Principles of Private law

SUBSTITUTION IN CREDIT AND IN DEBT

The original party can be replaced, or joined, by a new party. So, we have a succession in credit and/or indebt.

When we have a succession in credit parties we talk about asset side.

When we have a succession in debit parties we talk about liability side.

The conditions of these two are different.

Asset Side → if we have a change of the creditor side, is it a problem for the debtor? No. It changes just the creditor, the debtor will be payed in either way. In general, it is just necessary the communication to the debtor of the changing of the creditor. We don't need the agreement of the debtor.

Liability Side → we need the agreement of the creditor. If my debtor is Jeff Bezos and it changes to X, for the creditor it changes a lot. Changing debtor is different from changing creditor, from an economic point of view.

ASSET SIDE (active point of view) → the person who changes is the creditor

1. Assignment of credit
2. Factoring
3. Active

• delegation
• LIABILITY SIDE (passive point of view) => the person who changes is the debtor
• Expromission
• Assumption
• Passive delegation
• BREACH OF CONTRACT

We are in this case if the Supervening Impossibility is due to an unfair behavior of the debtor, and therefore he will have to pay damages (Art.1218).

ART. 1218

The debtor who does not carry out exact performance is liable for damages, unless non-fulfillment or the delay was due to an impossibility of performance deriving from a cause not chargeable to him.

The condition of Breach of Contract are:

1. How the performance is made.

If the performance is divisible, we can divide it as:

• TOTAL NON-FULFILLMENT => if you do nothing
• PARTIAL NON-FULFILLMENT => if you do just a part of what you had to do

When the obligation is not divisible (maybe giving a good like a smartphone), we say that our fulfillment is not exact. ex. I have to give an iPhone 4, but I give an iPhone 3. I give something different.

2. When the performance is

You have to give the judge some material evidence, not just your word.

The four conditions for this burden are:

• Adducing credit: the creditor has to speak about his loss.
• Adducing breach of contract: the creditor has to speak about how the contract was breached.
• Proving damage: you have to prove that you actually received a damage from the breach of contract. The loss of your assets and what you didn't received from the performance.
• Proving causal link between breach of contract and damage: you have to prove that the unique reason of your damage is the breach of contract. You can claim damages just for the behavior of the debtor, not other cases. ex. Bankruptcy isn't an example of breach of contract, because its linked to the behavior of the company, not due to the behavior of a single debtor.

Difference between loss (perdita subita) and damage (mancato guadagno).

The loss of your assets and what you didn't gain, related to the performance.

Ex. I have to give money in

1. What debtor can do?
• Fulfillment: He can demonstrate that he actually fulfilled the obligation.
• Supervening Impossibility: He can demonstrate that he couldn't performe due to a case not related to him.
• Liquidated Damages: the debtors admits the breach of contract. It's a close in the contract, it's a decision that was taken before the breach of contract. You decide the amount damages in the moment of the stipulation of the contract.
2. In this case, the creditor is free to adduce; the creditor doesn't have to prove neither damages and the causal link between breach of contract and damage, an advantage for the creditor who will just have to speak to the judge without any material evidence.
3. It is an advantage also for the debtor, because you will know which are the consequences of order to receive a book. I have a loss in my assets (my money). But if there is acompany which improves its value, than I would lose also that gain.

The breach of contract, you can control them and you can decide if the performance is worth or not.

Creditor contributory negligence: it is possible that the creditor may have contributed to the non-performance, or that he may have not contained damages (he didn't limit them). In this case the debtor says that he made the breach of contract, but he also says that also the creditor has contributed to it or didn't contain damages.

Ex.1. the creditor didn't open its quarters in order, for the debtor, to give the good.

Ex.2. the creditor didn't try to find a new person to fulfill the obligation, if you are hungry and you didn't find the sandwich, you try to find it to another bar.

DEBTOR'S DEFAULT

When the performance is only in late, a temporary fulfillment, and the creditor has still the interest in the performance, he will put the debtor's default, meaning that we have a certification where it's said that the debtor hasn't done its

The debtor can be considered in default when he fails to fulfill his obligations on time. There are certain preconditions for the debtor's default:

• Delay: The debtor is fulfilling the performance later than he should have done it.
• Imputability: The delay is due to the behavior of the debtor. For example, if the debtor is unable to give his smartphone to the creditor because it was stolen, but later finds it and returns it, he is not in default. However, if the debtor fails to give the smartphone due to his own behavior, he can be considered in default.
• Formal notice: The creditor must make a formal notice to the debtor, usually in writing.

There are three cases where formal notice is not necessary:

1. When the debt arose from a tort.
2. When the debtor has informed the creditor in writing that he will not be able to fulfill the obligation.
3. When there was a time limit and a specific place of performance.

the creditor's domicile (most relevant example: pecuniary obligations). In these cases formal notice is not requested. What does it mean Formal Notice? That the creditor requires the performance of the debtor.

Which are the consequences of debtor's default?

• Damages: the debtor will pay the damage related to the delay (the performance here is still possible)
• Transfer of risk: the risk of impossibility of performance deriving from a source not chargeable to the debtor (Art.1218). This is, usually, on the shoulders of the creditor, but if the debtor is in default, this risk is on the debtor's shoulders. The risk passes from the creditor to the debtor.

LESSON XVI

UNLIMITED LIABILITY

If the debtor doesn't fulfill its obligation, it will happen a breach of contract and the debtor will have to pay damages. But what happens if the debtor doesn't pay damages?

For this, we have two rules:

1. (Art.2740) The debtor is liable for the fulfillment of his obligations with all his

present and future property.

What does it mean => the debtor is liable with his entire assets, which can be attacked by the creditor. The creditor can chose to have purchase by tribunal related to the goods of the debtor (debtor's good can be purchased by tribunal) and this somme of money will be used to pay the losses to the creditor, what's left returns to the debtor. The creditor can't become the owner of the debtor's good, so "attack" means that the creditor can ask to a tribunal to sell a good of the debtor to a third party (that can't be the creditor, the debtor and the judge) and with the money resulted from the purchase goes to the creditor in order to fill the damages and satisfy its credits (the rest is to the debtor).

2. Each creditor has equal rights to satisfaction from the property of the debtor (PAR CONDICIO CREDITORUM), save when there are lawful causes of preference.

What does it mean => each creditor has the right to fulfill its

Part of the good of the debtor will be divided equally among the creditors (if there are four creditors, the good will be divided into four parts). However, if a creditor has a lawful cause of preference, they have the right to satisfy their credit before the others. For example, if this creditor has a right to 100, while the other three creditors have rights to 25 each, and the value of the good is 100, the first creditor will receive 100 thanks to the preference, while the other creditors will receive nothing.

There are three cases of lawful causes of preference:

1. Privileges: According to Article 2745, certain creditors are given preferential treatment based on the source of their claim (which can be general or special). This means that the law provides a lawful cause of preference. Privileges can be general, related to the entire property of the debtor, or special, related to just one specific good of the debtor.

For example, if a company fails to pay its employees and the employees want to recover their unpaid wages by attacking the company's assets, they have a privilege and the right to satisfy their credit.

Before all the other creditors.

PLEDGE: Art.2784, pegno

MORTGAGE: Art.2808, ipoteca

For both these two we need to remember that property can be divided in enjoyment rights in rem and security rights in rem. Pledge and Mortgage are about security rights in rem, where we have a transfert of the power of disposition. The debtor's good related to the performance is in the hands of the creditor (ancillary, non-autonomy), because the creditor has the right to have the property. We have a good that is related to the creditor, a specific good which is in the hand of the creditor and the creditor, if the debtor doesn't fulfill and doesn't pay damages, the creditor can exercise the pledge or mortgage, where he asks the tribunal to sell the debtor's good and, therefore, gives to the creditor the money to satisfy its credit.

Non-Autonomy, pledge and mortgage can't exist without the credit (I can't have these two without a creditor and a credit).

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