In General/The Classification of Contracts Flashcards
Definition of a Contract
A contract is an agreement by two or more parties whereby obligations are created, modified, or extinguished.
As previously discussed, a contract is a multilateral juridical act that gives rise to obligations.
Important: A contract creates, modifies, or extinguishes obligations.
Unilateral v. Bilateral Contract
Unilateral Contracts—“A contract is unilateral when the party who accepts the obligation of the other does not assume a reciprocal obligation.” La. Civ. Code art. 1907. See, e.g., La. Civ. Code arts. 1468 (donation inter vivos), 2989 (mandate), 2891 (loan).
Bilateral Contracts—“A contract is bilateral when the parties obligate themselves reciprocally, so that the obligation of each party is correlative to the obligation of the other.” La. Civ. Code art. 1908. For examples of bilateral contracts, see La. Civ. Code arts. 2439 (sale), 2668 (lease), and 2660 (exchange).
Unilateral v. Bilateral - Significance of Distinction
Putting in Default—An obligor in a bilateral contract may not be put in default unless the obligor of the other has performed or is ready to perform his own obligation (La. Civ. Code art. 1993).
Dissolution—Nonperformance by one party to a bilateral contract gives the other a right to seek dissolution of the contract. (see, e.g., La. Civ. Code art. 2704).
Gratuitous v. Onerous
Gratuitous Contracts—‘A contract is gratuitous when one party obligates himself toward another for the benefit of the latter, without obtaining any advantage in return.” La. Civ. Code art. 1910. See, e.g., La. Civ. Code art. 1468 (donation inter vivos); La. Civ. Code art. 2891 (loan for use); mandate (2992); 2926 & 2928 (deposit); 3044 (ordinary, i.e., uncompensated, suretyship); 1888 (remission).
Onerous Contracts—“A contract is onerous when each of the parties obtains an advantage in exchange for his obligation.” La. Civ. Code art. 1909. What do we mean by the term “advantage” in this article? See, e.g.,La. Civ. Code art. 2439 (sale).
Gratuitous v. Onerous - Significance of Distinction
Consent—The requirement of “acceptance” is sometimes relaxed in gratuitous contracts. See, e.g., 1888; 1890 (remission, or forgiveness, of debt); 1544 (acceptance of a donation inter vivos “subsequently in writing”).
Standard of Care—Gratuitous contracts are often subject to a lower standard of care than their onerous counterparts. See, e.g., 2930 (deposit); 3002 (mandate); 2044 (ordinary, i.e., uncompensated suretyship).
Significance of the other party—The individual parties to the contract are presumed to be the principal reason for entering into a gratuitous contract. Error “as to the person” may therefore more easily be grounds for annulment of a gratuitous contract. See La. Civ. Code art. 1950, cmt. (d).
More Easily Annullable—Gratuitous contracts are sometimes more easy to annul than onerous contracts on other grounds. We will study some of these circumstances later in our course.
Aleatory v. Commutative
Aleatory—“A contract is aleatory when, because of its nature or according to the parties’ intent, the performance of either party’s obligation, or the extent of the performance, depends on an uncertain event.” La. Civ. Code art. 1912. Examples of aleatory contracts include contracts of insurance; contracts for care and services for the duration of one party’s lifespan; and some contracts involving sales of future crops. See, e.g., La. Civ. Code art. 2451 (sale of a hope).
Note—An “aleatory” contract is not the same as a conditional contract, though an aleatory contract is one that is affected by a condition. A conditional contract is one in which the very existence of the contract depends upon an uncertain event. (The following is a conditional contract: I will sell you my house if I get that new job in New Orleans. If I do not get the new job in New Orleans, no one is bound.)
Commutative—“A contract is commutative when the performance of the obligation of each party is correlative to the performance of the other.” La. Civ. Code ann. art. 1911.
Note: This dichotomy is confusing. The Main Takeaway is this: commutative contracts are those in which the performances of the parties are rough equivalents and the extent of those performances is certain and known in advance. Aleatory contracts are those in which the performance of at least one of the parties is uncertain, and may or may not be roughly equivalent to the performance of the other party.
Nominate v. Innominate
Nominate—“Nominate contracts are those given a special designation, such as sale, lease, loan, or insurance….” La. Civ. Code art. 1914. .
Innominate—“…Innominate contracts are those with no special designation.” La. Civ. Code art. 1914. For example, a contract by which one party agrees to transfer ownership of a thing in return for services rendered has no name under Louisiana law.
Accessory v. Principal
Accessory—“A contract is accessory when it is made to provide security for the performance of an obligation. Suretyship, mortgage, pledge, and other types of security obligations are examples of such a contract….” La. Civ. Code art. 1913
Principal—“… When the secured obligation arises from a contract, either between the same or other parties, the contract is the principal contract.” La. Civ. Code art. 1913
Significance of the Distinction
The significance of this distinction is often that the nonexistence, invalidity, or extinguishment of a principal contract results in the nonexistence, invalidity, or extinguishment of any accessory contract. For example, once a loan is extinguished, the mortgage securing that loan is no longer enforceable. See, e.g., La. Civ. Code art. 3319(7) (mortgage extinguished by extinguishment of secured obligation).
Consensual, Solemn, and Real
Consensual—Consensual contracts are those formed through the will of the parties, without any need for any formality. For example, a sale of a movable thing is a consensual contract, as is a contract for labor or services.
Solemn—Solemn contracts require formality of some type, whether a written act under private signature, an act under private signature duly acknowledged, an authentic act, or some other heightened form. For example, a sale of an immovable requires a writing. (La. Civ. Code art. 2440) A donation inter vivos generally requires an authentic act. (La. Civ. Code art. 1541) A compromise must be made in writing or recited in open court and susceptible of being transcribed from the record of the proceedings. (La Civ. Code art. 3072)
Note—Formality may be required either for (i) validity of obligation or (ii) proof of obligation (or both).
Real—Some contracts are identified as “real contracts,” which come into existence when the object of the obligor’s obligation is delivered to the obligee. Consent, whether written or oral, is not sufficient for the formation of the contract. For example, a donation inter vivos of a corporeal movable may be made through a “manual gift,” but this contract requires delivery for perfection. (La. Civ. Code art. 1543) In this case, delivery is required for the validity of the contract (i.e., this is not merely a matter of proof). Likewise, delivery is required for the contract of loan (La. Civ. Code art. 2891) and deposit (La. Civ. Code art. 2926).
For their very existence requires an act, which is typically the delivery of something. Take for example something like a corporeal movable, like cash.
Think about times you have donated something. Did you sign an authentic act? Probably not.
There are other contracts that require delivery to be enforceable, like loan. The loaner hands the thing over, and then the loanee undertakes an obligation to give it back.
4 Prerequisites to Contract Formation
All contracts require 4 components for validity. They are:
Capacity
The parties must have the capacity to contract
Consent
The consent of the parties must be established through offer and acceptance
Cause
The parties must have a lawful cause for contracting
Object
The parties must contract for a lawful, possible, and determined or determinable object
