Obligations

Question 1

“Obligation” Defined

Answer 1

Obligation is a legal relationship between two or more persons.

Obligation exists when obligor owes a performance in favor of oblige and performance or duty is legally enforceable.

Question 2

Effects of Obligations

Answer 2

Obligee is entitled to judicial enforcement of obligor’s duty to perform and to recover damages if a failure to perform

Obligor is entitled to be discharged from obligation after full performance

Question 3

General Principles of Obligations

Answer 3

Duty of Good Faith Exists on All Parties, BUT there is nothing against unconscionability in the code!

Abuse of Right Doctrine – “Abuse of right” may be invoked to prevent oblige from exercising a right with the primary intent of harming obligor.

Question 4

Natural Obligations

Answer 4

Natural obligation exists when there is a moral, but not judicially enforceable, duty to render performance

a. A duty on the oblige to perform, but no right given to the oblige to force the obligor to perform (obligor should, but doesn’t have to)

Examples: prescribed debt, debt discharged in bankruptcy, obligation incurred by one who lacks capacity, dispositions in null will, stepparent’s duty to pay for medical expenses of stepchildren

Question 5

Effects of Natural Obligations

Answer 5

i. Not enforceable by judicial action. Cannot compel performance.
ii. A performance freely rendered (no fraud or duress) in compliance with a natural obligation cannot be reclaimed.
1. This applies even if liberative prescription ran on an obligation but an obligor performed anyway.
iii. A new contract made for the performance of a natural obligation is onerous if it’s express – will elevate to a full obligation
1. Acknowledgement of a debt is not an express promise to pay!

Question 6

Real Rights and Real Obligations

Answer 6

Real Right = right in a thing that is good ‘against the world’

Real Obligation = obligation incurred as a result of a real right.

Transfer of Real Obligations

1. Real obligation is transferred to person who acquires thing that has the obligation without any agreement to take on obligation.
2. One who acquires by particular title is not personally bound by real obligations that attach, and can free self of obligation by abandoning the thing.

Question 7

Strictly Personal and Heritable Obligations

Answer 7

Heritable Obligation = obligation that can be enforced by or against the successors of the original obliges, can be transferred to third party

Strictly Personal = obligation only enforceable against original oblige or obligor, and therefore is not heritable

Determining Which Kind:

1. Strictly Personal for Obligor – if performance requires special skill or qualification of obligor or if obligation is for personal services
2. Strictly Personal for Obligee – if performance is intended for obligee’s exclusive benefit

Question 8

Conditional Obligation

Answer 8

Obligation whose occurrence depends on an uncertain event. (If event certain to occur, obligation is not conditional but is an obligation subject to a term)

Question 9

Types of Conditions

Answer 9

Suspensive Condition – if obligation subject to suspensive condition, it is unenforceable unless and until the uncertain event occurs. (common law condition precedent)

Resolutory Condition – if obligation subject to resultory condition, it’s immediately enforceable but ends if the uncertain event occurs (common law condition subsequent)

Question 10

Potestative Condition

Answer 10

Fulfillment of uncertain condition is in party’s power to bring about

1. Purely Potestative Condition = fulfillment depends on the obligor’s whim, and suspensive condition is therefore null
   a. Whim = obligor’s unbridled discretion or arbitrariness.
2. If suspensive condition is based on obligor’s will, not whim, it’s not null. Requires weighing of interests, exercise of reasonable discretion, considered judgment.
3. Resolutory potestative condition in party’s power to fulfill is not null if condition is exercised in good faith.

Question 11

Obligations with a Term

Answer 11

“Term” = period allowed for performance of obligation, can be express or implied, certain (fixed) or uncertain, determinable or undeterminable

Term presumed to benefit the obligor, and term can be renounced by the party for whose exclusive benefit it was established.

If obligation has no term, performance is due immediately

Uncertain term concerns when event will occur, uncertain condition concerns whether the event will occur.

Question 12

Obligations With Multiple Persons

Answer 12

If obligation is binding on more than one obligor, or binds obligor to more than one oblige, obligation is either several, joint, or solidary.

Question 13

Several obligations

Answer 13

Separate performances owed, and are therefore separate obligations

Question 14

Joint Obligations

Answer 14

One performance owed, but no joint obligor is bound for the whole and no joint oblige entitled to receive whole performance

1. Divisible joint obligation – if object of performance is subject to division, each obligor must perform his portion, and each obligee may only receive his portion, and are basically several obligations
2. Indivisible joint obligation – joint obligors or obligees governed by rules of solidary obligations

Question 15

Solidary Obligations

Answer 15

When each obligor owes the whole performance and/or when obligees when each is entitled to receive whole performance

1. May arise either voluntarily or by operation of law, and type is determined by intent of parties.
2. If obligation is solidary for obligees, obligor may extinguish obligation by performing for any solidary obligee. If solidary for obligor, obligee may demand whole performance from any solidary obligee.
3. Renunciation – if solidary obligors, obligee can renounce solidarity in favor of one. Must be express. Obligor is not released. If renounced in favor of less than all obligors, those not renounced remain solidarily liable for original debt minus removed partial performance.
   a. No release, so obligor’s share can be affected by subsequent bankruptcy of another obligor.
4. Remission – if solidary obligors, obligee can remit debt in favor of one. Obligees not remitted remain solidarily liable.
   a. Effectively releases remitted obligor.
5. Allocation of Debt Among Obligors:
   a. Contribution – Lets solidary obligors obliged to pay whole seek contribution. If obligation’s cause concerns all obligors, then each is liable for his ‘virile portion’. If obligation arose in contract, virile portions are equal. If from offense, virile portions based on fault.
   i. Solidary obligors, even those renounced, bear loss arising from insolvency of a solidary obligor.
   b. Indemnity – If obligation concerns only one of the solidary obligors, he is liable for whole obligation. Other solidary obligors are his ‘sureties’.

Question 16

Conjunctive and Alternative Obligations

Answer 16

Conjunctive Obligation = obligor must render multiple items of performance, each one of which may be separately rendered (ex, monthly rent under a lease)

1. Each item is a separate obligation, which impacts liberative prescription.

Alternative Obligation = obligor bound to render one of two or more items (ex; lesionary sale for thing or its just value)

1. Choice belongs to obligor unless expressly/impliedly granted to obligee. No partial performance.

Question 17

Divisible and Indivisible Obligations

Answer 17

Divisible = object of performance may be divided

Individisble = object of performance not susceptible to division, by its

Question 18

Transfer of Obligations

Answer 18

Unless strictly personal, obligation may be transferred to a third party.

i. Assumption – transfer of obligations from obligor to new obligor
ii. Subrogation – transfer of obligation from obligee to new obligee

Question 19

Assumption of Obligaiton

Answer 19

Can occur by agreement between obligor and 3rd party or agreement by obligee and third party.

1. If by obligor and 3rd party, it is enforceable by the obligee against the 3rd person if in writing.
2. If between obligee and 3rd party, it must be in writing and cannot effect a release of the initial obligor.

Assuming 3rd person becomes bound to extent of assumption. Can only raise defenses based on their own contract or based on original obligor-obligee relationship, but not on 3rd person-obligor relationship.

Consent by obligee to assumption does not release original obligor, who remains solidarily bound. (Solidarity of different sources.)

1. To release original obligor requires ‘subjective novation’, an agreement by creditor to discharge and substitute.

Question 20

Subrogation of obligations

Answer 20

Extinguishes obligation only for original obligee. Performance of obligation by party in whose favor subrogation occurs causes that party to be substituted as obligee.

Conventional Subrogation:

1. If by agreement with obligor, it is effectively without obligee’s consent. Must be in writing and state that the purpose of loan is to pay the debt.
2. If with obligee, it is effectively without obligor’s consent, and is governed by the rules for assignment of a right.

Legal Subrogation - entitles new obligee to recover only to the extent he has performed, and only in one of five circumstances:

1. When one obligee pays another obligee with superior rights,
2. When a purchaser of property uses the purchase money to pay a creditor with a real right to the property
3. When an obligor who owes a debt with others pays that debt and has recourse against those other obligors as a result
4. When a successor pays an estate debt with his own funds
5. When a law provides for legal subrogation

Question 21

Proof of Obligations

Answer 21

Party demanding performance must prove existence of an obligation. Many contracts must be in writing. When one must, it cannot be proved by testimony unless instrument destroyed, lost, or stolen.

Question 22

Types of Writings

Answer 22

Authentic Act – writing executed in front of notary and two witnesses and signed by parties and all of the above. Constitutes full proof of agreement.

Act Under Private Signature Duly Acknowledged – act originally executed without notary present, but then acknowledged before a court or notary and two witnesses. Cannot substitute for authentic act where authentic act is required.

Act Under Private Signature – signed but not necessarily written by parties. Contract signed by only one party can be enforced against non-signer if party’s conduct demonstrates he has availed himself of contract.

1. Electronic signature satisfies signature requirement.

Question 23

Form Requirement for Transfer of Immovables

Answer 23

Must be in writing, either by an act under public signature or by authentic act.

1. Oral transfer is valid only if delivery and if transferor recognizes transfer under oath. Effective between parties once written agreement is confected, but must be recorded to affect 3rd persons.

Public Records Doctrine – to effect 3rd persons, transfer of immovable must be filed for registry in parish where property is located. This rule is unaffected by actual knowledge of the 3rd party.

Question 24

Writing Requirement to prove Obligations

Answer 24

Transfers of immovable property,

Mandate authorizing transfer of immovable property,

Promise to pay a debt of a third person,

Promise to pay a debt extinguished by prescription,

A compromise,

Suretyship.

Question 25

Ways to Extinguish Obligations

Answer 25

Performance

Impossibility

Novation

Remission of Debt

Compensation/Offset

Confusion

Question 26

Extinction of Obligations Through Performance

Answer 26

Performance extinguishes obligation. Performance must be rendered to obligee or his agent. If rendered to unauthorized 3rd person, obligation extinguished if obligee ratifies or obligation is reduced pro tanto if obligee derives a benefit from it

Question 27

Extinction of Obligations Through Impossibility

Answer 27

Obligor not liable when failure to perform is caused by fortuitous event (not reasonably foreseeable when contract made) that makes performance impossible, unless he assumed risk of loss or was in default before event.

i. If fortuitous event would destroy object of performance had it been in hands of obligee and timely rendered, obligor not liable except for delay damages.
ii. If entire performance impossible, contract is dissolved and no recovery. If impossible in part, court can reduce counterperformance or dissolve. If dissolved by event after partial performance, obligee is bound to the extent he was enriched.

Question 28

Extinction of Obligations through Novation

Answer 28

Extinguishing existing obligation by substituting a new one. Novation is never presumed, and requires clear unequivocal intent by obligee

i. Objective Novation – substitution of new performance or new cause. Obligor remains the same.
ii. Subjective Novation – substitution of new obligor for original one. Prior obligor must be discharged on account of substitution, and can occur without original obligor’s consent.
iii. If novation made by obligee and one of several solidary obligors, other solidary obligors are released. If obligee wants others to remain bound, those others must consent to new obligation.

Question 29

Extinction of Obligation through Remission of Debt

Answer 29

Voluntary relinquishment by obligee of her right to demand performance, which extinguishes the obligation

i. If obligee voluntarily surrenders to obligor the document that evidences obligation, presumption is that obligee intended to remit the debt. No presumption if obligee releases real security given for performance.
ii. Presumed that obligor accepts remission unless he rejects. Remission counts as a gratuitous contract that doesn’t require notarial act.
iii. Remission of debt in favor of principal obligor releases sureties. Remission in favor of sureties doesn’t release principal obligor. If multiple sureties, remission in favor of one releases others only to the extent they might have recovered against that surety.

Question 30

Extinction of Obligations through Compensation/Offset

Answer 30

Extinguishes two obligations simultaneously when two persons owe each other sums of money or quantities of fungible thins identical in kind, and sums or quantities are liquidated and presently due.

i. When compensation occurs, both obligations are extinguished to the extent of the lesser amount.
ii. Compensation between obligee and principal obligor extinguishes the surety’s obligation. Compensation between surety and obligee doesn’t extinguish principal obligor’s obligation.
iii. Compensation between obligee and one solidary obligor extinguishes for other solidary obligors to extent of that obligor’s portion. If between solidary obligee and an obligor extinguishes obligation for that portion of the obligee.
iv. Court can declare compensation if no liquidity but only for obligations susceptible to prompt and easy liquidation.

Question 31

Extinction of Obligations through Confusion (Merger)

Answer 31

Confusion exists when qualities of obligor and obligee are united in the same person, which extinguishes obligation

i. When party of confusion is a surety, obligation is not extinguished for the principal obligor.
ii. When solidary obligor becomes obligee, confusion extinguishes only for the portion of that obligor.
iii. When solidary obligee becomes obligor, confusion extinguishes only for the portion of that obligee.