contract law course

Year I Master 1 Contract Law

Contract Law

Prof. Cornelia Lefter

Grade: 1p. presence

1p. homework

2p. seminar (1p. presence, 1p. homework)

5p. exam

1p. office

Bibliography:

1. Cornelia Lefter, Raluca Dimitriu, Ovidiu Maican Civil Law, 2000, Ed.

Economica

2. Gabriel Boroi, Liviu Stanciulescu Institutii de drept civil in reglementarea

noului Cod Civil, 2012, Ed. Hamangiu

3. Dumitru Florescu Contracte Civile, 2011, Ed. Universul Juridic

4. Stanciu Carpenaru Drept comercial, 2011, Ed. Universul Juridic

5. Paul Richard Law of contract, 1998, Putnam Publishing

6. Law 287/2009 and Law 71/2011 The new Civil Code (NCC)


Course 1

Juridical relations

one party + other party = juridical relation

(creditor) (debtor) (stipulated by law Civil Code)

Obligations

Sources of civil obligations (in the Civil Code):

a) Events (in nature and society)

b) Human actions regulated by law unwillingly produced to conclude juridical

relations

willingly produced to conclude juridical

relations

Unwillingly produced human actions: flood in your apartment because of

another landlords pipe damage) => enter into a juridical relation because of the

situation

Willingly produced human actions: you enter into ones apartment because he

lets you, in order to fix his pipe.

Some actions may be lawful (cvasi contracts)

unlawful (offenses/crimes)

Law 1165/NCC the sources of civil obligations are:

1. The contract

2. The unilateral juridical acts

3. The legal juridical facts

4. The unlawful fact

5. Any other act/fact of which law binds the creation of an obligation

Juridical acts

- A material form of an act (e.g. the paper)

- The proof of the act (material proof), called instrumentum (the expression of

somebodys will made with the intention to produce legal effects)

!!! proof = instrumentum act

- e.g. when you buy a bread from the store you receive a receipt (this is the proof),

and when you pay the money you receive the bread (this is a juridical act)

Homework 1: Write about the legal and abstract capacity of natural and legal persons


Course 2

The unilateral juridical act (art. 1324 1329 / NCC)

It is defined to be unilateral the juridical act that supposes only the expression of

the will of each party.

We include here the unilateral promise and the public process of reward.

Article 1327 stipulates that if the author has not established a time limit, it is

supposed that the promise/contract is valid for a certain time, according to the nature

or the circumstances when the obligation was assumed. Within a unilateral promise, the

author expresses the intention to assume an obligation.

By difference, within the public process of reward, the author publicly promises

to reward a person who will carry out a certain service/activity for him. Article 1328

stipulates that who publicly promises a reward in exchange for a service is liable to pay

even if the service was carried out without knowing the reward.

The legal juridical facts

There are 3 different facts:

a) the administration of business (art. 1339 and 1340 / NCC)

Refers to the situation when a person, without being liable, voluntarily

administrates the business of another person who is not aware of this administration or,

knowing it, he could not appoint a mandator to carry it out. The person who

administrates is called endorser and the beneficiary is called endorsee.

The specificity of this situation is that the endorser acts only in the benefit of the

endorsee. The endorser can conclude juridical facts and acts without having a mandate

for that.

b) the undue payment (art. 1341 1345 / NCC)

That who pays without being liable has the right of restitution. It is presumed

until the contrary proof that the payment is done with the intention to pay off your own

debt. (art. 1341)

Undue payment is the situation when a payment made by someone is not an

obligation. Normally, a person who pays is considered to be liable to each payment it

corresponds a debt (there is a debtor). If that situation occurs, that person has the right

to be restituted the money.

c) the enrichment without legal cause (art. 1345 1348 / NCC)

That who in a non-imputable way has been enriched without legal cause to the

detriment of another is liable to restitution as far as the patrimonial loss suffered by the

other person, but not over the limit of his own enrichment. (art. 1345)


The unlawful facts (art. 1349/NCC)

Any person has the obligation to observe the rules of behavior that the law or the rules

of the place imposes and not to bring prejudice through his actions/non-actions to the

right or to the lawful interest of another person.

In case the persons do not observe the law and bring prejudices (moral, physical

etc.), they will be liable to cover the damages. We speak here about liability due to

damages or due to misfeasance or nonfeasance (raspundere non-conflictuala).

Certain categories of persons are kept liable: parents for their children, employer

for the facts of their employees, even if they do not do anything.

The contract (art. 1166/NCC)

It is defined as an agreement between the wills or two or more persons, with the

intention to create/modify/end juridical relations.

There are also rules referring to the contract not only in the NCC, articles up to

260 in number.

The contract is a juridical act and it also is bilateral.

Act = expression of somebodys will

Contract unilateral (only one party assumes obligations, but there are two

parties involved)

bilateral (but not the same as for unilateral acts !!)

!!! One cannot contract with himself. There must be two parties.

There are also exceptions, when you are forced to contract with yourself for

example (contract de comodat cu mine insami pentru ca detin spatiul).

Within the bilateral contract, one party has the responsibility to conclude the

contract, called active subject. He is entitled to receive something from the other party.

From the point of view of the debt relation, the active subject is the creditor. The

other party, who is liable to perform a duty for the active subject is called passive

subject or debtor. The duty that the debtor has to perform is to give, to do or not to do.

To give to transfer or to create a real right (e.g. selling and purchasing

contract sell a specific good, transfer the ownership right to the buyer)

To do to carry on a service/activity (e.g. do a service deliver a

telephone)

Not to do you assume the obligation not to do, although legally you are

allowed to do (e.g. contract with exclusivity clause assume not to do the

same thing/do a service with another party)*** *** synallagmatic (synallarmatical ?) contract the obligations of the parties

are reciprocal and interdependent

!!! The right of the active party is the obligation of the passive party.

Homework 2: Write about the classification of goods


Course 3

The classification of contracts (criteria)

1. according to the number of parties

a) unilateral contracts

b) bilateral contracts

art. 1171/NCC the contract is synallagmatical when the obligations born from

it are reciprocal and interdependent

2. according to the form of the contract

a) consensual contracts

The consensual contracts are enforceable by the simple consent of the parties.

Their conclusion does not impose the performance of another activity or a specific form

(concluded orally/written).

If goods have to be delivered, the handing over of them represents the

execution of the obligation and not a condition for their conclusion (e.g. sale-purchase).

b) real contracts

The real contract produces effects only when the goods are delivered (e.g.

warehouse, shipping contracts).

c) formal contracts

Formal contracts are those which are enforceable only if they are concluded in

a specific form (the authentic form normally the form written/drafted in front of a

notary).

Normally, the form can be enforced by law, either in order to prove the partys

obligations (ad probatiorum only for the proof, or ad validitatem for the validity of

the juridical operation itself); e.g. a mortgage has to be concluded in authentic form

(requested ad validitatem), and the insurance contract has to be concluded in a certain

form (ad probatiorum).

3. according to the personal qualities of the parties

a) intuitu personae

These contracts are concluded based on the personal qualities of the parties.

The effect that the error in personae (who the real party is) brings the annulment of the

contract.

The parties cannot subcontract in this kind of contract.

b) contract concluded by professionals or between professionals and

consumers

Here we take into account that at least one party is a professional from a

certain point of view (legal rules, Civil Code): The contract concluded between

professionals is submitted to special laws in admission to the provisions of the Code

(article 1176/NCC).


4. according to the content of the contract

a) adhesion contract

The adhesion contracts are those contracts where the essential clauses are

imposed by one of the parties or for this one, or as a result of his instructions, while the

other party is only able to accept them or not (article 1175/NCC).

The content of the contract is unilaterally imposed to the other party (e.g.

insurance, bank, cable provider, telephone contracts).

b) negotiated contract

5. according to the way the contract is performed

a) contract with instant execution (unno ictu)

b) contract with successive execution

6. according to the conclusion of the contract to another one

a) principal contract

b) accessory contract

The legal regime of the accessory contract follows the one of the principal

contract.

7. according to whether the contract is regulated or not by law

a) named contract

The named contract is regulated by law.

b) unnamed contract

The parties of the contract have to establish all the necessary elements of the

contract.

8. the framework contract

The framework contract is the agreement through which the parties agree to

negotiate, to conclude or to maintain contracted relations where the essential elements

are established by the contract (article 1176/NCC).

The ways in which the contract is performed, especially the term and volume

of services, as well as the price are established by subsequent agreements. It is just the

frame for other contracts.


Course 4

Conditions for validity of contracts

The conditions apply to any kind of contract

The grounds for validity conditions (article 1179/NCC)

The essential conditions for the contracts validity are:

- the capacity of the parties to contract

- the consent of the parties (generally consent)

- the general and lawful subject matter

- the lawful and moral consideration

The capacity of the parties ability of a subject of law to assume the obligations

and exercise rights in their own name.

have exercise/

assume

The concrete capacity

- underage persons no concrete capacity

- mentally ill persons no concrete capacity

- 14-16 persons restrained/limited concrete capacity, consent of the

parents/legal guardian needed

- 16-18 persons restrained/limited concrete capacity, consent of the

parents/legal guardian not compulsory

- over 18 full concrete capacity

Due to the social position they have, some persons (e.g. the President, the

deputies, the sanctioned by law persons parents accused to having killed their

children have interdiction to exercise parenting rights) have restricted their concrete

capacity for a certain period.

The abstract capacity of legal persons

Abstract capacity = the possibility recognized to have rights and obligations

206/NCC the legal person may have any rights and obligations, except for

those that may belong only to the natural person.

In addition, the legal person with no patrimonial rights may have only those

rights and obligations that are necessary for the accomplishment of their purpose

established by law, its constitutive act or state (the principle of specialty of the abstract

capacity of legal persons).

The sanction for non-observing this principle is the absolute nullity of the act.

capacity


The abstract capacity of the legal person begins at different moments, depending

on the fact if the legal person in question is submitted or not to registration meaning

incorporation or any other formality of publicity mentioned by law, with the purpose of

obtaining legal personality or in order for the legal person to be taken into consideration

(e.g. a commercial company incorporated by the Register of Trade; the state, town or

village are legal person not submitted tot registration).

The abstract capacity of the legal person begins at the moment of the registration.

The commercial company gets legal personality and abstract capacity at the moment of

incorporation at the Register of Trade.

The other legal persons have rights and obligations from the moment of their

setting up, from the moment they obtain the necessary authorization or from the

moment of fulfillment of any provision provided by law.

According to article 205/NCC, paragraph (3), even before its registration, the

legal person has some rights and obligations which are linked to its valid setting up.

These so-called limited or anticipated abstract capacity results directly from the aim

taken into account for the setting up of the legal person. This anticipated capacity

allows the legal person to obtain the necessary rights and to assume the necessary

obligations required for its valid setting up.

The end of the abstract capacity of the legal person refers to both the anticipated

abstract capacity and the full abstract capacity. The anticipated abstract capacity ends

when the full abstract capacity is obtained. The full abstract capacity ends when the

subject of law (the legal person) ends its existence.

The sanction for not complying with the legal rules of the abstract capacity of the

legal person is the nullity, either relative or absolute, depending on the nature of the

protected interests.

The concrete capacity of legal persons

Concrete capacity = the ability of a legal person to exercise the rights and

obligations by concluding in its own name juridical acts through its management

bodies.

In relation to the concrete capacity of the legal person, there are three rules:

- the legal person exercises its rights and obligations through its management

bodies;

- the juridical acts concluded by the management bodies of the legal person within

the limits of the powers given to them by law (constitutive acts) are the acts of

the legal person itself;

- the lawful/unlawful facts committed by the management bodies of a legal

person oblige the legal person itself if they are committed within the exercise of

their powers.

Unlike the natural person, the legal person obtains the concrete capacity on the

day of its setting up.


The sanction when not complying with the rules is nullity (= the sanction which

leads to the deprivation of the act itself of its effects).

Course 5

The consent of the parties

The juridical act is the expression of somebodys will, in order to produce

juridical effects.

Will = the juridical will of the parties is composed by two elements the consent

and the consideration.

In our system of law, the juridical will of the parties is governed by 2 principles,

as follows:

- the principle of freedom to contract (arts. 1169 and 1270(1)/NCC)

The parties are free to conclude a juridical act, to provide in it any particular

clauses and modify/end the juridical act they concluded.

In addition, according to the provisions of article 1178/NCC, the parties are free

to conclude named or unnamed contracts and to choose the form of the act if the law

does not impose it.

There are some limits imposed by law in relation to this principle as resulting

from article 11 and 1179/NCC. These limits are imperative legal provisions and good

morals. If the limits are not observed, the juridical act is sanctioned with abstract or

relative nullity.

The imperative legal provisions = must be applied as they are; derogations are

not permitted (e.g. the donation contract should be concluded in authentic form).

- the principle of the real will of the parties

If there are any differences between the real will of the parties at the conclusion

of the juridical act and the expressed clauses of the act, we have to take into account the

real intentions of the parties (article 1266(1)/NCC).

The most important effect of the principle of the real will of the parties is the

good faith. The good faith is a moral concept and refers to the behavior of the

contracting parties. It means that the contracting parties, especially the debtor, are

obliged to perform exactly the assumed obligations, in order to accomplish the purpose

or interest taken into account at the contract conclusion. In addition, the creditor is

obliged to do nothing that will make the conclusion of the contract more difficult or

even impossible.

Moreover, in accordance to the requirements of good faith, both parties are

obliged to cooperate in order to obtain a better performance of the contract (e.g. the

debtor who provokes the impossibility to conclude the contract or a person who

concludes a sale-purchase contract with 2 persons for selling an apartment do not

observe the requirements of good faith).


The creditor who puts the debtor in the position of making unnecessary expenses

does not observe the duty to act in good faith (e.g. the carrier is obliged to take the

shortest route).

Article 1170/NCC regulation of good faith in relation to contracts

Article 1183/NCC regulation of good faith during negotiations

The parties have the right to continue or end the contract without sanctions.

The consent means the externalized decision or intent to conclude a contract. In

order to be valid, it must fulfill several conditions:

1) To be expressed by a person who is mentally capable to conclude the act.

This means that the parties must have judgment, must be able to understand the

nature of the act and its consequences.

Generally, a person having full concrete capacity is presumed by law to have

judgment or discernment. This presumption may be overruled by proving that

temporary lack of judgment of the person in question (e.g. in case of temporary mental

illness or in case of drugs influence) article 1205(1)/NCC.

2) To be expressed by a person who has the intention to produce legal effects.

This condition is not fulfilled when, for example, a person is only kidding, has no

real intention to conclude a contract (informal bet).

3) To be externalized, the consent must result from the words/actions of the

parties.

In this respect, several problems arise in case of silence. Generally, in our law, the

consent cannot be implied and, therefore, in case of silence, it is considered that there is

no consent at all.

The inaction of the parties (or the silence) is not conceived as the expression of

the intention to conclude a contract. However, there are some exceptions from this rule,

as follows (article 1196(2)/NCC):

a) The law expressly provides, in some cases, that the silence of one of the

parties must be considered as consent (e.g. according to the law, the rent

contract continues to be enforced if, after the duration of the contract has

expired, the parties silently continue to perform the contract).

b) The initial agreement of the parties may constitute in some cases for

regarding silence as consent. It means that the parties, by their will, give a

particular juridical significance to silence.

4) To be genuine, the consent derives from the fact that the contract has an intention

and a free nature. Therefore, the consent to conclude a contract must be

intentional and genuine, because otherwise there is no contract between the

parties.

The lack of genuine consent may arise from the following vices of consent:


I. The mistake (error) = a false representation of reality at the conclusion of a

contract. It is induced by the person himself and not by the other party or

anybody else.

Classification:

a) According to the nature essential or immaterial error

The essential error leads to the relative nullity of the act, because

there is a lack of genuine consent.

The essential error may refer to the following issues:

- the nature of the contract (called error in negotium), e.g. when one of

the parties believe that it is a donation contract, and the other party

believes that it is a sale contract;

- the identity of the object of the contract (called error in corporae), e.g.

when one of the parties believes he sells a crop, and the other party

believes the contract refers to a plane;

- the qualities of the object of the contract (called error in substantia),

e.g. when the buyer believes that the object of the contract is an

apartment with the walls made of brick, and actually the walls of the

apartment are made of concrete;

- the qualities of the contracting party (called error in personae)

applies only in case of contracts concluded intuitu personae (in

person), meaning on the ground of one of the partys qualities, e.g. the

donation contract or a contract concluded with a singer for a specific

performance.

The immaterial error refers to an unimportant element of the

contract. Generally, this kind of error does not produce any

juridical consequences.

b) According to the number of parties affected unilateral or bilateral error

The unilateral error when the mistake is on the part of only one

of the parties

The bilateral (mutual) error when the mistake is on the part of

both parties

However, an act may be avoided on the ground of error vice of consent in

both cases of error.

c) According to its object error concerning the law or error concerning the

fact

The error concerning the law the legal provisions applicable in

the case, which is accepted as a vice of consent only in relation to


legal provisions essential in concluding the contract in accordance

with the will of the parties (article 1207(3)/NCC)

The error concerning the fact e.g. the object of the act, the value

and the contracting party, which is a vice of consent if it is essential

for concluding the contract.

II. The fraud = a misrepresentation of the reality, made with the intention to

deceive the other party and to determine him to conclude a contract.

Therefore, the fraud is always the result of another persons action.

According to the law, the fraud must always be proven. The fraud as a vice of

consent leads to the relative nullity of the contract.

The fraud has two elements:

a) The intentional element the will to deceive the other party

b) The material element the activities performed in order to lead the other

party into mistake (e.g. lying about the hidden defect of the sold goods or

failing to inform the other party about it).

According to the law, the fraud is a vice of consent even if it is the result of

the action of a 3rd party, but the contracting party is aware of this action.

III. The duress (violence) = a state of mind induced by threats in order to

determine the person to conclude a contract.

The duress leads to the relative nullity of the contract.

According to article 1216/NCC, the threats may be:

a) Moral referring to the feelings of the person;

b) Physical referring to the physical injury of the person or his property.

Furthermore, the threats may be exercised not only against the contracting

party, but also against a relative or against the relative to the contracting

party.

According to the law, the duress as a vice of consent can arise not only from

the activity of the contractual party, but also from the wrongful activity of a

3rd party (article 1220/NCC).

The duress has two elements:

a) The intentional element the intention to force the contracting party to

conclude a contract in a state of mind characterized by lack of free will;

b) The material element the means used in order to threat the contracting

party.


According to article 1216(4)/NCC, the duress, as a vice of consent, must be

considered from case to case. It means that, in each case, it is necessary to

determine whether the acts of threats are wrongful and whether the threats

and not the free will of the party have induced the consent to conclude a

contract.

IV. The injury

It means the disproportion between the mutual promises of the parties within

a contract.

In case of injury, one of the parties takes advantage from the lack of

experience, lack of knowledge or a specific state of mind of the other party

and provides in the contract in its own benefit a promise that is more valuable

than his own promise.

According to article 1221(3)/NCC, there is an injury when the minor assumes

an excessive obligation taking into account his patrimony, the advantage

obtained from the contract or the circumstances in which the contract was

concluded.

According to article 1222/NCC, the injury as a vice of consent may have the

following consequences:

a. The relative nullity of the contract, but only in the cases when the promise

of the injured party is reduced with more than half of its value at the

moment of concluding the contract.

b. The reduction of the promise of the injured party.

However, according to article 1224/NCC, the aleatory contracts cannot be

avoided on the ground of injury.

Course 6

The general and lawful subject matter (the object of the contract)

According to article 1225(1)/NCC, the object of the contract consists of the

juridical operation agreed by the parties as it results from all rights and

obligations assumed through the contract.

Therefore, for example we have the sale-purchase, rent, loan, deposit contracts as

object.

According to article 1226(2)/NCC, the object of the obligation consists of the

action or inaction that the debtor (passive party) is obliged to perform. In other

words, the object of the contract is composed by the behavior of the parties

established through that contract, namely the actions/inactions that the active

party has the right to request and the passive party has the obligation to perform.


For example, the object of a particular sale-purchase contract is the sale-purchase

operation, meaning the transfer of the ownership right of the specific goods by

one party in exchange for the payment of the price by the other party.

Generally, the behavior of the parties, meaning their actions or inactions, is

related to goods. Therefore, the goods must be considered as the derived object

of the contract.

In order to be valid, the object of the contract must fulfill the following general

conditions:

1. the object has to exist

The law considers the object as existing even if it does not actually exist, but it

will exist in the near future. For example, the sale of future harvest is a valid

contract.

Therefore, according to article 1228/NCC, a future thing may be the object of the

contract with only one exception: the future inheritance. The juridical acts having

as object the future inheritance are prohibited by law because of the moral

consideration.

2. the object of the contract has to be in civil circuit

Therefore, the goods that are the public property of the state or the

administrative-territorial units (villages, towns, counties) cannot be object of

contracts.

In addition, there are several categories of goods which may be the objects of

contracts, but only under special conditions (e.g. firearms, drugs etc.).

3. the object of the contract has to be identified or identifiable

According to article 1225(2)/NCC, a contract must have as object an identified

juridical operation under the sanction of absolute nullity.

In addition, at the moment of concluding the contract, the behavior of the parties,

meaning their actions/inactions and the thing which is the derived object of the

contract must be identified or at least identifiable.

Therefore, if the object of the contract is an individually determined thing, this

condition is fulfilled.

If the object of the contract is composed by generally determined goods, this

condition is fulfilled in the following ways:

- mentioning in the contract the exact number, quantity, quality or volume of the

goods. In this case, the object is identified (e.g. 10 kg of strawberries).

- mentioning in the contract several criteria for identifying the goods. This criteria

is going to be used when the contract is performed. In this case, the object is

identifiable.


In addition, it should be mentioned that the NCC contains expressed provisions

for determining the object of the contract, its quality, or other specific elements in

relation to it.

As for the quality of the object of the contract is concerned, according to article

1231/NCC, if it cannot be established by the contract, the quality of the promise

or object must be reasonable or at least of medium quality.

In addition, article 1232/NCC provides the possibility of establishing the object

of the contract by a 3rd party. Thus, for example, a 3rd party nominated by the

contractual parties may determine the price or any other element of the contract.

If the 3rd party is not able to establish the element in question or his assessment is

unreasonable, the price of the undetermined element will be established by the

judge.

In the relations between professionals, according to article 1233/NCC, if the

contract does not provide the price or the method to determine the price, the law

considers that the parties took into account the price usually charged in that field

of business for the same promises, under similar conditions, or if there is no such

price, a reasonable price.

If, according to the contract, the price must be determined in relation to a

reference factor, and this reference factor does not exist or is no longer used, it

must be replaced by the closest reference factor, according to article 1234/NCC.

4. the object of the contract must be possible

This condition is imposed by the principle of law according to which nobody can

be obliged to do something impossible.

This condition is not fulfilled only when there is an absolute impossibility to

perform the object of the contract, meaning the object is impossible for everybody

(e.g. traveling to the moon).

However, this condition is fulfilled if the impossibility is relative, meaning the

performance of the contract is generally possible, being impossible only for

particular persons (e.g. the obligation to return of a sum of money is always

possible, even if the debtor has no money to perform the obligation).

In addition, according to article 1227/NCC, the initial impossibility or the

obligation may be admitted. Therefore, the contract is valid even though at the

moment of concluding it there was an impossibility of one of the parties to

perform his obligation, unless the law provides otherwise.

5. the object must be lawful and moral

Therefore, a contract by which the parties promise to do something illegal and

immoral is not valid.

In addition, sometimes the object of the contract must fulfill several special

conditions in accordance with the type of agreement involved.


In some cases, the law requests some authorizations for concluding specific

controls (e.g. the sale-purchase of firearms is possible with a special permission).

The non-observance of the validity conditions leads to the absolute nullity of the

contract.

The lawful and moral consideration The consideration is the objective, motive, goal for which the parties decided to

conclude the contract. It is the element of the contract which answers to the

question why is the contract concluded?.

The consideration has two elements:

- the instant consideration the same in all acts belonging to a certain category.

In bilateral contracts, the instant consideration of each party is determined by the

mental consideration of the other partys promise (e.g. in the sale-purchase

contract, the instant consideration of the seller is determined by the wish to buy

the product; in contracts made with gratuitous title, the instant consideration is

the intentions to do/give something for free animus donati).

- the specific consideration different from a certain contracts to another.

In order for the contract to be valid, the consideration has to fulfill several

conditions. These conditions refer to the specific consideration because the

instant consideration is abstract and always valid.

According to article 1236/NCC, the conditions are the following:

o it has to exist if there is no consideration or it is not real, the sanction

applied to the contract is the relative nullity. The consideration is not

real when there is a misrepresentation of the motive for which the

contract is concluded (e.g. a specific sale-purchase, the specific

consideration is to buy a specific good).

o it has to be lawful and moral if the unlawful/immoral consideration

is done by both parties, or if one of the parties knows or should have

known the unlawful/immoral consideration, the sanction is the

absolute nullity of the contract.

It should be mentioned that the consideration does not have to be proven. Thus,

article 1239/NCC provides two presumptions:

the consideration that any contract exists

the contract is valid

As a consequence, the party who wants to obtain the nullity of the contract has to

prove that the consideration of a particular contract does not exist or it is not

valid.


Course 7

The legal form

The legal form is a validity condition of the juridical act. The observance of the legal

form is one of the validity conditions required for concluding a juridical act.

The legal form may be defined as the validity condition that represents the way in

which the will of the parties to conclude a juridical act is expressed. Actually, in our

law, most contracts are consensual (article 1178/NCC).

Therefore, the simple expression of the will of the parties is sufficient in order to

conclude a valid contract and the law does not normally request a special form for the

agreement of the parties.

There are exceptions from this rule, meaning juridical acts or contracts that must be

concluded in a certain form imposed by the law for their validity.

According to the juridical consequences of their non-observance the form conditions

meet the requirements concerning the legal form of the contract may be divided into

three categories:

1. the form requested by law ad validitatem

This form has to be observed for the validity of the contract. It means it is a

constitutive, essential validity condition of the juridical act. Therefore, the form

requested ad validitatem is compulsory and its non-observance is sanctioned by

the absolute nullity of the act.

For example, several categories of contract are valid only when they are

concluded in authentic form, meaning as a document drawn up by a notary (e.g.

the donation contract, all the contracts transfer a real right submitted to

registration with the Land Register).

2. the form requested by law ad probatiorum

This form has to be observed in order to prove the content of the act, although

the act is valid even in the absence of this form.

However, the form requested ad probatiorum is also compulsory, but its non-

observance is sanctioned by the impossibility to prove the act by other means of

evidence.

Therefore, even though the simple consent of the contracting parties is sufficient

for concluding a valid contract, the law requires a written form only for

constituting evidence that may be used in future disputes (e.g. insurance

contracts, company contracts).

3. the form requested for the opposability to a 3rd party

It means the formalities necessary, according to the law, in order to make the

juridical act opposable to persons who did not participate to its conclusion.

This form is based on the idea of protecting the interest of 3rd parties.

This form is also compulsory and its non-observance is sanctioned by the

inapposability of the act towards 3rd parties. This means that in such a case, 3rd

parties are allowed to disregard the juridical act in question and, therefore, the

act could not produce its effects over any 3rd party.


However, the act is able to produce its effects between the parties, but the parties

are not allowed to invoke against 3rd parties their right derived from the act (e.g.

the publicity concerned certain rights over movable goods, meaning the

formality of registration within the Electronic Register -> a mortgage contract

over movable things has effects only between the parties creditor and debtor,

unless it is registered in the Electronic Register; therefore, the creditor who is the

owner of the mortgage could not be able to invoke his rights against the debtor

unless he has observed the form requested by law).

The nullity of the act

A juridical act concluded with the observance of legal rules is a valid act. Therefore, it

can produce its effects provided by the law. Whenever, the contract concluded by the

parties disregards certain legal rules, it cannot produce legal effects. Therefore, the

contract is void. It means that a juridical act concluded against the provisions of the law

is sanctioned with a specific sanction nullity.

As a definition, the nullity is the civil sanction that deprives the juridical act of its effects

contrary to the legal provisions stipulated for its valid conclusion.

However, in the Romanian system of law, the nullity does not destroy the act itself, but

only its effects. Therefore, a void or avoidable act is not considered as nonexistent.

Actually, as a consequence of the nullity, such an act is not able to produce any effect

due to the nonobservance of legal rules at the moment when the act was concluded.

E.g. A sale-purchase contract done by a minor(


- the object of the contract is not valid;

- the consideration of the contract is prohibited by law and public morals;

- the form requested ad validitatem has not been observed.

b. the relative nullity sanctions the nonobservance at the conclusion of the

contract of legal provisions that protects private, individual interests. Such an

act is designated as avoidable. The following grounds lead to relative nullity

of juridical acts:

- the vices of consent;

- the consideration of the contract is missing;

- the discernment of the judge is missing at the moment of concluding the contract;

- the nonobservance of legal rules related to the concrete capacity of the parties.

This classification has a significant importance due to the differences between the rules

governing the absolute nullity and the relative nullity.

The absolute nullity is governed by the following rules:

a) Anybody having a legal interest may claim the absolute nullity of a juridical act

(even 3rd parties);

b) The absolute nullity may be claimed anytime. There are no limits in time for

bringing an action in absolute nullity before a court of law, meaning that the

action of absolute nullity is non-prescriptive by means of action or by means of

exception.

c) The absolute nullity cannot be ratified by the parties. It means that the effects of a

void act cannot be covered in order for the act to be able to produce its effects

despite the nullity.

On the other hand, the relative nullity is governed by the following rules:

a) It may be claimed only the party whose interests has been disregarded at the

moment of concluding the act, because the relative nullity protects only private

interests.

b) The relative nullity may be claimed by means of action only within a specific

period of time (the so-called term of extinctive prescription). The general term of

extinctive prescription is 3 years. It means the action in relative nullity is

prescriptive within 3 years. However, the relative nullity is non-prescriptive by

means of exception.

c) The relative nullity can be ratified by the parties. The ratification can be

expressed or implied. This means that the effects of an avoidable act may be

covered by the parties according to their will. The ratification is expressed when

the interested party concludes another act stating expressly his will to ratify the

former avoidable contract. The ratification is implied in the following cases:

- the interested party performs the avoidable act;

- the interested party does not bring in action in relative nullity within the

term of extinctive prescription in 3 years.


2. According to the extent, the nullity may be divided into partial or total.

a. the total nullity affects the whole act

b. the partial nullity affects only a part of the juridical act.

In case of partial nullity, the clauses of the act that are not avoided by nullity are still

able to produce their legal effects, because they are not contrary to the law.

Within the Romanian legal system, the partial nullity is the rule, and the total nullity is

the exception. Therefore, whenever it is possible, the intention of the parties must be to

save the act and to avoid only those clauses that are contrary to the law.

However, the extent of the nullity depends on two elements:

- the ground of the nullity (e.g. nonobservance of the form requested ad

validitatem leads to total nullity);

- the complexity of the consent of the juridical act.

Course 8

The effects of the nullity

As mentioned before, the nullity eliminates the effects of the juridical act, which are

contrary to the law. Therefore, the legal effect (or the juridical consequence) of the

nullity is the elimination of those effects of the juridical act which are contrary to the

legal rules that regulate its valid conclusion.

The effects of nullity are governed by 3 principles as follows:

a) The principle of retroactivity according to this principle, void or avoidable acts

cannot produce any effects in the future and the effects already produced in the

past must be eliminated. Therefore, this principle means the elimination of the

effects of the juridical acts which have been produced between the moment of

concluding the act and the mom of declaring the nullity. Therefore, once

pronounced by a judge or declared by the parties, the nullity applies in the past

from the moment the act was concluded and the parties are restored to their

positions prior to the agreement.

However, there are some exceptions to this principle, for e.g. in case of legal

persons their nullity does not produce any effects in the past and the legal

persons ends its existence only for the future.

b) The principle of restoring the parties into their positions before the conclusion of

the acts, also known as restitutio in integrum according to this principle, the

parties must restitute to each other all the promises already performed in

accordance with the void act.

The exceptions to this principle are the same as those to the retroactivity, because

the principle of restoring the parties into their prior position is a consequence of

the retroactivity principle.


c) The principle of avoidance of the accessory acts according to this principle, the

nullity of a primary juridical act leads to the nullity of the subsequent accessory

acts, due to their relation with the primary act.

Nevertheless, there are some exceptions to this principle which are justified on

another principle of law namely the principle of protecting the good faith. E.g.

the avoidance of the ownership title of the seller of an immovable thing does not

always lead to the nullity of the subsequent sale-purchase contract, concluded

between the first buyer and the third party, if it is proven that the third party has

acted in good faith (good faith = the third party is not aware of the nullity of

the first party).

The extinctive prescription

According to article 2500/NCC, the extinctive prescription is a way to extinguish the

right to act in justice due to its non-exercise during a period of time provided by the

law. In other words, the extinctive prescription leads to the loss of the right to obtain the

judgment of a court of law in order to proceed to the force execution of an obligation.

This loss of the right to act in justice is regulated by the law in relation to a period of

time during which the owner of a subjective right did not act, meaning he did not try to

obtain the performance of the corresponding obligation. Due to this inaction, the law no

longer protects the owner of the right and he loses the possibility to defend the

subjective right with the help of state authorities. Therefore, the extinctive prescription

may be considered as a civil sanction against the passivity of the owner of the subjective

right.

The effect of the extinctive prescription

The extinctive prescription extinguishes only the right to act in justice of the holder of

the subjective right. Therefore, the subjective right itself and the corresponding

obligation still exist after the expiration of this period of time, but the subjective right is

no longer protected by means of the power of the state. As a consequence, after the term

of the extinctive prescription has expired, the holder of the subjective right cannot

obtain anymore the assistance of the state through its competent bodies in the exercise

of his right, in order to oblige the debtor to perform his obligations. Nevertheless, as the

subjective right itself and the corresponding obligation still exist, the debtor may

willingly perform his obligations and such a performance is valid.

Within the Romanian system of law the effect of the extinctive prescription is governed

by 2 principles as follows:

- The extinction of the right to act in justice concerning a principal subjective right

leads to the extinction of the right to act in relation to accessory rights (article

2503(1)/NCC).


- If the performance of the obligation is successive, the term of extinctive

prescription must be calculated in relation to each performance (article

2503(2)/NCC) e.g. rent contract, the obligation to pay the rent monthly, for

each month there will be a specific extinctive prescription.

There is one exception to this principle, provided by article 2503(3)/NCC this

principle is not applicable if the successive performances compose a unitary

system due to their nature as resulting from the law or from the convention of

the parties.

The application field of the extinctive prescription

As a rule provided by law, the patrimonial subjects are prescriptive and the non-

patrimonial rights are non-prescriptive.

However, there are several exceptions. Thus patrimonial rights are divided in real

rights and debt rights. In general real rights are non-prescriptive. Actually in

accordance with the provision of the law, the application field of the extinctive

prescription refers mainly to debt rights, because they are mostly prescriptive.

The term of the extinctive prescription

The main idea to the extinctive prescription is the expiring of a period of time, because

the loss of the right to act in justice is regulated by the law in relation to a specific term

during which the holder of the subjective right did not act in order to claim/plan the

performance of the corresponding obligation. As a consequence, the law regulates the

term of extinctive prescription as a period of time during which the right to act in justice

must be exercised under the sanction of losing it.

According to the law, article 2517/NCC, the general term of extinctive prescription

provided by the law in relation to debt rights is of 3 years. However, the parties are

allowed to modify by their common agreement, the terms of the extinctive prescription,

either reducing or increasing them. In addition, article 2515(4)/NCC, provides that the

term of extinctive prescription agreed by the parties must be between 1 and 10 years.


Course 9

The conclusion of the contract

Any contract is consider as concluded when the parties reach an agreement, meaning

when the acceptance of one of the parties meets the offer of the other party.

There are two ways of concluding the contract:

1) the conclusion of the contract inter presentes, or between present parties.

Concerning the conclusion of the contract between present parties, meaning

parties that are at the same moment and place present, the moment of

concluding the contract is the moment when the agreement is reached, because

most contracts are consensual contracts. The place of the conclusion of the

contract is the place where the negotiation has been carried out and the

agreement of the parties has been reached.

Generally, even in case of consensual contracts, the parties draw out a written

document in order to use it as evidence in future disputes. In this document, the

parties stipulate expressly the moment and the place of concluding the contract.

2) the conclusion of the contract inter absentes, or between absence parties.

When the contract is concluded between absence parties, meaning persons who

are in difference locations, the problem of determine the moment and the place of

concluding the contract is much more difficult.

The contract concluded between absence parties may be divided as follows:

a) contract concluded by mail (post), which represents the most important category

of contracts of the absence parties.

All system of law provides that the contract is consider concluded when the

letter of acceptance meets the offer. If the acceptance is different from the offer, it

constitutes a new offer, which must be accepted by the party who has made the first

offer in order to conclude the contract.

However, there are some differences between the systems of law in difference

states concerning the establishment of the place and the moment of the conclusion of

the contract. Therefore, they are 3 theories:

The sending theory that is used meanly in the Anglo-American system of law.

According to this theory, the contract is concluded when the party who accepts

the offer sends the letter of acceptance to the other party. This date is proved by

the postage seal put on the letter by the postal service. The place of the

conclusion of the contract is the place of headquarters of the party who accepts

the offer, because in this place the accepter has met the offer.

The receiving theory which is used in most states. such us France, Italy, Belgium

and Romania. According to this theory, the contract is concluded when the party

who has made the offer receives the letter of acceptance of the other party. The

date is proved, as mentioned above, by the postage seal put on the letter by the

postal service. The place of concluding the contract is the place of headquarters


of the party who has made the offer, because in this place the acceptance has met

the offer.

The information theory used in Portuguese and Brazilian system of law.

According to this theory, the contract is concluded when the party who has made

the offer is informed by any means of the other party acceptance. Actually, this

moment may be placed before or after receiving the letter of acceptance. The

place of concluding the contract is the place of headquarters of the party who has

made the offer.

b) contract concluded by phone

Concerning the contract concluded by phone, the moment of concluding the

contract is the moment when the parties speak over the phone and their agreement is

reached.

Regarding the place of concluding the contract, there are 2 approaches as

follows:

- in the Anglo-American system of law, it is the place of headquarters of the party who

makes the contract.

- in the continental system of law (of roman tradition), it is the place of headquarters of

the party who receives the contract.

Homework 3: Case study

Course 10

The offer

The offer is a unilateral juridical act that expresses the will of the offeror to conclude a

contract.

The legal definition of the offering contract is provided by article 1188(1)/NCC, which

states: a proposal represents an offer to contract if it includes sufficient elements to

form the contract and it expresses the intention of the offeror to be obliged if the

beneficiary of the offer accepts it.

In order to be valid the offer must meet several requirements:

- The offer has to observe all the validity conditions provided by the law of the

validity of any juridical act, namely, the capacity, the consent, the object and the

consideration;

- The offer has fulfill the following conditions

1. It has to be made with the intention to produce legal effects meaning to

conclude a contract. From this point of view, the offer has to express a

serious, real and free will to conclude a contract.

2. It has to be communicated to the other party, meaning to the offeree.


3. It must be serious, precise and complete, meaning it must contain all the

necessary elements in order to conclude a contract by simple acceptance.

4. It must be kept within the term provided by the offer or within a reasonable

period of time, if the offer does not specify a term.

Generally, if the offer does not provide a particular term, the acceptance must be made

at once. Thus, according to article 1194/NCC, the offer without time limit addressed to

present persons has no effects unless it is accepted immediately. This rule also applies

to the offer made by phone or by other similar means to communicate at distance.

However, according to article 1193(1)/NCC, the offer without time limit addressed to

absent persons, has to be maintained a reasonable period of time, according to the

circumstances in order for the offeree to receive it, to analyze it and to send the

acceptance. In addition, in such a case the revocation of the offer does not make

impossible the conclusion of the contract unless the revocation reaches the offeree

before the offerer has received the acceptance.

If the offeror specifies a particular term of acceptance, the acceptance must be within

that period of time. Generally, the offer may be revoked anytime until it reaches the

offeree. As a consequence, after the offer has reached the other party it cannot be

revoked anymore.

In relation to the offer, two special situations must be analyzed as follows:

- The case of the tacit offer. In this respect the silence has the value of an offer, only

corroborated with other external elements (e.g. a taxi waits for clients in special

places).

- The proposal addresses to the public or to undetermined persons. According to

article 1189(1)/NCC, even if it is precise, it has not the value of an offer, but it

must be considered as a solicitation of offer or as an intention to negotiate.

However, according to article 1189(2)/NCC, the proposal addressed to the public

(meaning undetermined persons) has the value of an offer if it results from the

law, the customs or the practices or the specific circumstances.

Sometimes the offer cannot produce its effects and it is considered automatically as

cancelled. This cause of inefficiency of the offer is called the caducity (caducitate). The

caducity of the offer applies in the following cases:

- the offeror dies or becomes incapable before the offer is accepted;

- the offeree refuses the offer;

- the acceptance does not reach the offeree within the acceptance term.


The acceptance

The acceptance is the expression of the will of one party to conclude the proposed

contract under the conditions provided by the offer.

Therefore, the acceptance of the offer is a unilateral juridical act.

The legal definition of the acceptance is provided by article 1196(1)/NCC, which states

any act or fact of the offeree constitutes an acceptance if it shows its agreement

regarding the offer as it was proposed and it reaches in due time the author of the

offer.

However, according to article 1196(2)/NCC, the silence or the inactivity of the offeree

has not the value of acceptance unless it results from the law, the agreement of the

parties, the practices between them, the customs or other circumstances.

In order to be valid the acceptance has to fulfill several conditions:

- as any other juridical act, the acceptance must fulfill the validity conditions

required by law, namely the capacity, the consent, the consideration and the

object of the contract;

- in order to conclude a contract, the acceptance must fully correspond to the

elements of the offer. If the acceptance is different from the offer, it constitutes a

new offer which must be accepted by the party who has made the offer in order

to conclude the contract.

- if the offer is addressed to a certain person, the offeree is the only one entitled to

accept it; if the offer is addressed to the public, anyone can accept it and the

contract can be concluded with the first person who has accepted the offer.

Moreover the acceptance should be made within the term provided by the offer

and before the caducity of the offer unless the offerer accepts to conclude a

contract based on a delayed acceptance.

The effects of the contract

The effects of the contract mean the subjective rights and the corresponding obligations

that are created, modified or extinguished by the contract in question.

Actually, the effects of the contracts mean the content of the act. Therefore, in order to

determine the effects of a contract we must establish its content, meaning the clauses

that provide the rights and obligations which are created, modified or extinguished by

the act. In this respect, the following steps should be achieved:

1. determine the existence of the act and to prove it by using different means of

evidence that are allowed by the law;

2. determine the effects of the contract by the interpretation of these clauses.


The effects of the contract, as well as the effects of any juridical act, are governed by the

following 3 principles:

I. The principle of compulsory force of the act pacta sunt servanda

According to article 1270/NCC, the contract validly concluded has the force of the law

between the contracting parties, in other words the contract is compulsory as the law

itself.

Nevertheless, there are some exceptions to the principle of the compulsory force of the

contract, meaning the cases in which the effects of the juridical acts are not produced as

intended by the parties.

E.g. despite the will of the parties, the contract shall terminate before the expiry of its

term in the following cases:

the total destruction of the goods terminates the contract itself (article

1818/NCC)

the death, incapacity or insolvability, bankruptcy or death of any of the

parties, terminates the mandate contract (article 2030/NCC)

the contract concluded intuitu personae (= concluded based on the personal

qualities of the parties e.g. contract with a specific singer.) generally

terminate at the moment of death of the party who assumes obligations.

Another exception to this principle is based on the hardship theory (impreviziune),

which applies as long as the essential circumstances that existed at the moment of

concluding the contract did not change during its performance. Actually, the hardship

theory takes into account an essential change in the existing circumstances that have

determined the conclusion of the contract in question. The hardship event is

unpredictable, it cannot be overcome by the parties and it does not depend on the will

of the parties. The performance of the contract by one of the parties becomes very costly

due to this event. Therefore, when the hardship event happens, the parties must

renegotiate the contract in order to reestablish the balance between their promises. If the

renegotiation of the contract is not possible and the parties are not able to reach an

agreement in this respect, according to article 1171/1271(2)/NCC, the judge may

pronounce the adaption of the contract to the new circumstances or its termination.

E.g. Electricity contract an electricity supplier had concluded a contract with a client,

for a certain price for one year. Hidroelectrica S.A. had declared its insolvency

unusual because this company is a state owned one. As a consequence, the prices of

electrical energy prices raise. The supplier had terminated the contract, because it was

impossible to supply at the price established in the beginning, due to the market prices.

Hardship theory because there occurred events that were unrelated to the supplier.

Therefore, it was needed to renegotiate the contract. In case it is not possible, they can

ask the court of law to adapt the contract or terminate the contract.


Course 11

II. The principle of the relativity of the contracts effects

According to article 1280/NCC, the contracts produce their effects, only between the

contracting parties. Therefore, the principle of relativity of the contracts effects, means

that the effects of the act are produced only between the parties and the contract cannot

benefit or harm other persons.

In order to understand this principle and its exceptions, the following terms should be

explained: party, third party, interested party. These concepts are important because in

relation to a certain contract all subjects of law, meaning all persons are included in one

of these 3 categories.

1. The party is the person who concludes the contract either personally or by

representation. According to the principle of relativity, the effects of the contract are

generally produced only towards the contracting parties

2. The third party is the person who was not involved in any way in the conclusion or

the performance of the contract. Therefore, the contract cannot produce any effects

towards third parties

3. The interested party is a person who did not participate at the conclusion of the

contract but is affected by the effects of the acts due to his or her juridical relation

with the contracting party. The interested party are divided into 3 categories, as

follows:

a) Universal successors or successors with universal title

A universal successor is a person who acquires a patrimony, meaning an

universality of rights and obligations. For example, the sole legal successor of a

dead person inherits the whole patrimony and therefore he is a universal

successor. In company law, a case of universal succession is the merger by

absorption.

The successors with universal title are persons who acquire a fraction of a

patrimony. For e.g. is a dead person has several legal successors, each one

inherits only a part of the patrimony, and therefore they are successors with

universal title. In company law, the division of a company leads to a succession

with universal title.

From a juridical point of view, the universal successors and the successors with

universal title continue the personality of their author because they acquire the

whole patrimony or a part of the patrimony of their author.

Universal successors and successors with universal title are interested persons in

any act concluded by their author. Therefore, the contracts concluded by their

author produce juridical effects towards them because they acquire all or only a

part of the rights and obligations belonging to their author.


b) Successors with particular title

The successor with particular title is a person who acquires a certain subjective

right. For e.g. the buyer is the successor with particular title of the seller in

relation to the ownership right of the sold good.

The successors with particular title are interested parties only in relation to

contracts concluded by their author which fulfills the following conditions:

- they have been concluded before the transfer of the right between the successor

and his author;

- they have as object the same right or thing as the one acquired by the successor;

- they are concluded between the author and other persons than the successors.

Thus for e.g., according to the provision of the NCC, the buyer of a rented thing

is obliged to observe the rent contract concluded by the seller before the sale.

c) Simple creditors

The creditor is a person to whom an obligation is due. Any creditor has the right

to ask the debtor to provide a security for the performance of the obligation, as

for example the mortgage of a thing. The creditors who are the owners of such

securities are generally referred to as secured creditors. The creditors who do not

have such securities are known as simple creditors.

Nevertheless, according to the law, the simple creditors have a general security

over the patrimony of the debtor. This means that their receivables is secured

with a patrimony of the debtor. Therefore the simple creditors are interested

parties in relation to any acts made by their debtor because such acts may have

an influence over the patrimony of the debtor (meaning may increase or decrease

the patrimony of the debtor).

Exceptions to the relativity of the contract effects

These exceptions are actually cases in which the contract might produce its effects

towards third parties according to the will of contracting parties.

They are divided into two categories as follows:

- Apparent exceptions

- Real exceptions

Nevertheless, nobody may become a debtor to a contract concluded between other

persons without his consent. Therefore, concerning the passive side of the juridical

relation, there are no exceptions relating to the relativity of the contracts effects.

Actually, the exceptions are possible only concerning the rights that might arise in the

benefit of a 3rd party from a contract concluded between other persons.


These exceptions are:

1. The promise of another persons action, also known as promesse de porte-fort

It is a contract by which a person known as the promiser, promises to another

person, known as the promisee, to convince a third party to assume an obligation,

meaning to ratify a juridical act in his absence.

It is provided by article 1283/2283/NCC.

The promise of another persons action is not a real exception to the relativity of the

contracts effects because the promisor promises his very own performance, which

consists in convincing the third party to become a party to a juridical act. If the third

party does not want to ratify the juridical act, he cannot be obliged to execute the

obligation.

2. The simulation

The simulation means the juridical operation by which the parties conclude two

juridical acts as follows:

- the first one is a public act which is not real, it does not contain the clauses

actually intended by the parties. The public act is known by everybody, but it

creates a juridical situation which does not really exist between the parties;

- the second act is a secret act which corresponds to the real intentions of the

parties, but which is not known by third parties.

For example, in the public act, the parties agree to conclude a sale-purchase

contract, but in the secret contract, they provide that the juridical act concluded

betweenn them is a conation.

There are three categories of simulations as follows:

a) The false contract, when the parties conclude a public contract and a secret

agreement in which they provide that the public contract does not really exist;

b) The disguised contract, when the parties actually conclude two contracts, one

of them real but secret, and the second public but not real;

c) The interposition of another person when the secret contract provides the real

parties to the public contract (in order to avoid the law, A and B makes a

contract even if the main reason was to conclude).

The secret contract produces its effects between parties, while 3rd parties are

entitled to invoke the public contract. Nevertheless, the 3rd parties, are also

entitled to invoke the public contract in case this benefits them. In case of a

false sale-purchase contract, the creditors of the seller are allowed to invoke

the secret agreement by which the parties had agreed that the public contract

does not exist.


However, the simulation is not a real exception to the relativity to the contracts

effects, because the right of 3rd parties to invoke either the public or the secret

contract derives from the law and from the contract.

3. The direct actions

When a 3rd party is allowed to bring proceedings against the debtor of his debtor

in order to obtain the payment of his receivable. The 3rd party is not actually a

party to the contract concluded between his debtor and the debtor of his debtor.

The direct actions are not real exceptions to the relativity because in this case the

right to bring a direct action against a person without any direct juridical relation

is expressly granted by the law. For example, in the case of the construction

contract, article 1856/NCC, provides that the constructors employed by the

constructor have the right to bring a direct action against the beneficiary of the

construction in order to pay their salaries but only when the beneficiary has a

debt towards the construction. In the case of a mandate contract, article

2023(6)/NCC provides that the mandator has a direct action against the sub-

mandatory. Such a case arises when the principal mandatory has substituted

another person, the sub-mandatory, in his place, in order to execute the mandate

contract. Through the mandate contract, a party known as the mandatory

assumes the obligation to act as a representative of another party, known as the

mandatory.

The real exception of the relativity of the contracts effects is the stipulation to the

benefit of a third party. The stipulation is a contract by which one party, the promisor,

promises to the other party, the promisee, to perform an obligation to the benefit of a

third party known as the beneficiary. It is a real exception to the relativity of the

contracts effects because the beneficiary is not a party to the contract, but he will

benefit from the performance of the contract meaning, the effect of the contract will be

produced towards him. However, according to the provisions of the law, in order for

the stipulation to produce its effects, the beneficiary must accept. For e.g. the life

insurance contract, by which the insurance company promises to pay an amount of

money to a 3rd party, the beneficiary of the insurance, at the death of the insured person.

E.g. the transportation contract by which the sender and the carrier agree to transport

the merchandise and to deliver it to a third party, the beneficiary.

The general conditions for the validity for the stipulations of a 3rd party are the same as

for any other contract. In addition, the law provides special conditions of validity as

follows:

a. the expresses will of the parties to grant a right for the beneficiary, namely for

a third party.


b. at the moment of concluding the contract, the person of the beneficiary must

be determined or at least determinable.

The stipulation to the benefit of a 3rd party produces three categories of effects, as

follows:

1. The effects between the parties, namely the promisor and the promisee, as

any other contract. Therefore, the promisee may claim the cancellation of the

contract, or its forced execution and he may bring an action against the

promisor to carry on the promise to the benefit of a third party.

2. The effects between the promisor and the beneficiary. The stipulation to the

benefit of a 3rd party creates a juridical relation between the promisor and the

beneficiary despite the fact that the beneficiary is not a party to the contract.

Within this juridical relation, the beneficiary is the creditor and the promisor

is the debtor. As a consequence, the beneficiary may bring an action against

the promisor asking the court of law to oblige him to perform the contract.

Nevertheless, the beneficiary is not entitled to claim the cancelation of the

contract because he is not a party to that contract.

3. The effects between the promisee and the beneficiary. Normally the

stipulation to the benefit to a third party does not produce any direct effects

between the promise and the beneficiary. However, it produces an indirect

effect because the goal of the stipulation is the right granted to the

beneficiary to the promisors action.

III. The principle of irrevocability of the act

Generally, the principle of the irrevocability of the contract means that once concluded

it cannot be revoked. Actually, the contracts as bilateral juridical acts cannot be revoked

by the will of only one of the parties, but they may be terminated by common

agreement of both parties. Nevertheless, the unilateral juridical act cannot be revoked

by its author.

As exceptions to this principle there are several cases in which the unilateral revocation

of the act is allowed by law. For instance, the law allows:

- The revocation of the donation made by one spouse to another (art 1031/NCC)

- The termination of a rent contract by any of the parties if the contract has been

concluded for undetermined period of time (1816(1) Juridical Code)

- The termination of the mandate contract by any of the parties (article (1), a and b

from NCC)

- There are several unilateral juridical acts that may be revoked by their author

such as the will (art 1034/NCC) and the revocation of an offer without time limit

(art 1999 NCC)

- The offer may be revoked if the revocation letter reaches the other party before or

at the same time as the offer.


Specific effects of bilateral contracts

As mentioned before, the main feature of bilateral contracts is the reciprocity of the

parties obligation. Thus, each obligation is assumed taking into consideration the

others party obligation and each party at the same time, debtor and creditor of the

other party.

Taking into account this special feature, the bilateral contracts produce the following

effects:

A. The exception of non-performance of the contract

Is also known as exception de non ad impleti contractus and may be invoked

whenever one of the contracting parties who has not performed his or her obligations,

requests the other party to perform his or her promise. This party to whom the

performance of the obligation is requested may oppose the exception of non-

performance and may refuse to perform his obligations until he gets the other partys

performance.

It is regulated in a general manner by article 1556/NCC.

The exception of nonperformance of the contract applies whenever the following

conditions are fulfilled:

1. The mutual obligations of the parties have as source the same bilateral

juridical relation. Thus it is not possible to oppose this exception if the

obligations of the parties are created by different contracts E.g. between two

parties have been concluded two contracts a sale-purchase contract and a

rent contract, therefore there are two obligations. One obligation is the

obligation of the buyer to pay the price which arises from the sale-purchase

contract and the second one is the obligation of the other party, as the tenant

within the rent contract to pay the rent. In such a case, it is not possible to

invoke this exception, meaning the buyer is not allowed to refuse the

payment of the price due to the nonpayment of the rent deriving from

another contract.

2. The contracting party against which the exception opposed has not fulfilled

his obligation. Generally is has no relevance whether there is total or partial

nonperformance of the obligation.

3. The contracting party who invokes the exception has acted in good faith,

meaning the nonperformance of the other party is not intervened by his

behavior. E.g. the buyer refuses to take possession of the sold goods and then

he opposed the exception as far as his obligation to pay the price is

concerned.

4. The mutual obligation of the two parties must be performed in the same

time; therefore, the exception cannot be invoked if the parties have agreed a

specific term for performing one of the mutual obligations. From a

procedural point of view it is not necessary to invoke this exception within

the court of law. Is exercise is not submitted to any formality or to the


debtors formal notifications. The exception of nonperformance has a

defensive nature because the party who invokes it refuses the performance of

his due obligation. However, the effects of this exception are temporary since

the performance of the obligation is only suspended until the other party

performs his own obligations

B. The cancellation and termination of the contract

I. The cancellation of bilateral contract

Within a bilateral contract whenever one of the parties does not perform its contractual

obligations, the other party has two options, either to claim the forced execution of the

non-performed obligation, or the cancellation of the contract with eventual damages.

Thus, the cancellation of the contract is a special civil sanction for the nonperformance

of the bilateral contract. Is consists of retroactive cancellation ex tunc of the contracts

effects and the parties reinstatement of the parties formal juridical situation. The

cancellation of the contract is justified on the reciprocity and interdependence of the

partys obligations within bilateral contracts. The cancellation of the contract is different

from the contract nullity, thus in case of nullity the contract has been concluded by

disregarding the express provisions of the law. In fact, due to the nonobservance of the

legal rules the contract has not been validly concluded since the beginning. On the

contrary, in case of cancelation the contract was validly concluded but later on due to a

special reason meaning the nonperformance of contractual obligations by one of the

parties its effects are cancelled. The common aspect between nullity and cancellation is

the retroactive effect. Indeed, in both cases the parties are restored into the previous

situation before the contract was concluded. The cancellation of the contract is regulated

as a general rule by articles 1549 until art 1554 from NCC. According to the provisions

of the art.1550, the cancellation may be as follows:

a) Judicious cancellation when must be pronounced by the court of law

b) Unilateral cancellation which operates the following to the declaration of

cancelation of the interested party

c) Cancellation by law, which applies in the cases provided by the law or

according to the agreement of the parties.

Concerning the judicious cancellation, such an action is admissible and the judge may

pronounce the cancellation of the contract if the following conditions are observed:

- There is a total or partial nonperformance of contractual obligations from one of

the contractual parties. In case of partial nonperformance the court analyses

whether the non-execution is so important that the contract has to be cancelled or

not.

- The non-performance of the contract is guilty, meaning it is due to the parties

fault. In case of the party who has not fulfilled its obligation proves of force

majeure event or accident who caused, the court cannot pronounce the

cancellation of the contract but the intervention of contractual risk.


- The debtor who does not fulfill his contractual obligation as to be formally

notified in one of the legal ways stipulated by law

The action for the contracts cancellation may be brought by the creditor of the non-

performed obligation within the term of extinctive prescription of 3 years. However, the

creditor is not obliged to ask for the contracts cancellation. He may choose to ask the

court of law to oblige the debtor to perform his contractual obligation. Therefore, the

creditor has always the choice to choose between the continuation of the contract,

meaning its performance and the contracts cancellation. However, the juridical

cancellation of the contract is difficult and takes time. Therefore, in order to limit or to

avoid the intervention o

contract law course

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