7. Code III: Contracts Flashcards
Contract
an agreement that creates/ extinguishes/ modifies obligations
Unilateral Contract
only one party owes a duty
Bilateral Contract
both parties bind themselves reciprocally
2 Important Effects of Bilateral K
- each party is an obligor AND obligee
- when parties bind themselves reciprocally their obligations are co-relative
Onerous Contract
reason why obligor bound himself was to obtain a benefit for himself
Gratuitous Contract
reason bound was to benefit obligee or some other person
Gratuitous Contract
reason bound was to benefit obligee or some other person
Principal Contract
k whose obligation is secured by another K
Accessory Contract
k which provides security … dependent on principal k
Nominate Contract
given a special designation (special name/ rules)
Innominate Contract
no special designation/ no special rules
Communicative Contract
performance of parties is co-relative to the performane of the other party
Aleatory Contact
where performance/ extent of performance of any party to K depends on an UNCERTAIN EVENT
ONE PARTY’S PERFORMANCE MUST BE CERTAIN
(not the same as a conditional contract)
Requirements for Valid K
- capacity
- consent
- cause
- object
Capacity
all persons have contractural capacity
EXCEPT:
1. minors not emancipated
2. interdicts
3. persons deprived of reason at time of K
Capacity Enforceable for Minor When
(a) other party reasonably relies on minor’s false assertion of majority (LIE + REAS RELIANCE)
(b) related to minor’s business or necessary to education and support
OR
(c) when K is gratuitous
Onerous K enforceable DESPITE PARTY DEPRIVED OF REASON when:
other party knew/ should have known of the lack of capacity
K made by non interdicted party lacking capacity can be attacked after his death when:
- K is gratuitous
- K evidences a lack of understanding
- K is minor within 30 days of death
OR - application for interdiction filed before death
Consent
evidenced by offer and acceptance
generally no form requirements
Offer
- personal to offeror
- generally revocable
- expires when…
When Offer is Irrevocable
(a) specifies a period of time, irrevocable during that time period
(b) does not specify but intends a period of tine for offeree to
ADD TO THIS CARD- NOTES CUT OFF
Expiration of Offer: When Offer is Revocable
(aka default rule)
if not accepted in reasonable time
Expiration of Offer: When Offer is Irrevocable
expires when period of irrevocability expires
CHECK- NOTES CUT OFF
Acceptance: When?
- revocable = when transmitted by offer (“mailbox rule”)
- irrevocable = upon receipt
CHECK- NOTES CUT OFF
Rejection is effective ___________
upon receipt
Acceptance by Performance Types
- acceptance by commencement of performance
- acceptance by completion of performance
Acceptance by Commencement of Performance
offeror invites acceptance by performance
AND
it is contemplated that performance will be completed if commenced
= formed when performance begins
Acceptance by Completion of Performance
NOT revocable once performance has commenced for a reasonable time necessary to complete the performance
- offeree not bound to complete
- offeree must give prompt notice if accepting by performance (unless offeror knew/ should have)
Acceptance by Silence
EXCEPTIONAL CIRCUMSTANCES ONLY
when silence leads offeror to reasonably believe that the offer was accepted
Nonconforming Acceptance
acceptance not in accord with the terms of an offer is a COUNTER OFFER
exception for merchants
K of Adhesion
losing arg
when “particularly one sided”
one party has superior bargaining power = subject to special scrutiny
LA does not have doctrine of unconscionability
Cause
the reason a party obligates himself
- helps judge know what promises to enforce:
- distinguishing onerous/ gratuitous Ks
- distinguishing errors that constitute vices of consent/ those that don’t
- identified Ks that shouldn’t be upheld bc immoral/ illegal
Cause Need NOT be Express
- effective If there is any valid cause (even a lie)
Simulation
K in which parties do not express their true cause
Detrimental Reliance
promissor obligated when:
1. promisee RELIED on the promise to her DETRIMENT
2. promisor KNEW/ SHOULD HAVE that promisee would rely
3. promisee was REASONABLE in so relying
= recovery discretionary with the court
If Detrimental Reliance is on Gratuitous Promise without Formalities
reliance NOT reasonable
Object
performance obligor owes to obligee
- lawful
- possible
- determined or determinable
Future Things are a ________ object
future things are a valid object
Promise de Porte Fort
object of K is an act of a 3d party: OG obligor is bound by obligation UNTIL 3P binds himself
Stipulation Pour Autris
party may stipulate a benefit for a 3P beneficiary
4 Steps to Determine Consent
- ID offer - decide if revocable or not
- if revocable, was it revoked?
- if not revoked or if it was irrevocable, was it expired?
- if didn’t expire and wasn’t revoked, acceptance?
Vices of Consent
- error
- fraud
- duress
Bilateral Error
consent vitiated if BOTH parties are in error
- parties can reform the instrument to reflect their true mutual consent
Error Remedies
Rescission of K
NO DAMAGES
Unilateral Error
where only one party is in error, error will vitiate that party’s consent WHEN:
- it concerns a cause without which the obligation would have not been incurred (PRINCIPAL CAUSE)
AND - the cause was known/ should have been known to the other party
Problems with Unilateral Error
- the cause element
- the “but for cause” requirement
- the knowledge requirement
- failure to read K
Unilateral Error: The Cause Element
error concerns a cause when it bears on the:
- nature of K
- contractural object/ substantial quality of that object
- the person/ qualities of the other party
- anything parties regarded/ should have in good faith as a cause
- the law when a party was drawn erroneous conclusions of law and entered into a binding K based on them
Unilateral Error: The “But-For Cause” Requirement
party can rescind based on error only if the party would not have bound himself had he not suffered the error
Unilateral Error: The Knowledge Requirements
Other party knew/ should have of CAUSE (not the error)
Unilateral Error: Failure to Read K
not a valid argument
Rescission for Damages When there is ERROR
when unilateral error, that party may GENERALLY rescind the K
Exceptions to Rescission When there is Unilateral Error
- if party willing to perform as intended by party in error
- court may not allow rescission when effective protection of other party’s interest requires K to be upheld
- if error was “inexcusable”
Liability for Damages where there is Error
party who obtains rescission on grounds of his own error is liable for any loss sustained by the other party
unless the latter knew/ should have of the error
Fraud
misrepresentation or suppression of the truth made with the INTENT to obtain an UNJUST advantage or cause a loss or inconvenience to the other party
Fraud Remedies
- DAMAGES
- ATTORNEY’S FEES
+ rescission
Exception to Fraud
when a party could have EASILY ASCERTAINED the truth without difficulty or special skill
- unless relation of confidence has reasonably induced party to rely on the other’s ascertations
Fraud _________ be a “but for” cause so long as it ____________ consent.
Fraud NEED NOT be a “but for” cause so long as it SUBSTANTIALLY INFLUENCES consent.
- must have reliance on the statement
Fraud through Silence
only when facts IMPOSE A DUTY TO SPEAK
(special relationship/ duty to disclose)
Fraud Committed by 3P
vitiates consent if a party not in error knew/ should have known of the fraud
Duress
party who’s consent is vitiated knew truth but agreed to K anyway because he felt he was forced to consent
duress of such a nature as to cause a reasonable fear of unjust and considerable injury to a party’s person/ property/ or reputation
(or someone you love)
Duress Remedies
- rescission
- damages
- attorney’s fees
Fear in Duress
both objective and subjective
Unjust Injury in Duress
threat to perform a lawful act / exercise a legitimate right = NOT duress
3P and Duress
perpetrator can be a 3P and no requirement that other party of K knew/ should have known of the duress
Victim of Duress
can be spouse/ ascendant/ descendant/ or close friend of K party
Absolute Nullity
violates a rule of public order (object is illicit/ immoral)
- cannot be confirmed
- any party can invoke or court can declare it on its own initiative
- does not prescribe (action to annul)
Relative Nullity
violates a rule intended to protect a private party (lack of capacity/ vice of consent)
- can be confirmed
- only party who rule is intended to protect may invoke nullity
- action to RESCIND prescribes 5 years from when grounds for nullity ceased or was discovered
Effects of Nullity
null K deemed NEVER TO HAVE EXISTED
- performance must be restored (if can’t - court can award damages)
Rule of Severability
nullity of one portion does not render entire K null
UNLESS from the nature of the provision/ intention of the parties it can be presumed that wouldn’t have made K without the provision
Nullity ______ impair rights acquired by onerous K by 3P in good faith.
Nullity DOES NOT impair rights acquired by onerous K by 3P in good faith.
- for immovables, recordation applies
Effect of Conventional Obligations
Ks have effect of law for the parties and can only be dissolved by consent on grounds provided by law
- Ks must be performed in GOOD FAITH (if BF, greater liability for damages)
- K’s rights/ obligations are heritable
Breach (Failure to Perform)
- nonperformance
- defective performance
- delay in performance
= aggrieved obligee entitled of DAMAGES AND EITHER specific performance OR dissolution
Remedies for Failure to Perform
- specific performance
- damages
- non pecuniary damages
- contractural modification of liability
- stipulated damages
- delay damages (moratory)
- dissolution
Specific Performance
available when obligation is to deliver a thing/ not do a thing/ or execute an instrument
UNLESS it is impracticable
Impracticability
a. impossible
b. greatly disproportionate in costs than the actual damage caused
c. no longer in the obligee’s interest
OR
d. if substantial negative effect on the interest of 3P
Specific Performance when the Obligation is TO DO Something
discretionary
if agreement enforced by detrimental reliance, court may award damages instead of specific performance
Damages
generally measured by
1. loss sustained by obligee
AND
2. the profit of which he was deprived
Damages When Obligor in Good Faith
obligor liable only for damages reasonably foreseeable when K was made
Damages When Obligor in Bad Faith
obligor liable for all damages that are a direct consequence of his failure to perform
Bad Faith Obligor
intentional and malicious failure to perform
Damages - Obligee Misconduct
no recovery if
1. his BF caused obligor’s breach
OR
2. he concealed facts he knew/ should have known would have cause failure at the time K was formed
Damages - Negligence
reduces damages proportionally
Damages - Duty to Mitigate
obligee has a duty to make reasonable efforts to mitigate damages caused by obligor’s breach when:
- they are small in comparison to the potential losses
AND - it is virtually certain that the risks incurred will avoid at least part of the loss
Nonpecuniary Damages
allowed when:
- the K was intended to gratify a “non-pecuniary” interest
AND - obligor knew/ should have known that this failure to perform would cause this type of loss
OR
obligor intended to aggrieve obligee’s feelings through failure to perform
Contractual Modification of Liability
generally allowed,
NOT enforceable if limiting/ excluding liability for:
-
intentional/ gross fault that causes damage to other party
OR - causing physical injury to the party
Stipulated Damages
obviates the need for party to prove damages
either SP or stipulated damages but NOT BOTH (unless delay damages)
Delay Damages (Moratory)
owed from the time obligor is “put in default”:
- when time for performance if fixed
- by written demand
- by oral demand made before 2 wits
- by filing just for specific performance
- by a specific provision in K
obligor cannot be put in default before obligation is due
Extrajudicial Dissolution
= entitled to dissolution IF:
- express dissolution clause for breach
- obligee gives notice to perform within reasonable time
- without notice if evident obligor will not perform OR if delayed performance would be of NO VALUE to obligee (“time is of the essence”)
Judicial Dissolution
(court can grant obligor additional time to perform)
FACTORS court considers to grant dissolution:
- extent and gravity of failure to perform
- nature of obligor’s fault
- good/bad faith of parties involved
- the surrounding economic situation that make dissolution opportune or not
When Dissolution is NOT Available
when obligor has rendered a substantial performance and unperformed part does not substantially impair the interest of the obligee
Effect of Dissolution
parties restored to pre-K position
Absolute Simulation
parties intend K to produce no effects
= no effect as to between parties
Relative Simulations
intend K will produce different effect than one stated in K
= produces intended effect if requirements for them are stipulated
Revocatory Action
an obligee may annul an act of the obligor
that causes or increases his insolvency
and that occurred after right of the obligee arose
- K made in regular course of business may NOT be annulled
Insolvent
debts > assets
Prescription of Revocatory Action
1 year from when obligee learned/ should have of the act
MAY NOT be Brough more than 3 years after the act
Oblique Action
an obligee may exercise a right of the obligor if the right is heritable AND the obligor’s failure to exercise the right causes/ increases his insolvency
Conflicts of Laws Rough Rule
apply law of state whose policies would be MORE SERIOUSLY impaired if NOT applied
“rule of comparable impairment”
K is Valid as to Form if Made in Conformity with the Law of:
a. law of state of making
b. law of state of performance
c. common domicile or place of business of parties
d. law governing substance of K
- exception if law governing substance requires certain form for reasons of PUBLIC POLICY, then K must comply with that form
Special Contracts
- deposit and sequestration
- loan
- compromise
Deposit Contract
k in which depositor delivers a movable thing to depository for safekeeping – depository bound to return thing upon demand
Sequestration Contract
parties agree to deliver a thing to a depository pending resolution of a dispute
Loan for Use Contract
gratuitous K whereby lender delivers a non-consumable thing to borrower for his use
borrower must preserve thing as a prudent administrator, use it according to its intended purpose, and return the thing after he finishes using it
Loan for Consumption Contract
K whereby lender delivers fungible and consumable things to borrower who is permitted to consume them
must replace with same kind and quantity
Compromise Contract
k whereby 1 or more parties make concessions to settle a dispute or uncertainty concerning an obligation to other legal relationship
Form for Compromise
in writing or rendered in open court and capable of being transcribed
Accord and Satisfaction
a compromise made when claimant of disputed claim accepts a payment tendered with a clearly written condition that acceptance extinguishes the obligation
When Compromise Can be Rescinded
- vice of consent
NOT: error of law OR lesion
