Contract Law: Formation, Principles, and Classification

Posted on Dec 18, 2024 in Law & Jurisprudence

Sources of Obligations

Sources of obligations can be mediate (human fact: contract, unilateral declaration of will, tort) or immediate (the Act).

Features of Contracts

• Contracts cover all legal transactions resulting from an agreement of wills, standardizing their design and eliminating controversy, regardless of the type of contract, provided that it is bilateral or plurilateral.
• The link of obligation under the contract is a result of the law.

Concept of Contract

A contract is the agreement of two or more wills in accordance with the law, aimed at establishing a rule of interests between the parties, with the scope to acquire, modify, or terminate legal relationships.

Contract Requirements

According to article 82 of the Civil Code:

• Subjective Requirements:
  • Two or more persons
  • Generic ability to perform acts of civil life
  • Aptitude for hire
  • Consent of the contracting parties
• Objective Requirements:
  • Legality of the contract
  • Possibility or entity of the object of the transaction
  • Determination of the contract
  • Economy of its object
• Formal Requirements: Articles 129 and 1079 of the Civil Code

Principles of Contract Law

1. Principle of Autonomy of Will: Parties have the power to freely provide, as best suits them, by agreement of wills, the discipline of their interests, raising effects of a legal nature. This involves freedom to contract or not, choose a contractor, and determine the content, limited by public order, morality, and judicial review.
2. Principle of Consensus: A simple agreement of two or more wills is enough to generate a valid contract. Most legal businesses are bilateral and consensual, although some are solemn and require specific legal formalities.
3. Principle of Obligation of the Convention: Stipulations of the contract must be faithfully fulfilled, under penalty of assets against default. The act of negotiation is a rule of law between the parties and is intangible unless both parties terminate voluntarily or are excused due to unforeseeable circumstances or force majeure (article 1058, § only – CC). Courts can modify contracts in exceptional circumstances.
4. Principle of Relativity of the Effects of the Contract: The retainer only binds the parties involved, not benefiting or harming others, with few exceptions.
5. Principle of Good Faith: In contract interpretation, the intent matters more than the literal meaning of language. Parties should act with loyalty and mutual trust, helping each other in the formation and execution of the contract.

Formation of Contract

1. Preliminary Negotiations: Pre-contract does not create contractual obligations but can generate other obligations.
2. Proposal, Offer, or Solicitation: A declaration of will directed by one person to another, expressing the intention to be bound if the other party accepts. It must be serious, binding, and contain all essential elements.
3. Obligation to Offer:
   • Maintenance within a reasonable period.
   • Death or incapacity of the applicant does not invalidate the proposal unless the intention is otherwise.
4. Acceptance: Explicit or tacit manifestation of will by the recipient, made on time, adhering to all terms. Conditional acceptance is a new proposal.
5. Exception to the Binding Force of Contract:
   • If it appears from its terms.
   • If it results from the nature of the business.
   • If done without the person present, and it was not accepted at once.
   • If made without a term to an absentee, and sufficient time has elapsed for the answer to reach the applicant.
   • If done with a waiting period for a response, and the response is not issued within the deadline.
   • If the applicant repents, and the withdrawal reaches the offeree before or at the same time as the acceptance.

Phases of Formation of Membership Contract

Preliminary Negotiations

Consist of previous conversations, surveys, and studies on the interests of each party, in view of the future contract, without any binding legal status of the participants, but uniquely emerges in the field of liability tort guilt.

Proposal

• Concept: The offer or proposal is a declaration of will, directed by one person to another, under which the first expresses its intention to consider itself bound if the other party agrees.
• Character:
  • Unilateral declaration of will by the tenderer.
  • Binding force in relation to that formula (article 1080 and 1081 of CC).
  • A legal business.
  • Should contain all the essential elements of the proposed legal business.
  • The initial element of the contract must be serious, complete, accurate, and unambiguous.
• Requirement: The mandatory offer is a tax burden on the applicant not to withdraw for a time, otherwise compensating for damages. It subsists even in the face of death or supervening incapacity of the applicant before acceptance, unless there was another intention. The binding strength is not absolute (CC, article 1080, paragraph 2, and 1081, items I to IV).

Acceptance

• Resolution: Acceptance is the manifestation of will, expressed or implied, of the recipient of a proposal made on time, adhering to it in all its terms, making the contract finally completed, providing you do so in due course known to the offeror.
• Requirements:
  • Requires obedience to a particular way, except in solemn contracts (article 1084, CC).
  • Must be timely (Article 1082 and 1083 of CC).
  • Must correspond to a full membership to the offer.
  • Must be conclusive and consistent.
• Acceptance Contracts “Inter Praesent”: If the deal is between these, the offer may or may not stipulate the deadline for acceptance. If it contains no time limit, the acceptance shall be manifested immediately, and if the time is to be delivered at the end granted.
• Acceptance Contracts “Inter Absent”: If the contract is between absent and there is time, it should be noted, but if acceptance is delayed through no fault of the offeree, the tenderer should inform the fact to the acceptor, under penalty of liability for damages (article 1082, CC). If the seller did not specify any time limit, the acceptance shall be expressed in sufficient time to get the answer to the knowledge of them.
• Disclaimer of Acceptor: The acceptor may repent, since its withdrawal reaches the offeror before the knowledge of the acceptance or along with it.

Time of Completion of Contract

Agreement Between Present

Parties are bound when the offeree accepts the offer; only then will the contract produce legal effects.

Agreement Between Absent

According to the theory of agnição or statement (dispatch), contracts of written correspondence or telegraph become perfect since the acceptance is issued (article 1086, CC).

Celebration of Place of Business Legal Contract

The Civil Code, article 1087, deems the contract concluded in the place where it was proposed. For the LICC, article 9, § 2, the obligation under the contract shall be deemed to be incurred at the place where the applicant resides.

Interpretation of Contracts

Service Contract Interpretation

Interpretation carries objective and subjective functions, examining the act of negotiating its terms and the common intention of the parties. It mobilizes the content of the volitional, standing on empirical rules and practical logic.

Interpretive Rules

Our CC has only 3 rules on interpretation: article 85, article 1090, and article 1483, and Law No. 8078, article 47 (Consumer Code). Doctrine and jurisprudence have created Ermeneutica rules based on these devices.

Classification of Contracts

1. Nature of the obligation undertaken:
   • Unilateral or bilateral
   • Consideration or gratuitous
   • Switchgear or random
   • Party or by accession

Unilateral Contracts

Only one contractor assumes obligations to the other. Example: giving, lending, mutual.

Bilateral Contracts

Each contractor is simultaneously a creditor and debtor of the other (bilateral nature – mutual dependence). Example: Buying and selling, leasing.

Importance of Distinction

• The exceptio non-execution clause, implied termination clause.
• Applicability of the theory of risk only to bilateral contracts.
• Incidence of the second part of article 1092, relating to bilateral contracts.

Onerous Contracts

Advantages for both contractors and mutual burden. Example: lease.

Gratuitous Contracts

Losses affect only one party, providing a benefit to another without consideration. Example: A gift pure and simple.

Importance of Distinction

• Gratuitous: Debtor’s liability for the offense considers only willful misconduct. Onerous: Parts are liable for simple fault.
• Gratuitous: Donor is not liable for eviction and vices, except in donations with a charge. Onerous: Contractors account for eviction and vices.
• Gratuitous: Restrictive interpretation. Onerous: Not restrictive.
• Gratuitous: Error about the person is more serious than in onerous contracts (except for artistic works).

Commutative Contracts

Each contractor receives an equivalent service, with subjective equivalence. Example: Purchase and sale.

Aleatory Contracts

The provision of one or both sides depends on an uncertain future risk. Parties have a chance of winning or losing. Example: Insurance, oil exploration. There is no equivalence.

Importance of Distinction

• Commutative: Preview of what they get. Aleatory: No.
• Commutative: Vices apply. Aleatory: Vices do not apply.
• Articles 1118 to 1121 CC apply only to aleatory contracts.
• Withdrawal through injury applies only to commutative contracts.

Differences Between Aleatory and Conditional Contracts

• Conditional: Existence and validity depend on an uncertain future event. Aleatory: The contract is perfect from the outset.
• Conditional: Both sides can profit without one necessarily representing the loss of another. Aleatory: One’s advantage leads to another’s loss.
• Conditional: The event must be uncertain and future. Aleatory: The risk may be present if the parties are unaware.

Aleatory Species of Contract

• Relating to future things, Empti spei (sells for hope or chance of things existing), one party takes over the risk, setting the price due even if nothing is produced without fault (article 1118).
• Empti speratae (more or less the expected thing – sole paragraph of article 1119 CC).
• Existing things subject to loss or damage (article 1120 CC – merchandise that is lost).

Joint Contract

Equality of the parties to discuss the terms of the deal.

Contracts of Adhesion

Exclude freedom on terms, which are drafted by one contractor. Suppose: a) Uniformity; b) Proposal for permanent and general; c) Economic superiority of one party.

Contracts by Form

• Consensual
• Formal
• Real

Consensual Contracts

Formed by simple consent. Example: Transport, purchase and sale of movable property.

Formal Contracts

Need a special, solemn form to be valid. Example: Purchase and sale of property, insurance, bail.

Real Contracts

Finalized by the delivery of the thing. Example: Deposit lending.

Contracts by Name

• Nominated
• Unnamed

Nominated Contracts

Have nomen iuris and serve as a basis for setting new regulatory law (16 types: purchase and sale, donation, exchange, lease, loan, office, business management, editing, dramatic representation, society, partnership development; establishment of income, insurance, gaming and betting, and bail).

Unnamed Contracts

Move away from models established by law. Example: Contracts on coffee plantation exploitation, hosting contracts. Categorization depends on contract elements.

Contracts by Subject

• Transfer of property
• Transmission and enjoyment
• Service
• Special content (Law 8078/90 – Consumer Protection Code)

Contracts of Immediate or Instant Execution

Contracts that are bulging at the time (buying and selling of term); survive on the continuing obligation, although occurring partial solutions, until now by the implementation of a requirement or statute of limitations, it ceases to own contract.

Importance of contracts performed over:

• The nullity of the continued execution does not affect those already produced.
• The theory of improvisation only falls on the contracts continued.

Personal or Intuitu Personae Contracts

Those in which the person by the contractor is considered by others as decisive of its conclusion. One of the contractor has a decisive influence on the consent of the other, which has an interest in the contractual obligations are fulfilled by him, for his particular skill, competence, …

Impersonal Contracts

The person by the contractor is legally irrelevant, no matter who performs the obligation.

Importance of distinction:

• Intuitu personae – transferable.
• Cannot be transferred.
• May be annulled due to an error regarding the person of the contractor.

Effects of the Mandatory Contract

• The contract must be met as if it were law to contractors.
• The contractor cannot unilaterally release the tie of obligation unless there is a provision reserving the power to exempt from the bond on its own volition or if the discharge results from the nature of the contract, as with bail without a determined period (1500), or if there is a right of repentance.
• The contract may reach people who did not stipulate it, such as universal successors. The general principle is that the contract does not benefit or prejudice others. Singular successors, as in the case of a vendor who acquired contractual rights, are unrelated to the contract.
• Stipulation to third parties: A contract between two people where one (stipulation) agrees with the other (promising) some material advantage in favor of a third party, other than to adjust the training contract (insurance policy).
  • The promisor is bound to benefit the third party but can be exempted before the stipulation, as per article 1098 CC. The third party can require fulfillment and substitute the beneficiary.
• Agreement for a third party: When a person undertakes to provide an additional fact that a third party not participating in the contract (929 CC). Example: A promises B to get C to perform in favor of B. If C performs, the primary debtor is released. If C does not, A is in default and liable for damages (Obligation to do).

Special Effects of the Contract

• Lien
• Exceptio non-execution clause
• Prohibitive defects
• Eviction

Right of Retention

A person holding another’s property has just reason to delay the refund until payment due to him, because of that thing, by the owner. Requirements: a) detention of alien thing, b) preservation of the detention; c) net claims, and certain liabilities of the retainer in connection with the thing on hold and d) lack of legal exclusion or conventional lien.

Exceptio Non-Execution Clause

Prohibitive Flaws

Hidden faults or defects in the thing sold, subject to a commutative contract, making it unfit for use or reducing its value, so that the business would not take place if such defects were known. The purchaser can void the contract (redibitória) or reduce the price (actio quanti minoris). Liability rests on the principle of security. Requirements: a) anything acquired by virtue of commutative contract or grant recorded with charge b) defect or hidden defect that makes something improper his disposal, c) defect existing at the time of conclusion of business.

Legal Effects of Prohibitive Flaws

• Ignorance of addiction to the seller does not exempt it from liability unless stated otherwise.
• Warranty boundaries relating to compensation (quantum) and limits may be extended or restricted.
• Seller’s liability exists even if something perishes in the hands of the purchaser due to a latent defect existing at the time of tradition.
• The purchaser may void the contract or get a discount through action or quantity minoris estimator. Time frame for decay: CC = 15 days; Law 8078/90, article 26 = products and services and durable goods: 30 days and 6 months for movable property (CC, 178, § 5, IV).
• The hidden defect of one thing sold with others does not authorize the rejection of all.
• Waiver, express or implied, to guarantee prevents the filing of edilicias actions.

Eviction

Purchase and Sale

Definition

A contract in which one person (seller) undertakes to transfer to another (buyer) the domain of something corporeal or incorporeal for a price in cash or a corresponding value. The contract gives only a personal right, leading to an obligation to transfer the domain.

Characteristics of Contract

• Bilateral or synallagmatic
• Onerous
• Commutative or random (Empti spei and Empti speratae – existing things at risk of being lost, damaged, or deteriorated)
• Consensus or formal
• Transmissive area, not to operate your transfer but to serve as “titulus adquirendi“, a causal act of transfer generating an obligation to deliver. The contract requests the purchase of the domain, which can only be with tradition and transcription.

Constituent Elements of Purchase and Sale

Essential:

1. The thing
2. The price
3. The consent
4. The form

The Thing

Should exist, at least potentially, at the time of the contract (furniture, property, livestock) or intangible (values, property rights). The contract does not always focus on an object known and characterized at the time of formation. It should be individuated or ascertainable at the time of execution. It should be available or “in commercio” (65, 66, 67, and 70). It should be transferable to the buyer and not belong to the buyer. The seller may alienate it if it belongs to third parties, except for the possibility of recovering.

Price

• Pecuniariedade: Sum of money or things representing money (checks, bills of exchange, promissory notes, government securities, insurance).
• Seriousness: Consideration for the seller’s duty to deliver. It does not report any simulation. A fair price is not necessary.
• Certainty: The price should be certain for the buyer to make payment. The clause will be null. Chances of price above the window or type of auction. The price may be fixed by a third party or result from the market rate or the Exchange. It may also be achieved by price (gas, electricity).

Consent

About the thing, the price, and other terms of business, capacity, legitimacy, and power of disposition.

Restrictions

• Married person: Cannot alienate or record liens on the property (295, I and 242 I to III). The draft Civil Code, 1675, I and 1684, regulate differently.
• Consortia: Cannot effect a contract between themselves.
• Upward: Cannot sell to downward without express consent from other descendants.
• Those who must look after the assets of others (tutors, trustees, executors, administrators) article 1133.
• Condominium while the state of undivided: Cannot sell his share to a stranger if the other joint owner wants it for the same price. If indivisible, the joint owner can sell after offering it to other joint owners who refused.
• Owner of the leased thing: Must inform the tenant, who has the right of first refusal to buy on equal terms (Law No. 8245/91, articles 27 and 30).
• Efituenta: Can only sell the domain free of charge or against payment, in whole or in part, provided to communicate the fact, previously, the landlord directly. The same happens with the landlord directly.
• Seller: May not make the sale of a product on the simultaneous acquisition of another (law n º 4 / 62, article 11, letter “i”).
• See Law No. 8069/90, articles 77, 78, 81, I, II, III, V, 257, 242, 243, and 244.

Legal Effects

• Obligation of the seller to deliver the thing with accessories, transferring ownership to the purchaser, and the purchaser to pay the price as stipulated.
• Guarantee obligation on the seller against visible or prohibitive defects and eviction, a natural element of the contract. Seller: contract; Manufacturer’s obligation.
• Responsibility for risks and costs: Before tradition or transcription, the risk is borne by the seller, and the price by the buyer. If the property is lost or deteriorates due to an act of God or force majeure before tradition, the seller suffers the consequences and refunds the charge. If after tradition without the seller’s fault, the seller is entitled to the price, and the buyer bears the consequences. If the price is lost or degraded before tradition, the buyer suffers the risk. If after payment, the seller pays for the damage. Tradition leading to the buyer’s risk occurs when the thing is made available, even if unforeseeable circumstances occur. The buyer bears the risk if in arrears to receive when made available in time, place, and mood set.
• Right of rooms before tradition: see Article 868, CC.
• Purchaser’s right to refuse goods sold by sample if not delivered as promised.
• Purchaser’s right to require, for the sale of land, the complement of the area if there is a mismatch between the area found and the dimensions given. If not possible, claim termination or discount, provided the sale is “ad mensuram” (an ex or ex empto vendita). If the sale is “ad corpus” (fixed and determined body), it is unnecessary to require the implement of the area. It is assumed that the reference was simply enunciation when the difference found does not exceed 1/20 of the total length set. Article 1136, CC, does not apply if the purchase was made by public auction or sale. If there is excess area, the purchaser must report the corresponding price unless there is an agreement. See article 500, § 2 of the Draft Code Civil/75.
• Null and void, contracts and purchase of movable and immovable property, for payment in installments, clauses that establish the total loss of benefits paid for the creditor who, due to default, pleads termination and resumption of the product alienated.

Pacts Adjectives to Purchase and Sale Agreement and Grant

The contract of sale, provided the parties consent, is often accompanied by special clauses that change its face, requiring adherence to particular norms. These may make the effects of the contract an uncertain future event, making the deal conditional.

Pact of Retro Sale or Pactum de Retrovendendo

Clause conditioning the purchase and sale whereby the seller reserves the right to recover the property sold and repay the purchaser the price plus expenses, including improvements. Admitted to the sale of property, and the property becomes resolvable. The acquisition is conditional, characterized as a condition precedent. The buyer will own resolvable property, which expires when the seller exercises the right to recover. If the buyer refuses, the seller can move an exception to notification of rights in court, determining the amounts required by the Civil Code. The maximum period for redemption is 3 years – Deadline of decay. If two or more persons are entitled to the picture of the same goods and only one exercises it, the purchaser may order others to agree. If no agreement is reached, or if one party does not want to get the full importance, the right of all is terminated.

If other joint owners do not retroactively sell together and the same act, each may work out on their share its right of portrait unless the buyer can compel the other to rescue her all over.

Transferability of the right of redemption for assignment by act “inter vivos” because it is personal but passes to heirs.

Loss and extinction.

Right of buyer: the fruits and revenues.

Law of the seller against third parties: article 647 CC.

Sale to the Satisfaction

Makes the contract to the condition of being undone if the buyer does not please the thing. Pending the condition, the contract exists, but its effects are stalled until the buyer accepts. The sale, whatever its purpose, containing such a clause inserted, usually in the purchase and sale of genres that often prove, measure, weigh, or try before acceptance. The sale to satisfaction is under a condition precedent, not improving while the buyer is not satisfied. Article 1144 CC allows parties to give the character-returnable, in which case the contract will be completed first, with the effects of a perfect deal, likely to be solved if the buyer proclaims dislike. The buyer is the owner, but the property owner is resolvable.

If precedent prevails the nature of the covenant, the purchaser will assume the obligations of mere Comodatário until it announces its intention to accept the item bought.

The seller may not discuss the expression of displeasure, nor for expert examination or court decision to prove the good qualities of the thing sold, since the sale to the satisfaction is a stipulation in favor of the buyer.

Faced with the fact of an “ad gustum” translate uncertainty, this state of affairs can not continue indefinitely. It is appropriate to its termination and conversion of the contract ultimately the declaration of intention of the buyer. The parties shall fix the period of experimentation. And if there was a time period, the seller shall have the right to order him in court, to do so on pressing deadline, otherwise considered to perfect the sale.

No transfer of right or by act “inter vivos” or for “cause of death” to the buyer, but if the death of the seller, you can operate against the law resulting successors to the seller.

Contract for Concept

• Traits: Bilateral, costly, commutative, and consensual.
• Species:
  • As to the object:
    • Transport of passengers
    • Transportation of things
  • About the means employed:
    • Terrestrial
    • Air
    • Sea

Transportation of Things

The sender delivers to the carrier a particular object, on payment of freight, to be transferred to another person (agent or recipient).

• Knowledge of freight: Carrier’s name, order number, issue, sender and recipient names, place where goods are received and destination, type, amount or weight of goods, marks, freight, and signature of the company representative.
• Loss or loss of knowledge (usually a negotiable instrument). Knowledge is not the substance of the contract, being issued ad probationem.
• Obligation of the sender:
  • Deliver the goods.
  • Pay the freight.
  • Pack the goods appropriately.
  • Declare the nature and value of goods in a sealed envelope.
  • Bear risks due to a defect in the thing, unforeseeable circumstances, or force majeure.
  • Pay for damage during transport if:
    • Escape, injury, illness, or death of animals results from the risk of this kind of transport.
    • Loss, theft, or damage is due to goods not being well-conditioned.
    • Loading, unloading, or transshipment is made by the sender or representative without company assistance.
• Liability of the carrier:
  • Receive, transport, and deliver goods in time and place set.
  • Carry it out.
  • Issue knowledge.
  • Observe the route set.
  • Be responsible for loss, theft, or damage, except for addiction itself, force majeure, or fortuitous events.
  • Seek instructions from the sender if transport cannot be done or suffers a long break.
  • Inform the sender if it has to deposit the thing in court or sell it.

Transport of Persons

• Issue of travel of minors for a long journey.
• The ticket – or bearer, may establish classes according to rate or price and fix the place.
• The contract covers the transport of baggage (pay for excess).
• Obligations of the carrier:
  • Transport the passenger.
  • Carry it out.
  • Liability for damages from accidents, except for force majeure or passenger fault.
  • Take responsibility for damage due back unless due to force majeure.
  • Fulfill the contract for cumulative transportation, accounting for personal injury. Damage from delay or interruption is determined by the path.