

There are three main characteristics of confusion:

1. Occurs when the qualities of obligor and obligee are united in the same person. Obligation is extinguished.

2. Occurs when the qualities of the obligee and obligor are united in the person of the principal obligor. This extinguishes the obligation of the surety.

3. Occurs if a solidary obligor becomes an obligee. Confusion extinguishes the obligation only for that portion of that obligor.

EXTINCTION OF OBLIGATIONS (Review this)

1. Performance by the obligor extinguishes the obligation.

2. Performance may be rendered by a third person (even against will of obligee), unless the obligor or the obligee has an interest in performance by only the obligor. Performance rendered by a third person effects subrogation only when so provided by law or by agreement.

3. An obligation that may be extinguished by the transfer of a thing is not extinguished unless the thing has been validly transferred to the obligee of performance.

4. Performance must be rendered to the obligee or to a person authorized by him. If a performance is rendered to an unauthorized person may be valid if the obligee ratifies it. In absence of ratification, a performance rendered to an unauthorized person is valid if the obligee has derived a benefit from it, but only for the amount of the benefit.

5. Performance rendered to an obligee w/o capacity to receive it is valid to the extent of the benefit he derived from it.

6. Performance rendered to an obligee in violation of a seizure is not valid against the seizing creditor who, according to his right, may force the obligor to perform again. In that case, the obligor may recover the first performance from the obligor.

7. When the performance consists of giving a thing that is determined as to its kind only, the obligor need not give one of the best quality but he may not tender one of the worst.

8. An obligee may refuse to accept a partial performance. If the amount of an obligation to pay money is disputed in part and the obligor is willing to pay the undisputed part, the obligee may not refuse to accept that part, the obligee may not refuse to accept that part. If the obligee is willing to accept the undisputed part, the obligor must pay it. In either case, the obligee preserves the right to claim the disputed part.

9. 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.

10. Expenses that may be required to the render performance shall be borne by the obligor.

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WHAT ARE THE QUALITIES OF A VALID CONTRACT?

This comes from the old code – Article 1779 Requirements for validity of contract.

1. The parties are legally capable of contracting.

2. The parties’ consent is legally given.

Thus, consent must be freely given – a person cannot accidentally contract and a contract formed under duress is not binding. Legally given consent implies the importance of form in requirements.

See cases: Blann v. Aldige (page 27), Michael v. City of Mindin (page 29), Buruzs v. Buruzs (page 30), Marine Ins. Co. Ltd. Of London, Eng. V. Rehm (page 33), St. Paul Fire & Marine Ins. Co. v. Zurich Ins. Co. (page 36), Barchus v. Johnson (page 40), and Bridges v. Bridges (page 41).

3. A certain object is identified which forms the matter of the agreement.

Thus, a contract must be specific and determined.

See cases: Clark Warehouse & Implement Co. v. Jacques & Edmond Weil, Inc. (page 43) and Salles v. Stafford, Derbes & Roy, Inc. (page 45).

4. The contract has a lawful cause.

Cause [A party’s immediate motive for incurring his obligation. The reason why a party obligates himself.]

Thus, the contract must be lawful. For instance, you cannot have a binding contract to kill the president. Note, however, in Fix-It-Shop v. Roy, the court holds that a contract in which the law or regulations declare the object of the contract to be illegal, expressly also declares that though penalties may be enforced for the violation of the law or regulations, the contract made in violation of the law and/or regulations is still enforceable as long as the object of the contract is not malum in se. See also, Mobley v. Harrell (page 48).

Note: Contracts are governed by the law in existence at the time of their creation. (Thus a contract signed in 1970 is subject to the law regarding contracts in 1970, not 2001.)

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TITLE IV OF BOOK IIICONVENTIONAL OBLIGATIONS OR CONTRACTS

ARTICLE 1906 – Definition of contract

A contract is an agreement by two or more parties whereby obligations are 1) created; 2) modified; or 3) extinguished.

THERE ARE EIGHT TYPES OF CONTRACTS INIDCATED BY THE CIVIL CODE(Mnemonic – Ugly Boys Only Get Cussed At Prom Night)

1. Unilateral Contracts2. Bilateral Contracts3. Onerous Contracts4. Gratuitous Contracts5. Commutative Contracts6. Aleatory Contracts7. Principal and Accessory Contracts8. Nominate and Innominate Contracts

ARTICLE 1907 – Unilateral Contracts

A contract is unilateral when the party who accepts the obligation of the other does not assume a reciprocal obligation. (Only one party makes a promise or undertakes a performance.)

ATRICLE 1908 – Bilateral or Synallagmatic Contracts

The parties obligate themselves reciprocally, so that the obligation of each party is correlative to the obligation of the other. (A contract in which each party promises a performance, so that each party is an obligor on that party’s own promise and an obligee on the other’s promise.)

Correlative [Related or corresponding. Having or involving a reciprocal or mutually interdependent relationship.]

Synallagmatic Contract [The parties obligate themselves reciprocally, so that the obligation of each party is correlative to the obligation of the other.] Characterized by correlative obligations!

ARTICLE 1909 – Onerous Contracts

Each of the parties obtains an advantage in exchange for his obligation. (Each party is obligated to perform in exchange for each party’s promise of performance.)

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Key word: “Exchange.” This is the very essence of an onerous contract.

ARTICLE 1910 – Gratuitous Contracts

One party obligates himself towards another for the benefit of the latter, without obtaining any advantage in return.

NOTE: A person involved in a gratuitous contract cannot receive any advantage in return and performs an obligation for the benefit of the other party.

ARTICLE 1911 – Commutative Contracts

The performance of the obligation of each party is correlative to the performance of the other party. (Because one party’s performance is correlative to the performance of another party, nonperformance by either party affords a defense to the other.)

NOTE: This concerns correlative performances! (Do not get this confused with bilateral contracts.) A correlative obligation makes a contract bilateral. A correlative performance makes a contract both commutative and bilateral. In the absence of a correlative obligation, the bilateral contract is null. A party in default of his correlative performance does not make a commutative contract null, but is enforceable by the other party.

ARTICLE 1912 – Aleatory Contracts

The performance of either party’s obligation, or the extent of the performance, depends upon an uncertain event.

This contract contemplates reciprocal obligations; thus, what is gain for one of the parties is a loss for the other.

NOTE: The chance that an aleatory contract contemplates may result in one party not having to perform at all (consider insurance companies).

ARTICLE 1913 – Principal and Accessory Contracts

Principal Contracts [This contract gives rise to an accessory contract as an agreement from which a secured obligation originates. When a secured obligation arises from a contract, either between the same or other parties.]

Accessory Contracts [A contract entered for the purpose of carrying out a principal contract. It is made to provide security for the performance of an obligation.]

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ARTICLE 1914 – Nominate and Innominate Contracts

Nominate Contracts [Those contracts with a special designation, i.e. sale or lease.]

Innominate Contracts [Those contracts without a special designation.]

REGARDING THE APPLICABILITY OF THIS TITLE TO ALL CONTRACTS:

ARTICLE 1915 – ALL CONTRACTS, NOMINATE AND INNOMINATE, ARE SUBJECT TO THE RULES OF THIS TITLE.

ARTICLE 1916 – Nominate contracts are subject to special rules of the respective titles when those rules modify, complement, or depart from the rules of this title.

ARTICLE 1917 – The rules of this title are applicable to obligations that arise from sources other than contract to the extent that those rules are compatible with the nature of those obligations.

The following articles deal with the capacity to contract. Note: Where doubt exists as to the showing of an exception, THE PRESUMED CAPACITY TO CONTRACT PREVAILS.

Also, know difference between RECISSION and DISSOLUTION:

RESCISSION:

Rescission indicates that there was never an actual contract because one party was incapacitated. There was no legal contract.

DISSOLUTION:

Dissolution indicates that there was a legal contract, but that for some reason we are ending or dissolving the contract.

The next section of articles look at some of the requirements for a valid contract. Each section is labeled according to the requirements it focuses upon.

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I Part I for a valid contract – The parties must be legally capable of contracting.

Before reading the next articles, look at the sequence of steps. The code does not skip around topics; instead, it addresses them in a step-by-step format (i.e., basic information first, followed by exceptions or clarifications of the general rules). There are four basic steps when dealing with contract capacity.

STEP ONE – WHO HAS CONTRACTING CAPACITY?

ARTICLE 1918 – General statement of capacity

All persons have the capacity to contract except:

1. Unemancipated minors;2. Interdicts;3. Persons deprived of reason at the time of contracting.

STEP TWO – HOW DOES A PERSON GET OUT OF A CONTRACT THAT HAS BEEN MADE WITH A PERSON WHO DOES NOT HAVE CAPACITY?

ARTICLE 1919 – Right to plead rescission

Contract made by a person without legal capacity is null and may be rescinded only at the request of that person or his legal representative.

NOTE: Only the incapable person or his legal representative is allowed to raise the former’s lack of capacity as a basis for rescinding a contract.

NOTE: If you are an interdict, the action to rescind the contract is available only to the interdict or his curator. But, a contract made by an interdict after the date of successful application for interdiction is relatively null.

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STEP THREE – WHAT ARE THE RIGHTS OF THE PARTY WHO DID HAVE CAPACITY AT THE TIME OF THE CONTRACT?

ARTICLE 1920 – Right to require confirmation or rescission of the contract

Immediately after discovering the incapacity, a party, who was unaware of the incapacity of the contracting party, may require from the contracting party (if the incapacity has ceased, may ask directly of that person; if the incapacity still exists, may ask of the legal representatives):

1. That the contract be confirmed or 2. Rescinded.

Thus, a capable party does not have to wait until the incapable party chooses to confirm or attack the validity of the contract in order to discover whether or not it is valid.

STEP FOUR – WHAT HAPPENS WHEN A CONTRACT IS RESCINDED DUE TO INCAPACITY?

ARTICLE 1921 – Rescission of contract for incapacity

If contract is rescinded due to incapacity:

1. Each party shall restore to the other what was received from the contract.

2. If that restoration is not possible, the court can aware compensation to the party to whom restoration is not possible.

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The following articles look at the three specific groups of people who do not have capacity to enter into a contract. Thus, this is the clarification section of the code.

Group #1 – Unemancipated Minors

ARTICLE 1922 – Fully emancipated minor

A fully emancipated minor has full contractual capacity.

ARTICLE 1923 – Incapacity of unemancipated minor; exceptions

A contract by an unemancipated minor may be rescinded on grounds of incapacity EXCEPT:

1. When the contract is made for the purpose of providing the minor with something necessary for his support of education.

2. Or for a purpose related to his business.

ARTICLE 1924 – Mere representation of majority; reliance

The mere representation of majority by an unemancipated minor does not preclude an action for recession of the contract: Thus, a contract may not be rescinded when the other party reasonably relies upon the minor’s representation of majority.

Group #2 – Persons deprived of reason at the time of contracting

ARTICLE 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 based upon incapacity ONLY WHEN SHOWING THAT THE OTHER PARTY SHOULD HAVE KNOWN OF THE INCAPACITY.

Group # 3 – Interdicted persons

ARTICLE 1926 – Attack on noninterdicted decedent’s contracts

A contract made by a noninterdicted person DEPRIVED OF REASON at the time of contracting may be attached after his death on grounds of incapacity ONLY

1. When the contract is GRATUITOUS; or2. It evidences lack of understanding; or3. It was made within 30 days of his death; or4. When application for interdiction was filed before his death.

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II Part II for a valid contract – Consent must be legally given.

This section refers to two things: 1) consent cannot be given based upon fraud, or under duress, etc; and 2) formality requirements of a contract – or the form in which a contract must be presented in order for it to be valid. I will first look at the formality requirements necessary for certain contracts and will then go into the articles specifically addressing consent.

As a general rule, no specific or particular forms are necessary; but, there are exceptions in which a special form is required.

Order of formality (beginning with least formal and working down to most formal):

1. Silence;2. Oral;3. Oral with a witness;4. Informal writing;5. Acts under private signature;6. Authentic acts.

If the law requires a specific form for a contract, a higher form can be used, but a lessor form cannot be used. (For example, the law requires that a specific contract be an act under private signature – a person can use an authentic act instead, but not an informal writing.)

The articles listed below are from Title III, but they seemed to fit better here.

CHAPTER 5, PROOF OF OBLIGATIONSTITLE III

ARTICLE 1831 – Party must prove obligation

A party who demands performance of an obligation must be able to prove the existence of an obligation. Also, a party who asserts that an obligation is null, modified or extinguished, must be able to prove the facts or acts giving rise to the nullity, modification, or extinction.

ARTICLE 1832 – Written form required by law

When the law requires a contract be in written form, the contract may not be proven by testimony or presumption unless the written contract has been destroyed, lost or stolen.

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AUTHENTIC ACTS

ARTICLE 1833 – Authentic act

An authentic act is a writing executed before 1) a notary public and 2) two witnesses. It is to be signed by each party who executed the document, by each witness and by the notary public.

Per ARTICLE 1835, an authentic act is full proof of the agreement against parties, heirs and successors by universal or particular title.

ARTICLE 1834 – Act that fails to be authentic

An act that fails to be authentic (notary is nuts or form is crummy) is still valid as an act under private signature.

Also, per ARTICLES 1840 and 1841, a copy of an authentic act (1840) or a copy of an authentic act (or act under private signature) which has been filed for registry with a public officer (1841), constitute proof of the contents of the original contract.

What types of contracts must executed as an authentic act?

ARTICLE 1839 – Transfer of immovable property

A transfer of immovable property must be made by authentic act or by act under private signature. [An oral transfer is valid when the property has been actually delivered and the transferor recognizes the transfer when interrogated on oath.]

ARTICLE 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 (between living persons) of immovable property or incorporeal things, such as rents, credits, rights or actions, under the penalty of nullity.

Note that a manual gift (that is, the giving of corporeal movable objects) accompanied by a real delivery does not require any formality of form (ARTICLE 1539).

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ACTS UNDER PRIVATE SIGNATURE

ARTICLE 1836 – Act under private signature duly acknowledged

An act under private signature is regarded prima facie as the true and genuine act of a party executing it when his signature has been acknowledged, and the act shall be admitted in evidence without further proof.

The act may be acknowledged by a party to that act by:

1. Recognizing his signature as his own before a court;2. Recognizing his signature as his own before a notary public (and two

witnesses);3. Or in any other manner authorized by law.

An act under private signature does not substitute for an authentic act when the law calls for such an act.

ARTICLE 1837 – Act under private signature

An act under private signature need not be written by the parties, but it must be signed by them.

ARTICLE 1838 – Party must acknowledge or deny signature

A party against whom an act under private signature is asserted must acknowledge his signature or deny that it is his. [In case of denial, any proof may be used to establish that the signature belongs to that party.]

GENERAL INFORMATION

ARTICLE 1846 – Contract not in excess of $500.00

If the price or value is in excess of $500.00, the contract must be proved by at least 1) one witness and 2) other corroborating circumstances. [When the law does not require a specific form and the value or price does not exceed $500.00, the contract may be proved by competent evidence.]

ARTICLE 1847 – Debt of a third person and debt extinguished by prescription

Parol evidence is inadmissible to establish either a promise to pay the debt of a third person or a promise to pay a debt extinguished by prescription.

ARTICLE 1848 – Testimonial or other evidence not admitted to disprove a writing

Testimonial or other evidence may not be admitted to negate or vary the contents of an authentic act or an act under private signature. This evidence may be presented to prove vice of consent, or a simulation, or to prove that the written act was modified by a later and valid oral agreement.

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General information which should be addressed before studying CONSENT (which follows this section).

THE OFFER

Offer [a unilaterial declaration of the will of the offeror, which is addressed to another – the offeree – whereby the offeror proposes to the offeree the conclusion of a contract].

Elements of an offer:

1. Offeror’s will must be declared. The declaration of will must be SUFFICIENTLY PRECISE AND COMPLETE.

NOTE: If the offeror’s declaration lacks precision or completeness, it is not a true offer. Rather, it is an invitation to negotiate a prospective contract. Also, a true offer may be turned into an invitation to negotiate if the offeree makes a counteroffer which induces the parties to engage in further discussion of the intended contract.

2. Offeror’s will must be addressed to whom the offeror intends to contract.

NOTE: If the offeror makes the offer to several persons, the offeror must let other potential parties know that the offer has been made to others. Offeror will be liable to others if he does not let all parties know that the offer has either 1) been made to other parties or 2) is contingent upon acceptance by other parties.

THE OFFEROR IS MASTER OF THE OFFER!

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Once again the code goes in a specific sequence to make the information more manageable. (Also note, however, that I did take some of the articles out of sequential order because it made more sense to me.) Follow the sequence and it makes the articles/issues more understandable.

STEP ONE – WHAT IS THE GENERAL DEFINITION OF CONSENT

ARTICLE 1927 – Consent

A contract is formed by consent of the parties. Consent is formed by 1) offer and 2) acceptance.

Offer and acceptance can occur via (unless otherwise specified by the contract):

1. Orally; or2. In writing; or 3. Action or inaction.

The manner is which the contract is made does not have to be the same manner is which the contract is accepted. (Can orally offer a contact and accept it in writing.)

STEP TWO – IF AN OFFER IS AN INTEGRAL PART OF CONSENT, WHAT TYPES OF OFFERS ARE THERE AND WHAT ARE THE CHARACTERISTICS OF SUCH OFFERS?

SUBPART A TO STEP TWO – ONE TYPE OF OFFER IS AN IRREVOCABLE OFFER

ARTICLE 1928 – Irrevocable offer

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

If there is no time period specified, an offer is irrevocable for a reasonable time.

ARTICLE 1929 – Expiration of irrevocable offer for lack of acceptance

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

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SUBPART B TO STEP TWO – A SECOND TYPE OF OFFER IS A REVOCABLE OFFER

ARTICLE 1930 – Revocable offer

An offer that IS NOT IRREVOCABLE may be revoked before it is accepted.

ARTICLE 1931 – Expiration of a revocable offer

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

STEP THREE – WHAT HAPPENS TO AN OFFER IF A PERSON DIES BEFORE IT IS ACCEPTED?

ARTICLE 1932 – Expiration of offer by death or incapacity of either party

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

NOTE: This regards irrevocable contracts – not option contracts.

ARTICLE 1933 – Option contracts

An option is a contract whereby the parties agree that:

1. The offeror is bound by his offer for a specified period of time; and2. That the offeree may accept within that time.

This is not an irrevocable contract. 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 it expires at the death of either the offeror or the offeree. THUS, ASSIGNABILITY IS THE FACTOR OF DIFFERENCE BETWEEN OPTION AND IRREVOCABLE OFFERS.

An option contract is not assignable to either the offeror or the offeree if it can be shown that the obligation is personal in nature.

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STEP FOUR – WHAT ARE THE ELEMENTS OF ACCEPTANCE (THE SECOND PART OF CONSENT)?

SUBPART A OF STEP FOUR – GENERAL INFORMATION

ARTICLE 1936 – Reasonableness of manner and medium of acceptance

Regarding acceptance – the manner and/or medium of acceptance is acceptable if:

1. It is the same one used in making the offer; or2. It is one customary in similar transactions at the time and place the

offer is received.

(The two options above are correct unless circumstances known to the offeree indicate otherwise.)

ARTICLE 1938 – Reception of revocation, rejection, or acceptance

A written revocation, rejection or acceptance is received when

1. It comes into the possession of the addressee or of a person authorized by him to receive it; or

2. It is deposited in a place the addressee has indicated as the place for this or similar communications to be deposited for him.

Note: RECEPTION OF AN ACCEPTANCE AND KNOWLEDGE OF AN ACCEPTANCE ARE NOT THE SAME ISSUE. See case, Ambrose v. M&M Dodge, Inc. (page 69).

SUBPART B OF STEP FOUR – ACCEPTANCE OF AN IRREVOCABLE 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.

SUBPART C OF STEP FOUR – ACCEPTANCE/REVOCATION OF A REVOCABLE OFFER

ARTICLE 1935 – Time when acceptance of a revocable offer is effective

An acceptance of a revocable offer (which should be 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.

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ARTICLE 1937 – Time when revocation is effective

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

SUBPART D OF STEP FOUR – ACCEPTANCE BY PERFORMANCE

ARTICLE 1939 – Acceptance by performance

When an offeree is invited to accept by performance, it is contemplated that the performance will be completed if it is commenced, a contract is formed when the offeree begins the requested performance.

ARTICLE 1940 – Acceptance only by completed performance

When 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.

ARTICLE 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 notice is liable for damages.

SUBPART E OF STEP FOUR – ACCEPTANCE BY SILENCE

ARTICLE 1942 – Acceptance by silence

When silence leads the offeror reasonably to believe that a contract has been formed, the offer is deemed accepted.

STEP FIVE – WHAT IF THE ORIGINAL OFFER IS NOT ACCEPTED, BUT IS ALTERED?

ARTICLE 1943 – Acceptance not in accordance with offer

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

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STEP SIX – WHAT IF THE OFFER IS MADE TO THE GENERAL PUBLIC AND IS AN OFFER OF A REWARD FOR A SPECIFIC ACTION?

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.

ARTICLE 1945 – Revocation of an offer of reward made to the public

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

ARTICLE 1946 – Performance by several persons

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 (unless otherwise stated in offer or implied by nature of the act).

GENERAL INFORMATION

Regarding duration and revocability of contracts:

Note the difference between EXPIRATION (offer dies on its own terms due to the passage of time) and REVOCATION (offeror withdraws and terminates the offer).

Part III for a valid contract – The contract must be specific and determined (there must be a certain object which forms the matter of the agreement). This has been presented earlier in the notes in sufficient detail.

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Part IV for a valid contract – The contract must have a lawful purpose or a lawful cause.

Cause [The person’s motive or reason for obligating himself. (Why did he incur the obligation?)]

Note: The cause of an obligation only focuses upon the immediate motive for entering into a contract, not the ulterior or ultimate goal for entering the contract.

The cause of a contract affects three main elements of the contract:

1. The determination of classification of the contract (i.e., is the contract onerous or gratuitous). This determination goes back to Part II of a valid contract, consent must be legally given. In other words, we must know what type of contract we have in order to ascertain the necessary type of form we need to make our contract valid.

2. An aid in determining when, in a commutative contract, a party ought not have to perform due to the other’s failure of performance (implied resolutory condition) or due to the destruction of the thing that is the object of the contract. We refer to this as “failure of cause.”

3. To assist in determining vices of consent, which are flaws that eradicate the true apparent consent (cause is very important when dealing with this possible problem).

Cause is inherently subjective. Neither the law nor the courts can read a person’s mind to determine what a person was really thinking when he or she entered into a contract. The courts do try to use the reasonable person determination as a guideline for deciding cause.

ARTICLE 1966 – No obligation without cause

An obligation cannot exist without a lawful cause.

ARTICLE 1967 – Cause defined – detrimental reliance

Definition: Cause is the reason why a party obligates himself.

Detrimental reliance: Reliance by one party on the acts or representations of another, causing a worsening of the first party’s position. Detrimental reliance may serve as a substitute for consideration and thus make a promise enforceable as a contract. Recovery may be limited to the expenses incurred or the damages suffered as a result of the promisee’s reliance on the promise.

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Note, however, that reliance on a gratuitous promise made without the required formalities is not reasonable. (See previous notes on legal consent, above.)

Cause v. Consideration

CAUSE CONSIDERATIONThe reason why a party obligates himself. The determination of cause in a contract exists only in Louisiana. The rest of the country focuses upon consideration.

This is a common law term that has found its way into Louisiana law. Consideration states that in order for a promise to be legally binding, the promising party must receive some quid pro quo (“something for something”) for his promise.

There was much confusion regarding the two doctrines due (in part) the errors of translation from French to English in the 1808 and 1825 codes. [The French word consideration means the factor or thought.] The La. legislature became confused between the common law interpretation of consideration and the French interpretation of consideration and, included the common law definition of consideration in previous codes. These codes have now been amended.

Article 1967 does not refer to the common law term consideration; instead, it refers only to the civil law term of cause. The reason why a party binds himself need not be to obtain something in return or to secure an advantage for himself. An obligor may bind himself by a gratuitous contract.

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.

ARTICLE 1969 – Cause not expressed

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

ARTICLE 1970 – Untrue expression of cause

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

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The main purpose of cause is to determine why a person obligated himself. We must be careful, however, because people often disguise the true cause behind their obligations. For instance, people may often say that they have “sold” their home or their land for a nominal price. The law disagrees with this concept of cause – the law indicates that the true cause was not a sale, but, rather, a donation in disguise.

See ARTICLE 2464 – Price, essential elements

The price must be fixed by the parties in a sum either certain or determinable through a method agreed by them. There is no sale unless the parties intended that a price be paid.

The price must not be out of all proportion with the value of the thing sold. Thus, the sale of a plantation for a dollar is not a sale, though it may be a donation in disguise.

Calling something a sale does not make it a sale. You still have to focus upon the MOTIVE of the contract. [Note that even if the contract is innominate, it can still convey ownership.]

↕The importance of the above article regards form. Remember that a GRATUITOUS CONTRACT must be in authentic form. Also remember that the transfer of immovable property must be made by authentic act or by act under private signature. [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.] Thus, we must know whether the parties intended to make a sale or to create a donation.

DONATIONS IN GENERAL (as they relate to the cause of a contract)

There are three types of donations inter vivos:

1. Purely gratuitous [a donation made without condition and merely from liberality]

2. Onerous donation [a donation which is burdened with charges imposed on the donee] This is not a real donation if the value of the object given does not manifestly exceed the charges imposed on the donee. The idea with an onerous donation is to partially charge for something and to partially give something out of love and affection.

3. Renumerative donation [the object of which is to recompense for services rendered] This is not a real donation if the value of the services to be recompensed thereby being appreciated in money, should be little inferior

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to that of the gift. The idea with a renumerative donation is to pay someone back for prior assistance or work.

Note that the rules which apply to purely gratuitous donations regarding form do not apply to onerous or renumerative donations EXCEPT:

WHEN THE VALUE OF THE OBJECT GIVEN EXCEEDS BY ONE HALF THAT OF THE CHARGES OR OF THE SERVICES. [ARTICLE 1526]

Note regarding renumerative donations:

For a party seeking to enforce a or deny a renumerative donation – there are two options:

1) Have to prove that they are natural obligations (which are onerous, thus requiring no form); or

2) Value of services must be proven, and if the money a party is seeking is over one half the value, then the donation is purely gratuitous (which requires authentic form).

Which one of these options is right? Different results occur from the use of one option over the other. Article 10 provides that when the language of the law is susceptible of different meanings, it must be interpreted as having the meaning that best conforms to the purpose of the law. Courts also often look at the dates of the article provision (meaning that the courts will most likely use the most recent provision over the older provision). Another option to consider is that when one law is general and the other is specific, the specific law is presumed to trump the more general one. It is important to note that courts vary in their determination of which option to follow (i.e., if the contract is a natural obligation or if the one-half value provision applies).

Regarding donations made mortis causa

These donations can be made only in the form authorized by law (for these are, in effect, a last will and testiment). No gift may be validly promised to a person subject to the suspensive condition of the donor’s death.

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FORM OF DONATIONS INTER VIVOS

ARTICLE 1536 – Donation of immovables or incorporeals, form required

For the donation of immovable property or incorporeal things, authentic form is required.

ARTICLE 1538 – Donation of movables, form required

A donation inter vivos, even of movable effects, will not be valid, unless an act be passed of the same, as is before prescribed.

ARTICLE 1539 – Manual gift

The manual gift, that the giving of corporeal movable effects, accompanied with real delivery, is not subject to any formality.

NOTE: Various items which might otherwise be classified as incorporeals and thus insusceptible as a manual gift are nevertheless provided as manual gifts. This is due to special legislation (Act 452 of 1982) which provided that some incorporeals are so commonly used that the requirement for authentic form was unduly burdensome. Such items which can be manually given include the following: stock certificates, saving certificates, promissory notes, checks, drafts, and certificates of deposit. Also note that even though these things are made transferable through manual donation, other provisions and limitations on donations remain applicable.

Also of importance to note is that a promise to do a particular thing has to be in the same format as the actual agreement has to be; thus, if I promise to transfer my land to you (a contract which has to be an act under private signature) then my promise must be an act under private signature.

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PLEDGES

Making a pledge appears to be gratuitous, which would necessitate an authentic format. However, case law has treated pledges differently. See, Louisiana College v. Keller. The court in Louisiana College v. Keller indicates that the intention to be gratuitous makes the donation onerous. (Thus, one the benefit received by one party is the money and the benefit received by the other party is to know that they are gratuitous persons!) This is actually pretty cooky, but courts have supported this decision.

Something to consider about the case law which holds a pledge to be onerous is that no specific form is needed for an onerous contract. Thus, it seems that even an oral donation would be plausible. There has yet to be a case discussing this issue, however.

ABSENCE OR FAILURE OF CAUSE

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.

This article appears to be the simplest form of the concept of failure of cause. When an obligor fails to perform, the obligee has the right to dissolve the contract (or may consider the contract dissolved). In either case, the obligee may recover damages.

ARTICLE 3035 – Definition of a 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.

The idea then is that if the surety contract (accessory contract) is void, the principal contract is still in effect. But, if the principal contract is not in effect, then the accessory contract is void.

The presentation of Article 3035 regards the case regarding USF&G Insurance Company (in which USF&G is an insurer who will pay the defendant for its losses). But the court said that there was no consideration that the defendant received from its promise.

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In civil law language – when the court says that there is no consideration, it means that the contract WAS NOT an onerous contract. The contract was gratuitous, and was (in the case at hand) out of form.

Another case dealing with failure of cause is Losecco v. Gregory [Orange case], which deals with the idea of risk of loss.

ARTICLE 2450 – Sale of future things

A future thing may be the object of a contract of sale. In such as 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.

The sale of future things can be certain (such as the sale of a crop) or aleatory (such as the same of hope).

ARTICLE 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.

The determination of whether a thing is a future thing or a hope is dependent upon the common intent of the parties. Problems arise when a contract is not specific enough to show the common intent.

In the case at hand, the contract mentioned that the plaintiff was to assume all risks. Did those risks only include foreseeable risks or did they include uncertain events?

Note: In sale situations where a thing is now in existence and something happens to that thing before the sale transaction is completed, the owner of the thing must bear the loss.

In sale situations where the sale transaction occurs and then something happens to the thing, the new owner bears the burden.

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PRINCIPAL CAUSE – the motive without which the obligor would not have obligated himself.

MATERIAL CAUSE – a secondary motive (which is not the principal cause).

Often the motive of a contract appears to be subjective, but the motive can be objectified. When the motive is objectified, it becomes a TACIT CONDITION and is entered into the contractual field. Thus, sometimes when the material cause is expressed, it can become a principal cause. A question of fact for Article 2045 (regarding the common intent of the parties) is whether the subjective cause has been objectified in such a manner that the second party to a contract understands and agrees to the tacit conditions. [Another way to consider the question of fact for the jury is as follows: Was there a failure of cause?]

CHAPTER 13INTERPRETATION OF CONTRACTS

JUST REVIEW THESE – IMPORTANT TO KNOW WHEN CONSIDERING CAUSE, ETCETERA

ARTICLE 2045 – Determination of the intent of the parties

Interpretation of a contract is the determination of the common intent of the parties.

1. The parties’ common intent is object in nature. [The intent may have to be reconstructed to show what the parties intended – given the manner in which they expressed themselves in their contract. In this matter a party’s declaration of will becomes an integral part of his will.]

2. When there is a manifest difference between a party’s intent and the pertinent declaration of that intent, the rules governing error may apply.

3. When something is doubtful, we must try to determine what the common intent of the parties was at the time of the contract. [Assuming that the parties have used words to express their intent, however, the process of understanding those words is one of interpretation. Hence, interpretation of a contract is the determination of the parties’ intent.]

ARTICLE 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.

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ARTICLES 2047 and 2048 – Meaning of words

The words of a contract must be given their generally prevailing meaning. (2047) Words with different meanings must be interpreted as having the meaning that best conforms to the object of the contract. (2048)

ARTICLE 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.

ARTICLE 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.

ARTICLE 2051 – Contract worded in general terms [IMPORTANT!]

Although a contract is worded in general terms, it must be interpreted to cover only those things it appears the parties intended to include.

ARTICLE 2052 – Situation to which the contract applies [IMPORTANT!]

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.

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DETRIMENTAL RELIANCE

ARTICLE 1967 – Cause defined – detrimental reliance

Definition: Cause is the reason why a party obligates himself.

Detrimental reliance: Reliance by one party on the acts or representations of another, causing a worsening of the first party’s position. Detrimental reliance may serve as a substitute for consideration and thus make a promise enforceable as a contract. Recovery may be limited to the expenses incurred or the damages suffered as a result of the promisee’s reliance on the promise.

Common law courts address the concept of detrimental reliance under PROMISSORY ESTOPPEL. Example would be if a pawpaw tells his granddaughter that he would pay her $100,000.00 if she studies hard in college. This promise is not enforceable because it is not in correct form. But, what if the granddaughter goes to college and graduates deeply in debt (she did not work during school) in response to her grandfather’s promise? Promissory estoppel might hold her grandfather liable for his promise.

A break down of La. detrimental reliance:

A party may be obligated:

1. By a promise (Thus, not bound contractually, but the person is obligated);

2. And he or she should have known the promise would induce the other party to rely on it;

3. And the other person is reasonable in so relying upon the promise.

However, note the stipulation that reliance on a gratuitous promise made without the required form is NOT REASONABLE. This stipulation tends to gut the entire provision of detrimental reliance.

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NATURAL OBLIGATIONS

ARTICLE 1760 – Natural obligations

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

This is not very clear as to what a natural obligation will really be when it arises. Article 1762 goes on to list three possible circumstances when a natural obligation arises:

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.

Natural obligations are IMPERFECT. In other words, a person cannot sue alone on the grounds of a natural obligation. However, what is given according to a natural obligation cannot be restored.

Consider Article 1847 in light of the first example of a natural obligation:

Art. 1847 – Debt of a third person and debt extinguished by prescription

Parol evidence is inadmissible to establish either a promise to pay the debt of a third person or a promise to pay a debt extinguished by prescription.

A person cannot evade formality requirements required by law by making a double promise: I.e., a promise to pay $100.00 when you graduate is gratuitous and is not binding unless in writing; to make a promise to pay a natural obligation is onerous and does not have to be in writing; but, a person cannot make a gratuitous promise orally and then make an oral promise to fulfill his or her natural obligation to fulfill the gratuitous promise.

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CHAPTER 4VICES OF CONSENT

Section 1. Error

ARTICLE 1948 – Vitiated consent

Consent may be vitiated by:

1. Error; or

2. Fraud; or

3. Duress.

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.

NOTES – It is no problem to grant relief when both parties are in error. When both parties are in error, the contract may be rescinded, as when the parties misunderstood each other at the time of contracting – or, the parties may simply reform the contract to reflect the true intent of the parties.

When only one party is in error – technically, there is no meeting of the minds – but to immediately cancel the contract is unfair to the other party. Thus, we handle this by saying that the contract must concern the principal cause of the contract and the other party knows or should have known the true cause.

Class note – If one party knows the other party is in error regarding the principal cause, that party is under an obligation to speak up!

ARTICLE 1950 – Error that concerns cause

Error may concern cause when it

1. Bears on nature of the contract;

2. Bears on the thing that is the object of the contract;

3. Bears on a substantial quality of the thing that is the object of the contract;

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Thus, this article provides that a person may obtain relief when the thing for which a party has contracted or a substantial quality of the thing for which a party has contracted is different from what he understood it to be at the time of contracting.

4. Bears on the person or the qualities of the other party;

Thus, this article provides that relief may be obtained when a party intends to contract with a person or persons of certain quality or character, but has in error contracted with a different person, or with a person who lacks the intended quality or character. If the contract is gratuitous, it is presumed that the person of the intended obligee was the reason why the obligor bound himself.

5. Bears on the law;

Thus, you may obtain relief if a party has drawn an erroneous conclusion of law and entered into a contract on the basis of that error.

6. Bears on any other circumstance that the parties regarded or should have regarded as a cause of the obligation.

AN ERROR IN A PARTY’S MOTIVE (WHICH IS CONFINED TO THE PARTY’S SUBJECTIVITY) DOES NOT INVALIDATE CONSENT. Although the motives rest in the subjective sphere of the individual, they no doubt prompt him to engage himself, but they nevertheless, remain beyond the contractual field, they are anterior to the act of will by which the party obligates himself; they are not the constructive element of the act.

Class note – You cannot claim your consent to be in error IF YOU DO NOT READ THE CONTRACT! You must read the contract.

The law provides for an error of fact – the law does not provide for an error of judgment.

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 sustained by the other party unless the latter knew or should have known of the error.

Also, the court may refuse the rescission when the effective protection of the other party’s interest requires that the contract be upheld. In that case, a reasonable

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compensation for the loss he has sustained may be granted to the party to whom rescission is refused.

CHAPTER 4VICES OF CONSENT

Section 2. Fraud

ARTICLE 1953 – Fraud may result from misrepresentation or from silence

Fraud is a MISREPRESENATION or SUPPRESSION OF THE TRUTH.

Fraud is made with one of two intentions:

1. To obtain an unjust advantage for one party; OR

2. To cause a loss or inconvenience to the other party.

Fraud vitiates consent.

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 1) difficulty, 2) inconvenience; or 3) 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.

ARTICLE 1955 – Error induced by fraud

Error induced by fraud DOES NOT HAVE TO CONCERN THE CAUSE OF AN OBLIGATION to vitiate consent. IT MUST CONCERN A CIRCUMSTANCE THAT HAS SUBSTANTIALLY INFLUENCED THAT CONSENT.

NOTE: Notice the difference between fraud and error. With error – the vice must concern the cause of the obligation. With fraud – the vice does not have to concern the cause of the obligation – only something that has substantially influenced that consent. THIS WILL MORE THAN LIKELY BE A TEST QUESTION!

ARTICLE 1956 – Fraud committed by a third person

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

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Note with this that when fraud is committed by a third person without the knowledge of the party who benefited from it, the other party is still bound. Also, the victim of fraud committed by a third person is not bound if the OTHER party, though ignorant of the fraud SHOULD HAVE KNOWN about it.

ARTICLE 1957 – Proof

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

NOTE – Courts realize how hard it is to prove fraud by positive and direct testimony because those who engage in fraud usually cover tracks. Thus, it is not necessary for direct evidence to prove fraud.

ARTICLE 1958 – Damages

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

CHAPTER 4VICES OF CONSENT

Section 3. Duress

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 the following:

1. A party’s person;

2. A party’s property; or

3. A party’s reputation.

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

NOTE – In the cases, duress DOES NOT apply to financial situations. I.e., I would not have sold all my belongings except for I was bankrupt and wanted to by a McDonald’s hamburger. In that case, you are SOL.

ARTICLE 1960 – Duress directed against third persons

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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.

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.

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 duress.

ARTICLE 1963 – 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 person.

CHAPTER 4VICES OF CONSENT

Section 4. Lesion

ARTICLE 1965 – Lesion

A contract may be annulled on grounds of lesion only in those cases provided by law.

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APPENDIX A

A general guide to analyzing may practicable problems which arise with contracts:

1. Were the parties capable of contracting?

2. Was a valid offer made?

a. Did offeror make a consent to be bound (i.e., was not joking or tentative)?b. Was the offer sufficiently possible and certain or determinable?

3. Was a valid acceptance made?

a. Did the offeree make a consent to be bound?b. Was the acceptance in accord with the terms of the offer?c. Was the acceptance effective while the offer was still extant? (For

example, was transmission of the offer and receipt of the offer done within the time frames provided by irrevocable and revocable contracts? See consent codes listed below.)

4. Were both offer and acceptance in the form required by law (i.e., written, oral, etc.)?

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