COMMON LAW CONTRACTS FOR CIVIL LAW STUDENTS

Chapter 1. General Principles 1

Chapter 2. Natural Obligations 1

Chapter 3. Kinds of Obligations 2

Section 1. Real Obligations 2

Section 2. Strictly Personal and Heritable Obligations 2

Section 3. Conditional Obligations 2

Section 4. Obligations With a Term 4

Section 5. Obligations With Multiple Persons 4

Section 6. Conjunctive and Alternative Obligations 7

Section 7. Divisible and Indivisible Obligations 7

Chapter 4. Transfer of Obligations 8

Section 1. Assumption of Obligations 8

Section 2. Subrogation 9

Chapter 5. Proof of Obligations 10

Chapter 6. Extinction of Obligations 12

Section 1. Performance 12

Subsection A. Imputation of Payment 13

Subsection B. Tender and Deposit. 14

Section 2. Impossibility of Performance 15

Section 3. Novation 15

Section 4. Remission of Debt 16

Section 5. Compensation 17

Section 6. Confusion 18

TITLE IV: CONVENTIONAL OBLIGATIONS OR CONTRACTS (CC 1906-2057) 18

Chapter 1: General Principles 18

Chapter 2: Contractual Capacity and Exceptions 19

Chapter 3: Consent 20

Chapter 4: Vices of Consent 22

Section 1. Error 22

Section 2: Fraud 23

Section 3: Duress 23

Section 4: Lesion 24

Chapter 6: Object and Matter of Contracts 24

Chapter 7: Third Party Beneficiary 25

Chapter 8: Effects of Conventional Obligations 25

Section 1: General Effects of Contracts 25

Section 2: Specific Performance 26

Section 3: Putting in Default 26

Section 4: Damages 27

Section 5: Stipulated Damages 28

Chapter 9: Dissolution 28

Chapter 10: Simulation 30

Chapter 11: Nullity 30

Chapter 12: Revocatory Action and Oblique Action 31

Section 1: Revocatory Action 31

Section 2: Oblique Action 32

Chapter 13: Interpretation of Contracts 32

TITLE III: OF OBLIGATIONS IN GENERAL (C.C. 1756-1905)

Chapter 1. General Principles

NA 1756. An obligation is a legal relationship whereby a person, called the obligor is bound to render a performance in favor of another called the obligee. Performance may consist of giving, doing or not doing something.

NA 1757. Obligations arise from contracts and other declarations of will. They also arise directly from the law, regardless of a declaration of will, in instances such as wrongful acts, the management of the affairs of another, unjust enrichment and other acts or facts.

NA 1758. A. An obligation may give the obligee the right to:

(1) Enforce the performance that the obligor is bound to render;

(2) Enforce performance by causing it to be rendered by another at the obligor's expense;

(3) Recover damages for the obligor's failure to perform, or his defective or delayed performance.

B. An obligation may give the obligor the right to:

(1) Obtain the proper discharge when he has performed in full;

(2) Contest the obligee's actions when the obligation has been extinguished or modified by a legal cause.

NA 1759. Good faith shall govern the conduct of the obligor and the obligee in whatever pertains to the obligation.

Chapter 2. Natural Obligations

NA 1760. A natural obligation arises from circumstances in which the law implies a particular moral duty to render a performance.

NA 1761. A natural obligation is not enforceable by judicial action. Nevertheless whatever has been freely performed in compliance with a natural obligation may not be reclaimed.

A contract made for the performance of a natural obligation is onerous.

NA 1762. Examples of circumstances giving rise to natural obligation are:

(1) When a civil obligation has been extinguished by prescription or discharged in bankruptcy.

(2) When an obligation has been incurred by a person who, although endowed with discernment, lacks legal capacity.

(3) When the universal successors are not bound by a civil obligation to execute the donations and other dispositions made by a deceased person that are null for want of form.

Chapter 3. Kinds of Obligations

Section 1. Real Obligations

NA 1763. A real obligation is a duty correlative and incidental to a real right.

NA 1764. A real obligation is transferred to the universal or particular successor who acquires the movable or immovable thing to which the obligation is attached, without a special provision to that effect.

But a particular successor is not personal bound, unless he assumes the personal obligations of his transferor with respect to the thing, and he may liberate himself of the real obligation by abandoning the thing.

Section 2. Strictly Personal and Heritable Obligations

NA 1765. An obligation is heritable when its performance may have been forced by a successor of the obligee or against a successor of the obligor.

Every obligation is deemed heritable as to all parties, except when the contrary results from the terms or from the nature of the contract.

A heritable obligation is also transferable between living persons.

NA 1766. An obligation is strictly personal when its performance can be enforced only by the obligee, or only against the obligor.

When the performance requires the special skill or qualification of the obligor, the obligation is presumed to be strictly personal on the part of the obligor. All obligations to perform personal services are presumed to be strictly personal on the part of the obligor. When the performance is intended for the benefit of the obligee exclusively, the obligation is strictly personal on the part of that obligee.

Section 3. Conditional Obligations

NA 1767. A conditional obligation is one dependent upon an uncertain event.

If the obligation may not be enforced until the uncertain event occurs, the condition is suspensive.

If the obligation may be immediatly enforced but will come to an end when the uncertain event occurs, the condition is resolutory.

NA 1768. Conditions may be either expressed in a stipulation or implied by the law, the nature of the contract, or the intent of the parties.

NA 1769. A suspensive condition that is unlawful or impossible makes the obligation null.

NA 1770. A suspensive condition that depends solely on the whim of the obligor makes the obligation null.

A resolutory condition that depends solely on the will of the obligor must be fulfilled in good faith.

NA 1771. The obligee of a conditional obligation, pending fulfillment of the condition, may take all lawful measures to preserve his right.

NA 1772. A condition is regarded as fulfilled when it is not fulfilled because of the fault of a party with interest contrary to the fulfillment.

NA 1773. If the condition is that an event shall occur within a fixed time and that time elapses without the occurrence of the event, the condition is considered to have failed.

If no time has been fixed for the occurrence of the event, the condition may be fulfilled within a reasonable time.

Whether or not a time has been fixed, the condition is considered to have failed once it is certain that the event will not occur.

NA 1774. If the condition is that an event shall not occur within a fixed time, it is considered as fulfilled once that time has elapsed without the event having occurred.

The condition is regarded as fulfilled whenever it is certain that the event will not occur, whether or not a time has been fixed.

NA 1775. Fulfillment of a condition has effects that are retroactive to the inception of the obligation. Nevertheless, that fulfillment does not impair the validity of acts of administration duly performed by a party nor affect the ownership of the fruits produced while the condition was pending. Likewise, fulfillment of the condition does not impair the right acquired by third persons while the condition was pending.

NA 1776. In a contract for continuous or periodic performance, fulfillment of a resolutory condition does not affect the validity of acts of performance rendered before fulfillment of the condition.

Section 4. Obligations With a Term

NA 1777. The term for the performance of an obligation may be express or it may be implied by the nature of the contract.

Performance of an obligation not subject to a term is due immediately.

NA 1778. A term for the performance of an obligation is a period of time either certain or uncertain. It is certain when it is fixed. It is uncertain when it is not fixed but is determinable either by the intent of the parties or by the occurrence of a future and certain event. It is also uncertain when it is not determinable, in which case the obligation must be performed within a reasonable time.

NA 1779. A term is presumed to benefit the obligor unless the agreement or the circumstances show that it was intended to benefit the obligee or both parties.

NA 1780. The party for whose exclusive benefit a term has been established may renounce it.

NA 1781. Although the performance cannot be demanded before the term ends, an obligor who has performed voluntarily before the term ends may not recover the performance.

NA 1782. When the obligation is such that its performance requires the solvency of the obligor, the term is regarded as non-existent if the obligor is found to be insolvent.

NA 1783. When the obligation is subject to a term and the obligor fails to furnish the promised security, or the security furnished becomes insufficient, the obligee may require that the obligor, at his option, either perform the obligation immediately or furnish sufficient security. The obligee may take all lawful measures to perserve his right.

NA 1784. When the term for performance of an obligation is not marked by a specific date but is rather a period of time, the term begins to run on the day after the contract is made, or on the day after the occurrence of the event that marks the beginning of the term, and it includes the last day of the period.

NA 1785. The performance on term must be in accordance with the intent of the party, or with established usage when the intent cannot be ascertained.

Section 5. Obligations With Multiple Persons

NA 1786. When an obligation binds more than one obligor to one obligee, or binds one obligor to more than one obligee, or binds more than one obligor to more than one obligee, the obligation may be several, joint, or solidary.

NA 1787. When each of different obligors owes a separate performance to one obligee, the obligation is several for the obligors.

When one obligor owes a separate performance to each of different obligees, the obligation is several for the obligees.

A several obligation produces the same effects as a separate obligation owed to each obligee by an obligor or by each obligor to an obligee.

NA 1788. When different obligors owe together just one performance to one obligee, but neither is bound for the whole, the obligation is joint for the obligors.

When one obligor owes just one performance intended for the common benefit of different obligees, neither of whom is entitled to the whole performance, the obligation is joint for the obligees.

NA 1789. When a joint obligation is divisible, each joint obligor is bound to perform, and each joint obligee is entitled to receive, only his portion.

When a joint obligation is indivisible, joint obligors or obligees are subject to the rules governing solidary obligors or solidary obligees.

NA 1790. An obligation is solidary for the obligees when it gives each obligee the right to demand the whole performance from the common obligor.

NA 1791. Before a solidary obligee brings action for performance, the obligor may extinguish the obligation by rendering performance to any of the solidary obligees.

NA 1792. Remission of debt by one solidary obligee releases the obligor but only for the portion of that obligee.

NA 1793. Any act that interrupts prescription for one of the solidary obligees benefits all the others.

NA 1794. An obligation is solidary for the obligors when each obligor is liable for the whole performance. A performance rendered by one of the solidary obligors relieves the others of liability toward the obligee.

NA 1795. An obligee, at his choice, may demand the whole performance from any of his solidary obligors. A solidary obligor may not request division of the debt.

Unless the obligation is extinguished, an obligee may institute action against any of his solidary obligors even after institution of action against another solidary obligor.

NA 1796. Solidarity of obligation shall not be presumed. A solidary obligation arises from a clear expression of the parties' intent or from the law.

NA 1797. An obligation may be solidary though it derives from a different source for each obligor.

NA 1798. An obligation may be solidary though for one of the obligors it is subject to a condition or term.

NA 1799. The interruption of prescription against one solidary obligor is effective against all solidary obligors and their heirs.

NA 1800. A failure to perform a solidary obligation through the fault of one obligor renders all the obligors solidarily liable for the resulting damages. In that case, the obligors not at fault have their remedy against the obligor at fault.

NA 1801. A solidary obligor may raise against the obligee defenses that arise from the nature of the obligation or that are personal to him or that are common to all the solidary obligors. He may not raise a defense that is personal to another solidary obligor.

NA 1802. Renunciation of solidary by the obligee in favor of one or more of his obligors must be express. An obligee who receives a partial performance from an obligor separately preserves the solidary obligation against all his obligors after deduction of that partial performance.

NA 1803. Remission of debt by the obligee in favor of one obligor, or a transaction or compromise between the obligee and one obligor, benefits the other solidary obligors in the amount of the portion of that obligor.

Surrender to one solidary obligor of the instrument evidencing the obligation gives rise to a presumption that the remission of debt was intended for the benefit of all the solidary obligors.

NA 1804. Among solidary obligors, each is liable for his virile portion. If the obligation arises from a contract or quasi-contract, the virile portions are equal in the absence of agreement or judgment to the contrary. If the obligation arises from an offense or quasi-offense, a virile portion is proportionate to the fault of each obligor.

A solidary obligor who has rendered the whole performance, though subrogated to the right of the obligee, may claim from the other obligors no more than the virile portion of each.

If the circumstances giving rise to the solidary obligation concern only one of the obligors, that obligor is liable for the whole to the other obligors who are than considered only as his sureties.

NA 1805. A party sued on an obligation that would be solidary if it exists may seek to enforce contribution against any solidary co-obligor by making him a third party defendant according to the rules of procedure, whether or not that third party had been initially sued, and whether the party seeking to enforce contribution admits or denies liability of the obligation alleged by plaintiff.

NA 1806. A loss arising from the insolvency of a solidary obligor must be borne by the other solidary obligors in proportion to their portion.

Any obligor in whose favor solidarity has been renounced must nevertheless contribute to make up for the loss.

Section 6. Conjunctive and Alternative Obligations

NA 1807. An obligation is conjunctive when it binds the obligor to multiple items of performance that may be separately rendered or enforced. In that case, each item is regarded as the object of a separate obligation.

The parties may provide that the failure of the obligor to perform one or more items shall allow the obligee to demand the immediate performance of all the remaining items.

NA 1808. An obligation is alternative when an obligor is bound to render only one of two or more items of performance.

NA 1809. When an obligation is alternative, the choice of the item performance belongs to the obligor unless it has been expressly or impliedly granted to the obligee.

NA 1810. When the party who has the choice does not exercise it after a demand to do so, the other party may choose the item of performance.

NA 1811. An obligor may not perform an alternative obligation by rendering as performance a part of one item and a part of another.

NA 1812. When the choice belongs to the obligor and one of the items of performance contemplated in the alternative obligation becomes impossible or unlawful, regardless of the fault of the obligor, he must render one of those that remain.

When the choice belongs to the obligee and one of the items of performance becomes impossible or unlawful without the fault of the obligor, the obligee must choose one of the items that remain. If the impossibility or unlawfulness is due to the fault of the obligor, the obligee may choose either one of those that remain, or damages for the item of performance that became impossible or unlawful.

NA 1813. If all of the items of performance contemplated in the alternative obligation become impossible or unlawful without the obligor's fault, the obligation is extinguished.

NA 1814. When the choice belongs to the obligor, if all the items of performance contemplated in the alternative obligation have become impossible and the impossibility of one or more is due to the fault of the obligor, he is liable for the damages resulting from his failure to render the last item that became impossible.

If the impossibility of one or more items is due to the fault of the obligee, the obligor is not bound to deliver any of the items that remain.

Section 7. Divisible and Indivisible Obligations

NA 1815. An obligation is divisible when the object of the performance is susceptible of division.

An obligation is indivisible when the object of the performance, because of its nature or because of the intent of the parties is not susceptible of division.

NA 1816. When there is only one obligor and only one obligee, a divisible obligation must be performed as if it were indivisible.

NA 1817. A divisible obligation must be divided among successors or the obligor or of the obligee.

Each successor of the obligor is liable only for his share of a divisible obligation.

Each successor of the obligee is entitled only to his share of a divisible obligation.

NA 1818. An indivisible obligation with more than one obligor or obligee is subject to the rules governing solidary obligations.

NA 1819. An indivisible obligation may not be divided among the successors of the obligor or of the obligee, who are thus subject to the rules governing solidary obligors or solidary obligees.

NA 1820. A stipulation of solidarity does not make an obligation indivisible.

Chapter 4. Transfer of Obligations

Section 1. Assumption of Obligations

NA 1821. An obligor and a third person may agree to an assumption by the latter of an obligation of the former. To be enforceable by the obligee against the third person, the agreement must be made in writing.

The obligee's consent to the agreement does not effect a release of the obligor.

The unreleased obligor remains solidarily bound with the third person.

NA 1822. A person who, by agreement with the obligor, assumes the obligation of the latter is bound only to the extent of his assumption.

The assuming obligor may raise any defense based upon the contract by which the assumption was made.

NA 1823. An obligee and a third person may agree on an assumption by the latter of an obligation owed by another to the former. That agreement must be made in writing. That agreement does not effect a release of the original obligor.

NA 1824. A person who, by agreement with the obligee, has assumed another's obligation may not raise against the obligee any defense based upon the relationship between the assuming obligor and the original obligor.

The assuming obligor may raise any defense based upon the relationship between the original obligor and obligee. He may not invoke compensation based on an obligation owed by the obligee to the original obligor.

Section 2. Subrogation

NA 1825. Subrogation is the substitution of one person to the rights of another. It may be conventional or legal.

NA 1826. When subrogation results from a person's performance of the obligation of another, that obligation subsists in favor of the person who performed it who may avail himself of the action and security of the original obligee against the obligor, but is extinguished for the original obligee.

An original obligee who has been paid only in part may exercise his right for the balance of the debt in preference to the new obligee.

NA 1827. An obligee who receives performance from a third person may subrogate that person to the rights of the obligee, even without the obligor's consent. That subrogation is subject to the rules governing the assignment of rights.

NA 1828. An obligor who pays a debt with money for other fungible things borrowed for that purpose may subrogate the lender to the rights of the obligee, even without the obligee's consent.

The agreement for subrogation must be made in writing expressing that the purpose of the loan is to pay the debt.

NA 1829. Subrogation takes place by operation of law:

(1) In favor of an obligee who pays another obligee whose right is preferred to his because of a privilege, pledge, or mortgage;

(2) In favor of a purchaser of movable or immovable property who uses the purchase money to pay creditors holding any privilege, pledge, or mortgage on the property;

(3) In favor of an obligor who pays a debt he owes with others or for others and who has recourse against those others as a result of the payment;

(4) In favor of an heir with benefit of inventory who pays debts of the estate with his own funds; and

(5) In the other cases provided by law.

NA 1830. When subrogation takes place by operation of law, the new obligee may recover from the obligor only to the extent of the performance rendered to the original obligee. The new obligee may not recover more by invoking conventional subrogation.

Chapter 5. Proof of Obligations

NA 1831. A party who demands performance of an obligation must prove the existence of the obligation.

A party who asserts that an obligation is null, or that it has been modified or extinguished, must prove the facts or acts giving rise to the nullity, modification, or extinction.

NA 1832. When the law requires a contract to be in written form, the contract may not be proved by testimony or by presumption, unless the written instrument has been destroyed, lost, or stolen.

NA 1833. An authentic act is a writing executed before a notary public or other officer authorized to perform that function, in the presence of two witnesses, and signed by each party who executed it, by each witness, and by each notary public before whom it was executed.

To be an authentic act, the writing need not be executed at one time or place, or before the same notary public or in the presence of the same witnesses, provided that each party who executes it does so before a notary public or other officer authorized to perform that function, and in the presence of two witnesses and each party, each witness, and each notary public signs it.

If a party is unable or does not know how to sign his name, the notary public must cause him to affix his mark to the writing.

NA 1834. An act that fails to be authentic because of a lack of competence or capacity of the notary public, or because of a defect of form, may still be valid as an act under private signature.

NA 1835. An authentic act constitutes full proof of the agreement it contains, as against the parties, their heirs, and successors by universal or particular title.

NA 1836. An act under private signature is regarded prima facie as the true and genuine act of a party executing it when his signature has been acknowledged, and the act shall be admitted in evidence without further proof.

An act under private signature may be acknowledged by a party to that act by recognizing the signature as his own before a court, or before a notary public, or other officer authorized to perform that function, in the presence of two witnesses. An act under private signature may be acknowledged also in any other manner authorized by law.

Nevertheless, an act under private signature though acknowledged, cannot substitute for an authentic act when the law prescribes such an act.

NA 1837. An act under private signature need not be written by the parties, but must be signed by them.

NA 1838. A party against whom an act under private signature is asserted must acknowledge his signature or deny that it is his.

In case of denial, any means of proof may be used to establish that the signature belongs to that party.

NA 1839. A transfer of immovable property must be made by authentic act or by act under private signature. Nevertheless, an oral transfer is valid between the parties when the property has been actually delivered and the transferor recognizes the transfer when interrogated on oath.

An instrument involving immovable property shall have effect against third persons only from the time it is filed for registry in the parish where the property is located.

NA 1840. When certified by the notary public or other officer before whom the act was passed, a copy of an authentic act constitutes proof of the contents of the original, unless the copy is proved to be incorrect.

NA 1841. When an authentic act or an acknowledged act under private signature has been filed for registry with a public officer, a copy of the act thus filed, when certified by that officer, constitutes proof of the contents of the original.

NA 1842. Confirmation is a declaration whereby a person cures the relative nullity of an obligation.

An express act of confirmation must contain or identify the substance of the obligation and evidence the intention to cure its relative nullity.

Tacit confirmation may result from voluntary performance of the obligation.

NA 1843. Ratification is a declaration whereby a person gives his consent to an obligation incurred on his behalf by another without authority.

An express act of ratification must evidence the intention to be bound by the ratified obligation.

Tacit ratification results when a person, with knowledge of an obligation incurred upon his behalf by another, accepts the benefit of that obligation.

NA 1844. The effects of confirmation and ratification are retroactive to the date of the confirmed or ratified obligation. Neither confirmation nor ratification may impair the rights of third persons.

NA 1845. A donation inter vivos that is null for lack of proper form may be confirmed by the donor but the confirmation must be made in the form required for a donation.

The universal successor of the donor may, after his death, expressly or tacitly confirm such a donation.

NA 1846. When a writing is not required by law, a contract not reduced to writing, for a price or, in the absence of a price, for a value not in excess of five hundred dollars may be proved by competent evidence.

If the price or value is in excess of five hundred dollars, the contract must be proved by at least one witness or other corroborating circumstances.

NA 1847. Parol evidence is inadmissible to establish either a promise to pay a debt of a third person or a promise to pay the debt extinguished by prescription.

NA 1848. Testimonial or other evidence may not be admitted to negate or vary the contents of an authentic act or an act under private signature. Nevertheless, in the interest of justice that evidence may be admitted to prove such circumstances as a vice of consent, or a simulation, or to prove that the written act was modified by a subsequent and valid oral agreement.

NA 1849. A presumption is a consequence that the law or the court attaches to a known fact for the purpose of establishing the existence of another and unknown fact.

NA 1850. A party whose interest is favored by a presumption established by law need not offer other proof.

NA 1851. Legal presumptions are rebuttable or conclusive. A rebuttable legal presumption is established in the interest of private parties and may be controverted. A conclusive legal presumption is established for reasons of public policy and may not be controverted.

NA 1852. A presumption not established by law is left to the discretion of the court. Unless an allegation of fraud is involved, that presumption may be admitted only when testimonial proof is admissible.

NA 1853. A judicial confession is a declaration made by a party in a judicial proceeding. That confession constitutes full proof against the party who made it.

A judicial confession is indivisible and it may be revoked only on the ground of error of fact.

Chapter 6. Extinction of Obligations

Section 1. Performance

NA 1854. Performance by the obligor extinguishes the obligation.

NA 1855. Performance may be rendered by a third person, even against the will of the obligee, unless the obligor or the obligee has an interest in performance only by the obligor.

Performance rendered by a third person effects subrogation only when so provided by law or by agreement.

NA 1856. An obligation that may be extinguished by the transfer of a thing is not extinguished unless the thing has been validly transferred to the obligee of performance.

NA 1857. Performance must be rendered to the obligee or to a person authorized by him.

However, a performance rendered to an unauthorized person is valid if the obligee ratifies it.

In the absence of ratification, a performance rendered to an unauthorized person is valid if the obligee has derived a benefit from it, but only for the amount of the benefit.

NA 1858. Performance rendered to an obligee without capacity to receive it is valid to the extent of the benefit he derived from it.

NA 1859. A performance rendered to an obligee in violation of a seizure is not valid against the seizing creditor who, according to his right, may force the obligor to perform again.

In that case, the obligor may recover the first performance from the obligee.

NA 1860. When the performance consists of giving a thing that is determined as to its kind only, the obligor need not give one of the best quality but he may not tender one of the worst.

NA 1861. An obligee may refuse to accept a partial performance.

Nevertheless, if the amount of an obligation to a money is disputed in part and the obligor is willing to pay the undisputed part, the obligee may not refuse to accept that part. If the obligee is willing to accept the undisputed part, the obligor must pay it. In either case, the obligee preserves his right to claim the disputed part.

NA 1862. Performance shall be rendered in the place either stipulated in the agreement or intended by the parties according to usage, nature of the performance, or other circumstances.

In the absence of agreement or other indications of the parties' intent, performance of an obligation to give an individually determine the thing shall be rendered at the place the thing was when the obligation arose. If the obligation is of any other kind, the performance shall be rendered at the domicile of the obligor.

NA 1863. Expenses that may be required to render performance shall be borne by the obligor.

Subsection A. Imputation of Payment

NA 1864. An obligor who owes several debts to an obligee has the right to impute payment to the debt he intends to pay.

The obligor's intent to pay a certain debt may be expressed at the time of payment or may be incurred from circumstances known to the obligee.

NA 1865. An obligor may not, without the obligee's consent, impute payment to a debt not yet due.

NA 1866. An obligor of a debt that bears interest may not, without the obligee's consent, impute a payment to principal when interest is due.

A payment made on principal and interest must be imputed first to interest.

NA 1867. An obligor who has accepted a receipt that imputes payment to one of his debts may no longer demand imputation to another debt, unless the obligee has acted in bad faith.

NA 1868. When the parties have made no imputation, payment must be imputed to the debt that is already due.

If several debts are due, payment must be imputed to the debt that bears interest.

If all, or none, of the debts that are due bear interest, payment must be imputed to the debt that is secured.

If several unsecured debts bear interest, payment must be imputed to the debt that, because of the rate of interest, is most burdensome to the obligor.

If several secured debts bear no interest, payment must be imputed to the debt that, because of the nature of the security, is most burdensome to the obligor.

If the obligor has the same interest in paying all debts, payment must be imputed to the debt that became due first.

If all debts are of the same nature and became due at the same time, payment must be proportionally imputed to all.

Subsection B. Tender and Deposit.

NA 1869. When the object of the performance is the delivery of a thing or a sum of money and if the obligee, without justification, fails to accept the performance tendered by the obligor, the tender, followed by deposit to the order of the court, produces all the effects of a performance from the time a tender was made if declared valid by the court.

A valid tender is an offer to perform according to the nature of the obligation.

NA 1870. If the obligor knows or has reason to know that the obligee will refuse the performance, or when the object of the performance is the delivery of a thing or a sum of money at a place other than the obligee's domicile, a notice given to the obligee that the obligor is ready to perform has the same effect as a tender.

NA 1871. After the tender has been refused, the obligor may deposit the thing or the sum of money to the order of the court in a place designated by the court for that purpose, and may demand judgment declaring the performance valid.

If the deposit is accepted by the obligee, or if the court declares the performance to be valid, all expenses of the deposit must be borne by the obligee.

NA 1872. If performance consists of the delivery of a perishable thing, or of a thing whose deposit and custody are excessively costly in proportion to its value, the court may order the sale of the thing under the conditions that it may direct, and the deposit of the proceeds.

Section 2. Impossibility of Performance

NA 1873. An obligor is not liable for his failure to perform when it is caused by a fortuitous event that makes performance impossible.

An obligor is, however, liable for his failure to perform when he has assumed the risk of such a fortuitous event.

An obligor is liable also when the fortuitous event occurred after he has been put in default.

An obligor is likewise liable when the fortuitous event that caused his failure to perform has been preceded by his fault, without which the failure would not have occurred.

NA 1874. An obligor who had been put in default when a fortuitous event made his performance impossible is not liable for his failure to perform if the fortuitous event would have likewise destroyed the object of the performance in the hands of the obligee had performance been timely rendered.

That obligor is, however, liable for the damage caused by his delay.

NA 1875. A fortuitous event is one that, at the time the contract was made, could not have been reasonably foreseen.

NA 1876. When the entire performance owed by one party has become impossible because of a fortuitous event, the contract is dissolved.

The other party may then recover any performance he has already rendered.

NA 1877. When a fortuitous event has made a party's performance impossible in part, the court may reduce the other party's counterperformance proportionally, or, according to the circumstances, may declare the contract dissolved.

If a contract is dissolved because of a fortuitous event that occurred after an obligor has performed in part, the obligee is bound but only to the extent that he was enriched by the obligor's partial performance.

Section 3. Novation

NA 1879. Novation is the extinguishment of an existing obligation by the substitution of a new one.

NA 1880. The intention to extinguish the original obligation must be clear and unequivocal. Novation may not be presumed.

NA 1881. Novation takes place when, by agreement of the parties, a new performance is substituted for that previously owed, or a new cause is substituted for that of the original obligation. If any substantial part of the original performance is still owed, there is no novation.

Novation takes place also when the parties expressly declare their intention to novate an obligation.

Mere modification of an obligation, made without intention to extinguish it, does not effect a novation. The execution of a new writing, the issuance or renewal of a negotiable instrument, or the giving of new security for the performance of an existing obligation are examples of such a modification.

NA 1882. Novation takes place when a new obligor is substituted for a prior obligor who is discharged by the obligee. In that case, a novation is accomplished even without the consent of the prior obligor, unless he had an interest in performing the obligation himself.

NA 1883. Novation has no effect when the obligation it purports to extinguish does not exist or is absolutely null.

If the obligation is only relatively null, the novation is valid provided the obligor of the new one knew of the defect of the extinguished obligation.

NA 1884. Security given for the performance of the extinguished obligation may not be transferred to the new obligation without agreement of the parties who gave the security.

NA 1885. A novation made by the obligee and one of the obligors of a solidary obligation releases the other solidary obligors.

In that case, the security given for the performance of the extinguished obligation may be retained by the obligee only on property of that obligor with whom the novation has been made.

If the obligee requires that the other co-obligors remain solidarily bound, there is no novation unless the co-obligors consent to the new obligation.

NA 1886. A delegation of performance by an obligor to a third person is effective when that person binds himself to perform.

A delegation effects a novation only when the obligee expressly discharges the original obligor.

NA 1887. If the new obligor has assumed the obligation and acquired the thing given as security, the discharge of any prior obligor by the obligee does not affect the security or its rank.

Section 4. Remission of Debt

NA 1888. A remission of debt by an obligee extinguishes the obligation. That remission may be express or tacit.

NA 1889. An obligee's voluntary surrender to the obligor of the instrument evidencing the obligation gives rise to a presumption that the obligee intended to remit the debt.

NA 1890. A remission of debt is effective when the obligor receives the communication from the obligee. Acceptance of a remission is always presumed unless the obligor rejects the remission within a reasonable time.

NA 1891. Release of a real security given for performance of the obligation does not give rise to a presumption of remission of debt.

NA 1892. Remission of debt granted to the principal obligor releases the sureties.

Remission of debt granted to the sureties does not release the principal obligor.

Remission of debt granted to one surety releases the other sureties only to the extent of the contribution the other sureties might recovered from the surety to whom the remission was granted.

If the obligee grants a remission of debt to a surety in return for an advantage, that advantage will be imputed to the debt, unless the surety and the obligee agree otherwise.

Section 5. Compensation

NA 1893. Compensation takes place by operation of law when two persons owe to each other sums of money or quantities of fungible things identical in kind, and these sums or quantities are liquidated and presently due.

In such a case, compensation extinguishes both obligations to the extent of the lessor amount.

Delays of grace do not prevent compensation.

NA 1894. Compensation takes place regardless of the sources of the obligations.

Compensation does not take place, however, if one of the obligations is to return a thing of which the owner has been unjustly dispossessed, or is to return a thing given in deposit or loan for use, or if the object of one of the obligations is exempt from seizure.

NA 1895. Compensation takes place even though the obligations are not to be performed at the same place, but allowance must be made in that case for the expenses of remittance.

NA 1896. If an obligor owes more than one obligation subject to compensation, the rules of imputation of payment must be applied.

NA 1897. Compensation between obligee and principal obligor extinguishes the obligation of a surety.

Compensation between obligee and surety does not extinguish the obligation of the principal obligor.

NA 1898. Compensation between the obligee and one solidary obligor extinguishes the obligation of the other solidary obligors only for the portion of that obligor.

Compensation between one solidary obligee and the obligor extinguishes the obligation only for the portion of that obligee.

The compensation provided in this Article does not operate in favor of a liability insured.

NA 1899. Compensation can neither take place nor may it be renounced to the prejudice of rights previously acquired by third parties.

NA 1900. An obligor who has consented to an assignment of the credit by the obligee to a third party may not claim against the latter any compensation that otherwise he could have claimed against the former.

An obligor who has been given notice of an assignment to which he did not consent may not claim compensation against the assignee for an obligation of the assignor arising after that notice.

NA 1901. Compensation of obligations may take place also by agreement of the parties even though the requirements for compensation by operation of law are not met.

NA 1902. Although the obligation claimed in compensation is unliquidated, the court can declare compensation as to that part of the obligation that is susceptible of prompt and easy liquidation.

Section 6. Confusion

NA 1903. When the qualities of the obligee and obligor are united in the same person, the obligation is extinguished by confusion.

NA 1904. Confusion of the qualities of the obligee and obligor in the person of the principal obligor extinguishes the obligation of the surety.

Confusion of the qualities of the obligee and obligor in the person of the surety does not extinguish the obligation of the principal obligor.

NA 1905. If a solidary obligor becomes an obligee, confusion extinguishes the obligation only for the portion of that obligor.

If a solidary obligee becomes an obligor, confusion extinguishes the obligation only for the portion of that obligee.

TITLE IV: CONVENTIONAL OBLIGATIONS OR CONTRACTS (CC 1906-2057)

NA 1906. A contract is an agreement by two or more parties whereby obligations are created, modified, or extinguished.

NA 1907. A contract is unilateral when the party who accepts the obligation of the other does not assume a reciprocal obligation.

NA 1908. A contract is bilateral, or synallagmatic, when the parties obligate themselves reciprocally, so that the obligation of each party is correlative to the obligation of the other.

NA 1909. A contract is onerous when each of the parties obtains an advantage in exchange for his obligation.

NA 1910. A contract is gratuitous when one party obligates himself towards another for the benefit of the latter, without obtaining any advantage in return.

NA 1911. A contract is commutative when the performance of the obligation of each party is correlative to the performance of the other.

NA 1912. A contract is aleatory when, because of its nature or according to the parties' intent, the performance of either party's obligation or the extent of the performance depends on an uncertain event.

NA 1913. A contract is accessory when it is made to provide security for the performance of an obligation. Suretyship, mortgage, pledge, and other types of security agreements are examples of such a contract.

When the secured obligation arises from a contract, either between the same or other parties, that contract is the principal contract.

NA 1914. Nominate contracts are those given a special designation such as sale, lease, loan, or insurance.

Innominate contracts are those with no special designation.

NA 1915. All contracts, nominate and innominate are subject to the rules of this title.

NA 1916. Nominate contracts are subject to the special rules of the respective titles when those rules modify, complement, or depart from the rules of this title.

NA 1917. The rules of this title are applicable also to obligations that arise from sources other than contract to the extent that those rules are compatible with the nature of those obligations.

NA 1918. All persons have capacity to contract, except unemancipated minors, interdicts, and persons deprived of reason at the time of contracting.

NA 1919. A contract made by a person without legal capacity is relatively null and may be rescinded only at the request of that person or his legal representative.

NA 1920. Immediately after discovering the incapacity, a party, who at the time of contracting was ignorant of the incapacity of the other party, may require from that party, if the incapacity has ceased, or from the legal representative if it has not, that the contract be confirmed or rescinded.

NA 1921. Upon rescission of a contract on the ground of incapacity, each party or his legal representative shall restore to the other what he has received thereunder. When restoration is impossible or impracticable, the court may award compensation to the party to who restoration cannot be made.

NA 1922. A fully emancipated minor has full contractual capacity.

NA 1923. A contract by an unemancipated minor may be rescinded on grounds of incapacity except when made for the purpose of providing with something necessary for his support or education, or for a purpose related to his business.

NA 1924. The mere representation of majority by an unemancipated minor does not preclude an action for rescission of the contract. When the other party reasonably relies on the minor's representation of majority, the contract may not be rescinded.

NA 1925. A noninterdicted person who was deprived of reason at the time of contracting, may obtain rescission of an onerous contract upon the ground of incapacity only upon showing that the other party knew or should have known that person's incapacity.

NA 1926. A contract made by a noninterdicted person deprived of reason at the time of contracting may be attacked after his death, on the ground of incapacity, only when the contract is gratuitous, or it evidences lack of understanding, or was made within thirty days of his death, or when application for interdiction was filed before his death.

NA 1927. A contract is formed by the consent of the parties established through offer and acceptance.

Unless the law prescribes a certain formality for the intended contract, offer and acceptance may be made orally, in writing, or by action or inaction that under the circumstances is clearly indicative of consent.

Unless otherwise specified in the offer, there need not be conformity between the manner in which the offer is made and the manner in which the acceptance is made.

NA 1928. An offer that specifies a period of time for acceptance is irrevocable during that time.

When the offeror manifests an intent to give the offeree delay in which to accept, without specifying a time, the offer is irrevocable for a reasonable time.

NA 1929. An irrevocable offer expires if not accepted in the time prescribed in the preceding Article.

NA 1930. An offer not irrevocable under Civil Code Article 1928 may be revoked before it is accepted.

NA 1931. A revocable offer expires if not accepted within a reasonable time.

NA 1932. An offer expires by the death or incapacity of the offeror or the offeree before it has been accepted.

NA 1933. An option is a contract whereby the parties agree that the offeror is bound by his offer for a specified period of time and that the offeree may accept within that time.

NA 1934. An acceptance of an irrevocable offer is effective when received by the offeror.

NA 1935. Unless otherwise specified by the offer or the law, an acceptance of a revocable offer, made in a manner and by a medium suggested by the offer or in a reasonable manner and by a reasonable medium, is effective when transmitted by the offeree.

NA 1936. A medium or a manner of acceptance is reasonable if it is the one used in making the offer or one customary in similar transactions at the time and place the offer is received, unless circumstances known to the offeree indicate otherwise.

NA 1937. A revocation of a revocable offer is effective when received by the offeree prior to acceptance.

NA 1938. A written revocation, rejection, or acceptance is received when it comes into the possession of the addressee or of a person authorized by him to receive it, or when it is deposited in a place the addressee has indicated as the place for this or similar communications to be deposited for him.

NA 1939. When an offeror invites an offeree to accept by performance and, according to usage or the nature or the terms of the contract, it is contemplated that the performance will be completed if commenced, a contract is formed when the offeree begins the requested performance.

NA 1940. When, according to usage or the nature of the contract, or its own terms, an offer made to a particular offeree can be accepted only by rendering a completed performance, the fferor cannot revoke the offer, once the offeree has begun to perform, for the reasonable time necessary to complete the performance. The offeree, however, is not bound to complete the performance he has begun.

The offeror's duty of performance is conditional on completion or tender of the requested performance.

NA 1941. When commencement of the performance either constitutes acceptance or makes the offer irrevocable, the offeree must give prompt notice of that commencement unless the offeror knows or should know that the offeree has begun to perform. An offeree who fails to give the notice is liable for damages.

NA 1942. When, because of special circumstances, the offeree's silence leads the offeror reasonably to believe that a contract has been formed, the offer is deemed accepted.

NA 1943. An acceptance not in accordance with the terms of the offer is deemed to be a counteroffer.

NA 1944. An offer of a reward made to the public is binding upon the offeror even if the one who performs the requested act does not know of the offer.

NA 1945. An offer of reward made to the public may be revoked before completion of the requested act, provided the revocation is made by the same or an equally effective means as the offer.

NA 1946. Unless otherwise stipulated in the offer made to the public, or otherwise implied from the nature of the act, when several persons have performed the requested act, the reward belongs to the first one giving notice of his completion of performance to the offeror.

NA 1947. When, in the absence of a legal requirement, the parties have contemplated a certain form, it is presumed that they do not intend to be bound until the contract is executed in that form.

Section 1. Error

NA 1948. Consent may be vitiated by error, fraud, or duress.

NA 1949. Error vitiates consent only when it concerns a cause without which the obligation would not have been incurred and that cause was known or should have been known to the other party.

NA 1950. Error may concern a cause when it bears on the nature of the contract, or the thing that is the contractual object or a substantial quality of that thing, or the person or the qualities of the other party, or the law, or any other circumstance that the parties regarded, or should in good faith have regarded, as a cause of the obligation.

NA 1951. A party may not avail himself of his error if the other party is willing to perform the contract as intended by the party in error.

NA 1952. A party who obtains rescission on grounds of his own error is liable for the loss thereby sustained by the other party unless the latter knew or should have known of the error.

The court may refuse rescission when the effective protection of the other party's interest requires that the contract be upheld. In that case, a reasonable compensation for the loss he has sustained may be granted to the party to whom rescission is refused.

Section 2: Fraud

NA 1953. Fraud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from silence or inaction.

NA 1954. Fraud does not vitiate consent when the party against whom the fraud was directed could have ascertained the truth without difficulty, inconvenience, or special skill.

This exception does not apply when a relation of confidence has reasonably induced a party to rely on the other's assertions or representations.

NA 1955. Error induced by fraud need not concern the cause of the obligation to vitiate consent, but it must concern a circumstance that has substantially influenced that consent.

NA 1956. Fraud committed by a third person vitiates the consent of a contracting party if the other party knew or should have known of the fraud.

NA 1957. Fraud need only be proved by a preponderance of the evidence and may be established by circumstantial evidence.

NA 1958. The party against whom rescission is granted because of fraud is liable for damages and attorney fees.

Section 3: Duress

NA 1959. Consent is vitiated when it has been obtained by duress of such a nature as to cause a reasonable fear of unjust and considerable injury to a party's person, property, or reputation.

Age, health, disposition, and other personal circumstances of a party must be taken into account in determining reasonableness of the fear.

NA 1960. Duress vitiates consent also when the threatened injury is directed against the spouse, an ascendant, or descendant of the contracting party.

If the threatened injury is directed against other persons, the granting of relief is left to the discretion of the court.

NA 1961. Consent is vitiated even when duress has been exerted by a third person.

NA 1962. A threat of doing a lawful act or a threat of exercising a right does not constitute duress.

A threat of doing an act that is lawful in appearance only may constitute duress.

NA 1963. A contract made with a third person to secure the means of preventing threatened injury may not be rescinded for duress if that person is in good faith and not in collusion with the party exerting duress.

NA 1964. When rescission is granted because of duress exerted or known by a party to the contract, the other party may recover damages and attorney fees.

When rescission is granted because of duress exerted by a third person, the parties to the contract who are innocent of the duress may recover damages and attorney fees from the third person.

Section 4: Lesion

NA 1965. A contract may be annulled on grounds of lesion only in those cases provided by law.

NA 1966. An obligation cannot exist without a lawful cause.

NA 1967. Cause is the reason why a party obligates himself.

A party may be obligated by a promise when he knew or should have known that the promise would induce the other party to rely on it to his detriment and the other party was reasonable in so relying. Recovery may be limited to the expenses incurred or the damages suffered as a result of the promisee's reliance on the promise. Reliance on a gratuitous promise made without required formalities is not reasonable.

NA 1968. The cause of an obligation is unlawful when the enforcement of the obligation would produce a result prohibited by law or against public policy.

NA 1969. An obligation may be valid even though its cause is not expressed.

NA 1970. When the expression of a cause in a contractual obligation is untrue, the obligation is still effective if a valid cause can be shown.

NA 1971. Parties are free to contract for any object that is lawful, possible, and determined or determinable.

NA 1972. A contractual object is possible or impossible according to its own nature and not according to the parties' ability to perform.

NA 1973. The object of a contract must be determined at least as to its kind. The quantity of a contractual object may be undetermined, provided it is determinable.

NA 1974. If the determination of the quantity of the object has been left to the discretion of a third person, the quantity of an object is determinable.

If the parties fail to name a person, or if the person named is unable or unwilling to make the determination, the quantity may be determined by the court.

NA 1975. The quantity of a contractual object may be determined by the output of one party or the requirements of the other.

In such a case, output or requirements must be measured in good faith.

NA 1976. Future things may be the object of a contract.

The succession of a living person may not be the object of a contract other than an antenuptial agreement. Such a succession may not be renounced.

NA 1977. The object of a contract may be that a third person will incur an obligation or render a performance.

The party who promised that obligation or performance is liable for damages if the third person does not bind himself or does not perform.

NA 1978. A contracting party may stipulate a benefit for a third person called a third party beneficiary.

Once the third party has manifested his intention to avail himself of the benefit, the parties may not dissolve the contract by mutual consent without the beneficiary's agreement.

NA 1979. The stipulation may be revoked only by the stipulator and only before the third party has manifested his intention of availing himself of the benefit.

If the promisor has an interest in performing, however, the stipulation may not be revoked without his consent.

NA 1980. In case of revocation or refusal of the stipulation, the promisor shall render performance to the stipulator.

NA 1981. The stipulation gives the third party beneficiary the right to demand performance from the promisor.

Also the stipulator, for the benefit of the third party, may demand performance from the promisor.

NA 1982. The promisor may raise against the beneficiary such defenses based on the contract as he may have raised against the stipulator.

Section 1: General Effects of Contracts

NA 1983. Contracts have the effect of law for the parties and may be dissolved only through the consent of the parties or on grounds provided by law. Contracts must be performed in good faith.

NA 1984. Rights and obligations arising from a contract are heritable and assignable unless the law, the terms of the contract or its nature preclude such effects.

NA 1985. Contracts may produce effects for third parties only when provided by law.

Section 2: Specific Performance

NA 1986. Upon a obligor's failure to perform an obligation to deliver a thing, or not to do an act, or to execute an instrument, the court shall grant specific performance plus damages for delay if the obligee so demands. If specific performance is impracticable, the court may allow damages to the obligee.

Upon a failure to perform an obligation that has another object, such as an obligation to do, the granting of specific performance is at the discretion of the court.

NA 1987 The obligor may be restrained from doing anything in violation of an obligation not to do.

NA 1988. A failure to perform an obligation to execute an instrument gives the obligee the right to a judgment that shall stand for the act.

Section 3: Putting in Default

NA 1989. Damages for delay in the performance of an obligation are owed from the time the obligor is put in default.

Other damages are owed from the time the obligor has failed to perform.

NA 1990. When a term for the performance of an obligation is either fixed, or is clearly determinable by the circumstances, the obligor is put in default by the mere arrival of that term. In other cases, the obligor must be put in default by the obligee, but not before performance is due.

NA 1991. An obligee may put the obligor in default by a written request of performance, or by an oral request of performance made before two witnesses, or by filing suit for performance, or by a specific provision of the contract.

NA 1992. If an obligee bears the risk of the thing that is the object of the performance, the risk devolves upon the obligor who has been put in default for failure to deliver that thing.

NA 1993. In case of reciprocal obligations, the obligor of one may not be put in default unless the obligor of the other has performed or is ready to perform his own obligation.

Section 4: Damages

NA 1994. An obligor is liable for the damages caused by his failure to perform a conventional obligation.

A failure to perform results from nonperformance, defective performance, or delay in performance.

NA 1995. Damages are measured by the loss sustained by the obligee and the profit of which he has been deprived.

NA 1996. An obligor in good faith is liable only for the damages that were foreseeable at the time the contract was made.

NA 1997. An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of his failure to perform.

NA 1998. Damages for nonpecuniary loss may be recovered when the contract, because of its nature, is intended to gratify a nonpecuniary interest and, because of the circumstances surrounding the formation or the nonperformance of the contract, the obligor knew, or should have known, that his failure to perform would cause that kind of loss.

Regardless of the nature of the contract, these damages may be recovered also when the obligor intended, through his failure, to aggrieve the feelings of the obligee.

NA 1999. When damages are insusceptible of precise measurement, much discretion shall be left to the court for the reasonable assessment of these damages.

NA 2000. When the object of the performance is a sum of money, damages for delay in performance are measured by the interest on that sum from the time it is due, at the rate agreed by the parties or, in the absence of agreement, at the rate of legal interest as fixed by Article 2924. The obligee may recover these damages without having to prove any loss, and whatever loss he may have suffered he can recover no more. If the parties, by written contract, have expressly agreed that the obligor shall also be liable for the obligee's attorney fees in a fixed or determinable amount, the obligee is entitled to that amount as well.

NA 2001. Interest on accrued interest may be recovered as damages only when it is added to the principal by a new agreement of the parties made after the interest has accrued.

NA 2002. An obligee must make reasonable efforts to mitigate the damage caused by the obligor's failure to perform. When an obligee fails to make these efforts, the obligor may demand that the damages be accordingly reduced.

NA 2003. An obligee may not recover damages when his own bad faith has caused the obligor's failure to perform or when, at the time of the contract, he has concealed from the obligor facts that he knew or should have known would cause a failure.

If the obligee's negligence contributes to the obligor's failure to perform, the damages are reduced in proportion to that negligence.

NA 2004. Any clause is null that, in advance, excludes or limits the liability of one party for intentional or gross fault that causes damage to the other party.

Any clause is null that, in advance, excludes or limits the liability of one party for causing physical injury to the other party.

Section 5: Stipulated Damages

NA 2005. Parties may stipulate the damages to be recovered in case of nonperformance, defective performance, or delay in performance of an obligation.

That stipulation gives rise to a secondary obligation for the purpose of enforcing the principal one.

NA 2006. Nullity of the principal obligation renders the stipulated damages clause null. Nullity of the stipulated damages clause does not render the principal obligation null.

NA 2007. An obligee may demand either the stipulated damages or performance of the principal obligation, but he may not demand both unless the damages have been stipulated for mere delay.

NA 2008. An obligor whose failure to perform the principal obligation is justified by a valid excuse is also relieved of liability for stipulated damages.

NA 2009. An obligee who avails himself of a stipulated damages clause need not prove the actual damage caused by the obligor's nonperformance, defective performance, or delay in performance.

NA 2010. An obligee may not avail himself of a clause stipulating damages for delay unless the obligor has been put in default.

NA 2011. Stipulated damages for nonperformance may be reduced in proportion to the benefit derived by the obligee from any partial performance rendered by the obligor.

NA 2012. Stipulated damages may not be modified by the court unless they are so manifestly unreasonable as to be contrary to public policy.

NA 2013. When the obligor fails to perform, the obligee has a right to the judicial dissolution of the contract or, according to the circumstances, to regard the contract as dissolved. In either case, the obligee may recover damages.

In an action involving judicial dissolution, the obligor who failed to perform may be granted, according to the circumstances, an additional time to perform.

NA 2014. A contract may not be dissolved when the obligor has rendered a substantial part of the performance and the part not rendered does not substantially impair the interest of the obligee.

NA 2015. Upon a party's failure to perform, the other may serve him a notice to perform within a certain time, with a warning that, unless performance is rendered within that time, the contract shall be deemed dissolved. The time allowed for that purpose must be reasonable according to the circumstances.

The notice to perform is subject to the requirements governing a putting of the obligor in default and, for the recovery of damages for delay, shall have the same effect as a putting of the obligor in default.

NA 2016 When a delayed performance would no longer be of value to the obligee or when it is evident that the obligor will not perform, the obligee may regard the contract as dissolved without any notice to the obligor.

NA 2017. The parties may expressly agree that the contract shall be dissolved for the failure to perform a particular obligation. In that case, the contract is deemed dissolved at the time it provides for or, in the absence of such a provision, at the time the obligee gives notice to the obligor that he avails himself of the dissolution clause.

NA 2018. Upon dissolution of a contract, the parties shall be restored to the situation that existed before the contract was made. If restoration in kind is impossible or impracticable, the court may award damages.

If partial performance has been rendered and that performance is of value to the party seeking to dissolve the contract, the dissolution does not preclude recovery for that performance, whether in contract or quasi-contract.

NA 2019. In contracts providing for continuous or periodic performance, the effect of the dissolution shall not be extended to any performance already rendered.

NA 2020. When a contract has been made by more than two parties, one party's failure to perform may not cause dissolution of the contract for the other parties, unless the performance that failed was essential to the contract.

NA 2021. Dissolution of a contract does not impair the rights acquired through an onerous contract by a third party in good faith.

If the contract involves immovable property, the principles of recordation apply.

NA 2022. Either party to a commutative contract may refuse to perform his obligation if the other has failed to perform or does not offer to perform his own at the same time, if the performances are due simultaneously.

NA 2023. If the situation of a party, financial or otherwise, has become such as to clearly endanger his ability to perform an obligation, the other party may demand in writing that adequate security be given and, upon failure to give that security, that party may withhold or discontinue his own performance.

NA 2024. A contract of unspecified duration may be terminated at the will of either party by giving notice, reasonable in time and form, to the other party.

NA 2025. A contract is a simulation when, by mutual agreement, it does not express the true intent of the parties.

If the true intent of the parties is expressed in a separate writing, that writing is a counterletter.

NA 2026. A simulation is absolute when the parties intend that their contract shall produce no effects between them. That simulation, therefore, can have no effects between the parties.

NA 2027. A simulation is relative when the parties intend that their contract shall produce effects between them though different from those recited in their contract. A relative simulation produces between the parties the effects they intended if all requirements for those effects have been met.

NA 2028. Any simulation, either absolute or relative, may have effects as to third persons.

Counterletters can have no effects against third persons in good faith.

NA 2029. A contract is null when the requirements for its formation have not been met.

NA 2030. A contract is absolutely null when it violates a rule of public order, as when the object of a contract is illicit or immoral. A contract that is absolutely null may not be confirmed.

Absolute nullity may be invoked by any person or may be declared by the court on its own initiative.

NA 2031. A contract is relatively null when it violates a rule intended for the protection of private parties, as when a party lacked capacity or did not give free consent at the time the contract was made. A contract that is only relatively null may be confirmed

Relative nullity may be invoked only by those persons for whose interest the ground for nullity was established, and may not be declared by the court on its own initiative.

NA 2032. Action for annulment of an absolutely null contract does not prescribe. Action of annulment of a relatively null contract must be brought within five years from

the time the ground for nullity either ceased, as in the case of incapacity of duress, or was discovered, as in the case of error or fraud.

Nullity may be raised at any time as a defense against an action on the contract, even after the action for annulment has prescribed.

NA 2033. An absolutely null contract, or a relatively null contract that has been declared null by the court, is deemed never to have existed. The parties must be restored to the situation that existed before the contract was made. If it is impossible or impracticable to make restoration in kind, it may be made through an award of damages.

Nevertheless, a performance rendered under a contract that is absolutely null because its object or its cause is illicit or immoral may not be recovered by a party who knew or should have known of the defect that makes the contract null. The performance may be recovered, however, when that party invokes the nullity to withdraw from the contract before its purpose is achieved and also in exceptional situations when, in the discretion of the court, that recovery would further the interest of justice.

Absolute nullity may be raised as a defense even by a party who, at the time the contract was made, knew or should have known of the defect that makes the contract null.

NA 2034. Nullity of a provision does not render the whole contract null unless, from the nature of the provision or the intention of the parties, it can be presumed that the contract would not have been made without the null provision.

NA 2035. Nullity of a contract does not impair the rights acquired through an onerous contract by a third party in good faith.

If the contract involves immovable property, the principles of recordation apply.

Section 1: Revocatory Action

NA 2036. An obligee has a right to annul an act of the obligor, or the result of a failure to act of the obligor, made or effected after the right of the obligee arose, that causes or increases the obligor's insolvency.

NA 2037. An obligor is insolvent when the total of his liabilities exceeds the total of his fairly appraised assets.

NA 2038. An obligee may annul an onerous contract made by the obligor with a person who knew or should have known that the contract would cause or increase the obligor's insolvency. In that case, the person is entitled to recover what he gave in return only to the extent that it has inured to the benefit of the obligor's creditors.

An obligee may annul an onerous contract made by the obligor with a person who did not know that the contract would cause or increase the obligor's insolvency, but in that case that person is entitled to recover as much as he gave to the obligor. That lack of knowledge is presumed when that person has given at least four-fifths of the value of the thing obtained in return from the obligor.

NA 2039. An obligee may attack a gratuitous contract made by the obligor whether or not the other party knew that the contract would cause or increase the obligor's insolvency.

NA 2040. An obligee may not annul a contract made by the obligor in the regular course of his business.

NA 2041. The action of the obligee must be brought within one year from the time he learned or should have learned of the act, or the result of the failure to act, of the obligor that the obligee seeks to annul, but never after three years from the date of that act or result.

NA 2042. In an action to annul either his obligor's act, or the result of his obligor's failure to act, the obligee must join the obligor and the third persons involved in that act or failure to act.

A third person joined in the action may plead discussion of the obligor's assets.

NA 2043. If an obligee establishes his right to annul his obligor's act, or the result of his obligor's failure to act, that act or result shall be annulled only to the extent that it affects the obligee's right.

Section 2: Oblique Action

NA 2044. If an obligor causes or increases his insolvency by failing to exercise a right, the obligee may exercise it himself, unless the right is strictly personal to the obligor.

For that purpose, the obligee must join in the suit his obligor and the third person against whom that right is asserted.

NA 2045. Interpretation of a contract is the determination of the common intent of the parties.

NA 2046. When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent.

NA 2047. The words of a contract must be given their generally prevailing meaning. Words of art and technical terms must be given their technical meaning when the contract involves a technical matter.

NA 2048. Words susceptible of different meanings must be interpreted as having the meaning that best conforms to the object of the contract.

NA 2049. A provision susceptible of different meanings must be interpreted with a meaning that renders it effective and not with one that renders it ineffective.

NA 2050. Each provision in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole.

NA 2051. Although a contract is worded in general terms, it must be interpreted to cover only those things it appears the parties intended to include.

NA 2052. When the parties intend a contract of general scope but, to eliminate doubt, include a provision that describes a specific situation, interpretation must not restrict the scope of the contract to that situation alone.

NA 2053. A doubtful provision must be interpreted in light of the nature of the contract, equity, usages, the conduct of the parties before and after the formation of the contract, and of other contracts of a like nature between the same parties.

NA 2054. When the parties made no provision for a particular situation, it must be assumed that they intended to bind themselves not only to the express provisions of the contract but also to whatever the law, equity, or usage regards as implied in a contract of that kind or necessary for the contract to achieve its purpose.

NA 2055. Equity, as intended in the preceding articles, is based on the principles that no one is allowed to take unfair advantage of another and that no one is allowed to enrich himself unjustly at the expense of another.

Usage, as intended in the preceding articles, is a practice regularly observed in affairs of a nature identical or similar to the object of a contract subject to interpretation.

NA 2056. In case of doubt that cannot be otherwise resolved, a provision in a contract must be interpreted against the party who furnished its text.

A contract executed in a standard form of one party must be interpreted, in case of doubt, in favor of the other party.

NA 2057. In case of doubt that cannot be otherwise resolved, a contract must be interpreted against the obligee and in favor of the obligor of a particular obligation.

Yet, if the doubt arises from lack of a necessary explanation that one party should have given, or from negligence or fault of one party, the contract must be interpreted in a manner favorable to the other party whether obligee or obligor.