Real Rights - Main Concepts PDF

CHAPTERS 12 AND 13 REAL RIGHTS – MAIN CONCEPTS *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full Di...

CHAPTERS 12 AND 13 REAL RIGHTS – MAIN CONCEPTS *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full Difference between an IMMOVABLE GOOD and a MOVEABLE GOOD: as their own name indicate, immovable goods are those that cannot be moved (this is not a very legal definition, but for you to understand). In any case, immovable goods are listed in article 334 CC (and page 236 of the handbook, third edition; number 5 can be a little controversial, because it classifies as immovable goods, “movables related with the running and exploitation of immovable goods” such as machines, tools, containers… It is easy to understand why those are included in the category of “immovable goods” if we think, for example, of a cattle shed –nave ganadera–: all the tools and machines thereof, which are linked to the cattle shed itself –and that are of great size and value– are considered immovable goods). Fruits: things generated by other things without altering the essence of such thing. The fruits or products of a thing belong to its proprietary (fruits are, of course, the fruits you all are thinking about, but also rents arising from a lease agreement, dividends, minerals…) (articles 354 CC and 335 CC). Real rights: a real right or right in rem is an immediate and direct power of a person over a thing that the others must respect. The typical real right is the right of property, as a full and plenary real right. However, there are many more, but those are known as “limited real rights”, that can be classified in different categories: I. LIMITED REAL RIGHTS OF ENJOYMENT: they allow the use or enjoyment of a thing that is property of other: (i) Usufruct: the usufructuary uses the thing as if it were the proprietary, with the right to have the fruits. However, the proprietary is another person, thus the usufructuary cannot alter the thing. (ii) Use: more limited than the usufruct, grants the right just to have the fruits necessary for the person entitled to use. (iii) Habitation: right to use determine rooms of a property. (iv) Easements (servidumbre): an easement is a burden imposed upon a real property for the benefit of another real property belonging to a different person. For example, easement of access (servidumbre de acceso), of light (servidumbre de luces para los tendidos eléctricos), etc. II. LIMITED REAL RIGHTS OF GUARANTEE: they grant the faculty to sell a good in guarantee for the performance of an obligation: (i) Pledge: constituted over movable goods (for example pledges over shares). (ii) Mortgage: constituted over immovable goods. It needs to be constituted in public deed and registered in the property registry to be valid (art. 1.875 CC). Is one of the typical examples of “formal contract”. 1 III. ACQUISITION OF REAL RIGHTS: Real rights over things can be acquired by different ways: (i) Through occupancy is the way of acquiring the right of property. - Article 609 CC refers in general to the fact that “ownership is acquired by occupation”. - This article 609 CC adds that “ownership and other rights over property are acquired and transmitted by law, by gift, by succession, and as a consequence of certain contracts by means of tradition”. - Therefore, traditio (transmission) is necessary to acquire the property. Traditio is constituted by title (contract) + modus (delivery, having the possession). Sometimes, when the delivery as such is not possible, it is accepted the traditio fictia (for example, the delivery of the keys to transmit the property of a house), or traditio instrumentalis when, in case of a contract that has to be made by means of a notarial deed, the raising of it shall be equivalent to delivery (article 1462 CC). - Article 610 CC refers to the acquisition of the property of movable goods. (ii) Through accession: we refer to everything the property produces or that is added or united to it, either naturally or artificially. For example, the lands that have been created in the sea in the case of La Palma volcano: the owners of the lands acquire the property of those extra lands created by the volcano via accession. (iii) Through usucapio: manner of acquiring, essentially the property, by the mere possession (property is not the same as possession. Someone can posses something without being the owner). Ordinary usucapio: the person possessing, possesses in good faith and with fair title (this is, he ignores that the tittle is not sufficient or has a defect, and thinks that the person who has delivered the thing was the real owner. For example, if my brother gives me a guitar that I think is of him, but actually it is not): - Movable goods: 3 years. - Immovable goods: 10 years between presents, 20 year between absents. (This is, if I posses the guitar during 3 years in good faith and with fair title, I can acquire its property. With immovable goods, is 10 years between presents and 20 years if some of the parties is absent). Extraordinary usucapio: the person possessing, possesses in bad faith and without fair title. - Movable goods: 6 years. - Immovable goods: 30 years. 2 IV. PROPERTY REGISTER (i) Just gives publicity to real rights over immovable goods. It is a mean of proof of rights recorded therein. (ii) To register a real right in the Property Register, it must be granted in public deed (but this does not mean that we are talking about “formal contracts”; only, that if we want to give publicity and make third parties know about a real right we have, we need to grant the contract in a public deed to make it have access to the Register). (i) In relation to the above, with the exception of the mortgage right, which registration is necessary for its validity and thus, it should be granted in a public deed (mortgage right is a formal contract), registration of other real rights and legal acts over them is not compulsory. This entails that it might happen that the registry and the reality differ, but it is of common practice to register everything related to real rights in the Property Register. (ii) The main effects of the registration with the Property Register are two: It protects the owner of things, because the rights registered are presumed to exist and belong to the owner recorded. This entails that whoever wants to attach the ownership recorded in the Registry, has to proof that it is not the true ownership. This can be done through a claim of nullity or cancellation (art. 38 de la Ley Hipotecaria or “Mortgage Law”). It protects third parties who acquire based on what is registered therein. This is provided in article 34 of the Mortgage Law: “the third party acting in good faith who acquires by onerous title any right of the person who appears in the Registry as having the faculty to transfer it, shall be maintained in his acquisition, once he has registered his right, no matter if the right of the person who transferred it to him is lately annulled or resolved due to causes which do not appear in the Registry”. This is known as the “principle of protection of the third party acting in good faith”. Therefore, this third party is compulsory that must be acting in good faith without knowing that the buyer is not actually the real proprietary. For example, if I am in conversations with the alleged owner of a house to buy it, and I go to the Property Register and it shows that indeed, such is the owner of the house, if afterwards it results that he was not, article 34 of the Mortgage Law protects me and I am able to keep the ownership of the house. Please note that this is a general situation. It can happen that, due to the particularities of the case, a Judgement is rendered declaring that the first sale was valid and therefore, that, in the example explained above, I should be deprived for the ownership. In that case, it applies the “warranty for eviction” explain when speaking about the contract of sale and regulated in article 1256 of the CC (this is, the seller should compensate the buyer for that situation). 3  CHAPTER 11 NON-CONTRACTUAL LIABILITY *Disclaimer: this summary does not prevent you to study the book. Non-contractual liability or civil liability arises when there is no contractual relation between two or more persons, but one suffers harm as a result of an act or omission of others (article 1089 CC). Article 1.902 CC provides the general rule of non-contractual liability: “a person who by an act or omission causes damage to another, concurring fault or negligence, is bound to repair the damage caused”. Therefore, the remedy awarded to the person who suffers the damage is a compensation with the aim to leave him “undamaged”. This compensation shall be granted in nature or shall consist of a monetary compensation, but it might also consist of a combination of both. Articles 1902 to 1910 CC regulates the non-contractual liability. A. REQUIREMENTS THAT SHOULD BE MET IN ORDER TO CLAIM FOR CIVIL OR NON-CONTRACTUAL LIABILITY: 1. “Unlawful” act or omission Actions (for example, a driver runs with his car over a pedestrian; a worker hits someone when manipulating a crane; a child hits a friend with a football ball…). Omissions (for example, a train controller does not close the access to the railway on time and an accident takes place, a worker does not signal a ditch and someone falls inside it; the reparations required are not made in a device that explodes causing damages…). When we refer to “unlawful” acts or omissions, we refer to anything contrary to the law, but broadly and generally speaking. This is: any act or omission which causes damage shall be presumed to be unlawful, unless the person who caused the damage (i) acted in self-defense; (ii) acted under necessity in order to avoid a bigger damage, (iii) acted by virtue of lawful authority such as a license, or (iv) acted with the consent of the victim. 2. Fault or negligence / Strict liability It is necessary that the damage is attributable to the agent who causes the damage either because he had the intention to cause it (dolus), or because he did not act with sufficient diligence to prevent the damage (fault or negligence). Article 1902 CC only refers to fault or negligence and not to fraud or dolus, but it is obvious that dolus can give rise to civil or non-contractual liability. Fault or negligence should be understood in this context as the omission of the necessary diligence to prevent the damage. Lack of diligence is analyzed under the perspective of article 1.104 CC: “The debtor's fault or negligence consists in the omission of such diligence as is required by the nature of the obligation and corresponds to the circumstances of the persons, time and place. When the obligation does not express the diligence to be rendered in its fulfillment, the diligence that would correspond to a good father of a family shall be required”. 1 3. Damage Of course, the obligation to compensate only arises when the negligent conduct of the agent produces a damage. The damage not only has to exist, but also it has to be certain and valuable, that is, it has to be proven and valuated with sufficient certainty. This is easier with regard to the value of the loss (daño emergente) than to the loss of profits (lucro cesante) (for example, to prove the hospital expenses might be easy, but not so much to prove the loss of profits during the days the person has stayed at the hospital). The concept of damage includes future damages (i.e., future consequences of corporal injuries), economic or personal damages (damage to property and damage to persons), and moral damages. They can be caused to either individuals or artificial persons (i.e., when the reputation of the artificial person has been harmed due to untrue information made public). 4. Causation: link between the conduct and the damage Between the conduct of the agent and the damage, a causation relation has to exist. The “victim” is the one that has to proof the cause of the damage (this is, and the burden of proof corresponds to the victim. If he cannot prove the damage arises from the conduct identified as cause, then he shall not be compensated). *Sometimes it can be hard to determine the causation of the damage. For this purpose, there are several theories, such as the “adequate causation”, by means of which, in case of doubt, the cause is the one that normally produces the damage. *Another possibility is that it is not known, among several possible persons, who caused the damage or to which extent. In that cases, the rule of solidarity (joint and several) applies, and all the agents are liable for the totality of the damage, without prejudice to the internal relations between them. *Lastly, there are several elements that can interfere in the link between the cause and the damage, which might limit the liability of the agent or event totally exonerate him from liability: (i) Act of God or force majeure (ii) Intervention of a third party: for example, when a third-party drugs someone to commit a crime. The liable is the one who drugs the person who commits the crime without having full faculties. However, if the causation is not totally broken by the intervention of the third party and both actions produced the damage, the compensation shall have to be distributed between them both, joint and severally. (iii) Concurrence of faults: for example, when a drunkard walks on a railway and is run over by the train whose driver was not attentive: both are liable. This is called “contributory negligence” and exists when the conduct of the agent (the driver in this case) is joined by the negligent conduct of the victim (the drunkard). (iv) Fault of the victim: for example, if somebody is visiting the zoo and introduces an arm into a tiger’s cage. That person assumes his own liability. 2 B. LIBIALITY FOR OTHERS AND STRICT LIABILITY CASES 1. Liability for others In several cases, several persons are liable for the negligent acts or omissions carried out by agents under their control. This is refer to as “liability of others” because the agent of the damage and the person liable for it are different individuals. This liability for others is numerus clausus, this is, this only ahppens in three situations regulated in article 1.903 CC: (i) Parents and tutors for their children, minors or incapable persons, (ii) Owners or managers of schools for the damage caused by students during school time and school activities, and (iii) Employers for the damage caused by their employees in the performance of their duties while in duty (“while in duty” refers to the fact that the damage has to have occurred while the employee was performing activities related to his job). 2. Strict liability The above is different from the “strict liability cases”. The general rule in non-contractual liability is that there is no liability without fault. However, there is a criterion of attribution of liability to the agent of the damage different from fault. It is the “strict liability criterion”, cases in which liability is attributed independently of the diligence observed in the conduct. This criterion is generally applied in relation to accidents that happen in the industry sector and is followed in some rules of the Civil Code (1.905 -owners of animals for the damages caused by such animals-, 1.908.2 -machines owners for the damages caused by the toxic smoke resulting from those machines-, 1908.3 -tree owners for the damages caused by the fall of those trees-, and 1.910 CC -house owners for the damages caused by the things threw from such house-). [Strict liability is explained in the book within the section referred to fault of negligence, as these are cases in which liability is attributed independently from the diligence observed by the owner of the thing/animal that caused the damage. Let us say that these are case in which the law stablishes the liability regime independently of the fault or the negligence involved] 3  CHAPTER 8 NON-PERFORMANCE OF OBLIGATIONS *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full First of all, every non-performance is considered a breach of contract, and as we have studied, a breach of contract always entails the possibility for the creditor that has not been satisfied to be compensated with damages. In other words: lack of performance shall give rise to a compensation for the damages caused thereby (art. 1.101 CC in relation to 1124 CC for bilateral obligations). To understand the different kinds of non-performance the following classification might be made: (i) Total breach: a total breach of performance occurs when the debtor has not performed his obligation and he cannot perform in the future, either because performance is no longer possible or because it is still possible, but it does not satisfy the creditor's interests anymore. For example, when Santa Claus does not show up in Christmas eve. the delay in the performance entails a total breach of the obligation because the term in which the obligation had to be fulfilled was essential for the satisfaction of the creditor. The case of loss of the thing due or sudden impossibility of performance is also a case of total breach of the obligation. Nevertheless, it has the special consequence of extinguishing the obligations (therefore, the debtor is not liable for the non-performance) if the requirements of article 1.182 CC are met (the loss is not attributable to the fault of the debtor and takes place before the debtor's delinquency). A total breach also exists when the performance is still possible, and the creditor is still interested in the performance but there is a clear will of the debtor not to perform (expressed or which can be inferred from the debtor's acts or omissions of the debtor) (ii) Defective performance: a performance is defective if it does not adequate to what the parties agreed; it might be because it is defective or because it is partial. In the case of defective performance the debtor has undertaken some acts in order to perform the obligation, but his acts do not exactly adjust to the performance agreed. (iii) Delay in performance: when the debtor does not perform on time, but performance is still possible (if the creditor is not interest in performance anymore, we would be in a case of total breach). The delay in performance does not automatically set the debtor in delinquency. 1100 CC states the following requirements: i. The obligation has to be liquid and expired, this is, has to be subject to be asked for and its amounts determined (es decir, líquida y exigible) ii. The delay has to attributable to the debtor iii. The creditor has demanded performance. This requirement is sometimes not required for the debtor to be set in delinquency. Effects of debtor’s delinquency due to delay in performance: (i) The debtor who incurs in delay is not released from his obligation to perform what he has not performed on time. The debtor still has to fulfil his obligation (inasmuch the creditor is still interested) (ii) Art. 1101 CC states that the debtor in delay shall have to pay a compensation for the damages caused by the delay. (iii) If the debtor is already in delinquency and it is finally not possible to perform due to an act of God or force majeure, as the delinquency was previous to that, the debtor is still liable, paying therefore damages for the total breach of the obligation. 1 (iv) Fault or negligence in performance: we speak about fault or negligence when referring to the lack of diligence in the performance of obligations. When a person is carelessness, neglectful or does not apply the proper expertise to the performance of his obligations there is a case of negligence. Article 1.104 CC provides that the fault or negligence of the debtor consist on the omission of the diligence required by the nature of the obligation and that corresponds to circumstances of the person, time and place. With regard to the proof of fault or negligence, in the case of obligations to give a thing in the debtor's possession, article 1.183 CC entails a presumption of negligence of the non-performing debtor that he shall have to destroy. If the obligation is an obligation to do something, article 1.183 CC does not apply and therefore it should be for the creditor to proof the negligence of the debtor. (v) Deceit (or “dolus”) in non-performance: deceit in this epigraph has to be differentiated from the deceit we have referred to under the vices of consent. By deceit here we refer to the conscious act of the debtor who does not perform his obligations. Deceit is a conscious and deliberate non- performance. ACT OF GOD OR FORCE MAJEURE Liability does not arise for the debtor whose non-performance cannot be attributed to his fault. Liability does not arise out of events that cannot be foreseen or that, if foreseeable, were inevitable. This is the definition of Act of God of Force Majeure (art. 1105 CC). For example, if in an area of big storms, the debtor has to deliver a car that he has at his house garage and it is destroyed by a lightning because he did not have a lightning rod, he shall not be liberated from liability. The same can be said in the case of a debtor who knows of the possibility of his workers starting a strike and does not take all the possible measures to secure the delivery of his products to his clients. Examples of act of God or force majeure are wars, atmospheric catastrophes (floods, fires, earthquakes) if they could not be foreseen in that area), robberies, acts of the Administration that could not be foresee and prevented (e.g. expropriation), etc. *The debtor is not exempted from liability due to force majeure if the parties to the obligation so agree. ACT OF PERFORMANCE AND TERMINATION OF BILATERAL OBLIGATIONS See final part of Chapter 5 (basic summary and pages 103 and 104 of the handbook, jointly with pages 140 and 141). LIABILITY OF THE DEBTOR The compensation for damages is a consequence of the non-performance an obligation, no matter which kind of non-performance has taken place if it is attributable to the debtor (art. 1.101 CC). Any kind of unfulfilling debtor shall have to compensate the creditor if his breach of the obligation has caused damages. In principle, the compensation should leave the creditor in the same position as if the obligation had been properly fulfilled. The compensation for damages envisaged in article 1.101 CC consists not only of the “value of the loss” (daño emergente, this is, the damage already suffered) but also of the “loss of profits or gains” (lucro cesante, this is, the loss of benefits, the losses suffered for the non-performance of the obligation) (art. 1.106 CC). Although article 1.106 CC does not refer to the “moral damage” (non-pecuniary loss) consisting here of the distress or nuisance that the creditor may suffer due to the lack of performance, they can be as well claimed in case it is possible to prove them and the link between the performance and the damage suffered. 2  CHAPTER 7 WAYS OF EXTINGUISHING OBLIGATIONS OTHER THAN PAYMENT *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full Article 1.156 CC provides that obligations are extinguished by (1) their payment or performance; (2) the loss of the thing due; (3) the remission of the debt; (4) the confusion of the rights of creditor and debtor; and by (5) novation. 1. LOSS OF THE THING DUE OR SUDDEN IMPOSSIBILITY OF PERFORMANCE The thing due is lost not only when the thing to be delivered is lost (in obligations to give something), but also in obligations to do something when the performance becomes legally or physically impossible (art. 1.184 CC) – in these cases, the obligation was validly constituted (otherwise it would be null) but impossibility arises after the constitution. If the thing that has to be delivered disappears or the performance becomes impossible, the obligation shall be extinguished, and the debtor liberated, inasmuch as two requirements are met (art. 1182 CC): (i) That the loss of the thing or the sudden impossibility of performance is not due to the debtor's fault. (article l 183 CC provides that the debtor's fault is presumed when the thing due is lost while in his possession and his lack of fault is not proven); and (ii) That the loss of the thing or the sudden impossibility of performance takes place before the debtor’s delinquency. This, because the debtor who does not perform on time due to his fault is also responsible for the loss of the thing or the sudden impossibility of performance in case of Act of God or force majeure. If any of the two circumstances contemplated in article 1.182 CC take place (the debtor acts with fault or is in a state of delinquency), the debtor shall not be liberated. *If the debtor has received something in exchange of the thing lost, he has the obligation to deliver to the creditor what he recovered in substitution of such thing (art. 1.186 CC). For example, if the thing due was lost in a fire and the debtor receives a compensation from the insurance company, he shall have to give such compensation to the creditor. 2. REMISSION OF THE DEBT: it is the renounce of the creditor to his right of credit which entails the extinction of the debtor’s obligation (art. 6.2 CC). 3. CONFUSION OF THE DEBT: It is the extinction of the obligation due to the concurrence in one person of the concept of debtor and creditor (art. 1192 CC). 4. COMPENSATION OF DEBTS: compensation exists when 2 debts are extinguished because the persons obliged are reciprocally debtor and creditor of each other (if I owe you 100 €, but you owe me 50, then we compensate debts and I only owe you 50 €). 5. NOVATION: novation = modification, change (is the judicial or legal way of expressing “change”, “modification”). A novation of an obligation can either extinguish the obligation, or just modify it. *For subjective modifications of obligations (assignment of credit -cesión de créditos-, subrogation on the credit -subrogación; tener en cuenta el principio del capítulo 6 cuando hablábamos de pago de deudas por terceros-, and transfer of debts -cambio de deudor-), see the book. Important: difference between assignment and subrogation: the subrogation is unselfish and stated by law, this is, it satisfies the interest of the person subrogated to recover what he has given to the first creditor (again, to understand it, take into account what we saw in Chapter 6 in relation to the scenarios where a third party pays the creditor on behalf of the debtor); the assignment of credits is a mean to make the credit circulate.  CHAPTER 6 PERFORMANCE OF OBLIGATIONS *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full I. Payment by a third party: Any third party can make the payment (art. 1158 cc) unless the duty of performance is of personal nature (art. 1161 CC). For example, if the duty of performance consists of the painting of a portrait by a famous and particular painter: only he can perform the obligation. Payment by a third party liberates the debtor, but it entails certain consequences between the debtor and the third party who pays for him. We can find 3 different scenarios: (i) With the agreement of the debtor: the third party has the possibility to choose between a reimbursement right (derecho de reintegro) against the debtor, or a right to subrogate (derecho de subrogación) in the position of the previous creditor (which means he can benefit from the guarantees given by the debtor to guarantee the payment of the debt). For example, if María (the third party), pays on behalf of Juan (the debtor), to Carlos (the creditor), the debt of 100 € held by Carlos against Juan, then María can either claim Juan the reimbursement of the 100 €, or she can subrogate herself in the position of Carlos. In this last case, because imagine that Juan guaranteed the repayment of the debt with his iPhone: if María subrogates in Carlos’ position, she can claim Juan not the 100 €, but the guarantee / iPhone (this, very simplified). (ii) With the opposition of the debtor: the third party can only claim from the debtor the benefit the debtor received from payment (action for enrichment). For example, Juan (the debtor) owes 100 € to Carlos (the creditor), but Juan opposes that, due to previous transactions between them, he actually owes only 80 € to Carlos. María (the third party), without listening to Juan and with his opposition, pays 100 € to Carlos. Then, such third party, María, can only claim the debtor, Juan, 80 €, not the whole 100 €. This action for enrichment is an “action for reimbursement” in certain manner mitigated, and there is no right to subrogate. (iii) Without the debtor’s knowledge: if in any of the above-referred scenarios, María had paid to Carlos without the knowledge of Juan (this is, without express opposition of the debtor), María has an action for reimbursement of the whole 100 € but not the right to subrogate. II. Payment to a third party: - It is possible to pay to a person different from the creditor insofar it is useful for the creditor (1163.2 CC) (for example, when payment is performed to the brother of the creditor who afterwards gives him the money received, or in matrimonies with community of property). - Art. 1164 CC foresees the figure of the “apparent creditor”: payment made in good faith to the person in possession of the credit, releases the debtor. The person in possession of the credit is the one who “apparently” is the creditor. Then, the creditor can claim the apparent creditor for “unjust enrichment”. For example, someone wants to buy a guitar. When the buyer arrives to the house of the seller, his brother is there and is the one who has the guitar and delivers the guitar to the buyer (the brother of the buyer is “possessing the credit”, which in this case is the guitar). Therefore, the buyer pays in good faith to the brother of the seller and takes the guitar. Then, the seller can claim his brother for the money received. *With regards to the proof of payment, the Law does not oblige the creditor to give receipt of payment (except in particular cases such as in contracts with consumers) but giving a receipt of payment is in accordance with the principle of good faith and the usual usages (los usos y costumbres). 1 III. Payment requirements: in order to liberate the debtor, payment shall have the following requirements: (i) Identity: payment has to be the exact duty of performance agreed between the parties. The creditor cannot be forced to receive something different from the duty of performance agreed, not even if it is of equal or greater value (art. 1166 CC). In obligations to “do” something this is very easy to understand, for instance, when a painting should be painted by a particular artist. In monetary obligation, for example, is payment has been agreed to be made in euros, then payment cannot be made in dollars. In generic obligations, being the duty of performance, the delivery of a thing pertaining to a kind, if the quality and circumstances of the thing have not been foreseen by the parties, the creditor cannot ask for one of the higher quality, nor can the debtor deliver one of inferior quality – rule of medium quality governs. (ii) Integrity: unless provided otherwise, payment has to be completely fulfilled: completely delivery or completely performance. For example, if performance consists in payment of a sum, integrity means total payment; if it is delivery, total delivery with accessories and fruits (however, creditor can accept partial payment if agreed by the creditor, because the agreement of the parties is always above all). (iii) Indivisibility: it is similar to integrity, and means that, unless provided otherwise, partial performance is not accepted: performance cannot be fractionated even though it could be subject to division. This, again, unless the creditor accepts partial performance. IV. Term of performance / Moment of payment: the general scenario is that the moment of payment determines the moment from which the credit can be asked for and sets the moment from which the debtor can be placed in a state of delinquency. Therefore, from the moment of payment, the creditor can enforce the obligation asking for performance. The moment of payment can be fixed on a particular date or when a certain event takes place (uncertain term). The obligations subject to term shall only be enforceable when the date arrives art. 1.225.1 CC). If there is no term, but from the nature of the obligation it can be inferred that there was an intention to grant a term, the Courts may declare it as such. Article 1.127 CC provides that whenever a term is established in an obligation, it is presumed to have been established for the benefit of the debtor and of the creditor. This means that neither the creditor can ask for advanced payment, nor the debtor can oblige the creditor to accept payment in advance, unless such benefit has been granted to any of them (e.g. amortization of a loan, this is, advanced payment of a loan). The lack of performance of the term can entail a mere delay or the definitive non-performance of the obligation if the term fixed has an essential character (for example, if Santa Claus does not appear in Christmas eve). In both case we have a breach of contract, but the consequences would be different (in the second case, there is no possibility for termination nor performance, so only damages could be claimed). V. Place of payment: article 1171 CC states that (i) payments shall be made at the place designated in the obligation, (ii) alternatively, if no place has been determined and we are in a case of a delivery obligation, where the thing was located when the obligation was constituted (except if we are talking of sale contracts, in which payment shall be made at the place of delivery, art. 1500 CC), and (iii) alternatively, in the rest of the cases, the place of payment shall be the domicile of the debtor. VI. Creditor’s default / delinquency: when the creditor refuses to receive payment without a proper reason or cannot receive the payment, this should not impede the debtor from liberating himself. The law provides the debtor with a procedure to liberate himself in these cases. The procedure has two stages: 2  (i) Offer: when payment is offered to the creditor and he does not receive it or he unfairly refuses payment, such offer of payment entails the creditor’s default, which means (a) that the risk of the loss of the thing due is transferred to the creditor, (b) that the delay in performance does not entail the debtor’s default, and (c) that there is not accrue of interests, if applicable. (ii) Consignment: it is the deposit of the thing with the judicial authority or the Notary, at the disposal of the creditor. Situations in which consignment is applicable (therefore, the consignment is only applicable to obligations “to give something”). Article 1176 CC provides different cases in which the debtor can consign the thing due: (a) Refusal by the creditor to accept payment or to grant the document acknowledging payment or the cancellation of a guarantee (b) If the creditor is absent or incapacitated (c) If several persons claim that they have the right to collect payment (d) If the creditor is unknown (e) If the tittle of the obligation has been lost. The acceptance of the consignment by the creditor or the declaration of the judge that consignment is properly made, extinguishes the obligation. If after the offer of payment is made, the debtor does not consign the thing due (when applicable), the debtor is not liberated from his obligation, but default or delinquency starts for the creditor. VII. Special ways of performance: (i) Imputation of payments: when a debtor has different debts with the same creditor, the debtor, at the time of making payment, has the possibility to decide which of the debts want to extinguish (art. 1172 CC). (ii) Accord and satisfaction: according to article 1166 CC the creditor is not obliged to accept as payment a thing different from the one originally agreed. But the agreement of the parties on a performance different from the original is valid – this way of performance is pro soluto, this is, it extinguishes the obligation no matter if the value of the thing given is smaller or bigger than the original debt. (iii) Payment by assignment of property: when a debtor does not have sufficient assets to pay all of his creditors, he can agree with them the assignment of all of his assets - this way of performance is pro solvendo, this is, if the total amount of the debt was bigger than the value of the assets assigned, the debtor shall still be indebted for the excess. 3  CHAPTER 5 THE OBLIGATION *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full 5.1 Effects of contracts: the obligation According to article 1088 of the Civil Code, an obligation entails “giving, doing or not doing” something. Each obligation has 2 sides: A. a debtor, which is the party that has to give, do or not do something. B. the creditor, which is the party entitled to request the debtor, the performance of the obligation. If the debtor does not comply, then LIABILITY of the debtor arises. The liability is unlimited, as stated in article 1911 CC (the debtor is liable with all of his current and future assets) (principle of universal patrimonial liability – responsabilidad patrimonial universal). 5.2 Elements of the obligation Parties subject to the obligation. a. The object of the obligation: we have seen that it is the duty of performance and can consist of “giving, doing or not doing”. It is importat that this object is (i) possible, (ii) lawful, (iii) determined or subject to determination; (iv) subject to an economic valuation. b. Bond created by the obligation between the debtor and the creditor: in bilateral obligations, each party is at the same time debtor and creditor (for example, a sale and purchase contract). 5.3 Types of obligations: special reference to obligations with several persons involved 5.3.1 Obligations depending on the object thereof - Positive (to give or do something) or negative (not to do something) - Specific (the object is individually determinate –a Velázquez painting-) or generic (the object pertains to a kind of goods -a kilo of oranges-) - Simple (only one object is involved) or complex (involves more than one object) - Divisible (the obligation can be divided in pieces or parts) or indivisible (the obligation must be completely fulfilled) - Principal (the main obligation) or accessory/subordinate (the obligation accessory to the mail obligation) 5.3.2. Obligations depending on the bond - Unilateral (only one bond, therefore there is only one debtor and one creditor: donation) or bilateral (each party is at the same time the creditor and the debtor: sale and purchase) obligation [there is reciprocity in the duties] - Pure (the obligation is not subject to any condition) or conditional obligations. [the condition can be suspensive –the obligation does not arise until the condition does not occur- or subsequent (resolutoria) (the obligation ends when the condition occurs] 1 5.3.3. Obligations depending on the persons subject to it: joint and joint and several obligations JOINT OBLIGATIONS (OBLIGACIONES MANCOMUNADAS) In passive joint obligations each of the debtors only has to fulfil his or her part of the obligation; in turn, in active joint obligations the creditor cannot ask one debtor to fulfil the entire obligation: he or she must ask for a part of the obligation to each of the debtors. If the parties have not stipulated how the obligation is divided between the debtors (I mean, the percentage of “obligation” that each debtor has to fulfil), article 1138 CC sets forth that it is presumed that the obligation is divided in equal parts between the debtors. For instance, if Manuel and Pablo owe money to Sofia and their obligation is joint and the contract says nothing about it, then each of the debtors must pay 50 euros, and Sofia cannot ask Manuel to pay 100 euros, or Pablo to pay 100 euros. In passive joint obligations it is relevant to know the content of article 1139 CC --> the insolvency of one of the debtors does not affect the others. It is important to note that joint and several obligations (that we will explain later) are never presumed. Therefore, if the contract or the special law does not state that the obligation is joint and several, then the obligation will be joint. This is the content of article 1137 of the CC. But this in general terms, because the Supreme Court has shaded this1. The effect of joint obligations is as follows: If the obligation is joint and the obligation is divisible --> as we have explained, each debtor fulfils its part of the obligation and there are no problems. On the contrary, if the obligation is indivisible, it means that failure to comply from one of the debtors makes performance impossible. In other words, the non-performance of one of the debtors entails a total breach of the joint obligation, which becomes an obligation to compensate damages. Therefore, in order to fulfil the obligation, it must be transformed into a monetary obligation. This monetary obligation can, by definition, be divided among the debtors, therefore now each debtor can fulfil his or her part of the obligation. Each debtor must pay a sum equivalent to the corresponding portion of the value of the thing of which the obligation consists of (article 1150 CC). *Example of indivisible joint obligation: a rock band. Each member has a specific obligation, and the creditor can only request each of them for the performance of each obligation (the creditor cannot request the drummer to play the guitar, for example). 1Our Supreme Court has ruled, in several occasions, that, when speaking of non-contractual obligations (these obligations arise when I damage a third party’s car, for example), the obligations are to be deemed joint and several even if, obviously, it is not expressly stated so. Our Supreme Court has also stated that if from the agreement of the parties it is possible to understand that the parties wanted the obligation to be joint and several, then it will be joint and several even if it is not expressly stated as such. 2 JOINT AND SEVERAL OBLIGATIONS (OBLIGACIONES SOLIDARIAS) In joint and several obligations, each creditor has the right, and each debtor has the obligation, of asking or fulfilling the whole obligation. What are the effects of such obligations? If the joint and several obligation is active, then there are several creditors and any of the creditors can ask the debtor for full performance. If the creditor that asks for full performance obtains it, then the obligation is extinguished. The creditor that obtained full performance is liable before the rest of the creditors for their part (article 1142 CC) If the joint and several obligation is passive, then there are several debtors and the creditor can ask any of the debtors for full performance. Going back to our example, if Pablo and Manuel owe Sofia 100 euros and their obligation is joint and several, Sofía can ask Pablo or Manuel to pay 100 euros, and Pablo or Manuel cannot say “no, but Pablo (or Manuel) owed you money too! No. they have to pay the whole amount. But this does not seem fair, right? That is why article 1145 CC sets forth that the debtor that pays for the rest of the debtors has a right to recover what he paid from the rest of the debtors (this is called “right of contribution” (acción de regreso)). In other words, the debtor that paid can ask the rest of the debtors to give him back their part of the obligation. Contrary to what happens in joint obligations, here the insolvency of one of the debtors affects the rest of the debtors because they have to replace him and pay for his part as well. Final note: If performance becomes suddenly impossible, then all debtors will be free and the obligation would be extinguished. Nonetheless, if the impossibility is due the negligence of one of the debtors, then the rest are liable and have to compensate the creditor (without prejudice of the right of contribution that those debtors have against the negligent debtor) (article 1147 CC). *Example of impossible joint and several obligation: if several debtors are obliged to deliver a house and the house collapses. Then, the performance becomes suddenly impossible. If the house collapses because of the negligence of one of the debtors, they are still liable towards the creditor. *An example of special law that includes joint and several obligations is consumer law. In Consumer law it is common to establish that the damaged party (usually, the consumer) can sue either party involved in the transaction, even if that consumer does not have a contractual relationship with all of them* - CONSUMER PROTECTION LAW – Real Decree 1/2007, of 16 November (Real Decreto Legislativo 1/2007, de 16 de noviembre, por el que se aprueba el texto refundido de la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias). *SEE BELOW EXPLANATION WITH PICTURES OF THE DIFFERENCE BETWEEN JOINT AND JOINT AND SEVERAL OBLIGATIONS: 3 4  BILATERAL OBLIGATIONS In bilateral obligations both the parties are obliged, both parties have a credit right and a duty of performance, and both parties are bound to fulfil reciprocally towards each other. Reciprocity is decisive in a bilateral obligation. It is necessary that every obligation has its correspondent obligation for the other party. For example, the obligations arising from a contract of sale are bilateral as the seller is bound to give the thing sold and the buyer has to pay the price agreed. Simultaneous performance is the rule, but it has to be taken into account that alterations may exist to this due to the agreement of the parties, to usages or customary practices or to the nature of the thing due. It might be that the performances are separated in the time, but the interdependence is not altered. In these cases, the interdependence continue, because it could be understood that the party that fulfils in the first place is giving a credit to the party that fulfils in the second place until it does so. Bilateral obligations have special consequences deriving from the reciprocity within them: (i) Special regime on the debtor's delinquency: the debtor in an obligation finds himself in a situation of delinquency when he does not perform on time and the creditor asks him to fulfil his obligation (art. 1.100 CC). The specialty of bilateral obligations is that in a bilateral obligation none of the parties shall incur in delinquency if the other one does not fulfil either. Therefore, form the moment one of the parties fulfils, delinquency starts for the other (art. 1.100 CC in fine). (ii) Special performance and termination regime: when one of the parties does not fulfil his obligation, the other party can terminate the obligation or ask for performance thereof, with a claim for damages in both cases (art. 1.124 CC). Article 1.124 CC gives the party that performs the possibility to ask for fulfilment or to terminate the obligatory relation that binds him to the unfulfilling party. If the party who performed opts for the request of performance, he can still ask for termination if performance becomes impossible. [See in this regard, outline referred to Chapters 3 and 4, breach of contracts] (iii) Exception for non-performance of contracts (exceptio non adimplendi contractus): this a judicial principle according to which none of the parties to a bilateral obligation can ask for performance of the other parties' obligations without having fulfilled their own. The party whose performance is being asked (by the other party who has not performed) can defend himself by opposing this exception. This is based on the functional bilateralism, as the parties have to simultaneously perform their obligations. For the exception for non-performance to play, the following requirements have to be met: (a) a bilateral obligatory relation has to exist; (b) the Claimant has not performend his obligation and (c) there has to be good faith in the claim for the exception of the defendant (e.g. not having motivated the breach of performance by the other party). (iv) Exception for inaccurate performance of contracts (exceptio non rite adimplendi contractus): this is another judicial principle according to which the defendant can refuse to perform his obligation until the claimant has accurately performed his own obligation. The party whose performance is being asked (by the other party whose performance has been inaccurate in quantity, quality, time or manner) can defend himself by opposing this exception 5  CHAPTER 4 *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full 1) RULES OF INTERPRETATION OF CONTRACTS When a contract, or when clauses of a contract are not clear enough, there are some rules or criteria to follow in order to know the sense of the contract / clause: - First rule of interpretation: terms of the contract, how the contract is drafted, the wording of the contract (1.281 CC). - Second rule of interpretation: if the wording of the contract is not clear, then the intention of the parties applies. But how can the intention of the parties be ascertained? Analyzing their acts, whether contemporaneous or subsequent to the contract (1281 CC). - Third rule: if the wording is not clear, and is not possible to clearly identify the intention of the parties, then, the obscure stipulation shall be understood in the most adequate way for the stipulation to produce effects (1284 CC) (for example, if it is agreed that a plumber will install the water supply in a house, it is of common sense to interpret the contract in the sense that the plumber will be in charge to supply the pipes and install them). - Fourth rule: the sense of the whole contract, this is, looking at the other clauses in other to be able to interpret the clause which is obscure (this is, integration of the contract). If applying those rules, it is not possible to interpret the contract, (i) when referred to the principal object of the contract, then the contract is null, (ii) when referred to minor matters of the contract, the doubts will be interpreted (1) in favor of the smallest transfer of rights, or (ii) in favor of the greatest reciprocity of interests (1289 CC). The interpretation of obscure clauses shall never be in favor of the party who caused the obscurity in bad faith (1288 CC). 2) INTEGRATION OF CONTRACTS Integrating contracts refers to the completion of it, filing the gaps left by the parties. This can be done: (i) Taking into account the sense of the whole contract, this is, looking at the other clauses (looking for the solution from the rest of the contract), or, when this is not enough, by (ii) External resources: (i) the Law that may apply to that specific contract, or, alternatively, the general rules that may apply, (ii) usages –usos y costumbres– and (iii) good faith. 1 3) EFFECTIVENESS OF CONTRACTS A) Contracts bind the parties: contracts are made to be performed and fulfilled by the parties in the manner agreed. Only, in super exceptional cases, when the change of circumstances is unpredictable and extraordinary, the principle of good faiths allows the contracts to be adapted to the new circumstances. This, because maintaining the initial contract would be unfair (for example, the Covid was an unpredictable and extraordinary situation which the Supreme Court has understood that allows rental or lease contracts of business premises to be adapted taken into account the time they were closed). When this happens, we say that the clause “rebus sic stantibus” applies. B) Contracts cannot be left to the will of one party: a contract cannot be modified or revoked by only one of the parties. For example, in a construction project, if a delivery date has been agreed upon, the party performing the work cannot unilaterally decide to change the delivery date to suit its own interests. C) Contracts bind only the parties: principle of relativity of contracts: they only bind the parties who entered into the contract, not third parties. In any case, it is possible that the parties agree that the contract will benefit a third party who can therefore request the parties to fulfill the contract (for example, a life insurance where the beneficiary is a third party) 4) INEFFECTIVENESS OF CONTRACTS (i) Nullity (nulidad absoluta o de pleno derecho; es como si el contrato nunca hubiese existido y nunca hubiese desplegado efectos): a null contract does not produce any effect, this is, it is not valid as it is born dead. Nullity is definitive and protects public interest. The most relevant cases of null and void contracts are: Contracts contrary to the law are null and void (6.3 CC). Contracts lacking the essential elements thereof (this is, contracts lacking consent, object or cause shall be null and void) (1.261 CC). Contracts which object is not determined or is unlawful (1.271, 1.272, 1.273 and 1.305 CC). Contracts with an unlawful cause or without a real cause (1.275, 1.305 and 1.306 CC). Formal contracts lacking the required form for their perfection. This is, there is no consent, object, or cause, or either the contract does not have the legal form required to be valid. The action to claim for the nullity of a contract at Court can be started at any time, there is not term for it, and by whomever is interested in the declaration of the nullity. Anybody with a rightful interest can invoke the nullity, and it can also be declared ex officio by the judge. Finally, nullity can be partial. It might be that only a part of the contract is void. (ii) Voidability (anulabilidad; el contrato existe y es válido hasta el momento en que se anula): a voidable contract has a defect, so it is valid as long as it is not challenged due to the existence of such defect. This is: there is a cause of voidability, and it can be claimed by only one of the parties to destroy the effects of the contract which was 2  effective as yet. Rather than protecting public interest, protects private interest. The causes of voidability are the following: Vices of consent (art. 1.261 CC). Lack of capacity to act. Lack of marital consent for the execution of onerous acts when such consent is required (art. 1.322 CC). This is: there is consent, object and cause, but with a defect that enables the contract to be declare voidable. The action for the declaration of voidability can only be brought to Court by the person whose interest is being protected (art. 1.302 CC). The action has a term of expiration of four years (article 1.301 CC). Once the term of four years has elapsed without the action for voidability having been started, the contract shall be considered to be valid and can no longer be challenged. Also, voidable contracts can be confirmed. Confirmation is the declaration of will of the party who could ask for the voidability of the contract making valid and effective the act of the law which was affected by a cause of voidability. Confirmation can be express or tacit. *EFFECTS DERIVED FROM NULLITY AND AVOIDABILITY: The effects of a contract being declared ineffective (due to nullity or voidability) is that the parties should return the things they have exchanged (article 1.301 CC, this is called “restitution”): as such contract would be considered as never executed. If restitution is not possible, the obligation to return the goods is turned into a monetary obligation (article 1.307 CC). (iii) Rescission (rescission de un contrato por causa determinada por la ley): rescission is the ineffectiveness stated by law for contracts which, although having all the essential elements and not having any defects therein, entail a prejudice for certain persons to whom the law provides with an action to stop the contract from being effective. The term to initiate this action is of four years, and the effects are that the parties should return the things they have exchanged. The main and essential cases of rescission of contracts are stated in article 1.291 CC: 1) Contracts that may have been entered into without judicial authorization by tutors or curators, provided that the persons they represent have suffered an injury. 2) Those celebrated in representation of the absent ones, whenever these have suffered injury. 3) Those celebrated in fraud of creditors. 4) Contracts relating to litigious matters, when they have been entered into by the defendant without the knowledge and approval of the litigants or the competent judicial authority. 5) Any others in which it is specially determined by law. 3  CHAPTER 3 CONTRACT LAW *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full 1. What is the autonomy of will of the parties? A principle by virtue of which the parties can enter into any agreement, any kind of contract, with any object, as long as it does not contravene imperative laws. For example, can two parties sign a contract in order to create a company whose object is defraud taxes? No, because it goes against imperative laws. 2. What is the difference between unilateral and bilateral contracts? Unilateral contracts only create obligations for one of the parties (for example, a donation) Bilateral contracts create obligations for both parties (for example, a sale) 3. What is the difference between gratuitous and onerous? In gratuitous contracts, one of the parties gives an advantage to the other without receiving anything in exchange (for example, a donation). In onerous contracts, each of the parties receive something in exchange (for example, a sale). 4. What is the difference between consensual, real and formal contracts? (when is the contract perfected: until there is no perfection, there are not obligations for the parties) Consensual contracts are perfected by the mere consent (most contracts). For example, a sale. Real contracts are perfected by consent plus the physical delivery of the object of the contract. For example, a loan and deposit. Formal contracts are those that require an especial form to be perfected. For example, the donation of immovable assets (to avoid frauds). These contracts are call ad solemnitatem. Another example is the constitution of a mortgage: to produce effects it is necessary to raise it in a public deed and, furthermore, register it within the Property Register. 5. What is the difference between an ad probationem and ad solemnitatem contract? Ad probationem is a contract for whose validity is not necessary to have a specific form, just to prove it. For example, those of article 1280 CC. If they do not adopt that form, they are valid, but any party can require the other to adopt such a form. If the other party rejects it, and both have agreed that it is an essential obligation, the contract could be terminated (see page 65 of the third edition of the book). Ad solemnitatem contracts are formal contracts, this is, they a need a specific form the be valid. The general rule in Spanish Law is that contracts are perfected through consent, so a special form is not necessary for their validity. However, as we have seen, some contracts need a specific form to be valid (ad solmenitatem), and others need a specific form to be correctly proven (ad probationem). A contract can even be formalized orally, or it can be implied. But in those cases, is going to be more difficult to prove its existence. 1 6. What is the difference between typical and non-typical contracts? Typical contracts have a specific regulation, such as agency agreements. Non-typical contracts do not have a specific regulation, and thus are base only on the parties will. For example, a leasing. 7. What is the difference between negotiated and adhesion contracts? In negotiated contracts, the parties negotiate its main conditions. In adhesion contracts, main conditions are not negotiated. The strong party sets the conditions, and the weak one can only accept them or leave them. In this case, there is not actually autonomy of the will of the parties, in favor of mass contracting. There is a Law on General Conditions Contracts to avoid abuse. 8. What are the essential elements of a contract? Consent, object, and consideration (consentimiento, objeto y causa). If one of these elements is missing, there is no contract- For example, minors that are not emancipated and persons incapacitated by a judge, cannot give valid consent. Therefore, if they enter into a contract, that contract is born death, because there is no consent (1.263 CC). 9. In what circumstance the consent can be invalidated? When is given by mistake, violence, intimidation or dolus (art. 1265 CC) Mistake false knowledge of reality at time of conclusion of contracting. - It must be referred to the substance of the subject matter of the contract - It must an essential error (it must affect the conditions of the thing that the parties thought of special interest for the conclusion of the contract). - It must be excusable (not due to the negligence of the party suffering it, this is, not imputable to that person; otherwise, is bears with it) - The person who formalizes the contract is important only when it determined the formalization of it (for example, an artist) Violence Use of irresistible and physical force to obtain the consent. Intimidation Use of threats and intimidation. Dolus/Deceit When someone acts in bad faith knowing so. For example, when the buyer knows that the product is defective and omits it or selling an art piece knowing that is false. EXAMPLE: If I sell a false Picasso to a friend: - When my friend realizes that the painting is false, he can claim the contract to be annulated / declare voidable as his consent was not complete, it was “viced” due to mistake. - If my friend can prove that I knew, at the time of selling the painting, that it was false, besides from mistake, he can claim “dolus” from my side, as I acted with bad faith. - If my friend can prove that, furthermore, I used intimidation (either you buy this painting or I kill you family), he can claim intimidation as well. - If he can prove that I used violence, she can claim violence as well. 10. Can the object of a contract be something unlawful or impossible? No. For example, the object of a sale contract could not be drugs or weapons, because that is unlawful, and the object of a contract could not be building a house in the moon, because it is impossible. In those cases, there is no object. 2 11. What is the cause or consideration of a contract? It is the intention on the basis of which the contract is formalized. Civil Code says that cause is the promise of a thing or the performance of a service by the other party. Is the typical economic aim of the contract (not the particular aim pursued by the parties). For example, in a sale, the cause for the vendor is the price, and for the buyer, the thing bought. Therefore, in general, the cause is the selling/buying of the house. It is not possible for the cause to be false, because in that case we talk about simulation and the contract is null and void. For example, simulating a sale when it is actually a donation, or simulating a sale when there is not transfer of the property. Likewise, the cause must be lawful. This way, the cause cannot be, for example, creating something illegal. 12. Offer and acceptance Contracts are generally perfected by mere consent (1.258 CC). Consent is expressed by the concurrence of offer and acceptance. An offer can be withdrawn before it is accepted. If it is accepted, it cannot be withdrawn. If the offeror and the person who accepts are in different places, there is consent from the moment the offeror knows the acceptance or should have known it in good faith (e.g., he should have known but he does not because he does not open the letter containing the acceptance). In case of contracts entered into by automatic/electronic means, article 1262.3 CC provides that consent shall exist from the moment in which acceptance is declared. (e.g., I click on the acceptance button in the web page). 3  CHAPTER 2: PERSON’S LAW *Disclaimer: this summary does not prevent you to study the book. This is only intended to help you study the main concepts of theory, but it you want to pass the course, you need to study the book in full I. CAPACITY. MAIN CONCEPTS 1. Legal personality Every natural person, just for the fact of being born, has legal personality, which is the ability to be subject of rights (from an active point of view) and duties (from a passive point of view). Therefore, legal personality is obtained by birth (article 30 of the Civil Code, “once the complete loosening from the mother’s womb takes place”). In any case, article 29 CC establishes that although legal personality starts at birth, upon conception a person is considered as born for all effects that are favorable to him. This is, the person not yet born but conceived (the nasciturus) can, for example received donations or inherit, and, if finally born, he can formalize the inheritance or acquire the donations made to him before he was born. In relation to the foregoing, the law grants certain groups of individuals with legal personality, considering them, therefore, as persons (corporations, partnerships, associations, foundations…) why? Because there are certain goals and interests that cannot be achieved individually. Therefore, these groups of “persons” to whom the law give legal personality, are as well capable of holding rights and duties, and are called “artificial persons” (persona jurídica) as opposed to “natural persons”. (persona física). 2. Capacity: natural capacity (capacidad jurídica) and legal capacity (capacidad de obrar) All natural persons have civil or natural capacity (because they can hold legal rights), but not all of them have legal capacity (which is the capacity to manage and exercise the rights and obligations the person holds). [nasciturus example: does not have natural nor legal capacity, but can inherit through a representative –parent–] 3. When is natural/civil capacity and legal capacity acquired? Any person has natural/civil capacity from birth until death. And, regarding legal capacity, in general terms2, it is acquired when the person turns 18 years old (person of legal age). Therefore, minors (under 18) have civil/natural capacity but not legal capacity, so they need a representative to act on their behalf in order for their actions to have civil effects. Their representative are their parents (this is called patria potestad) or tutor (in case he does not have parents). For example, a minor can inherit because he has natural/civil capacity, but not by himself: he needs his parents to do it on his behalf. This is: a person with civil/natural capacity can hold rights but not administer them by himself. Another example: a minor can only sign a valid contract, in general terms, only through his representative: it is for the parents or tutor to bind the minor’s patrimony. However, it is now accepted that minors can validly contract in cases of little economic weight that, due to their characteristics, are normal of their age and in accordance with social usages (buy tickets for the cinema). In fact, the law expressly foresees situations in which the consent of the minor is necessary for him to enter into a valid contract: (i) in general terms, to provide personal services, (ii) from 16, to sign an employment contract, and (iii) from 12, they need to consent their adoption. 2 There are exceptions: for example, it is necessary to be 25 to adopt children. 1  4. Emancipation A minor, of 16 years or older, is emancipated when his parents are released from their parental duties and the right to care, custody and administration of the child patrimony because the minor has economic independence from his parents (if a minor is emancipated but is still supported by his or her parents, he or she is not considered emancipated). How can minor emancipation have effects against third parties? by registering it in the Civil Registry. Once granted, it cannot be revoked. Emancipation (i) can be granted by the parents with the consent of the minor or a judge, (ii) by a judge, or (iii) “de hecho” / “de facto”, i.e., by acting in a consolidated way as economically independent from the parents (although the parents could in this case revoke the situation, which is an exception to the general rule). Can an emancipated minor fully act as a person of legal age? yes, except from two situations: without the parental/turtor or curator’s consent3, they cannont (i) borrow money and (ii) encumber or sell immovable property, commercial and industrial establishments, nor goods of an extraordinary value. 5. Incapacitation Incapacitation is the limitation or deprivation of a person’s legal capacity, either totally or partially, by a judge because the person is impaired by a mental or physical impossibility to understand the consequences of his acts. When someone is totally incapacitated a tutor to act on his behalf is appointed. If it is just partially to do particular acts, a curator is appointed. The disease of deficiency of mental or physical nature should be persistent in order to incapacitate the person. Incapacitation is only granted by a judicial decision. Therefore, to annul/declare voidable a contract due to the person’s inability to govern himself, it is necessary to proof that before a judge because legal capacity is presumed. Therefore, without a judicial judgement of incapacitation, anyone can perform valid contracts and, to annul/declare voidable the contract in question, it should be proven that, when the act was performed, the person was incapacitated. The declaration of incapacity, when talking about people of legal age, must be brought to court by the spouse or person with similar relationship, descendants, ascendants or siblings. Furthermore, anyone can inform the Public Prosecutor (Ministerio Fiscal) if they think someone should be incapacitated. Different from incapacitation is prodigality, which is declared by judicial decision with respect to someone who manages his affairs in a reckless and disorganized manner, which endangers his patrimony. An incapacitated person is a person that cannot govern himself / take care of himself, either totally of partially, therefore his legal capacity is compromised either totally or partially. For example, a person with a mental illness, but also, someone that, when formalizing a contract, is under the effects or drugs and alcohol and is not conscious about his acts. 3The tutor protects the interests of a person who is totally lack of legal capacity, while the curator acts in cases of partial lack for legal capacity and only for acts that cannot be performed by him/herself. 2 II. ARTIFICIAL PERSONS. MAIN CONCEPTS There are different types of artificial persons. Corporations, for example, are artificial persons. Now we are going to study two types of artificial persons: associations and foundations. 1. What is the difference between an association and a foundation? - An association is based in a group of people that search a common goal (there are profit and non- profit associations. A profit association is actually a corporation). - A foundation is based on a patrimony aimed at achieving a goal of general interest, this is, they are aimed at developing activities for the benefit of the community named as goals of a general interest (foundations are constituted by a patrimony attached to the consecution of a particular end). 2. Are both foundation and associations non-profit? Yes, except when we are talking about corporations. The Foundations Law and the Associations Law regulate non-profit foundations and associations. 3. Is there a minimum patrimony to constitute a foundation and an association? - Foundation: minimum patrimony of 30.000 € (this minimum initial patrimony is called “dotación”/endowment). - Association: there is no minimum patrimony to constitute an association. 4. Is there a minimum number of members to constitute a foundation and an association? - Foundation: Yes, three, this is, the Board of Managers (Patronato), that need to watch for the fulfilment of the foundation’s aim and administer the patrimony. The post is non-remunerated. - Associations: no. The management and representation of the association is carried out a representation committee (órgano de representacion). 5. How a foundation is validly constituted? A foundation shall have legal capacity from the moment of registration of the Articles of Incorporation4 with the Foundation’s Registry. 6. How an association is validly constituted? An association shall have legal capacity from the moment the agreement reached by three or more natural or artificial persons who undertake to join knowledge, means and activities to achieve a common and licit purpose. This agreement is expressed in the Constitutional Certificate (Acta Fundacional). Therefore, in the case of associations, it is not necessary, in order to acquire legal capacity, to register the Constitutional Certificate in any register. However, is such registration is not performed, the association will not be effective against third parties. In both associations and foundations, the functioning of it is regulated in the bylaws, and bot are non- profit, which means any income shall be aimed at fulfilling the goals od the association/foundation, 4Articles of association / incorporation is the document that creates an entity, whereas bylaws set out the rules and procedures for internal governance of the entity. 3  III. EMPOWERMENT. MAIN CONCEPTS Act of empowering – voluntary representation: the act of empowering is the act by which the principal grants another person (that is call representative) a power to act in his name and on his behalf. It is documented in the power of attorney / power of representation. This is what we call “direct representation”: what the representative performs on behalf of the principal, by means of the power of representation granted, affects the principal, as it has been performed by the principal himself. Once empowered, the representative has to act attending primarily the interest of the principal. This is why if the principal (as well called dominus) gives instructions to the representative, he has to follow them. If the representative does not follow the instructions, the act is valid towards third parties, the principal is bound to perform it, and the representative is liable towards the principal EXAMPLE: - If the principal gives representation to the representative to buy a house, but does not specify the price, the representative may buy it for any price (always seeking the best interest of the principal), since he is not in breach of any instruction given by the principal. - A different situation is if the principal gives representation to the representative to buy a house for 100,000 euros and the representative buys it for 200,000 euros. Then, the representative is liable towards the principal, and will have to compensate him for damages for deviating from his instructions. It is easy to see in this example that the compensation would be 100,000 euros. - If, in the latter case, the representative buys the house for less than 100,000 euros, the benefit to the principal is clear and, although he is deviating from his instructions, he is doing so for his benefit. In that case, then, there is no problem. - In both cases, the third party, the seller of the house in this case, does not suffer any damage, because, as we have seen, when there is representation given by the principal to the representative, the principal is bound to perform the act and, in case the representative does not follow his instructions, he will claim what is due. A different situation is when the “representative” acts on behalf of the principal without a representation having been granted: in this case, there are not instructions to follow or unfollow; directly, there is no representation. Therefore, the transaction is not valid: the principal is not bound to perform it, and of course the “representative” is liable towards the principal (we use quotation marks because if there is no representation granted, then we are not speaking of a real representative). The above, unless the principal ratifies what the “representative” has made a posteriori. This is: if the “representative” does something without representation, but then afterwards the principal ratifies it, the transaction is valid (this is common sense). Indirect representation: the representative acts in the interest of the principal, but in its own name. This way, the representative is bound directly to the person with whom he has contracted, as if the matter were his own personal, and the principal is not bound towards that third party. For example: I am not in good terms with the carpenter in my neighborhood, so I instruct a friend to order a bookcase from him. I am not giving him representation to act on my behalf, but the fact is that he is acting on my interest. The agent acts "in his own name", but in my interest. Another example: any company salesperson (the one who sales, for example, beverages for Coca-cola). 4