6. Legal subjects and natural persons

Question 1

Define legal subjects

Answer 1

An entity in which legal rules impose duties upon and assign competences and rights to

entity capable of holding rights, duties and capacities.

Question 2

2 main categories of legal subjects

Answer 2

1. Human beings
2. Artificial entities

Question 3

Define legal personality and capacity to act

Answer 3

Both human beings and legal entities:

1. are (potentially) vested with rights and duties - legal personality
2. have the power to establish (or modify) legal relationships - capacity to act or legal capacity

Question 4

Difference between human beings and legal entities

Answer 4

Human beings have a right to privacy, freedom of expression, freedom of religion and a right to physical integrity but not all of these rights make equal sense in case of legal entities (e.g. physical integrity)

Question 5

Remark about legal subject and legal personality

Answer 5

The notion of legal subject is strictly bound to the notion of legal personality, which is the capacity to have juridical positions (rights, duties, etc.)

Question 6

Legal personality for human beings (personhood)

Answer 6

• Human beings may generally be the holders of rights since birth (rarely since conception): they are called the “natural persons” (personnes physiques, natürliche Personen, persone fisiche)
• When natural persons die, most of their (patrimonial) rights (e.g. property) and duties (e.g., most debts) go into probate, except some which shall cease (e.g. rights of personality)
• Fetuses and embryos are generally vested with specific rights:
  
  • to acquire donations and inheritance
  • to health (cases of malpractice and liability of doctors)

Question 7

Does slavery belong to natural law?

Answer 7

“those who are as different [from other men] as the soul from the body or man from beast—and they are in this state if their work is the use of the body, and if this is the best that can come from them—are slaves by nature. For them it is better to be ruled in accordance with this sort of rule, if such is the case for the other things mentioned”

Question 8

Legal capacity for human beings

Answer 8

Natural persons acquire the (legal) capacity (power) to act when they reach their majority (mostly upon turning 18 years of age, but it may vary from 15 to 21 years in different jurisdictions)

However, To conclude a few legal transactions (like marriage or employment contracts) a minor age suffices (generally set out in 16 years), although a court declaration may be requested

Question 9

Define incapacitated person

Answer 9

any person who is impaired by reason of mental illness, mental deficiency, physical illness or disability, chronic use of drugs, chronic intoxication, or other cause (except minority) to the extent of lacking sufficient understanding or capacity to make or communicate responsible decisions.

Question 10

Types of incapacitated persons

Answer 10

• Protective incapacities
• Punitive incapacities

Question 11

Protective incapacities

Answer 11

• Infants, minors
• Impaired or disabled persons
  
  • judicial procedures of interdiction, inhabilitation, support administration

Question 12

Punitive incapacities

Answer 12

Legal disabilities (disqualification)

• convictions for committing a serious crime can automatically include a legal disability (disqualification) for duration of sentence (forfeiture of offices , etc.)
• offenders thus convicted generally maintain the capacity to get married and to make a will

Question 13

Legal transactions and incapacitated persons

Answer 13

Legal transactions performed by an incapacitated person are not per se deprived of any legal effects, but:

• The incapacitated party may bring about an action to have her/his legal transactions avoided by a court
• The incapacitated party may repudiate her/his legal transaction, by refusing to execute it

Question 14

What happens when a person has full incapacity?

Answer 14

• A legal representative is endowed with the power to perform (patrimonial) legal transactions on behalf of the incapacitated person (the ward)
• Legal representatives act as proxies of the ward
• Legal representatives may be controlled by an undercurator appointed by the court

e.g.

• Minors are legally represented by their parents, jointly for acts of extraordinary administration
• Interdicted persons are represented by a guardian or curator, or by an administrator, or by a trustee appointed by the court. The same applies to minors, given that their parents are missing or incapacitated themselves

Question 15

What happens when a person has limited incapacity?

Answer 15

In cases of limited incapacity, a person has the power to perform acts of ordinary administration (and to get married). For acts of extraordinary administration, it shall be represented or assisted by a limited guardian or curator

Question 16

2 main cases when limited incapacity occurs

Answer 16

Court Inhabilitation:

• Disabled persons may validly enter into acts of ordinary administration
• They may not validly enter into so-called acts of extraordinary administration

Emancipation of minors

• Generally because authorised to get married, sometimes without due court process

Question 17

Define incapacity de facto

Answer 17

A legal transaction performed by a party who (although not incapacitated de iure) is temporary impaired by drunkenness, drug abuse, insanity, etc. can be avoided or repudiated by that party only if strict conditions are met:

• That the legal transaction performed is greatly detrimental to her/him
• That, being a contract, the counterpart was in bad faith, i.e. aware of such incapacity de facto

Question 18

Notion of consumers

Answer 18

• stems from economics and sociology
• has developed an autonomous meaning in the legal domain, having become the factor triggering the application of a distinct set of rules, known as ‘consumer law’
• a consumer is a natural person, who is acting outside the scope of an economic activity (trade, business, craft, liberal profession)

Question 19

Legal rationale for consumers

Answer 19

for protecting consumers is based on the notion of market failures and inefficiencies, such as inequalities of bargaining power between a consumer and a business and information asymmetries

The vast majority of EU Member States have one, overarching definition which applies across consumer law (§ 13 BGB, art. 3 Codice del consumo)

• The notion of consumer does not extend to legal persons
• A particularly controversial area is that of so-called mixed transactions which a person concludes for both a personal and professional purpose (Solution in the DCFR: such a transaction is covered by consumer protection rules if it is concluded ‘primarily’ for non-professional purposes)

Question 20

Rules on agency

Answer 20

• By its nature, a legal entity, being fictitious, can act but through the agency of natural persons
• An agent who acts within the scope of authority conferred by a legal entity binds the latter in the obligations she/he creates against third parties
• In cases of defects in consent (e.g. mistake, fraud), the state of mind taken into consideration is the one of the agent (i.e. the natural person who acts on behalf of the legal entity)

Question 21

What are the legal entities of private law?

Answer 21

• corporations (legal persons): Completely autonomous entities, discrete personality, separate from the owners as to their property, organization, liability, etc.
• unincorporated legal entities:

Collections of individuals, which (to some extent) share property, organization, liability, etc.

Question 22

Advantages of corporations (legal persons)

Answer 22

No personal liabilities of the owners for the entity’s actions and related lawsuits (see business studies flashcard)

Question 23

Disadvantages of corporations (legal persons)

Answer 23

• Annual and start-up costs
• Mostly registered and regulated by at least one (board of directors), possibly two (supervisory board and managing board), legal bodies
• administrative burdens

Question 24

Advantages of unincorporated legal entities

Answer 24

• Low or limited start-up costs
• Not registered and possibly not regulated by any legal body
• no administrative burdens

Question 25

Disadvantages of unincorporated legal entities

Answer 25

• Owners are (to some extent) personally liable for the entity’s actions and related lawsuits
• In some jurisdictions, unincorporated legal entities cannot enter into contracts and/or own property

Question 26

Define non-profit entities

Answer 26

are established to further a social cause (charitable, scientific, research, educational, etc.)

• they are (partly) exempted from taxation
• they are prohibited from distributing their income to shareholders, leaders or members

Question 27

Types of non-profit corporations

Answer 27

Foundations (Stiftungen, fondations, fondazioni)

• corporation soles: a single incorporated office
• e.g. The Crown

Associations (Vereinigungen/Verbände, associations, associazioni)

• corporation aggregates: a group of members, or partnership

Question 28

Types of for-profit entities

Answer 28

aim to earn profits and to distribute them to the owners (dividends)

• corporated businesses
  
  • limited liability (LLC)
  • joint stock company/ public limited (PLC)
• unincorporated businesses
  
  • general partnership (GP)
  • limited liability partnership (LLP)