Cause Flashcards
Definition of Cause
In General—“An obligation cannot exist without a lawful cause.” (La. Civ. Code art. 1966)
i. Definition—“Cause is the reason why a party obligates himself.” (La. Civ. Code art. 1967)
Objective v. Subjective Cause
Hybrid Approach—Louisiana law utilizes a hybrid theory of cause, in that both objective and subjective cause are relevant. Some rules relating to cause focus more heavily on objective cause, while other rules relating to cause focus more heavily on subjective cause.
Objective Cause = To obtain ownership of a thing; to receive a price in money for a thing
Subjective Cause = To move closer to work.
Definition of Simulation
“A contract is a simulation when, by mutual agreement, it does not express the true intent of the parties. If the true intent of the parties is expressed in a separate writing, that writing is a counterletter.” (La. Civ. Code art. 2025)
Relative Simulation
A simulation is relative when the parties intend that their contract shall produce effects between them even though different from those recited in their contract. A relative simulation produces between the parties the effects they intend if all of the requirements for those contracts have been met.”
Hypo: Mahogane and Claire enter into a contract titled “Act of Sale” whereby Mahogane purports to “sell” her house to Claire for $100,000. In fact, Mahogane intends to make a donation to Claire, and Claire never pays the price. This contract is a relative simulation. The parties intend that their contract shall produce effects different from those recited.
Relative Simulation - Donation in Disguise
“[In a sale,] [t]he 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.”
Absolute Simulation
A simulation is absolute when the parties intend that their contract shall produce no effects between them. That simulation, therefore, can have no effects between the parties.” (La. Civ. Code art. 2026)
a. Hypo—Mahogane and Claire enter into a contract titled “Act of Sale” whereby Mahogane purports to “sell” her house to Claire for $100,000. In fact, Mahogane does not intend to convey ownership to Claire at all, and Claire never pays the price. This contract is a absolute simulation. The parties intend that their contract shall produce no effects.
Effects of Simulations - Between the Parties
Between the parties, simulations are given the effect intended by the parties, not the effect expressed. Thus, the contract is enforced according to its “true” or subjective cause and not recited or objective cause.
Illustration—Mahogane “sells” her house to Claire, but neither party intends a transfer of ownership. Mahogane and Claire do not execute a written counterletter. Later, Claire seeks to enforce the agreement against Mahogane so to take possession of the house. Mahogane will be unable to prove the contract was a simulation. Claire will be decreed the owner of the house (although she will have to pay the price pursuant to the enforceable sales contract).
Effects of Simulations - As to Third Parties
Third parties may be permitted to rely on the parties’ recited or objective cause.
i. Rule—“Any simulation, either absolute or relative, may have effects as to third persons. Counterletters can have no effects against third persons in good faith. Nevertheless, if the counterletter involves immovable property, the principles of recordation apply with respect to third persons.” (La. Civ. Code art. 2028)
ii. Illustration—Movables—Mahogane “sells” her car to Claire for $100. Assume the transaction is an absolute simulation. Claire sells the car to Daniel. Daniel is not aware of Mahogane and Claire’s secret agreement. Daniel is entitled to keep the car.
ii. Illustration—Immovables—Immovables are governed by the public records doctrine. According to the law of registry, rights in immovables established by contract are without effect as to third persons unless the contract is filed in the public records. Thus, if Mahogane “sells” her house to Claire for $100,000, and Claire records the act of sale, the record does not disclose Mahogane’s contractual right (by counterletter) to the property. Thus, if Claire sells to Daniel, Daniel is entitled to keep the house.
Purely Gratuitous Contracts - General Rules
As we have discussed, gratuitous contracts must meet the formal requirements set out for donations. In addition, purely gratuitous contracts are subject to additional rules of donations, such as the rule that a donation may be revoked for ingratitude.
Purely Gratuitous Contract - Exceptions
Gratuitous Contracts other than Donations—The civil code defines the “donation inter vivos” as a contract by which a donor divests himself of ownership of a thing in favor of a donee. (La. Civ. Code art. 1468). Other types of gratuitous contracts (that generally involve personal services rather than the giving of a thing) do not require the same heightened formalities. An example is the contract of mandate, which may be gratuitous. See La. Civ. Code arts. 2989, 2992, 2993. Such “indirect liberalities” do not deplete the patrimony of the contracting party.
b. Charitable Subscriptions—Louisiana, like many other common law and civil law jurisdictions, enforces charitable subscriptions or pledges without the requirement of formality. (Normally, the promise to pay money would require an authentic act, since the right to cash is an incorporeal movable, excluded from the manual gift rules.) See, e.g., Louisiana College v. Keller, 10 La. 164 (1836) & Baptist Hospital v. Cappel, 129 So. 425 (La. App. 2 Cir. 1930).
c. Debt of Another Party—A promise to pay the debt of a third person may be onerous or gratuitous. If it is gratuitous, it requires a writing (for proof) though not an authentic act. If the promise is onerous, that is, “impelled from the pecuniary or business motives of the promisor,” then a writing is not required. See Litvinoff, p. 134 (notes).
Onerous Donation - Definition
The rules peculiar to donations inter vivos do not apply to a donation that is burdened with an obligation imposed on the donee that results in a material advantage to the donor, unless at the time of the donation the cost of performing the obligation is less than two-thirds the value of the thing donated.”
Remunerative Donation - Definition
The rules peculiar to donations inter vivos do not apply to a donation that is made to recompense for services rendered that are susceptible of being measured in money unless at the time of the donation the value of the services is less than two-thirds the value of the thing donated.
Remunerative and Onerous Donation Hypos:
A transfers a tract of land to B worth $90,000 in return for $25,000 worth of accounting services. Is $25,000 greater than or less than 2/3 of $90,000? Do the rules of donations apply?
A transfers a tract of land to B worth $90,000 in return for $65,000 worth of accounting services. Is $65,000 greater than or less than 2/3 of $90,000? Do the rules of donations apply?
A transfers a tract of land to B worth $90,000 in return for $60,000 worth of accounting services. Is $60,000 greater than/less than 2/3 of $90,000? What do we do in this case? See CC 1526 and 1527. Do the rules of donations apply?
- Because 25,000 is less than 60,000 ; it is a gift. Therefore, the rules of donations apply.
- Because 65,000 is greater than 60,000, the rules of donation do not apply.
- Because it is equal to 2/3 of 90,000, it is onerous and the rules of donation do not apply.
Absence or Failure of Cause
When cause is absent or fails, the contract is null. That is, “no cause” results in “no contract.” Note that in a bilateral and commutative contract, when one party fails to perform, this impacts the other party’s cause. However, in this case the rules governing nonperformance of obligations, rather than nullity, apply.
- Lossecco v. Gregory Case (Aleatory Contract)
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Unlawful Cause
Unlawful Cause—“Every obligation must have a lawful cause.” (La. Civ. Code art. 1966)
i. Protection of the Public Order—“Persons may not by their juridical acts derogate from laws enacted for the protection of the public interest. An act in derogation of such laws is an absolute nullity.” (La. Civ. Code art. 7)
“The cause of an obligation is unlawful when the enforcement of the obligation would produce a result prohibited by law or against public policy.” (La. Civ. Code art. 1968) Note that “unlawful” cause includes not only cause that prohibits “illegal” results but also “immoral” results or results “against public policy.”
- Fees contingent on the termination of a marriage
- Gambling debts
