Understanding Service Agreements: Leases, Deposits, & Brokerage
Rental Services
Lease Agreements
Lease agreements, or service contracts, are governed by Article 1544 CC. These contracts involve one party providing a service to another for a set price. There are two main types:
- Obligations of Means/Given Methods: The contractor agrees to perform an activity using specific methods.
- Obligations of Result: The contractor is responsible for achieving a specific result.
These contracts are temporary, lasting for a specific period or until the completion of a defined task. The service provider (tenant) is obligated to provide adequate service, while the client (landlord) must pay the agreed-upon price.
Contract Work
This consensual, legally recognized, and paid contract centers on the contractor’s responsibility for delivering a specific result. Key elements include:
- Work: Clearly defined at the outset.
- Price: Payable in cash or by work units, potentially based on standard industry rates.
The Civil Code distinguishes between contracts where the contractor provides only labor and those where they provide both labor and materials. This distinction is crucial in determining liability if the work is destroyed before completion. The contractor is obligated to deliver the work within the agreed timeframe, and the client is obligated to pay. In the case of furniture works, the contractor may retain the piece until payment is received.
Decennial Liability (Art 1951)
This article establishes the liability of construction stakeholders (developers, designers, builders, etc.) for damages caused by building defects, especially those affecting structural stability, for up to 10 years after completion. They are also liable for damages related to habitability due to material defects for 3 years. Builders are further responsible for damages from faulty finishing work. Liability is waived only in cases of unforeseen circumstances or force majeure. Insurance is required before construction begins.
Deposit Contracts
Regulated by both the Civil Code and Commercial Code, deposit contracts involve a depositary receiving movable property from a depositor for safekeeping and eventual return. Commercial deposits typically involve businesses dedicated to such activity or relate to money, securities, or merchandise.
Types of Deposits
- Irregular Deposit: Expendable goods are deposited, and the depositary returns an equivalent quantity and quality (e.g., bank deposits).
- Managed Deposit: Similar to irregular deposits, but the deposited assets can be used by the bank (e.g., investments).
- General Warehouse Deposit: Primarily for goods and merchandise, with receipts issued for transferability.
- Necessary Deposit: Inherent in lodging and transportation contracts.
- Required Deposit: Fulfilling a legal obligation.
The depositary is obligated to preserve the deposited item and is liable for any damages. The depositor is obligated to pay the agreed-upon price.
Brokerage Agreements
A brokerage agreement is a contract where a broker, acting independently and without representation, works to facilitate the conclusion of a contract between two parties.
Key Features
- The broker operates independently and is not subordinate to either party.
- The broker is obligated to work towards the contract’s conclusion but is not responsible for the outcome.
- The broker connects the parties but does not represent either one.
- Payment is due only upon successful agreement between the parties.