Forms of Transmission of Obligations & Unjust Enrichment

Posted on Oct 6, 2024 in Law & Jurisprudence

UNIT XV: FORMS OF TRANSMISSION OF OBLIGATIONS

Concept and Classification

Concept: The transfer of duties refers to the ability of an obligation to change its active or passive subjects without altering its essence. The obligation remains fundamentally the same.

Classification: The modes of transmission of obligations are generally classified from three perspectives:

1. By the Nature of the Cause of Transmission

a) Mortis Causa Transmissions (Hereditary Transmission): These include situations where an obligation or receivable passes from a deceased debtor to their creditors, heirs, or legatees.

b) Inter Vivos Transfers: These encompass situations where the obligation or credit right passes to other individuals through acts between living parties (debtor or creditor).

2. By Understanding Transmission as a Right or Obligation of Credit

a) Active Transmissions: These cover the transfer of credit rights, either through mortis causa or inter vivos acts. The creditor changes, but the obligation remains the same (same debtor, purpose, and cause).

b) Passive Transmissions: These include the transfer of obligations through mortis causa or inter vivos acts, resulting in a change of debtor.

3. By the Nature of the Successor(s) in the Mandatory Relationship

a) Transmission to Universal Successors (Universal Title): This covers the transfer of credit obligations or rights to individuals who succeed the original party in the entirety of their assets or an undifferentiated portion. This can occur through inter vivos or mortis causa acts.

b) Transmission to Assigns (Particular Title): This includes the transfer of credit obligations or rights to individuals who succeed the original party in a specific part of their assets. This can occur through mortis causa acts (legacy) or inter vivos acts (contracts).

Exceptions to the Principle of Transfer of Obligations

Article 1163 of the Civil Code states: “It is presumed that a person has contracted for himself and his heirs and assigns, when not thus the nature of the contract.” This principle has several exceptions:

a) Agreement of the Parties: Parties can stipulate that the contract does not continue with their heirs or successors.

b) Nature of the Contract: This applies in various circumstances:

  1. Annuity: Upon the creditor’s death, the credit right ceases and does not pass to heirs (Art. 1791 CC).
  2. Contracts of Personal Intuition: If a party in contracts like mandate (Art. 1704 CC) or partnerships (Art. 1673 CC) dies, the contract expires unless otherwise stipulated (Art. 1676 CC). This also applies to construction contracts upon the death of the worker, architect, or contractor (Art. 1640 CC).
  3. Contracts of Personal Intuition for One Party: If the party whose qualities define the personal nature of the contract dies, the obligation may pass to their heirs, or the counterparty may be required to deal with them (e.g., loan based on the borrower’s qualities, Art. 1725 CC).
  4. Employment Contracts: The contract terminates upon the worker’s death, but may continue with the employer’s heirs if the employer dies, unless the service is closely linked to the employer’s activity (e.g., nurse to a doctor, lawyer’s secretary).
  5. Confusion: If a person inherits a claim against themselves, the credit is extinguished.
  6. Conventional Usufruct: The usufruct ends upon the death of the usufructuary (Art. 619 CC).

UNIT XVI: MASS EXTINCTION OF OBLIGATIONS

Legal Basis and Payment

Article 1282 of the Civil Code states that obligations are extinguished by the means outlined in Chapter IV and those established by law. These means of extinction can be classified as voluntary (dependent on the parties’ will) or involuntary (independent of the parties’ will).

I. Payment

Definition: Payment is the voluntary fulfillment of an obligation. It is the ordinary or normal way to discharge an obligation.

II. Elements of Payment

  1. A valid obligation
  2. The intention to extinguish the obligation
  3. The subject of payment (solvens and accipiens)
  4. The object of payment (thing, activity, or conduct)

Costs of Payment

Article 1297 CC states that payment costs are borne by the debtor. However, Article 1770 CC states that if a deposit is made at the designated place for return, travel expenses are borne by the depositor.

Time and Place of Payment

Payment is due immediately if no time limit is specified. If a term is fixed, payment is due upon expiry. Implied terms exist for obligations that require time to fulfill (e.g., creating something, studying a case). The fixed term may expire if the debtor becomes insolvent, diminishes guarantees, or denies promised guarantees (Art. 1215 CC).

Article 1295 CC dictates the place of payment: the place fixed by contract, the location of the thing if it’s certain and determinate, or the debtor’s domicile (with exceptions in Articles 1528, 27, 31, 32, 1492, 1744, 1770 CC).

Novation

Definition: Novation is the voluntary extinction of an obligation by substituting it with a new one. It involves the transformation of one obligation into another.

Types of Novation:

  • Subjective Novation: Changing the subject of the obligation (either debtor or creditor).
  • Objective Novation: Changing the object or cause of the obligation (e.g., changing the debt from a lease to a loan).

Requirements of Novation:

  1. Existence of a previous obligation (Art. 1324 CC)
  2. Existence of a new, valid obligation different from the original
  3. Intention to extinguish the original obligation and substitute it with a new one (“animus novandi“)

Effects of Novation:

  1. Extinguishes the previous obligation (liberatory effect)
  2. Creates a new obligation with its own characteristics

Compensation

Definition: Compensation is the extinction of reciprocal debts when they are homogeneous, liquid, and due (Art. 1331 CC).

Advantages of Compensation:

  1. Double payment is avoided, preventing the movement of money and associated risks and expenses.
  2. Guarantees payment for each debtor, as they avoid paying without receiving payment in return.
  3. Avoids competition with other creditors.

Nature of Compensation: Compensation is a legal means of extinguishing obligations and can operate without the parties’ consent (legal compensation). It can also be conventional.

Types of Compensation:

  • Legal Compensation: Operates automatically when two debts meet the requirements (Art. 1332 CC).
  • Conventional Compensation: Occurs when the requirements for legal compensation are not met, but the parties agree to it.
  • Compensation by Faculty: Occurs when a party entitled to compensation waives a legal obstacle to it.
  • Judicial Compensation: Occurs when a debt lacks a requirement for legal compensation, and a party requests the judge to declare compensation.

Effects of Compensation: Compensation extinguishes mutual debts legally and operates automatically, even if the parties are unaware. It cannot affect the rights acquired by third parties (Art. 1340 CC).

Confusion

Definition: Confusion occurs when one person becomes both the creditor and debtor of an obligation. This extinguishes the obligation, as no one can be liable to themselves.

Cases of Confusion:

  • Universal succession (e.g., debtor inherits from creditor or vice versa)
  • Particular title succession (e.g., debtor acquires a claim against themselves through assignment)

Elements of Confusion:

  1. Existence of a civil obligation (excluding natural obligations)
  2. The qualities of creditor and debtor merging in one person
  3. Occurrence between the principal creditor and debtor
  4. The credit must be disposable by the creditor

Remission of Debt

Definition: Remission is the act by which a creditor renounces their right to claim against a debtor. It is a gratuitous act, but can also be for consideration.

Classes of Remission:

  • Total Remission: Covers the entire debt.
  • Express Remission: The creditor explicitly declares their intention to waive the claim.
  • Partial Remission: Refers to only a portion of the debt.

Conditions for Remission by Delivery of a Private Document:

  1. Delivery must involve the original title, as it serves as proof of the right.
  2. Delivery must be voluntary.
  3. Delivery must be made by the creditor or an authorized representative (Art. 1246 CC).
  4. Delivery must be made to the debtor or their representative (excluding the guarantor).
  5. Delivery to one joint debtor is evidence of release for all joint debtors (Art. 1231 CC).

Effects of Remission: Remission extinguishes the obligation.

Prescription

Definition: Prescription is a means of being released from an obligation after a certain time and under specific legal requirements.

Nature: Debate exists on whether prescription extinguishes the obligation or the right to legal action. Some argue that only the right to enforce the obligation through legal means is extinguished.

Rationale: Two main reasons for prescription are public order and the presumption of payment.

  1. Public Order: Without prescription, debtors could be perpetually bound. Obligations should eventually be extinguished, unlike real rights (e.g., ownership).
  2. Presumption of Payment: If a creditor makes no claims for a certain time, it is presumed they have been paid.

Requirements for Prescription:

  1. Inaction of the Creditor: The creditor, despite having the ability to enforce the obligation, fails to do so.
  2. Lapse of Time: The time period is fixed by law and must be claimed by the debtor. The judge cannot declare prescription if it is not invoked.

Suspension of Prescription

Suspension occurs when a legal or moral impediment prevents the creditor from taking action. The time elapsed before the impediment counts towards prescription, but the period stops running during the impediment. Examples include:

  1. Between spouses
  2. Between parent and child under parental authority
  3. Between a minor or their guardian and the guardian until termination of guardianship
  4. Between an emancipated minor and their curator
  5. Between an heir and an inheritance accepted with benefit of inventory
  6. Between individuals subject to administration and their administrator
  7. Against unemancipated minors or individuals under injunction (Art. 1964 CC)

Waiver of Prescription

The debtor can expressly or implicitly waive their right to invoke prescription (Art. 1957 CC).

Effects of Prescription

  1. Extinguishes the obligation and the right to legal action
  2. Extinguishes accessory guarantees (e.g., pledges, privileges, interests)
  3. Operates retroactively, discharging the debtor from the time prescription began

UNIT XVII: THE WRONGFUL ACT

Concept and Legal Basis

Concept: A wrongful act is any human conduct, intentional or negligent, that violates a legal duty, whether arising from a unilateral expression of will or an agreement.

Legal Basis: Article 1185 of the Civil Code states: “Whoever intentionally or negligently, or recklessly caused damage to another, is obligated to repair.” This also applies to those who cause harm by exceeding the limits of good faith or the purpose of a right.

Characteristics of a Wrongful Act

A wrongful act must have three fundamental characteristics:

  1. It is an unlawful act, contrary to law.
  2. It results in damage or injury.
  3. It is attributable to the author.

Differences Between Wrongful Act and Criminal Offense

  1. Violation of Law: Wrongful act violates private law; criminal offense violates public law.
  2. Consequences: Wrongful act leads to obligation to compensate the victim; criminal offense leads to a penalty imposed on the offender.
  3. Harm: Harm is essential for a wrongful act; intent is sufficient for a criminal offense (e.g., attempted crime).
  4. Legal Basis: All wrongful acts are covered by Article 1185 CC; criminal offenses are classified in the Penal Code.
  5. Responsibility: Wrongful act responsibility is based on negligence and the extent of damage; criminal offense responsibility is based on intent and the degree of intentionality.
  6. Statute of Limitations: Civil liability for wrongful acts expires after 10 years; criminal offense limitations vary depending on the offense.

Responsibility for One’s Own Act

Responsibility for one’s own act requires a wrongful act or omission, a harmful result, and a cause-effect relationship between them.

Requirements:

  1. Wrongful Act or Omission: Must be a human act (positive or negative) that is unlawful and culpable (intentional or negligent).
  2. Harmful Result: The damage must be real and actually existing, encompassing both property and moral damages.
  3. Causality: There must be a direct link between the act/omission and the injury, without a contractual link or contributory negligence by the victim.

Responsibility for Acts of Another

This occurs when someone under another’s custody, control, or surveillance commits a wrongful act. Two categories of liable persons are those responsible for agents and those responsible for subordinates.

Cases of Responsibility for Acts of Others:

  • Parents or guardians for minor children
  • Teachers or artisans for students or apprentices under their supervision
  • Employers for employees acting within their employment
  • Parents or guardians for individuals with mental illnesses under their care
  • Owners or caretakers for things under their care

Damage Committed by Animals

The owner of an animal is liable for damages it causes unless they prove:

  1. They exercised sufficient care and vigilance.
  2. The animal was provoked.
  3. There was negligence by the injured party.
  4. The act resulted from unforeseeable circumstances or force majeure.

Domestic animals are distinguished from wild animals based on their obedience and relationship with humans.

Difference Between Tort and Contractual Liability

Tort liability aims to hold individuals accountable for damages caused by their wrongful acts, ensuring reparation for the victim. Contractual liability arises from the breach of an existing contract between parties, obligating the breaching party to repair the resulting damages.

UNIT XVIII: UNJUST ENRICHMENT

Concept and Legal Basis

Concept: Unjust enrichment occurs when a person’s assets increase without a valid legal cause, resulting in another person’s impoverishment. No one should enrich themselves at the expense of another without a legitimate reason. The impoverished party is entitled to restitution.

Legal Basis: Article 1184 of the Civil Code states: “Whoever unjustly enriched at the expense of another person, is obliged to compensate, within the limits of their own enrichment, of everything that has been depleted.”

Action in Rem Verso

Article 1184 establishes the principle that no one should unjustly enrich themselves at another’s expense. The action to reclaim this unjust enrichment is called in rem verso. This action is subsidiary, meaning it can only be exercised when no other specific legal action is available to obtain compensation. It is a personal action, not a real action, and can only be brought against the enriched party or their heirs. If multiple parties are enriched, the action is brought against each according to their share of the enrichment. The action is divisible, but if the individual shares cannot be determined, the enriched parties are obligated in equal parts.

The subsidiary nature of the action has two main consequences:

  1. It cannot be exercised if a specific legal action for compensation exists.
  2. It cannot be pursued if the impoverishment could have been addressed through another action that has now prescribed or been waived.

The action for unjust enrichment exists to complete the legal system, providing a remedy when no specific action is available or when other actions have been lost due to negligence. The right to restitution is personal, even if the object of enrichment still exists and can be returned in kind.