Contract Law: Key Concepts and Applications
1. Stipulation in Favor of a Third Party (Art. 436/438)
This contract benefits a third party who isn’t directly involved. It contradicts the principle of relativity of contract effects. Examples include life insurance and lease agreements stipulating rent allocation to a third party.
Article 436
A third-party beneficiary can demand fulfillment of the obligation. If this requirement is violated, the stipulated compliance can be claimed.
Sole Paragraph
The beneficiary can demand fulfillment but is subject to all contract terms. Assent is required, and the policyholder doesn’t innovate under Art. 438.
Article 437
If the third-party beneficiary waives the right to demand execution, the policyholder cannot dismiss the debtor. If an express clause grants the third party the right to claim contract performance, the policyholder cannot modify it. Without this clause, the policyholder can modify the contract.
Article 438
The policyholder can substitute the designated third party without their consent or the other contractor’s consent.
Sole Paragraph
Substitution can occur through an inter vivos act or a last will and testament.
This contract has exogenous effects, impacting individuals outside the contract.
2. Promise of Fact of a Third Party (Art. 439/440)
Article 439
One who promises a third party’s action is liable for losses and damages if the action isn’t performed.
Sole Paragraph
This responsibility doesn’t apply if the third party is the promisor’s spouse, the action depends on their agreement, and compensation lies on their property within the marriage arrangements. Only direct damages are recoverable. Separate property of the non-promising spouse isn’t compromised, and the promisor is liable for damages.
3. Contract with Person to Declare (Art. 467/471)
Article 467
A party can reserve the right to appoint someone to acquire rights and fulfill obligations. This is common in preliminary sales contracts, allowing for later transfer of property ownership. This clause is called the pro amico aconnect clause.
Article 468
The appointment must be communicated within five days of contract completion unless another term is specified.
4. Preliminary Contract (Art. 462/466)
Article 462
The preliminary contract must contain all essential elements of the final contract, except for form.
Article 463
Without a repentance clause, either party can demand execution of the definitive contract after the preliminary contract is completed. A notification term applies.
Sole Paragraph
The preliminary contract should be registered with the relevant authority.
Article 464
After the term expires, a judge can enforce the preliminary agreement unless the obligation’s nature prevents it.
Article 465
If the policyholder doesn’t fulfill the preliminary agreement, the other party can consider it broken and claim damages.
Article 466
In a unilateral promise, if the promisor doesn’t fulfill it within the stipulated period or a reasonable time, the promise is void.
Contract Extinction
Contracts can be extinguished in four ways:
- Normal fulfillment (compliance)
- Death (for personal contracts)
- Previous fact (invalidity: void/voidable)
- Express termination (Art. 474/477 c/ 476/477, except for unfulfilled contracts). Right of repentance (Art. 420, CC, Art. 49, CDC) allows contract withdrawal, potentially with penalties (e.g., arras or sign) but no damages. Repentance can be exercised within seven days for off-premises purchases (including airfare), as per the CDC.
Purchase and Sale
Elements:
- Seller and Buyer
- Price (must have monetary value)
- Transfer of Ownership (not exclusive to purchase and sale)
- Movable property (transferred by tradition)
- Immovable property (transferred by registration)
- Parties
- Thing (generally corporeal, but some scholars include intangibles like copyrights)
- Price
Classification:
- Bilateral (synallagmatic)
- Costly
- Commutative (can become aleatory)
- Solemn (for properties over 30 salaries; otherwise, not solemn)
- Typical
Articles 505/508 (Retrovenda)
This is a buyback clause. The seller retains the right to repurchase the property. Ownership is resolvable; any buyer during the retrovenda period knows they might lose the property.
Article 519, CC (Retrocession)
This is the possibility of reclaiming expropriated property if it’s not used for the stated public interest. There are differing views in the STJ, with some allowing property recovery and others only damages.
Sale with Reserve of Ownership
The seller retains ownership until the buyer fulfills certain conditions. The buyer has possession but not ownership. The seller has resolvable ownership.
Articles 521/528 (Res expert emptor)
The thing perishes with the buyer, who possesses and controls it.
Note: The corresponding action in leasing is repossession. In fiduciary alienation, it’s search and seizure.
Movable/Non-fungible Thing
A car can be considered non-fungible due to its unique chassis number.
Extrajudicial or Judicial Notice
Used for action and collection of overdue payments.
Donation to the Unborn (Art. 542/543)
The law protects the rights of the unborn from conception. Live birth is a condition for the donation.
Donation under Periodic Subsidy (Art. 545)
- If no period is stipulated, it ends with death.
- It can be contractual or testamentary.
- It cannot exceed the donee’s lifetime.
Propter Nuptias (Art. 546)
Donation due to marriage, either between spouses or from a third party. The wedding is the condition.
Reversal Clause (Art. 547)
The donation is valid only if the donor dies before the donee. The donee has full ownership while the donor is alive.
Universal Donation (Art. 548)
Donating all assets is void. A minimum must be reserved for subsistence.
Conjunctive Donation (Art. 551)
A gift to two or more people without specifying shares is divided equally. The ‘right of legal accrual’ means the surviving donee receives the entire share.
Manual Donation (Art. 541, ยง)
Donation of small-value movable property, delivered immediately. ‘Small value’ is relative to the donor’s financial condition.
Unofficial Donation (Art. 549)
This is a donation of the legitimate portion, which is null. It’s assessed at the time of donation, not the donor’s death.
Donation to Concubine (Art. 550)
Cancelable up to two years after the relationship ends.
Donation for Future Entity (Art. 554)
Donating a value to establish an entity.
Promise to Donate
Legal and recognized by the STJ.
Withdrawal (Art. 555)
- Ingratitude (Art. 557)
- Unfulfilled condition