Obligations and Relevant Civil Contracts

SYNOPSIS

A. OBLIGATIONS IN GENERAL

1. Common Rules on Obligations 7.101
2. Obligations to Give 7.102
3. Obligations to do and not to do 7.106
4. Alternative Obligations 7.109
5. Facultative Obligations 7.110
6. Obligations having a Penalty Clause 7.111
7. Divisible and Indivisible Obligations 7.112
8. Several Liability or Simply Mancomunal obligations 7.113
9. Joint and Several Liability Obligations 7.114
10. Acknowledgment of obligations 7.115


B. EXTINGUISHMENT OF OBLIGATIONS 7.116

1. Payment 7.117
2. Payment by consignment 7.119
3. Payment and Subrogation 7.120
4. Imputation of Payments 7.121
5. Dation or Giving in Payment 7.122
6. Payment by Mistake and Without Cause.
    Release by Mistake 7.123
7. Novation 7.126
8. Set-off 7.127
9. Settlement 7.128
10. Merger 7.129
11. Remission of Debt 7.130
12. Impossibility to Pay 7.131
13. Statute of Limitations 7.132

C. EXECUTION FORMALITIES
     IN CONTRACTUAL OBLIGATIONS

D. CONTRACTS IN GENERAL

1. Types of Contracts 7.137
2. Contractual Consent 7.138
3. Object of Contracts 7.139
4. Effects of Contracts 7.140

E. SALE 7.143

F. PROMISE OF PURCHASE AND SALE  7.147

G. ASSIGNMENT OF RIGHTS 7.148

H. EXCHANGE 7.152

I. LEASE 7.153

J. HIRING OF SERVICES. WORK OR TASK HIRE 7.159

K. LEASING 7.160

L. MANDATE 7.166

M. BAILMENT 7.168

N. LOAN 7.169

A. OBLIGATIONS IN GENERAL

7.101 Part One of Section One of Book Two of the Civil Code, under Titles I through VI, deals with the nature and cause of obligations¹, mainly to the effect of establishing that obligations may be to give, do or not do something and the need of a cause for all obligations; with creditors rights to performance or enforcement²; with the consequences of debtor’s default³, these being mainly liability for damages in case of tort and, though to a lesser degree, fault or negligence; with acts of God and force majeure⁴, which is defined as any event that has not been able to be foreseen or, if foreseen, has not been able to be avoided; and with the nature, types and effects of conditions⁵, including forbidden conditions, resolutory and suspensive conditions, and terms⁶ established for performance of obligations.
¹ Arts. 499 to 502.
² Art. 505.
³ Arts. 506 to 512 and 519 to 522.
⁴ Arts. 513, 514.
⁵ Arts. 527 to 565.
⁶ Arts. 566 to 573.

7.102 Title VII of Part One of Section One of Book Two of the Civil Code deals with obligations to give, which include obligations to give a specific thing to the effect of transferring real rights, or only the use or tenancy of the thing, or of rendering it to its owner¹. An obligation to give a specific thing includes its accessories². Property of revenues and accretions and liability for loss and damages preceding delivery depend on ownership and circumstances such as debtor’s negligence or absence of fault³. Conflicting interests between several alleged creditors demanding a right to delivery are decided in view of the relevant concurring circumstances, such as whether the purpose of the obligation is to transfer property on the thing involved or return it to its owner, or the movable or immovable nature of same thing, or delivery having been made to a possessor in good or bad faith, or title date priority when delivery is pending⁴.
¹ Art. 574.
² Art. 575.
³ Arts. 578 to 591 and 2422 to 2444.
⁴ Arts. 592 to 599.

7.103 Obligations to give may refer to unascertained non fungible things belonging to a certain species and identified by peculiar qualities pertaining to certain individuals within such a species. Unless the contract provides otherwise, debtor may choose the thing to be delivered, but may not deliver the worst nor is bound to deliver the best available thing. Once the choice is made, delivery is governed in accordance to the rules pertaining to obligations to give a specific thing¹.
¹ Arts. 601 to 603.

7.104 Obligations to give quantities of things determined by their number, weight or measure must be fulfilled in the required amounts of the stated species and quality, which once counted, weighed or measured by the creditor shall be considered specific things¹.
¹ Arts. 606 to 615.

7.105 Except for never becoming obligations to give specific things an its implications, the aforesaid rules concerning obligations to give unascertained things apply to obligations to give amounts of money, in a comprehensive sense of both national or any foreign currency¹. Compound interest is not admitted save when expressly agreed upon for established periods, or settled in accordance to periodic variations of the market rate of interest, or of interest accrued following a court judgment of enforcement².
¹ Arts. 616 and 617, 619 as emended by Convertibility Law 23.928.
² Art. 623 as amended by Convertibility Law 23.928.

7.106 Title VIII of Part One of Section One of Book Two of the Civil Code deals with obligations to do and not to do.

7.107 The action due under an obligation to do may be accomplished by a third party except when performance, as intended by the parties on agreeing to the obligation, may only be satisfied by debtor in consideration of his personal circumstances and qualifications. If performance becomes impossible through no fault of the debtor’s, the obligation is extinguished and the debtor must refund or return anything received from the creditor. If through his fault, debtor cannot be compelled against his will and is liable for damages. Enforcement of obligations to do that are not of a personal nature may be reached through performance by a third party at debtor´s expense if creditor does not choose to claim damages¹.
¹ Arts. 625 to 631.

7.108 Under an obligation not to do debtor must refrain from doing something that he otherwise would be entitled to. If the required abstention becomes impossible through no fault of the debtor’s, the obligation is extinguished as in the case of obligations to do. If through his fault, debtor may be compelled to destroy what has been done or have a third party do so at his expense and, when destruction is impossible, shall be liable for damages¹.
¹ Arts. 632 to 634.

7.109 Title IX of Part One of Section One of Book Two of the Civil Code deals with alternative obligations, meaning those of any nature that may be duly satisfied by performance of any one of several possible objects. Unless otherwise agreed, choice lies with debtor, in which case if performance in one way becomes impossible, through debtor’s fault or due to other reasons, the remaining choice must be performed. If performance in any way was to have become impossible, one alternative being so through debtor’s fault, debtor is due for the value of the last performance to become impossible. If the choice rests with the creditor and performance of one alternative were to become impossible through debtor’s fault, creditor may claim the remaining object or the value of the one lost. If both were to have been lost through debtor’s fault, creditor may claim the value of one or the other. If none can be performed through no fault of the debtor’s, the obligation is extinguished¹.
¹ Arts. 635 to 642.

7.110 Title X of Part One of Section One of Book Two of the Civil Code deals with facultative obligations, meaning those that have a single or principal object which, notwithstanding, debtor is entitled to substitute at his sole choice with another. When in doubt as to the nature of an obligation, it must be deemed to be alternative rather than facultative¹.

1 Arts. 643 to 651.

7.111 Title XI of Part One of Section One of Book Two of the Civil Code deals with obligations that include a penalty clause to ensure performance by way of imposing a penalty or fine for default or late performance, which normally is in lieu of liquidated damages inasmuch as, a penalty clause having been established, creditor is no longer entitled to liquidated damages, even when proving the penalty’s insufficiency to cover damages. Likewise, creditor does not have to prove damage, nor is debtor released from payment by proving that no damage was caused. Nevertheless, courts may reduce the amount of an established penalty if disproportionate to the concurring circumstances. Creditor may not demand performance of the obligation and payment of the penalty unless the penalty appears to have been established for a delay in performance or it has expressly been agreed that payment of the penalty does not extinguish the principal obligation¹. To enforce a judgment, courts may apply adjustable penalties in favour of claimants whose rights have been admitted².
¹ Arts. 652 to 660.
² Art. 666 bis of the Civil Code and Art. 37 of the Federal Civil and Commercial Procedure Code.

7.112 Title XII of Part One of Section One of Book Two of the Civil Code deals with divisible and indivisible obligations. Obligations are divisible when able to be performed in separate parts and are indivisible when their object is only able to be performed as a whole. Joint liability does not make an obligation indivisible, nor does indivisibility cause joint liability. Divisible obligations between a single debtor and creditor must be performed as though they were indivisible, and neither can the creditor be compelled to receive part payments nor the debtor to make them. Unless otherwise established, in an obligation between several creditors and a single debtor, or of one debtor towards several creditors, the debt is divided among them in equal parts. Insolvency of one or more of the debtors does not oblige the remaining debtors to discharge other than their part of the debt. Suspension of a statute of limitations for reasons concerning a particular debtor does not benefit or affect other creditors or debtors¹.
¹ Arts. 667 to 678.

7.113 Obligations having more than one creditor or debtor and one and the same object are considered mancomunal obligations, whether liability be jointly o severally undertaken. In simply mancomunal or several liability obligations the credit and debt is divided in as many equal parts as creditors and debtors concur, unless otherwise divided among them on establishing the obligation, and each part is considered an independent credit or debt. If the object owed be divisible, each debtor is obligated solely for his part and each creditor only has a right to claim his part in the credit¹.
¹ Arts. 690 to 698.

7.114 Joint liability may be legally established or agreed upon by the parties to the effect that total performance of the obligation may be exacted in whole by all and any of the creditors and from all or any of the debtors. Creditor may resign to joint liability, to the benefit of all or any of the debtors, and consent to the debt being divided among the debtors. Novation, set-off or remission of the debt by any of the creditors and with any of the debtors extinguishes the obligation. Any interruption of a statute of limitations in favour of one of the creditors or affecting one of the debtors benefits or affects the rest of them¹.
¹ Arts. 699 to 717.

7.115 Acknowledgment of an obligation may result from a formal act containing an exact reference to the cause, importance and date thereof or tacitly from payments made by debtor, but does not constitute and independent title and cannot validly aggravate the debt¹.
¹ Arts. 718 to 723.

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B. EXTINGUISHMENT OF OBLIGATIONS

8.116 Under Titles XVI through XXIII of Part Two of Section One of Book Two, the Civil Code deals with the different ways of extinguishing obligations, that include payment, novation, set-off, settlement, merger, remission and impossibility to pay¹.
¹ Art. 724.

7.117 Payment is compliance of performance due under the obligation, whether the obligation be to give, to do or not to do¹. Any able debtor not only is obligated but has a right to pay. Payment may be made by a third party with or without debtor’s knowledge or even against his will, and must be accepted by creditor whether payment be made in debtor’s or in paying party’s name, unless, the obligation being to do, it may only be satisfied by debtor in consideration of his personal circumstances and qualifications. The third party must be fully reimbursed, but if payment were made against debtor’s will, reimbursement is only due to the extent by which the latter has benefited². Payment must be made, as the case may be, to the creditor, if able, or to any or each of the creditors according to the whether the obligation is of an indivisible or divisible nature or to the liability arising therefrom being joint or several, or to the holder of an endorsable commercial paper or document, or to creditor’s representative, heirs or assignees, or to the third party designated to receive payment³.
¹ Art. 725.
² Arts. 726 to 730.
³ Arts. 731 to 736.

7.118 Payment must be performed as agreed to, at the established place and time. Creditor cannot be obliged to receive something different to what is his due, even though of the same or greater value, nor to accept part payments where none have been authorized¹.
¹ Arts. 740 to 742 and 747 to 751.

7.119 Payment by consignment is the discharge of an obligation by way of a court deposit of the thing owed, that debtor may resort to in order to avoid default when creditor refuses or is unable to receive payment, is missing or unknown, title has been lost or is contended, or the debt has been attached prior to debtor’s release, and shall only be valid and obliging if all requisites as to the parties, the object due and the time and place of performance are met or, if contested by the creditor, when so declared by a court judgment¹.
¹ Arts. 756 to 766.

7.120 When payment is performed by a third party, subrogation in creditor’s rights may be conventional, when consented to either by the creditor or the debtor, or legal, when due to a preferred creditor having been paid, or if debtor pays a debt he is liable for with others, or when payment by a third party was consented to by debtor or performed without his knowledge, or if payment was made of a mortgage secured credit by the purchaser of the property, or when a debt of a deceased person is paid by an heir beneficiary with funds of his own. As a rule, subrogee’s right to reimbursement from debtor is to the extent of his own disbursement, save when subrogation is conventional and its effects limited to a certain extent¹.
¹ Arts. 767 to 771.

7.121 A debtor owing capital and interest may not impute a payment to the former without creditor’s consent and a payment of capital and interest will first be ascribed to the latter unless creditor has given a receipt also for capital¹.
¹ Arts. 776 and 777.

7.122 Payment is deemed performed when creditor accepts as a discharge something other than money instead of what is owed him. If what creditor receives is a credit of the debtor’s, rules on assignment of rights are applicable; if the price for which the thing is received by the creditor is established, rules pertaining to the contract of sale apply¹.
¹ Arts. 779 to 781.

7.123 Anybody paying due to a mistake of fact or of law is entitled to reimbursement, except if creditor has destroyed evidence of the credit due to having received such payment, and save for the right to claim performance from the true debtor¹. Rules applying to possessors in good and bad faith govern the extent of restitution and property of revenues and accretions and liability for loss and damages².
¹ Arts. 784, 785 and 790.
² Arts. 786 to 789 and 2422 to 2444.

7.124 Error or no error, payment without cause, or for a future cause that cannot come to be because of a legal obstacle or that has in fact failed to exist, or for a cause that has ceased to be, or is contrary to law or to public interest or to good custom and usage, or that has been obtained through illegal means entitles to repetition or repayment¹.
¹ Arts. 792 to 795.

7.125 The above rules apply to releases given by error, that are to no effect between creditor and debtor¹.
¹ Arts. 796 to 798.

7.126 Novation occurs when an existing obligation is extinguished, together with any accessory obligations or guarantees unless otherwise expressly stipulated, when transformed into a new one, mainly by substituting the object owed under the previous obligation, but also by way of substituting the creditor if consented to by the debtor, missing which consent the case is considered an assignment, or by substituting the debtor on condition that the creditor expressly releases the primitive debtor¹.
¹ Arts. 801 to 817.

7.127 Obligations of two persons being creditor and debtor of each other are set-off and extinguished to the extent of the lesser amount reciprocally owed from the time that both debts begin to exist together, provided that what is owed by one of the parties can be given in payment to the other, that both debts continuing to exist as such are liquidated, have matured and refer to money or to quantities of things of the same species and quality or to unascertained non fungible things belonging to a certain species as long as choice rests with the debtor in both cases, and that no third party has a right to legitimately oppose the set-off¹.
¹ Arts. 818 to 822.

7.128 Settlements are a means of extinguishing litigious or doubtful obligations by mutual concessions of the parties. Rules governing personal ability needed to enter into contracts and concerning the object, formalities, proof and validity of contracts also apply to settlements in the absence of specific rules. Settlements are indivisible and only enforceable as a whole and any provision therein deemed invalid affects all the settlement. Settlements do not imply a transfer but an acknowledgment of rights and, when of rights already litigious, become enforceable only on submission to the acting court¹. With the exception mainly of family matters, in principle all kinds of rights of whatever nature and type may be subject to settlement², that only binds the parties directly involved and those having an accessory or joint liability obligation, but not third or other interested parties even if the obligation be indivisible³.
¹ Arts. 832 to 838.
² Arts. 842 to 849.
³ Arts. 850 to 853.

7.129 Merger or confusion results from the qualities of creditor and debtor coinciding in the same person, thus extinguishing the debt and all accessory rights, either totally or partially depending on all the creditors and debtors being involved in the merger or not. If subsequently confusion were to cease, the rights and obligations are restored to the interested parties as well as any accessory guarantees save if affecting third parties¹.
¹ Arts. 862 to 867.

7.130 Remission is the release or waiver by the creditor of a debtor from his debt and, when accepted, extinguishes the obligation and its accessories. Though normally gratuitous, remission may also be for a price or in exchange for some other thing, and the creditor renouncing must have legal capacity. Remission is not to be presumed and until accepted may be withdrawn without prejudice to the rights acquired by third parties between the release and withdrawal. Remission can also be accomplished by returning to the debtor the original document stating or accounting for his debt which, when in the power of debtor, is presumed to have been voluntarily given to him by creditor, who is nevertheless entitled to bring proof against such a presumption. The return of pledged property by the creditor causes remission only of such a right and does not have the effect of remitting the debt in itself, and is presumed to have been returned of creditor’s own free will unless otherwise proven¹.
¹ Arts. 868 to 887.

7.131 Obligations are extinguished when their object becomes materially o legally impossible to comply with through no fault of debtor’s. If not feasible through a fault of debtor’s, or when debtor has taken liability for force majeure upon himself, be it by a provision assuming such a risk or same having occurred after debtor should be in default, the primitive obligation to give or to do becomes one of paying for damages¹.
¹ Arts. 888 and 889.

7.132 The statute of limitations results in the loss of a right of action due to not exercising a right during a certain period and does not affect the obligation in itself but rather the right to enforce a claim. With a few exceptions, all legal actions are in principle subject to the statute of limitations, the normal period being ten years unless a shorter one be established by law for particular cases¹.
¹ Arts. 3949, 4019 and 4023.

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