Week 2: property law, law of obligations Flashcards
Distinguish between “Legal subjects” and “Legal objects”
- Legal subjects: “persons” are considered.
*Natural persons–>
->Acting for private purposes.
->Acting for commercial purposes (ex. business);
(One-person business/craftsmanship/liberal professions such as an attorney or doctor)
*Legal persons–>
->Without legal personality (“partnerships”)- separate assets
->with legal personality (“companies”)- limited liability or not, depending on business type; if personal assets can be seized. - Legal objects: “assets”
*Goods
->tangible vs. intangible
(including documentary intangibles- rights materialised in documents; ex. stocks, bonds)
->movable vs. immovable (ex. piece of land)
->generic (ex. bulk goods- money vs. specific goods- Mona Lisa)
*Animals
*Services
Types of Legal Objects
Legal objects: “assets”
*Goods
->tangible vs. intangible
(including documentary intangibles- rights materialised in documents; ex. stocks, bonds)
->movable vs. immovable (ex. piece of land)
->generic (ex. bulk goods- money vs. specific goods- Mona Lisa)
*Animals
*Services (ex. to build/construct a house)
Types of Legal Subjects
Legal subjects: “persons” are considered.
*Natural persons–>
->Acting for private purposes.
->Acting for commercial purposes (ex. business);
(One-person business/craftsmanship/liberal professions such as an attorney or doctor)
*Legal persons–>
->Without legal personality (“partnerships”)- separate assets
->with legal personality (“companies”)- limited liability or not, depending on business type, if personal assets can be seized.
Categorise “rights”
Rights->
A) Absolute rights-
enforceable to all (“erga omnes”)
1. Property law; “real rights”
2. Rights regarding creation of the human mind; “intellectual property”
B) Relative rights-
personal rights (“law of obligation”)
1. Legal Acts; “unilateral & multilateral”
2. Legal Facts; “torts”
Real rights (property law)
Right in or over an indefinable asset or group of assets. It follows the asset or group of assets, notwithstanding in whose hads asset can be found.
In most legal systems=closed system.
Only the legislator can create real rights.
Types of “real rights”
- Ownership
- Real right of use (easements)
->Ground lease
->Right of usufruct (civil law) - Real security rights
->Pledge
->Lien - Security right of immovable property
->Civil law vs. Common law mortgage - Charge
Ownership
In principle- the most important real right!!!
Ownership can be wested in 1 person or different persons (co-ownership)
Ownership vs. possession vs. custody
–>OWNER has a legal power over a good (& perhaps a physical power)
–>Possessor has a physical power over a good.
–>Custodian only keeps the good for someone else for a certain time. (It is clear from the start that he will have to return the goods to the owner)
Real right of use (easements):
“ground lease”
Ground lease “emphytheusis”:
*Min. (ex. 25 years) and max. (ex.99 years) period of time during which the holder can use the good, enjoy the benefits/returns.
Ex. Peach farm that leases land can sell harvest, but only for agreed period of time!
*The holder has to pay a lease to the owner!
Ex. Pay a lease on land on which you bulid a farm.
Real right of use (easements):
“Right of usufruct (civil law)”
One separates the bare ownership (the owner of a good) from the person who has a right to use it (person who has the usufruct).
One can enjoy a certain benefits/returns for a certain time period.
Right to:
usage- to use the property
fructus- to get the fruits from the property.
Only owner can sell or lease the usufruct!
Real security rights
Real security rights–> meaning security rights attached to an object.
*As opposed to personal security right- ex. personal guarantor.
*A security right is a right/claim which a creditor can exercise in a case the debt is not repaid/performed by the debtor.
*It is an accessory to the main claim the creditor has on the debtor = it can thus be executed only if the debtor does not fulfil his obligations.
Examples: Pledge and Lien.
Real security rights: “Pledge”
Owner of an object entrusts the object to his creditor as security.
Creditor is NOT and owner!!! He is a possesor!
Ex. “Pawn shop”, “Art-finance”
Requirements:
*Created specifically by contract.
*Security right on moveable good.
*It requires in principle the transfer of possession!
Why? Possession is an indicator of ownership (of movable good).
->Protection against fraud.
->The debtor must give the object to the creditor until full payment of debt.
HOWEVER, “constructive possession” is possible” = a pledge via 3rd party.
Non-possessory pledge: “constructive pledge”
Pledged object is required to guarantee business. Thus, possession replaced by registration in public register.
Security right on physical object on documentary intangibles.
+Goods (ex. Picasso painting)
+Documents of title (ex. Pledge of shipment documents/ bills of landing)
+Instruments embodying a money obligation. (ex. Share pledge, receivables pledge)
Generally no formalities nor registrations required. Possession by creditor serves as notice.
How does a pledge terminate?
2 cases:
1. Either the debtor pays/redeems the debt & recovers the object.
2. Debtor cannot pay debt–> object is sold (court order often req.)–> powerful security!
If there is a surplus from sale, it is returned to the debtor.
Real security rights: “Lien”
Right given to the creditor to detain the goods of debtor until a debtor is fully paid or performance of some other obligations is done.
+Goods were delivered to the creditor for a purpose other than security
ex. repair shop (lent for repair), sea carrier
+Created by contract, by law or by recognised customary practice:
–> By customary practice:
ex. Sea carrier ob carriage charges on passenger’s luggage- if not paid by they can keep the luggage until the fee is paid.
ex. Inn keeper
–> Lien by statute:
ex. An airport company over an aircraft for airport charges & fuel.
ex. A garage acting as an agent for the police.
!Possession of a good is required, if not the security right is lost!
(Security rights for tangible goods terminates when no longer in possession).
Security right on immovable property.
Also on very valuable movable property, ex. ships. Not a real mortgage, but is a security right.
*Civil law mortgage
Mortgagee is not the legal owner; he only has a right on the good, and also of course does not have possession.
Made known to the public via public register, making it enforceable to all.
–>Possession remains with the debtor.
–>Formal contract required (often via notary public)
*Common law mortgage- mortgagee is an owner!
Transfer of ownership- to a creditor by way of security upon the express or implied condition that the ownership will be re-transferred to the mortgagor on repayment of debt.
Possible surplus in case of foreclosure belongs to the CREDITOR!
–>Mortgagee is entitled to the possession, but mortgaged object is often left in the debtor/mortgagee.
–>Security right on every object- movable (ex. car), immovable, (in)tangible.
Fiduciary relationship
Devision between legal & economic ownership.
Mortgage- Mortgagee temporarily becomes the owner of the object.
Charge
Right of the creditor to have a designated asset or group of assets or all assets of the debtor appropriated to discharge the debt.
–> Neither a transfer of possession
or ownership.
–>Debt is satisfied out of the proceeds of the sale of designated asset. (Voluntary sale or by court order).
–>Created by:
Statute (civil law countries)
Trust
Cotract (UK)
Types of charges:
*Fixed charge
*Floating charge=changing assets
Fixed charge
Attaches as soon as the charge has been created or the debtor has acquired rights in the specific asset to be charged.
!Debtor cannot dispose the asset without consent of chargee/creditor, unless by satisfying debt.
Floating charge
Floating charge=changing assets
Over a designated class of assets in which debtor has or will in the future acquire an interest.
+Debtor can freely dispose assets if keeps the charge floating.
+Upon a certain events a floating charge “organises” and becomes a fixed charge.
+Value agreed upon (if store sells its inventory the charge stays the same number; even though charge is floated- ex. number of laptops fluctuates when selling.
Relative rights: “personal rights”
Rights/claims of a person.
Ex. Claim to transfer money to me, as a creditor, as a payment for your debt.
“Law of obligations”–>
Legal Acts
Legal Facts
“Law of obligations”: Legal Facts
Facts to which law applies legal consequences. It happens unintended.
Legal facts can be:
*an event (ex. death)
*condition (ex. insanity)
*omission(not doing something)/action (ex. accident)
There are legal consequences attached to legal facts.
In some cases TORT LAW is applied! It is the branch of law that protects people that suffers from injuries because of negligence etc.
It includes pre-contractual liability!!
To be applied there needs to be:
*damages
*fault
*causal link between fault and damages.
“Law of obligations”: Legal Acts
Actions that were intentionally taken considering the legal consequences.
Legal acts can be:
*Unilateral- one party needed
ex. offer, resignation
*Multilateral- 2+ parties involved.
ex. Contract
Several conditions for the legal act to be VALID (that contract exists) need to be considered:
1. Consent
2. Object
3. Cause
4. Ability
Validity of legal acts: Consent
Consent= clear intention to be bound.
It is to be determined from:
*Party’s statements, conduct or omissions
*The fact that it was reasonably understood by another party.
*The fact that consent may not be defected (no vices)
To be consensual, the defect (vices) of the intention of the party should be absent, taking into account the facts of a particular case.
Validity of legal acts: Object
(What?)
For the legal act to be valid, the object of the act should be:
*Clearly defined
*Permissible by law
*On the market
Validity of legal acts: Cause
(Why? You take legal act/enter into an agreement)
Cause is one of the conditions for a valid binding agreement.
Cause is the reason parties decide to enter into the agreement.
!!It SHOULD NOT be against public policy or mandatory law!!
Validity of legal acts: Ability
A party must have the ability to enter into a legal agreement for a valid legal action to happen.
2 types of capacity–>
1.) Legal capacity (to have a possibility to hold a certain right)
2.)Personal capacity (to have the ability to exercise the holder rights).
ex. Insanity- if known to the other party and not inducedly protected the insane party.
Define “vices”
To be consensual, the defect (vices) of the intention of the party should be absent, taking into account the facts of a particular case.
- “Vices”–> “Mistakes”
In legal terms they are:
*About the core of the claim- known or ought to have known by another party.
*Excusable=all other reasonable persons would have made the same mistake
*At the moment legal act is concluded. - “Vices”–>”Fraud”
*About the core of the claim
*Fraudulent representation, whether by words or contract, or fraudulent non-disclosure of any info. by other party.
*Intention of the other party needs to be fraudulent.
*At the moment legal act is concluded. - “Vices”–>”threats”
Another defect of intention can be caused by violence or threats:
*Towards person or their close relatives
*Imminent and serious threat
*Wrongful in itself or to apply.
*At the moment legal act is concluded.
Ex. violence, abusing the need for money. - “Vices”–> “Exploiting unfair advantages”
*One party was dependent or had a relationship of trust with another; was in economic distress or had urgent needs.
*The party had urgent needs or was in financial distress.
*Another party knew or ought to have known about these circumstances and take excessive advantage of it.
*At the moment legal act is concluded.
*In a way grossly unfair or took excessive benefit.
Sanctions that can be applied to legal acts.
- Avoidance of the legal acts or “nullity”
It sanctions rules that were breached during the conclusion of the legal act.
Retroactive effect:
new law applies to the situations that appeared before the law was enacted (the legal act never existed).
2 types:
1.) Absolute
2.) Relative
Consequence of the avoidance:
+retroactive effect
+Avoid vs. void - we need a court to sentence a sanction vs. operates automatically.
- Absolute nullity
*Rules of public order violation
*Anyone can invoke avoidance
*At every stage of dispute
*There is no waiver- cannot be waived by the contracting party.
Why? The act was something against that constitutes essence of society, economy, culture… - Relative nullity
*Mandatory law violated by sanctions
*Only protected parties can invoke avoidance of the sanction.
*Happens at the beginning of the dispute= first stage of going to court
*Waiver is conditionally possible
