1995 sale exmo 2015 01 06

Loyola University New Orleans, College of Law

Sales and Leases: January 2015 -- Prof. Gruning

Note: For convenience, this document numbers the parts and the sections within each part. The hyperlinks to cases in Westlaw should be active.

Sale: Exposé des Motifs Table of Contents

ContentsSale: Exposé des Motifs....................................................................................................................................................1

Introduction....................................................................................................................................................................3I. General Principles.......................................................................................................................................................4

1.1 Definition of Sale.................................................................................................................................................41.2 Applicability of Other Titles................................................................................................................................41.3 Purchase of a Thing Already Owned....................................................................................................................51.4 Sale of a Future Thing..........................................................................................................................................51.5 Sale of a Hope......................................................................................................................................................51.6 Price: Essential Elements.....................................................................................................................................61.7 No Price Fixed by the Parties...............................................................................................................................71.8 Price Left to Determination by Third Person.......................................................................................................71.9 Sale of the Thing of Another................................................................................................................................71.10 Time of Transfer 0f Ownership..........................................................................................................................81.11 Time of Transfer of Risk....................................................................................................................................8

II. Sales of Movables......................................................................................................................................................92.1 Preliminary Remarks............................................................................................................................................92.2 Additional Terms in the Acceptance....................................................................................................................92.3 Obligation To Deliver Conforming Things........................................................................................................112.4 Buyer's Right of inspection................................................................................................................................122.5 Acceptance And Rejection of Nonconforming Things......................................................................................132.6 Partial Acceptance..............................................................................................................................................142.7 Merchant Buyer's Duty Upon Rejection.............................................................................................................152.8 Purchase of Substitute Things By the Buyer......................................................................................................152.9 Cure of Nonconformity......................................................................................................................................162.10 Ownership of Things in Transit........................................................................................................................172.11 Judicial Dissolution..........................................................................................................................................172.12 Payment Against Documents...........................................................................................................................18

III. Sales of Immovables...............................................................................................................................................193.1 Formal Requirements.........................................................................................................................................193.2 Manners of Sale..................................................................................................................................................19

IV. Delivery and Eviction.............................................................................................................................................214.1 Construction of Ambiguities; Waiver of Warranty............................................................................................214.2 Methods of Making Delivery.............................................................................................................................214.3 Retention of Possession By Seller; Presumption of Simulation.........................................................................224.4 Incorporeals, Method of Making Delivery.........................................................................................................234.5 Delivery Excused Until Payment of the Price....................................................................................................234.6 Condition of Thing At Time of Delivery...........................................................................................................244.7 Eviction: General Principles...............................................................................................................................244.8 Modification Or Exclusion of Warranty.............................................................................................................254.9 Transferring One's Rights To A Thing (Sale By Quitclaim Deed)....................................................................264.10 Rights of the Buyer Against the Seller in Case of Eviction.............................................................................294.10 Restitution of Full Price Despite Deterioration................................................................................................304.11 Call in Warranty...............................................................................................................................................30

V. Redhibition..............................................................................................................................................................315.1 General Principles..............................................................................................................................................315.2 Apparent Defects................................................................................................................................................325.3 Thing Not of the Kind Specified in the Contract...............................................................................................325.4 Time of Existence of Defect...............................................................................................................................34

Sale: Exposé des motifs (2012 dwg) of 63

5.5 Liability of the Good Faith Seller.......................................................................................................................345.6 Notice of the Existence of Defect.......................................................................................................................355.7 Prescription.........................................................................................................................................................355.8 Multiple Sellers And Multiple Buyers...............................................................................................................365.9 Redhibition of Matched Things Sold Together..................................................................................................375.10 Quanti Minoris..................................................................................................................................................385.11 Liability of the Seller in Bad Faith...................................................................................................................385.12 Exclusion Or Limitation of Warranty...............................................................................................................395.13 The Warranty of Fitness..................................................................................................................................415.14 Revised Article 2524........................................................................................................................................44

VI. Obligations of the Buyer........................................................................................................................................446.1 General Principles..............................................................................................................................................446.2 Interest................................................................................................................................................................446.3 Liability of the Buyer Who Fails To Take Delivery..........................................................................................456.4 Dissolution of Sale For Nonpayment of Price....................................................................................................45

VII. Lesion....................................................................................................................................................................477.1 General Principles..............................................................................................................................................477.2 Action Against the Vendee Who Has Resold the Immovable...........................................................................487.3 Peremption of Action For Lesion.......................................................................................................................48

VIII. Sale With Right of Redemption...........................................................................................................................488.1 General Principles..............................................................................................................................................488.2 Liability For Deterioration At the Time of Redemption....................................................................................49

IX. Assignment of Rights.............................................................................................................................................509.1 General Principles..............................................................................................................................................509.2 Delivery of Title.................................................................................................................................................509.3 Notification of the Debtor in Assignment of Rights..........................................................................................519.4 Warranty.............................................................................................................................................................55

X. Giving in Payment...................................................................................................................................................5510.1 General Principles............................................................................................................................................5510.2 Giving in Partial Payment................................................................................................................................57

XI. Agreements Preparatory To the Sale......................................................................................................................5711.1 Introduction......................................................................................................................................................5711.2 The Option: General Principles........................................................................................................................5711.3 Time When Option Becomes Effective............................................................................................................5811.4 Warranty of The Assignor of An Option..........................................................................................................5911.5 Contract To Sell: General Principles................................................................................................................5911.6 Deposit And Earnest Money............................................................................................................................6011.7 Right of First Refusal: General Principles........................................................................................................6111.8 Time Limitations For Exercising Options And Rights of First Refusal...........................................................62


Louisiana Civil Code. Book III. Of the Different Modes of Acquiring the Ownership of Things:

Title VII. Sale

Note that this document retains hyperlinks to cases on Westlaw.

Introduction1996 Main Volume

The articles on sales of the Louisiana Civil Code of 1870 followed the basic scheme of the Code Napoleon from which they were lifted. Designed for an agrarian society two centuries ago, the title on sales no longer adequately served the needs of a society that is not centered on landed wealth. Over the years, the Louisiana Legislature made certain amendments to the original articles in an attempt to keep the Civil Code structure in tune with the changing times. See, e.g., Acts 1910, No. 249; Acts 1920, 2nd Ex.Sess., No. 27 (introducing the option contract); Acts 1974, No. 673 (limiting the liability of the seller in good faith). Likewise, Louisiana courts made valiant efforts to adapt the old articles to the requirements of commerce and everyday life in the late twentieth century. See Benglis Sash & Door Co. v. A.P. Leonards, 387 So.2d 1171 (La.1980); Media Production Consultants, Inc. vs. Mercedes-Benz of North America, Inc., 262 La. 80, 262 So.2d 377 (1972).

But there is a limit to what mending legislation and judicial interpretative ingenuity can do with a legislative scheme that no longer adequately serves the needs of the community. While it was becoming increasingly obvious that the Louisiana Civil Code articles on sales were insufficient to meet the needs of Louisiana citizens, legislative innovations in the area of sales, both in the United States and abroad, made the agedness of the sales articles of the Louisiana Civil Code and the urgency of their revision glaringly clear. Article 2 of the U.C.C. and the 1980 Convention on International Sales are recent legislative models providing realistic approaches to contemporary sales problems that stand in sharp contrast to the elegant, yet outdated, provisions of the Louisiana Civil Code. Those two bodies of law, as well as various other contemporary models, could not be ignored.

In spite of their age, the old articles did not deserve to be totally eliminated. What was needed was a major overhaul; a structural and functional renovation that left the foundations intact. Most basic principles of the Louisiana Civil Code of 1870 on sales are preserved in this revision, yet no article has been left untouched. The language of the provisions of the Civil Code of 1870 that were reproduced has been modernized.

While the revision adopts many provisions from Article 2 of the U.C.C., the basic civilian character of the sales articles of the Louisiana Civil Code remains intact. The approach throughout the revision was to adopt whatever provisions were thought useful, regardless of the source, yet to adapt the language of those provisions to fit the civilian mould and the plan of the Louisiana Civil Code. The result is a modern sales scheme that fits well in Louisiana's civil law tradition while at the same time adequately serving the personal and commercial needs of Louisiana citizens.


I. General Principles

1.1 Definition of SaleRevised Article 2439 rephrases the source provision by expressing that, through a sale, a person “transfers ownership of a thing” rather than “gives a thing.” The true meaning of “obligation to give,” that is, the transferring of title to a thing, as opposed to the handing over or delivery of a thing, has never been clearly understood. See 2 Litvinoff, Obligations 20-38 (1975). For that reason the revision of obligations, although it preserved “giving” as one of the possible objects of a performance in Article 1756, eliminated Articles 1905-1925 of the Louisiana Civil Code of 1870 that dealt with the obligation of giving. The text of revised Article 2439 is consistent with that approach.

Though at first blush it might seem that the words “transfers ownership in a thing” are confined to corporeal things, that is not so because rights are, by definition, incorporeal things. See C.C. Art. 461. Thus, the sale of a usufruct still entails a transfer of ownership of a thing, namely a right, that falls within the scope of the revised article. See C.C. Art. 544.

The second paragraph of Article 2439, which is so obvious that it might very well be eliminated, has been preserved because it expresses a rule oftentimes used by the Louisiana jurisprudence. See Hearty Burger of Harvey, Inc. v. Brown, 407 So.2d 806 (La.App.4th Cir.1981); Vercher v. Toda Enterprises, Inc., 216 So.2d 318 (La.App.3d Cir.1968); Gant v. Palmer et al., 10 So.2d 523 (La.App.1st Cir.1942); Hearon v. Davis, 8 So.2d 787 (La.App.2d Cir.1942); Collins v. Louisiana State Lottery Co., 43 La.Ann. 9, 9 So. 27 (1891).

Article 2439 preserves the idea that a price must consist of a sum of money, an idea that has been challenged in modern times. See Smith, Exchange Or Sale?, 48 Tul.L.Rev. 1029 (1974). In fact, the Uniform Commercial Code has completely eliminated the requirement that the price of a sale be stipulated in terms of money. See U.C.C. 2-304. It is also worth noting that modern civil codes exclude from the definition of sale the notion that the price must consist of a sum of money. See Article 1470 of the Italian Civil Code; Article 433 of the German Civil Code.

1.2 Applicability of Other TitlesArticle 2438 of the Louisiana Civil Code of 1870 provided that the title on “Conventional Obligations” governed sale transactions in all matters not especially provided for in the title on sales. In other words, the redactors intended that the title on conventional obligations should constitute a body of suppletive law for sale transactions. When Article 2438 was originally enacted the title of the Louisiana Civil Code devoted to conventional obligations -- Title IV of Book III -- contained virtually all of the provisions on the subject of obligations in the Civil Code, while Title III, the other title concerning obligations in the Civil Code of 1870, contained only five articles (one article defined obligations (1756); one classified obligations (1757); two dealt with natural obligations (1758-59); and one classified civil obligations according to their origin (1760)). The 1984 Obligations revision substantially changed that picture by placing all subjects of a general scope under current Title III, entitled “Obligations in General”; so the cross-reference contained in former Article 2438 thereby became misleading.


Under revised Article 2438, it is intended that all provisions of the Louisiana law of obligations govern sale transactions wherever the title on sales of the Louisiana Civil Code does not otherwise provide. As the comments indicate, that does not effect a change in the law.

1.3 Purchase of a Thing Already OwnedRevised Article 2443 reproduces the substance of the source provision in that it reasserts the impossibility of the purchase of a thing already owned by the purchaser. The revised article does allow, however, the purchase of rights to the thing from persons who have, or may have, adverse claims to the thing. A property owner may wish to purchase the rights of those who own claims that are adverse to his property rights in order to remove a cloud from his title. That is consistent with accepted real estate practices. Louisiana courts have never interpreted Article 2443 as prohibiting a property owner from purchasing claims adverse to his ownership rights. See Walker v. Baer, 129 So. 218 (La.App.1st Cir.1930).

1.4 Sale of a Future ThingThe sale of a future thing presents two problems. First, there is a possibility of confusion between such a sale and a contract for work by the plot or job. See C.C. Art. 2756 (1870). Second, there is a need to avoid the danger of overgeneralizing the implied suspensive condition of the coming into existence of the thing.

Concerning the first problem, even without attempting a definitive solution at this time, it is clear that practical experience shows many instances of sales of things not yet in existence, as is the case of manufacturers who either have run out of stock or simply produce upon orders. Sales of that kind are readily distinguishable from building contracts for the lack of specifications furnished by the buyer.

Concerning the second problem, French writers have shown little concern for the matter. See 10 Planiol et Ripert, Traité pratique de droit civil français -- De la vente et du louage 25-26 (1932); Beudant, Cours de droit civil français -- La vente et le louage 56-58 (1908); Pothier, Traité du contrat de vente 3-5 (Bugnet ed. 1861). No doubt, Article 2450 of the Louisiana Civil Code of 1870, like its French ancestor, had been drafted for transactions having as object things produced as the result of natural processes. When that is the case it is reasonable to imply that the coming into existence of a thing is a suspensive condition of the sale. It is different, however, with things to be produced by the labor or industry of the seller, since in such a situation the seller's failure to make the thing he promised would result in breach rather than in nullity of the contract. Revised Article 2450 addresses this problem by providing that “a party who, through his fault, prevents the coming into existence of the thing, is liable in damages.”

1.5 Sale of a HopeFormer Article 2451 was one of the staples of the Louisiana Civil Code. Yielding to the weight of tradition, the language of that article has been preserved in the revised Article with only slight modifications.

The sale of a hope presents two problems, however. In the first place, a


treasure, rather than the originally hoped-for fish, may be caught in the net. In the second, a fortuitous event may prevent the casting of the net. The two problems revolve around the extension of the risk assumed by the parties.

Concerning the problem that things other than fish are caught in the net, various solutions are possible. Thus, one may take the approach that he who bears the risk should also obtain the benefit of an unexpected profit; or, conversely, one may argue that the buyer is only entitled to what was in contemplation of the parties at the time of the agreement -- which, in the example given by the article is fish -- and, possibly, things of a similar type -- Ejusdem Generis. If the Ejusdem Generis approach is used, the buyer would probably be entitled to an octopus or a crab caught in the net, but certainly not to a treasure.

Where a fortuitous event prevents the casting of the fisherman's net, the answer to the question about who should bear the loss would seem to depend upon the particular nature of the hope that was sold. Thus, the hope may be based on a condition of things expected to exist in the future -- that is, a readily available net that the fisherman proposes to, and is capable of, casting. Or, the sale may be of the hope both that the net will be cast and, if so cast, that fish will be caught therein. In the first factual situation, the seller bears the risk of a fortuitous event that prevents the casting of the net. In the latter case, the risk of a fortuitous event preventing the casting of the net is born by the buyer. See Losecco v. Gregory, 108 La. 648, 32 So. 985, 996 (1901).

Nevertheless, whatever solution may be deemed proper to this latter problem, its place is not in revised Article 2451, but rather as part of the doctrine of impossibility of performance.

1.6 Price: Essential ElementsFormer Article 2464 was another staple of the Civil Code of 1870. For that reason the principle it contains, and also part of its language, have been preserved in revised Article 2464. Indeed, Louisiana courts utilized that article to expurgate the Louisiana law of the once prevailing common-law doctrine of token consideration. See Murray v. Barnhart, 117 La. 1023, 42 So. 489 (1906), where the reasonableness of the price idea that Article 2464 reflects was applied by analogy to the contract of lease.

The last paragraph of Article 2464 of the Louisiana Civil Code of 1870 is not to be found in the corresponding article -- Article 1591 -- of the Code Napoleon, nor in the Projet du gouvernement. It was taken, no doubt, from Pothier. See 3 Oeuvres de Pothier -- Traité du contrat de vente 10-11 (Bugnet ed. 1861). The paragraph presents no problem if it is read as a reference to lesion. It is noteworthy, however, that in the view of some writers the idea which that paragraph reflects could be used as grounds for actions not only of rescission as in the case of the sale of an immovable, but also of nullity for vile price, which could also involve the sale of movables. In such views a vile price is not a “serious” price and, therefore, a purported sale at such a price would be null for the lack of one of the essential elements of the price. See Beudant, Cours de droit civil français 101-104 (1908). The revised Article carries forward the idea of that paragraph.


Thus, under revised Article 2464 the price must be 1) either certain or determinable, and 2) not totally out of proportion with the value of the thing sold.

1.7 No Price Fixed by the PartiesRevised Article 2466 carves out an exception to the general rule that the price must be determined by the parties for sales of movables where the seller 1) is a merchant, 2) who habitually sells the goods in question. The article is in line with contemporary business understandings and expectations. Moreover, it promotes good faith and fair dealing by precluding a party to a sale from “backing away” from the contract by urging a technicality, wherever it is objectively possible to set the price.

Not long ago the Louisiana Supreme Court took a posture on the issue of the required degree of certainty of the price in a contract of sale that is consistent with the principle behind this article. In Benglish [sic?] Sash & Door Co. v. A.P. Leonards, 387 So.2d 1171 (La.1980), the court held that a sale was valid even though no price had been stipulated. In the course of its opinion the court stated: “It is not essential that the specific sum of the sales price be stated at the time of contracting .... The parties can consent to buy and to sell a certain thing for a reasonable price, and when they do, the contract of sale has been perfected .... Consent of the parties to buy and sell the specific item at a reasonable price may be implied from the circumstances of the case.” Id., at 1172-1173.

1.8 Price Left to Determination by Third PersonIn French law, under the traditional approach, a party who has agreed that the price will be set by arbitrators to be named at a future time by the parties to the agreement may prevent the perfection of the sale by refusing to name an arbitrator. 2 Planiol et Ripert, Traité élémentaire de droit civil 784-785 (La.State Law Ins.1959). While in such a situation the other party cannot sue for specific performance, he may have an action for damages sustained as a result of the breach of the innominate contract entered into by the parties. See Planiol (supra). The same result obtains under the Louisiana jurisprudence. Thus, in Louis Werner Sawmill Co. v. O'Shee, 111 La. 817, 35 So. 919 (1904), while denying specific performance where the estimators appointed by the parties failed to agree on the price, the court reserved the aggrieved party's right to pursue an action for damages. Id., at 921. In Andrus v. Eunice Bond Mill, 185 La. 403, 169 So. 449 (1936), the plaintiff's suit for damages was sustained although the defendant had refused to appoint an estimator as stipulated in the contract.

As the comments indicate, revised Article 2465 changes the law by providing that, if the parties fail to name the third person, or if the person named fails to make an estimation of the price, then the determination of the price may be made by the court.

1.9 Sale of the Thing of AnotherFrench authorities agree in asserting that Article 1599 of the Code Napoleon, equivalent to former Civil Code Article 2452 (1870), contains an overstatement. That overstatement is attributed to the drastic change


effected by the Code Napoleon in matters of sale, consisting in turning a contract that, under Roman law and the ancien régime only gave rise to an obligation to effect a transfer, into a contract that accomplished an immediate transfer. See C.C. Arts. 2439, 2456 (1870). Taking a step further, it is possible to realize that former Civil Code Article 2452 (1870) stated an incomplete conclusion. In fact, the sale of the thing of another, rather than being null, may effect a transfer through the application of the public records doctrine, where immovable property is concerned, and through the operation of the bona fide purchaser doctrine, where movables are concerned. A null juridical act would produce no effects at all, while the sale of a thing belonging to another may give rise to damages, in the first place, and may create a just title for purposes of the short acquisitive prescription, in the second. See C.C. Arts. 3473, 3483; Beudant, op. cit. at 71. Both such consequences are important legal effects that seem to deny the nullity that former Article 2452 asserted.

Be that as it may, it would be dangerous to tamper with the principle contained in the source article because it is, no doubt, a salutary one. Accordingly, revised Article 2452 preserves the substance of the source article by providing that “The sale of a thing belonging to another is null.”

It should be clear that this Article only concerns the seller and buyer. For the true owner the sale of his property by another is res inter alios acta that cannot affect him, and he can bring a revendicatory action if out of possession.

1.10 Time of Transfer 0f OwnershipAt Roman law, and under ancient French law, ownership was transferred upon delivery of the thing sold to the buyer. This approach was not followed by the Code Napoleon. Article 1583 of the French Civil Code, the source provision of Article 2456 of the Louisiana Civil Code, provides that ownership is transferred from the seller to the buyer upon consent alone, when there exists an agreement as to the thing and the price of the sale. See 2 Litvinoff, Obligations, § 136 et seq. (1975). Revised Article 2456 preserves the principle that ownership is transferred by consent alone.

1.11 Time of Transfer of RiskThe rule that risk follows ownership, even in the absence of delivery of the thing sold, introduced into modern law by the Code Napoleon, was adopted by the common law and the Uniform Sales Act. This rule has been criticized on several counts, both in continental Europe and in the United States. The argument of the critics is basically two-fold: unfairness in the buyer's bearing the risk of loss of an object which he cannot control, and unpredictability of the moment when ownership is transferred in many practical situations. See 3 Mazeud, Leçons de droit civil, Vol. 2, pt. 1 at 173 (1979); White and Summers, Uniform Commercial Code 175-177 (2d ed. 1980).

The U.C.C. abandoned the approach of res perit domino in favor of an approach considered to be more in line with commercial expectations. Under the U.C.C. risk essentially follows possession and control over the thing, regardless of who is deemed to be the owner at the time of the loss. See U.C.C. §§ 2-509, 510. Modern civil codes uniformly provide that the risk of loss is transferred to the buyer at the moment of delivery. See Article 522 of the


Greek Civil Code and Article 2324 of the Civil Code of Ethiopia.

The first paragraph of revised Article 2467 follows the modern approach by providing that risk of loss of the thing sold is transferred at the moment of delivery.

The second paragraph of that article also changes the law. It provides that, after delivery, risk of loss is transferred to the buyer even if the goods do not conform to the specifications of the contract, if the buyer does not act “in the manner required to dissolve the contract.”

When the buyer receives nonconforming goods, if the nonconformity makes the goods unsatisfactory to him, he should promptly notify the seller of that fact. It is reasonable to assume that if the buyer does not seasonably move to either (1) have the contract rescinded, or (2) have the goods replaced by the seller, the goods delivered, though nonconforming, are nonetheless satisfactory to him. In such a situation, basic notions of fairness and good faith would seem to require that the buyer bear the risk of loss or deterioration of the thing sold caused by a fortuitous event. See C.C. Arts. 1759, 1983 (rev. 1984).

II. Sales of Movables

2.1 Preliminary RemarksOne of the changes brought about by the industrial revolution was a transformation of society's conception of wealth. Formerly, wealth had been primarily associated with the ownership of immovable property. Since the industrial revolution, new developments in industry and technology have led to a growing importance of things that are movable in nature. Motor vehicles, heavy industrial equipment, drilling rigs, and sophisticated machines of every type are examples of assets having a value that is, in many instances, considerably greater than that of immovable property. There were few such valuable movables in this state at the time the Louisiana Civil Code of 1870 was enacted; so it is no wonder that the Louisiana Civil Code, like the Code Napoleon, contained no section devoted to the sale of movable property.

The Louisiana State Law Institute, as part of its revision of the law of sales, considered the possibility of adopting Article 2 of the U.C.C. in globo. After considerable study and debate, the Council decided that certain provisions of the U.C.C. did not mesh with fundamental principles of Louisiana civil law. The Law Institute also concluded that the solutions contained in a number of sections of the U.C.C. were, as a matter of policy, inappropriate. Accordingly, the Institute's Council decided that the provisions of the U.C.C. that were worth adopting should be incorporated into the Louisiana Civil Code, but only after appropriate changes had been made in the language of those provisions so that they might conform to civilian terminology. It was also decided that the new articles governing movables be collected in a separate chapter in the title on sales to be exclusively devoted to the sale of movable property. In this revision, Chapter 9 of the title on sales, comprising Articles 2601 through 2617, is devoted to sales of movable property.

2.2 Additional Terms in the AcceptanceAccording to the “mirror image” rule, which prevailed at common law, for an Sale: Exposé des motifs (2012 dwg) of 63

acceptance to be conclusive for contract-formation it had to conform to the terms of the offer in every respect. If it failed to do so, it would be deemed to be a counteroffer and, regardless of the intent of the parties, would not serve to form a contract. See 1 Litvinoff, Obligations 337 (1969). The arbitrary nature of that rule created numerous problems, since it ran counter to the normal practices and expectations of merchants. It was a trap for the unwary and a haven for the welsher. See White and Summers, Uniform Commercial Code 22 (1980).

Under the regime of the Louisiana Civil Code of 1870, the same approach followed at common law prevailed in Louisiana. The acceptance had to in all respects conform to the terms of the offer, and any conditions, limitations, or modifications were taken to be counteroffers. See C.C. Arts. 1805, 1806 (1870). That approach was retained in the 1984 Obligations revision. Thus, revised Article 1943 provides: “An acceptance not in accordance with the terms of the offer is deemed to be a counteroffer.”

To deal with problems created by the “mirror image” rule the drafters of the U.C.C. introduced Section 2-207. That section sets forth rules designed to facilitate the sale in cases where the acceptance does not in every way conform to the terms of the offer.

Similarly, the 1980 convention on international sales rejects the “mirror image” rule concerning the form of acceptance required for contract formation. Thus, under Section 2 of Article 19 of that convention, additional or different terms contained in the acceptance which do not materially alter the terms of the offer do not render the acceptance invalid unless the offeror promptly objects to the discrepancy. If the offeror does not so object, the additional terms contained in the acceptance are incorporated into the contract. See Winship, “Formation of International Sales Contracts Under the 1980 Vienna Convention,” 17, The International Lawyer, no. 1, p. 1.

An exchange of forms containing several varying provisions should not prevent the formation of an agreement when the parties intend to contract. When it is clear that the parties have agreed to undertake a sale transaction, one of them who later wishes to retract upon discovering that he has made a bad bargain, or is now able to strike a better deal, should not be able to repudiate his obligations by way of an arbitrary technicality that is unresponsive to the way sales are made in the business world of today.

While the U.C.C. covers the problem of the “battle of the forms” in one section -- Section 2-207 -- for technical reasons it is preferable to divide the subject into two separate articles. That is so because when the writings of the parties differ two different situations may arise: On the one hand, the writings of the parties may evince an intention to form a contract, and the problem is one of determining the terms of such a contract. On the other hand, there is the situation where the writings of the parties have not formed a contract, yet the parties are, in fact, performing. Thus, in this revision those two situations are addressed in two separate articles: revised Articles 2601-2602 of the Louisiana Civil Code.

Article 2601 attempts to eliminate the controversy that has arisen in other states with respect to what constitutes a “material alteration” under Section 2-207 of the U.C.C. Compare Marlene Industries Corp. v. Carnac Textiles, Inc., 45


N.Y.2d 327, 380 N.E.2d 239 (Ct.App., N.Y., 1978) with Dorton v. Collins, 453 F.2d 1161 (U.S. 6th Cir.1972), where two distinguished courts gave different answers to the question whether an arbitration clause set forth in the acceptance constitutes a material alteration of the offer. Article 2601 attempts to clarify that problem, first of all, by defining the term “material alteration” generally: Thus, additional terms in the acceptance constitute a “material alteration” of the offer when it must be presumed that the offeror would not have contracted on those terms.

Article 2602 covers the situation where, in spite of the fact that the writings of the parties have not formed a contract, the parties are, in fact, performing. The Article clearly indicates that, in such a situation, the terms of the contract shall be those as to which the two writings agree plus any term that may be added by suppletive law.

That Article also seeks to eliminate an unfair advantage that might be derived by the party who sends the last communication under current interpretation of Section 2-207 of the U.C.C. Under what has come to be known as the “last shot” doctrine, the party who sends the last communication usually gets his non-conforming terms incorporated into the agreement, unless the other party promptly signifies his dissent thereto. See Roto-Lith Ltd. v. F.P. Barlett & Co., 297 F.2d 497 (U.S. 1st Cir.1962). In Roto-Lith, the buyer sent a purchase order to the seller for a quantity of cellophane adhesive manufactured by the latter. Subsequently the seller returned an acknowledgment that contained a disclaimer of all warranties on the product. The buyer was silent as to the disclaimer. He neither assented nor objected to it. The emulsion was shipped thereafter and was received and paid for by the buyer. The problem arose when the emulsion failed to perform its intended function and the buyer instituted an action for damages. The court held that a responding document “which states a condition materially altering the obligation solely to the advantage of the offeror” was “expressly conditional” within the meaning of U.C.C. Section 2-207(1). Id. at 499-500. The seller's supposed acceptance was, therefore, a counteroffer which was accepted when the buyer received and used the goods.

It is quite clear that under the Roto-Lith approach the party who fortuitously sends the responding, or last, form will get all of his terms incorporated into the agreement where performance takes place and the other party remains silent. That approach often gives an unfair and unbargained for advantage to the party who “fires the last shot.” Such a solution is contrary to basic principles of Louisiana obligations law, since it fails to require the consent of the party receiving the last shot. Under revised Article 2602, the party who sends the last communication would not derive an unfair advantage therefrom.

2.3 Obligation To Deliver Conforming ThingsAccording to Article 2475 of the Louisiana Civil Code of 1870, the seller had two principal obligations: delivery and warranty of the things sold. While the Civil Code of 1870 devoted no less than six articles to regulating the extent and effects of the obligation of delivery with respect to immovables, it was conspicuously silent with respect to the obligation of delivery concerning movables. That silence may have been due to the fact that civil codes were


not conceived as instruments to regulate commercial sales. At the time the Louisiana Civil Codes of 1825 and 1870 were enacted, most major European countries had commercial codes regulating, among other things, commercial sales.

Revised Article 2603 provides that the seller must deliver “things conforming to the contract.” Clearly, delivery of non-conforming goods would have been a breach of the obligation of delivery and, consequently, a breach of contract under the Civil Code of 1870. However, due in part to the fact that the Civil Code did not regulate at length the seller's obligation of delivery with respect to movables, Louisiana courts experienced some difficulty in distinguishing between problems of faulty performance of the obligation of delivery -- i.e., delivery of goods that did not conform to the specifications of the contract -- and problems of delivery of defective goods or redhibition. Thus, in Walton v. Katz & Besthoff, Inc., 77 So.2d 563 (La.App.Orl.Cir.1955), the plaintiff had bought from the defendant paint advertised as “mildew resistant,” a quality verbally re-asserted by the defendant's employee. The paint was fine in every respect, except that it did not resist mildew. The court sustained a plea of prescription over the buyer's objection that the suit was one for breach of contract, which called for application of a 10-year prescriptive period, rather than a suit for redhibition.

That same court held, however, in Victory Oil v. Perret, 183 So.2d 360 (La.App.4th Cir.1966), where the plaintiff oil company had contracted to supply to the defendant for use in the latter's truck diesel fuel suitable for that purpose, but had delivered, in part, diesel fuel of a type that caused damage to the truck, that the oil company had failed to fulfill its contractual obligations and that the rules of redhibition were not applicable, stating that the seller did not deliver that for which the parties had contracted.

On the other hand, in Reiners v. Stran-Steel, 317 So.2d 657 (La.App.3d Cir.1975), a case involving the supplying of incorrect rafters for the construction of a steel building, another appellate court analyzed the problem as one involving redhibition. The court held, however, that since the “defects” in the supplying of the rafters were corrected prior to the plaintiffs bringing suit, such defects could not properly be grounds for redhibition, but gave rise only to reduction of the price or quanti minoris. Id., at 660.

Revised Article 2603 attempts to solve that conflict in the jurisprudence by stating, categorically, that the seller of movables must deliver things conforming to the contract. Under this article it becomes clear that where the seller delivers goods that do not conform to the specifications of the contract, he has breached the contract of sale regardless of whether the goods actually delivered are defective or not.

2.4 Buyer's Right of inspectionRevised Article 2604 provides that a buyer has a right to inspect things delivered pursuant to a contract of sale.

The buyer's right of inspection is accessory to his right to receive goods that conform to the specifications of the contract. See revised Article 2603. Unless the parties stipulate otherwise the buyer has a right to inspect the goods before making payment.


The right of inspection before making payment does not exist, however, in documentary sales -- as, for instance, in a C.I.F. contract -- since in such agreements the buyer must make payment upon the seller's tender of the required documents, regardless of whether the goods arrived at the point of destination. Nevertheless, even in the case of documentary sales, the buyer has a right to inspect the goods in order to ascertain whether they are in conformity with the agreement, and may reject them if they do not so conform.

2.5 Acceptance And Rejection of Nonconforming ThingsAccording to revised Article 2605, a buyer may reject nonconforming things within a reasonable time. To make effective a rejection of such things the buyer must give reasonable notice to the seller. A buyer's failure to make an effective rejection shall be regarded as an acceptance of the things.

After the buyer has had sufficient time to inspect the goods delivered, it is reasonable to require that he either seasonably notify the seller of any nonconformity of the goods to the specifications of the contract or be deemed to have accepted the goods. There are several policy reasons militating in favor of this requirement. First of all, the seller may be able to cure the defect in delivery, and, if he is capable of doing so seasonably, he should be allowed to do so. Second, if promptly notified of the rejection, the seller may be in a better position to sell the goods to another buyer. Third, in many cases the buyer's neglect to inform the seller promptly that the goods are nonconforming amounts to a violation of the overriding duty of good faith. See C.C. Arts. 1759, 1983 (rev. 1984); 2 Litvinoff, Obligations 5-9 (1975). Moreover, the buyer should not be allowed to “sit on the goods” and speculate on the market's fluctuations at the seller's peril and risk.

Thus, it appears quite reasonable for the law to provide that when the buyer does not seasonably notify the seller that the goods are rejected due to their nonconformity, the buyer who has had a reasonable opportunity to inspect the goods is deemed to have accepted them.

As the comments to revised Article 2605 indicate, that rule should not be applied to a purchaser of consumer goods. The buyer of consumer goods cannot be held to the same standards of commercial reasonableness as the merchant buyer. That is so because the consumer lacks the resources and “know how” that a merchant buyer is presumed to have. Even the consumer, however, must act reasonably and in good faith. See C.C. Arts. 1759, 1983 (rev. 1984).

Where the buyer accepts the delivered goods with knowledge that they do not conform to the specifications, it is fair to preclude him from rejecting the goods thereafter on grounds of nonconformity. In such an instance the buyer, having willingly accepted a variance in the object of the contract, should not be allowed to repudiate his acceptance and reject the goods. Aside from the provisions of this Article, it would seem that, in such a situation, the buyer would be precluded from rejecting the goods on grounds of nonconformity by the overriding principle of good faith and the doctrine of contra factum proprium. See C.C. Arts. 1759, 1983 (rev. 1984). Hebert v. McGuire, 447 So.2d 64 (La.App. 4th Cir.1984). Thus, according to revised Civil Code Article 2606, a buyer who, with knowledge, accepts nonconforming things may no longer Sale: Exposé des motifs (2012 dwg) of 63

reject those things on grounds of that nonconformity, unless the acceptance was made on the reasonable belief that the nonconformity would be cured.

As the comments indicate, the provisions of Article 2606 are consistent with the principle of contractual freedom. Where the buyer accepts the delivered goods with knowledge that they do not conform to the specifications, the buyer may be presumed to consent to an alteration in the object of the sale. It follows that he has agreed to enter into a sale whose object is the thing that was actually delivered. Concerning that -- new -- sale there are no grounds to rescind for nonconformity, because, by virtue of the acceptance, the thing delivered now conforms to the specifications of the sale. See C.C. Art. 1983 (rev. 1984).

Nevertheless, when the buyer reasonably believes that the nonconformity will be cured by the seller, the buyer may subsequently reject the goods on grounds of nonconformity if the nonconformity is not cured. That is so because, in such a situation, the buyer has only conditionally accepted nonconforming goods. The seller's failure to correct the nonconformity constitutes a resolutory condition. See C.C. Arts. 1767, 1773, 1775 (rev. 1984).

2.6 Partial AcceptanceIt is not unusual for the object of a contract of sale to consist of more than one commercial unit. When a shipment of goods contains several commercial units of a certain thing, one or more of such units may not conform to the specifications of the contract. In such a situation the buyer finds himself with goods that are useful for the intended purpose -- the contractually conforming units -- and goods that are not -- the contractually nonconforming units. In such an instance it seems inequitable, as well as economically inefficient, to make the buyer either accept or reject the entire shipment. Revised Article 2607 allows the buyer to accept those commercial units of the shipment that conform to the specifications of the sale and reject those that do not.

Louisiana courts have on several occasions been confronted with the problem of determining the buyer's right to accept part of the things delivered where a shipment of goods contained both conforming and nonconforming goods. The matter has arisen primarily in redhibition cases. In Bates v. Lilly Brokerage Co., 159 So. 457 (La.App.2d Cir.1935), the plaintiff bought 200 second-hand barrels to be used for vinegar. Upon inspection, he discovered that 150 barrels had contained an acid that made them unfit for that use. The court held that the buyer was entitled to keep the contractually conforming units and return the remainder against t

he defendant's contention that the plaintiff had to return all or none. The court formulated the rule thusly: “If several things sold together are independent of each other and do not form a whole, and if the value of each thing is not increased by its union with the rest, a redhibitory action can be maintained only for those things that are found to be defective, and the contract must stand and be carried into effect in relation to the others.” Id. at 459.

In Huntington v. Lowe, 3 La.Ann. 377 (1848), the purchaser of pork by hogheads discovered that several hogheads were unsound. The Louisiana Supreme Court held that in such a situation the buyer was entitled to retain the sound hogheads and return the unsound ones. Id. at 379. It is noteworthy


that in Huntington, just as in Bates, supra, the vendor claimed that the buyer had either to keep or to return the entire shipment. The court in Huntington countered the seller's argument thusly: “The rule that the redhibitory vice of one of several things sold together gives rise to the redhibition of all, applies to a limited class of cases; those where one of the things would not have been bought without the other. The illustrations given in the code are a pair of matched horses or a yoke of oxen. The rule is a reasonable one, and we have narrowed it from the Roman law. ‘Quumautem jumenta paria veneunt, edicto expressum est ut, cum alterum in ea causa sit ut redhiberi debeat, utrumque redhibeatur; in qua re tam emptori quam venditori consulitur, dum jumenta non separantur.’ But when the things are independent of each other, the redhibitory action lies for that which is affected by the redhibitory vice. The example given by the civilians is a lot of unmatched horses or a flock of sheep. If one proves to be unsound, the partial dissolution of the sale is permitted.” Id. at 379. Under revised Article 2607, as under these prior decisions, the buyer may accept conforming commercial units and reject nonconforming ones. In case of partial acceptance the buyer “must pay at the contract rate for any things that are accepted.”

2.7 Merchant Buyer's Duty Upon RejectionWhen the buyer rejects goods that have been delivered to him by the seller, revised Article 2608 requires that he take certain measures to preserve the integrity of the goods delivered. It should be noted, however, that in such instances the buyer, even though following the seller's instructions in accordance with the provisions of this Article, is not a mandatary of the seller. In other words, the fact that the buyer has exercised the right of rejection does not transform the contract of sale into one of agency. Rather, the buyer at that point becomes a kind of negotiorum gestor. See C.C. Arts. 2295-2300 (1870). Thus, the rejecting buyer is held to the standard of a prudent administrator in the care and handling of the goods for the seller's account. See C.C. Art. 2298 (1870). As in the case of a gestor, the buyer who undertakes to handle and care for rejected goods pursuant to Article 2608 should be entitled to reimbursement for his expenses. See C.C. Art. 2299 (1870).

In H.T. Cottam & Co. v. Moises, 149 La. 305, 88 So. 916 (1921), the buyer breached a contract of sale of goods by refusing to accept delivery. The seller then proceeded to resell the goods on his own account, and sued the buyer for the difference between the contract price and the price obtained for the goods. The defendant argued that the plaintiff was not entitled to judgment, among other reasons, because the goods had been sold on the plaintiff's rather than on the defendant's, account. The Louisiana Supreme Court rejected that argument. According to the Court: “It is immaterial that the plaintiffs ordered the goods sold for their account instead of for the account of the defendant.... As the sale of goods is only a method of determining the amount of damages, it is immaterial for whose account the sale is made. But it is more rational that it be made for account of the vendor, as he remains the owner of the goods and the price is to be paid to him. It would be a contradiction to say that the goods are sold for account of the purchaser, who has not paid the price, and who, therefore, was not the owner of the goods, and who was not to get the proceeds of the sale.” Id. at 917.


Although, in the Cottam case the buyer was the breaching party, and it was the seller who was forced to resell the merchandise, it would seem that its rationale should be applicable to instances where a buyer is faced with the need to dispose of unwanted goods. Under revised Article 2608, as in Cottam, the goods are sold for the account of the owner of the goods rejected: the seller. It should be noted, however, that this Article applies only to a situation where the seller delivers nonconforming goods and the buyer rejects them.

2.8 Purchase of Substitute Things By the BuyerAt common law, and under the U.C.C., the buyer's right to obtain substitute or replacement goods in the market upon the seller's breach is known as “cover”. In exercising the remedy of cover the buyer must, as in other cases, act in good faith. Thus, for example, the buyer cannot ordinarily cover with goods of a higher quality, even if they are commercial substitutes of the contract goods.

Under the traditional approach previously followed by the Louisiana jurisprudence, where the seller repudiates the agreement or fails to deliver conforming goods, the buyer's damages were measured by the difference between the contract price and the market price at the moment of the breach. See Hafner Mfg. Co. v. Lieher Lumber & Shingle Co., 127 La. 348, 53 So. 646 (1910); Palmer v. Smith Co., 165 La. 788, 116 So. 186 (1928); Lexington Candy Co. v. Prejean, 168 La. 1078, 123 So. 719 (1929); Burglass v. J.C. Healy, Co., 159 La. 393, 105 So. 384 (1925).

Where that formula is used in assessing the buyer's damages, it places the buyer in a better or worse economic position, depending on how promptly the buyer acts and what price fluctuations take place in the market. Moreover, under that approach the actual cost of the replacement or substitute goods that the buyer purchases, and the market price of those goods at the time and place of their acquisition, are irrelevant to the buyer's damage suit. Thus, if the seller repudiated a $50,000 contract for belts, and the buyer promptly obtained substitute belts for $60,000, if the market price at the time of the breach was $55,000, the buyer could recover only $5,000, and not the full $10,000 above the original contract price that it cost him to “cover.” That result seems impractical, since it discourages mitigation of damages by the buyer, as he seemingly proceeds at his own peril and risk when he goes to market to purchase substitute goods.

Revised Article 2609 rejects the traditional approach utilized by Louisiana courts in the past in favor of one more in line with the loss actually sustained by the buyer. Under Article 2609 the buyer may recover “the difference between the contract price and the price of the substitute things.” Thus, under revised Article 2609, the buyer may obtain substitute goods in the market without assuming the risk of price fluctuations. Also under that article, the buyer is precluded from speculating on price fluctuations at the seller's expense.

2.9 Cure of NonconformityRevised Article 2610 allows the seller an opportunity to cure a nonconforming performance of the contract of sale in instances where “the time for performance has not yet expired or when the seller had a reasonable belief


that the nonconforming things would be acceptable to the buyer.” Revised Article 2610 is premised on the principle that, whenever possible, the parties' bargain should be preserved. When the time for performance has not expired, the buyer has lost nothing if the seller is allowed to correct an improper performance within the time limitations set forth in the agreement. Also, where because of a prior course of dealing between the parties or other circumstances, it is reasonable for the seller to have assumed that the buyer would accept the goods delivered, even though they did not conform to the specifications of the contract, it is reasonable to allow the seller to cure the nonconformity.

It is clear, however, that in either case of improper performance the seller must have acted in good faith. Thus, if the seller intentionally ships goods of an inferior quality ahead of time, in the hope that the buyer will accept them, the seller will be liable to the buyer for breach of contract and will not, ordinarily, have a right to cure under Article 2610. See C.C. Arts. 1759, 1983 (rev. 1984).

As noted in the comments to revised Article 2610, the seller's right of “cure” does not arise unless the buyer rejects the goods delivered. That is so because, when the buyer accepts nonconforming goods, theoretically at least, there is nothing to cure.

There may be instances, of course, where a nonconforming delivery is very much to the buyer's advantage and the seller, consequently, would be interested in rectifying the delivery. Thus, for instance, instead of delivering 500 assembly-made polyester suits, the seller might mistakenly ship 500 hand-made suits of the finest silk. In such a situation the seller would normally be entitled to reclaim his merchandise and to ship the contracted-for suits. But that would not be a matter of “cure”. That is a problem to be resolved under general principles of the law of obligations, such as the doctrine of error. See C.C. Arts. 1948-52; 1759, 1983 (rev. 1984).

2.10 Ownership of Things in TransitThe provisions once contained in R.S. 45:901-955, which reproduced the Uniform Bills of Lading Act, have been repealed and replaced by Chapter 7 of R.S. 10, which contains provisions on documents of title. As a result, there is no clear provision in present Louisiana law governing the effects of the form of the bill of lading in relation to ownership of the things that are shipped under such bills, a matter formerly governed by R.S. 45:940. The repealed provisions were intended, no doubt, also to govern transfer of risk under the traditional principle res perit domino -- risk follows ownership.

Revised Article 2613 is designed to fill this gap in Louisiana law. It is not a verbatim reproduction of R.S. 45:940, as the second sentence of the second section -- which practically rendered ineffectual the form of the bill of lading -- has been eliminated. Under the new Article it is the form of the bill of lading that clearly establishes ownership of the things, in a manner consistent with the intendment of the Louisiana jurisprudence. See California Fruit Exchange vs. John Meyer, Inc., 166 La. 9, 116 So. 575 (1928).

2.11 Judicial DissolutionArticle 2564 of the Louisiana Civil Code of 1870 had a peculiar history. Its Sale: Exposé des motifs (2012 dwg) of 63

French equivalent, Article 1657 of the Code Napoleon, reads: “In the sale of movable things dissolution takes place of right for the benefit of the seller after expiration of the time agreed for the payment.” Article 89, at page 362, of the Louisiana Digest of 1808 reproduced the text of the French article, but the revision of 1825 adopted the present text. See 3 Louisiana Legal Archives, Part II at 1408 (1942). The main difference between the texts of 1808 and 1825 is that the former allows dissolution of the sale of movables only for failure to pay the price and in favor of the seller, while the latter seems to allow dissolution for any kind of failure to perform and in favor of both parties. Those two approaches appear combined in Article 1517 of the Italian Civil Code.

Pothier is silent on this matter. Troplong treats it extensively and traces the origin of the French article to ancient French coutumes. See Troplong, Le droit civil expliqué--De la vente 346-350 (1836). In the ancien droit dissolution of a sale of movables could be sought only for the buyer's failure to pay the price and, moreover, could not be invoked by the buyer. See Troplong at 335.

The source of the text of Civil Code Article 2564 as it appeared in the Civil Code of 1870 cannot be readily ascertained. Be that as it may, that text seems to be more consistent with modern law, as confirmed by the Italian example. Louisiana jurisprudence, moreover, found the Article useful. See Madere v. Cole, 424 So.2d 1125 (La.App. 1st Cir.1982). For that reason its substance has been retained in revised Article 2615.

Revised Article 2615 eliminates the expression “of right” -- intended as a literal translation of de plein droit -- because it is equivocal and lends itself to be interpreted as meaning that certain effects take place automatically, which is not so. See 2 Litvinoff, Obligations 531 (1975). See also Atkins v. Garrett, 252 F. 280 (D.C.1917).

Revised Article 2615 only contemplates judicial dissolution. That must be stressed because the new Louisiana law of obligations, besides judicial dissolution, also contemplates nonjudicial dissolution by a party's initiative. See C.C. Arts. 2013-2016 (rev. 1984). In the case of nonjudicial dissolution there is no occasion for a court to grant an additional time to perform.

2.12 Payment Against DocumentsUnder revised Article 2617, when the contract of sale calls for “payment against documents,” the seller must promptly tender the required documents to the buyer, and the buyer must make payment upon the seller's tender of the required documents, even if the goods have not yet arrived. Examples of sales requiring the buyer to make “payment against documents” are the following types of commercial sales: “F.O.B. vessel,” “F.A.S.,” “C.I.F.,” and “C. & F.” Where the agreement requires the buyer to make payment for the goods upon the seller's tender of the required documents, the transaction is known as a “documentary sale.” See 3 Anderson, Uniform Commercial Code Series 481 (1981); Henson, The Law of Sales 67-68 (1985).

A documentary sale normally envisions a resale of the goods by the buyer. Thus, it is extremely important, where a documentary sale is involved, that the seller procure a bill of lading covering the goods in the quantity called for by the contract, since the resale by the buyer is normally made by negotiating


the bill of lading. The contemplation of resale by assignment of the documents also accounts for the rule that in a documentary sale the seller may not deliver, nor the buyer demand, the goods as a substitute for the documents. See, for example, U.C.C. § 2-320(4), which, with respect to “C.I.F.” and “C. & F.” contracts -- both of which are documentary sales -- provides: “Under the term C.I.F. or C. & F. unless otherwise agreed the buyer must make payment against tender of the required documents and the seller may not tender nor the buyer demand delivery of the goods in substitution for the documents.”

It is important to note, however, that even though in a documentary sale the buyer must pay for the goods upon delivery of the documents -- which, in most cases, arrive before the goods are delivered -- payment by the buyer does not constitute acceptance of the goods. Thus, by making payment the buyer does not waive or forfeit any remedies that he may otherwise have, or even impair his right to inspect the goods after they are delivered. See 3 Anderson, Uniform Commercial Code Series 488 (1981). That point is made perfectly clear by the redactors of the U.C.C. in comment 12 to Section 2-320, where it is said: “Under a C.I.F. contract the buyer, as under the common law, must pay the price upon tender of the required documents without first inspecting the goods, but his payment in these circumstances does not constitute an acceptance of the goods nor does it impair his right of subsequent inspection or his options and remedies in the case of improper delivery. All remedies and rights for the seller's breach are reserved to him. The buyer must pay before inspection and assert his remedy against the seller afterward unless the nonconformity of the goods amounts to a real failure of consideration, since the purpose of choosing this form of contract is to give the seller protection against the buyer's unjustifiable rejection of the goods at a distant port of destination which would necessitate taking possession of the goods and suing the buyer there.”

III. Sales of Immovables

3.1 Formal RequirementsAs under the source provision of the same number, revised Article 2440 requires that sales of immovables be made either by authentic act or under private signature. The Article allows testimonial proof of an oral sale pursuant to the provisions of Article 1839 of the Louisiana Civil Code.

Revised Article 2440 adds nothing of substance to the provisions of Civil Code Article 1839, which deals with all transactions affecting immovables. Thus, it might fairly be asked whether an article reproducing the substance of Article 2440 is necessary. Technically speaking, the answer is no. However, in order to avoid all speculation concerning whether the failure to include the provisions of that Article signifies an intent to change the law concerning sales of immovables, the revised Article particularizes for the law of sales the principle set forth in Article 1839.

3.2 Manners of SaleUnder the scheme of the Louisiana Civil Code of 1870 three different manners or methods of selling immovable property were recognized:

1) sales at a price per measure;


2) sales of a “certain and limited body;” and

3) sales per aversionem.

When immovables are sold on the basis of a price per measure, the seller must give -- and the buyer is, consequently, entitled to receive -- the exact quantity stipulated in the act of sale. C.C. Art. 2492 (1870); C.C. Art. 2492 (rev. 1992). If the real measure of the immovable is less than what was stipulated in the act of sale, the buyer is entitled to a diminution of the price; and in instances where the immovable conveyed is larger in measurement than what is provided in the act of sale, the seller is entitled to a proportionate increase in the price. C.C. Art. 2493 (1870).

Louisiana courts have held that the question whether a particular sale is one “by measure” or of a different type must be answered from the recitals in the act of sale. See Campbell v. Cook, 51 La. 269, 91 So. 731 (1922). In Phelps v. Wilson, 16 La. 185 (1840), the immovable conveyed was described in the act of sale as follows: “A parcel of land situated, lying and being in the parish of Rapides, on the south side of Red River, being section number 26, township 3 north, range 1 east, containing eighty-nine 50-100 acres, agreeably to the register's certificate, number 2036, together with all the improvements and appurtenances thereto belonging.” Id. at 186. A post-sale survey revealed that there was a deficiency greater than one-twentieth of the acreage conveyed. The court held that the sale was of a “certain and limited body.” Since the discrepancy exceeded one-twentieth of the land conveyed, the court held that the vendee was entitled to a reduction of the price under Article 2494 of the Civil Code of 1870.

The text of Article 2492 of the Louisiana Civil Code (1870), dealing with sales of immovables at a price per measure, contained several ambiguities. First of all, the meaning of the phrase “can not conveniently do it”, with respect to the seller's obligation to deliver the full, specified extent of the premises, was unclear. The word “convenience” is inexact and subject to several different interpretations. It would seem that only the seller's inability-in-fact to convey the contractually stipulated extent of the premises should exonerate him from specific performance.

Secondly, Article 2492 did not clearly state the nature of the buyer's right in case of partial nonperformance by the seller of his obligation of delivery. Lastly, Article 2492 failed to provide with clarity the seller's obligation, and the buyer's correlative right, in cases where the seller is unable to deliver the full extent of the premises.

Revised Article 2492 combines the substance of Articles 2492 and 2493 of the Louisiana Civil Code of 1870. It allows the buyer to recede from the sale “when the actual extent of the immovable sold exceeds by more than one twentieth the extent specified in the contract.”

Article 2494 of the Louisiana Civil Code of 1870 dealt with sales of “certain and limited bodies” or of “distinct and separate objects.” Those are sales where the property is sold with an indication of quantity, but for a lump sum, rather than a price per measure. For such instances, Article 2494 provided that, should there be a discrepancy between the measurements as designated in the act of sale and the real measurements of the immovable, the seller was not entitled to a price increase in the case of an overplus, and the buyer was Sale: Exposé des motifs (2012 dwg) of 63

not entitled to a price reduction in case of a deficiency, “unless the real measure comes short of that expressed in the contract, by one twentieth part, regard being had to the totality of the object sold....” C.C. Art. 2494 (1870).

Thus, it would seem that, concerning the right to compensation for discrepancy in measurement, the only difference between sales by measure and sales of “certain and limited bodies” was that in the latter type of sale there was no room for price adjustment unless the discrepancy consisted of the real measurement's falling short of the stipulated measurement by at least five percent.

Under revised Article 2494, when the sale is made with indication of the extent of the premises but for a lump price, there is no right to an increase or reduction in the price for a discrepancy in the measurement of the premises, unless the surplus or shortage exceeds by more than five percent the extent specified in the act of sale.

Under the provisions of Article 2495 of the Louisiana Civil Code of 1870, when the immovable sold was “designated by the adjoining tenements and sold from boundary to boundary,” the law did not allow an increase or diminution of the purchase price on account of a discrepancy. C.C. Art. 2495 (1870). That was the so-called sale per aversionem.

Revised Article 2495 effects a merger of Articles 2494 and 2495 of the Louisiana Civil Code of 1870. As the comments indicate, this Article changes the law in part in that it makes every sale of immovable property described as constituting a certain and limited body a sale per aversionem. This combination of the substance of Articles 2494 and 2495 should serve to eliminate much of the confusion generated by the obscure text of Articles 2494 and 2495 of the Louisiana Civil Code of 1870.

IV. Delivery and Eviction

4.1 Construction of Ambiguities; Waiver of WarrantyWhile the warranties that protect the buyer against eviction from, and redhibitory vices in, the thing sold are subject to waiver, it is well established that three elements must exist before a waiver is held to be effective:

(1) The waiver must be written in clear and unambiguous terms;

(2) The waiver must be contained in the sale and -- where there is one -- the chattel mortgage document; and

(3) The waiver must either be brought to the attention of the buyer or explained to him.

See: Hob's Refrigeration v. Poche, 304 So.2d 326 (La.1974); Roy v. Cuccia, 298 So.2d 840 (La.1974); Prince v. Paretti Pontiac, 281 So.2d 112 (La.1973); Media Prod. v. Mercedes-Benz of North Amer., 262 La. 80, 262 So.2d 377 (La.1972).

Terms such as “no warranties of any kind or character” and “sold as is” have been repeatedly held not to have satisfied the requirement that the terms of the waiver shall be clear and unambiguous with respect to the warranty of fitness. See Dunlap v. Chrysler Motors, 299 So.2d 495 (La.App. 4th Cir.1974); Lee v. Blanchard, 264 So.2d 364 (La.App. 1st Cir.1972); McLain v. Cuccia, 259 Sale: Exposé des motifs (2012 dwg) of 63

So.2d 337 (La.App. 4th Cir.1972); Juneau v. Bob McKinnon Chevrolet, 260 So.2d 919 (La.App. 4th Cir.1972); and Stumpf v. Metairie Motor Sales, 212 So.2d 705 (La.App. 4th Cir.1968).

Revised Articles 2474 and 2475 reproduce the substance of the source provisions on which the above cited cases are based. Accordingly, the same results reached in those decisions should obtain under this revision.

4.2 Methods of Making DeliveryRevised Article 2477, involving the methods of making delivery in sales of both movable and immovable property, effects a merger of Articles 2477-2479 of the Louisiana Civil Code of 1870. As the comments indicate, the revised article changes the law insofar as it extends to acts under private signature the presumption that former Civil Code Article 2479 created for authentic acts. As explained below, that change is consistent with the legislative history of Article 2479 (1870).

Article 2479 of the Louisiana Civil Code of 1870 provided that delivery of immovables accompanied “the public act which transfers the property.” Although it could have been argued that “public act,” as used in the article, is synonymous with authentic act, Louisiana courts indicated that this was not so. In the case of Potts v. Reynolds, 131 La. 421, 59 So. 837 (La.1912), the supreme court stated that an act of sale of land under private signature, duly recorded, should be interpreted to be in accordance with the provisions of Article 2479 of the Louisiana Civil Code.

Moreover, the origin and history of Article 2479 indicate clearly that the term “public act” therein was not meant to be synonymous with the term “authentic act.” Article 2479 provided as follows:

“The law considers the tradition or delivery of immovables, as always accompanying the public act, which transfers the property....”

In the Projet du Gouvernement (1800), Book III, Title XI, Article 25, it was stated:

“The tradition of immovables is accomplished by the act alone which transfers the ownership.”

Article 1605 of the Code Napoleon provides as follows:

“The obligation to deliver immovables is fulfilled by the seller when he has delivered the keys, if it is a building, or when he has delivered the titles of ownership.”

Article 29 of the Louisiana Digest of 1808 provided as follows:

“Tradition or delivery of immovables is made by the .... delivery of the titles.”

The pertinent language of Article 2479 of the 1870 Code was first incorporated into Louisiana law as Article 2455 of the Civil Code of 1825. The redactors of the Code of 1825 introduced the present language without comment. Since the redactors consistently made comments concerning changes in the law when changes were intended, it is fair to conclude that they did not wish to effect a change in the law by the change in language in that instance.

Furthermore, the fact must be considered that Article 2479 was the only article in the Civil Code of 1870 addressing delivery in sales of immovables. Since the Louisiana Civil Code of 1870 admitted the validity of sales under


private signature, it is fair to assume that the redactors would have written a special provision to govern delivery in this type of sale had they intended for delivery thereunder to be effected in a manner different from that provided in Article 2479. Since there is no such special provision, one must conclude that the redactors intended for Article 2479 to govern both sales by authentic act and those under private signature.

4.3 Retention of Possession By Seller; Presumption of SimulationRevised Article 2480 reproduces the substance of the source provision to the effect that when the seller remains in possession of the thing sold a presumption of simulation arises.

A simulated sale is a feigned or pretended sale clothed with the formalities of a valid sale. In such a transaction the parties intend for the property to remain in the vendor's patrimony and for no price to be paid. It is a sham and as a result, an absolute nullity. See Succession of Terral, 312 So.2d 296 (La.1975); Succession of Webre, 247 La. 461, 172 So.2d 285 (La.1965); Spiers v. Davidson, 233 La. 239, 96 So.2d 502 (La.1957). When the thing sold remains in the corporeal possession of the seller, who acts as owner, to the injury of a third person, the rule that the delivery of immovables accompanies their transfer ceases, and the sale is presumed to be simulated. See Russell v. Culpepper, 344 So.2d 1372 (La.1977); Succession of Terral, supra; Succession of Webre, supra. To rebut this presumption the vendee must prove a good faith transaction resulting in a true alienation of ownership for a price. Succession of Terral, supra; Dietz v. Dietz, 227 La. 801, 80 So.2d 414 (La.1955); Succession of Combre, 217 La. 955, 47 So.2d 734 (La.1950); Holohan v. Guirovidr, 220 So.2d 527 (La.App. 4th Cir.1969); Litvinoff, “The Action In Declaration of Simulation In Louisiana Law,” in Essays on The Civil Law of Obligations 139 (Dainow, ed. 1969). In sum, the vendee must establish the parties' good faith intention to transfer ownership, the delivery of the property, and the existence of a price.

4.4 Incorporeals, Method of Making DeliveryThere were two articles in the Louisiana Civil Code of 1870 that addressed the requirements for a valid transfer of incorporeal rights: Articles 2481 and 2642. While Article 2481 provided two different ways in which incorporeals could be assigned -- that is, by the giving of the title or by the use made by the buyer of the title with the seller's consent -- Article 2642 only allowed a delivery to take place by “the giving of the title.” Thus, at first blush there would seem to be an inconsistency between the two articles.

That discrepancy between the texts of Articles 2481 and 2642 of the Louisiana Civil Code of 1870 -- paralleled by that existing between Articles 1607 and 1689 of the Code Napoleon -- may only be an apparent contradiction, however. That appears to be so because where the seller allows the buyer to make use of the title he is, in effect, allowing the buyer to avail himself of the title in order to enforce the claim, which amounts to a transfer of possession -- or to a giving -- of the title evidencing the claim.

Besides the apparent contradiction between Articles 2481 and 2642 of the Louisiana Civil Code of 1870, there were several theoretical problems with the language of Article 2481 of the Civil Code of 1870. First of all, many


incorporeals are simply not transferred by the handing over of the titles or by the use thereof made by the buyer with the seller's consent. Secondly, it is hard to imagine how the provisions of Article 2481 could have any practical bearing on the delivery of incorporeal immovables. Pursuant to those concerns, revised Article 2481 has amended the substance of Article 2481 by: 1) limiting the applicability of the article to transactions involving movables; and 2) eliminating the obscurities involved in the language of the source article.

It should be noted that the difficulties discussed above are not addressed by the French authorities. Baudry-Lacantinerie in his treatise on the civil law discusses the problems involved in the delivery of incorporeals under Article 1607 of the Code Napoleon -- the equivalent of Article 2481 of the Louisiana Civil Code -- but what he says therein is not useful for Louisiana. See 19 Baudry-Lacantinerie et Saignat, Traité théorique et pratique de droit civil, 300-302 (1908).

4.5 Delivery Excused Until Payment of the PriceWhere the seller has not granted the buyer a term for the payment of the price, the seller need not deliver the thing sold until the price is paid. See C.C. Art. 2487 (1870). The seller's right to withhold delivery until payment is made is known in continental doctrine as a “droit de retention” (right of retention). The basis of that right is the presumed will of the parties: In a bilateral contract neither party is presumed to bind himself except on condition that the other party perform his obligation. See 2 Planiol et Ripert, Traité élémentaire de droit civil, (Part 1) 856 (La.St.L.Ins. transl. 1959). Moreover, it should be noted that the doctrine of cause makes the obligations arising out of a bilateral contract correlative. In such a contract, the obligation of each party is the other's cause. See 1 Litvinoff, Obligations, 396-400 (1969); see also C.C. Art. 1908 (rev. 1984).

Along that line of thought, Louisiana courts have uniformly held that a buyer who is in default by failing to pay promptly cannot maintain an action for damages for the seller's failure to deliver. See Smith v. Anders, 148 La. 474, 87 So. 241 (La.1921); Bunge Corporation v. McGuffie, 317 So.2d 227 (La.App. 3d Cir.1975); Louisiana Farm Bureau Rice, Inc. v. Miller, 389 So.2d 840 (La.App. 3d Cir.1980).

Revised Article 2487 reproduces the substance of the source provision and declares that the seller “may refuse to deliver the thing sold until the buyer tenders payment of the price, unless the seller has granted the buyer a term for such payment.”

4.6 Condition of Thing At Time of DeliveryThe seller's obligation to deliver the thing sold implies that of conserving it and keeping it safe until the moment of delivery. See 2 Planiol et Ripert, Traité élémentaire de droit civil, (Part 1) 816 (La.St.L.Ins. transl. 1959). Before the 1984 Obligations revision, Article 1908 of the Louisiana Civil Code of 1870 provided that a person -- such as the seller before delivery -- who has a thing in his keeping must “take all the care of it that could be expected from a prudent administrator.” Since that obligation is merely incidental to the overriding duty of good faith -- see C.C. Arts. 1759, 1983 (rev. 1984) -- the


seller's obligation to care for the thing as a prudent administrator has not been altered in any way by the repeal of former Article 1908.

French doctrine is to the effect that the seller's obligation of preserving the thing does not mean solely that the seller should exercise due diligence to protect the thing against all risk of loss or theft; it also means that the seller must abstain from making alterations in the thing between the time of the sale and that of delivery, Planiol, supra, at 816.

Revised Article 2489 preserves the substance of the source provision. It states that the seller must deliver the thing in the condition that the parties “expected, or should have expected, the thing to be at the time of delivery, according to its nature.”

4.7 Eviction: General PrinciplesRevised Article 2500 reproduces the substance of Articles 2500-2502 of the Louisiana Civil Code of 1870. It changes the law only insofar as it gives legislative recognition to the danger of loss as a circumstance which is as operative as an actual loss. See Bonvillian v. Bodenheimer, 117 La. 793, 42 So. 273 (1906); McDonold & Coon v. Vaughan, 14 La.Ann. 716 (1859); Landry v. Gamet, 1 Rob. 362 (1842).

The seller is not responsible for the acts of persons not asserting any rights to the thing sold; thus, the dispossession of the buyer from the thing sold by a trespasser or other wrongdoer does not constitute eviction. It is only when the third party asserts a lawful claim to the thing sold, under color of title or otherwise, that the seller's obligation to warrant the buyer against eviction comes into play.

French doctrine and jurisprudence are to the effect that the fact that the buyer knows of a right in a third person that may be the basis for a disturbance does not give him a right to call his vendor in warranty; an actual disturbance in his peaceful possession of the property is required. See 2 Planiol et Ripert, Traité élémentaire de droit civil (Part 1) 827 (La.St.L.Ins. transl. 1959). Thus, where the buyer discovers a mortgage inscription in the public records on the immovable purchased, it has been held that he should wait until he is disturbed by the mortgage creditor. See Doriai, May 8, 1891, D. 92.2.541.

Louisiana courts have held that where a perfect title exists in a third person, whereby it is rendered certain that the vendor has no title, there is such an eviction as will authorize a call in warranty. Robbins v. Martin, 43 La.Ann. 488, 9 So. 108 (1891); Bickham v. Kelly, 162 La. 421, 110 So. 637 (1929). See also Kling v. McLin, 394 So.2d 1289 (La.App. 4th Cir.1981), where the court held that the buyer of an automobile is evicted where the vehicle sold is encumbered by a chattel mortgage at the time of the sale.

Thus, it is a well-established proposition that under Article 2500 of the Civil Code of 1870 the buyer did not have to be actually dispossessed of the thing in order to be entitled to call his vendor in warranty. In the leading case of McDonold & Coon v. Vaughan, 14 La.Ann. 716, 718 (1859), it was said: “It is true, ‘it is not necessary that a party should be actually dispossessed to constitute an eviction. It may take place while he continues to hold the property, if under a different title from that transferred to him by his vendor, as when he inherits it, or acquires it by purchase from the true owner.’ Landry


v. Gamet, 1 R. 362; Thomas v. Clement, 11 R. 397. Or, if a perfect title exists in a third person, whereby it is rendered legally certain that his vendor had no title.”

The last sentence of Paragraph one of revised Article 2500, like its source -- Article 2501 of the Louisiana Civil Code of 1870 -- , makes it quite clear that the seller has a duty to warrant the buyer against undeclared encumbrances burdening the thing sold. In fact, it has been held that under that article the seller will be liable to the buyer for undeclared encumbrances even if the encumbrances affecting the property were of record. See Young v. Sartor, 152 La. 1064, 95 So. 223 (1923). In Richmond v. Zapata Development Corp., 350 So.2d 875, 878 (La.1977), the Supreme Court stated: “Because the registry laws are intended only as notice to third parties and have no application whatever between parties to a contract, a vendee is under no obligation to search the record in order to ascertain what his vendor has sold and what it has not, and the vendee is entitled, as between himself and his vendor, to rely upon his deed as written.”

4.8 Modification Or Exclusion of WarrantySince a stipulation of non-warranty, unaccompanied by knowledge on the part of the buyer of the danger of eviction, will not prevent the buyer from recovering the purchase price in the event of eviction, the purchaser under such a deed who has not paid the price may suspend the payment if he is disquieted or has just reason to fear that he will be, until he is restored to quiet possession or the seller gives security. See Article 2557 of the Louisiana Civil Code of 1870; Gautreaux v. Boote, 10 La.Ann. 137 (1855). In Gautreaux the court stated: “But admitting it to be a correct construction of the act of sale that the vendors were to be subject to no warranty as to the validity of their title ... the only exception stated in Article 2557 to the rule there laid down, that the buyer may require security to be given to him when he has just cause to apprehend being disquieted by adverse claims, is the case where the buyer has been informed before the sale of the danger of eviction. The seller is bound to restore the price in case of eviction, even where it has stipulated that there should be no warranty, unless the buyer was aware at the time of the sale of the danger and purchased at his peril. Article 2557.” Id. at 139. See also Litvinoff, Sale and Lease in the Louisiana Jurisprudence, 346-47 (2d ed., 1986).

Articles 2504 and 2505 of the Louisiana Civil Code of 1870 were ambiguous with respect to the situation where the buyer, under a sale with no warranty, 1) was aware of the danger of eviction, and 2) purchased at his peril and risk, and 3) was thereafter evicted by a personal act of the seller. The ambiguity arises from the fact that it wasn't entirely clear whether the seller's accountability for his personal acts, as specially set forth in former Article 2504, applied not only to sales where the warranty was excluded, but also to those where, in addition to the exclusion of warranty, the buyer 1) was aware of the danger of eviction, and 2) purchased at his peril and risk.

It would seem that the seller's accountability for his own acts should obtain in both types of situation. By combining the provisions of former Articles 2504 and 2505, revised Article 2503 makes that quite clear.


4.9 Transferring One's Rights To A Thing (Sale By Quitclaim Deed)At common law, the distinguishing feature of a quitclaim deed is that it is an instrument that purports to convey nothing more than the interest or estate of the grantor, if any he has, at the time of the conveyance, rather than the property itself. See 3 A.L.R. 945 (1919); 26 C.J.S., Verbo Deeds, Section 8, at 181; Moelle v. Sherwood, 148 U.S. 21, 13 Sup.Ct. 426, 37 L.Ed. 351 (1893); Van Rensselaer v. Kerney, 11 How. 297, 13 L.Ed. 703 (1850). Conveyance by quitclaim deed does not include any implication that the vendor has good title to the property, or even that he has any title at all. Thus, the purchaser by quitclaim deed is put on immediate notice that he is not acquiring land but merely the interest of his vendor in the land. See Waterman et al. v. Tidewater Associated Oil Co. et al., 213 La. 588, 35 So.2d 225 (La.1947).

The idea of a quitclaim as transferring whatever right, title, or interest the grantor has seems to be an outgrowth of the common-law doctrine of estates. The term “quitclaim” does not appear in the Louisiana Civil Code, but a quitclaim deed may be properly characterized as a type of transfer by sale, since by using this device the transferor purports to alienate permanently to the transferee whatever interest -- including ownership -- the transferor possesses in the thing.

With respect to warranty, the Louisiana Civil Code of 1870 contemplated three types of sales: sales with warranty (former Civil Code Article 2501); sales limiting or excluding warranty (former Civil Code Article 2503); and sales at the buyer's peril and risk (former Civil Code Article 2505). Sale by quitclaim would be a fourth type under the scheme of that article.

There are many instances where it cannot be accurately ascertained whether a person owns an interest in a piece of immovable property. This is not an uncommon phenomenon in the area of successions, for example, particularly concerning the rights of illegitimates. In such instances a person may be asked to release any contingent interest that he might own in an immovable for a nominal or relatively low price. Clearly, in such a case, it could hardly be expected that the transferor should give the transferee any warranty with respect to the right -- or thing -- conveyed. See, generally, comment, “The Legal Effect of Quitclaim Deeds in Louisiana Law,” 23 Tul.L.R. 534 (1949); Rubin, The Work of the Louisiana Supreme Court for the 1947-48 Term, 9 La.L.Rev. 215, 220-21 (1949).

Louisiana courts have generally held that a sale by quitclaim deed is without warranty, and in Sabourin v. Jilek, 128 So.2d 698, 701 (La.App. 4th Cir.1961), the court even went so far as to state that “adding ‘without warranty’ to this deed of quitclaim changes nothing and is merely a redundancy, since under our law a quitclaim is a transfer of the vendor's interest without warranty.”

However, there have been hints in the jurisprudence suggesting that quitclaim and non-warranty may not always be synonymous in Louisiana. In Read v. Hewitt, 120 La. 288, 45 So. 143, 144 (La.1907), the court stated: “... the objection that the deed is without warranty has no force, for warranty is implied if not expressly excluded.” Moreover, in Waterman v. Tidewater, supra, Justice McCaleb saw a subtle distinction between sale without warranty and quitclaim. Waterman, 35 So.2d at 230-31.

It seems clear that the quitclaim deed is a useful form of conveyance. Sale by Sale: Exposé des motifs (2012 dwg) of 63

quitclaim deed is a sui generis type of sale that deserves legislative attention. Revised Article 2502 gives legislative formulation to the traditional understandings of the effects of a sale by quitclaim deed. The word “quitclaim” is not, however, utilized in the text of the article.

Since the decision of Read v. Hewitt, 120 La. 288, 45 So. 143 (La.1907), it has been consistently held that a quitclaim deed can be a basis for 10 year acquisitive prescription, because the mere use of such a deed is by itself insufficient to place the purchaser on notice concerning the possible invalidity of the vendor's title to the property. Land Development Co. v. Shultz, 169 La. 1, 124 So. 125 (La.1929); Perkins v. Wisner, 171 La. 898, 132 So. 493 (La.1929); Cherami v. Cantrelle, 174 La. 995, 142 So. 150 (La.1932); Smith v. Southern Kraft Corporation, 202 La. 1019, 13 So.2d 335 (La.1943); Bel v. Manuel, 234 La. 135, 99 So.2d 58 (La.1958); Board of Commissioners v. S.D. Hunter Foundation, 354 So.2d 156 (La.1977). Moreover, it has been held that the fact that a deed excludes all warranty of title or is a quitclaim deed may be regarded as an indication that the seller lacked faith in his title, but it does not necessarily indicate that the purchaser lacked faith in the seller's title to the property. See Land Development Co. v. Shultz and Cherami v. Cantrelle, supra.

On at least two occasions, however, Louisiana courts suggested that the rationale espoused by the jurisprudence following Read v. Hewitt, supra, is an unsatisfactory approach to the question of good faith. In Board of Commissioners, Lafourche Basin Levee District v. Elmer, 268 So.2d 274 (La.App. 4th Cir.1972), the court suggested that in each instance the buyer must legitimately believe that the seller had a good and valid title in order to be in good faith; any doubt as to the validity of the title expressed by the seller in the deed can reasonably raise a doubt in the mind of the buyer. In Board of Commissioners v. S.D. Hunter Foundation, 354 So.2d 156 (La.1977), the Louisiana Supreme Court qualified the rule of Read v. Hewitt by holding that where a deed discloses a basis for doubting the vendor's ownership of the property conveyed, then the vendor is not in good faith.

Revised Article 2502 codifies the rule of Read v. Hewitt, supra. This article makes it clear that: 1) a sale by quitclaim is a “just title” that will support acquisitive prescription of 10 years; and 2) the fact that the sale is by quitclaim does not raise a presumption of bad faith on the part of the purchaser.

Louisiana courts have long refused to apply the doctrine of after-acquired title to quitclaim deeds. See Avery v. Allain, 11 Rob. 436 (1845); Waterman v. Tidewater Associated Oil Co., 213 La. 588, 35 So.2d 225 (La.1947). However, it has been held that a quitclaim deed that obligates the vendor to perfect the title will support an after-acquired title despite the technical labeling of these transactions as quitclaim or non-warranty deeds. See Rycade Oil Corp. v. Board of Commissioners, 129 So.2d 302 (La.App. 3d Cir.1961).

Revised Article 2502 preserves the rule established by the jurisprudence to the effect that the doctrine of after-acquired title does not apply to sales by quitclaim deed. The parties may provide in their agreement, however, that the vendor is obligated to perfect the title delivered at the act of sale. In such a situation, the vendor who subsequently gets good title to the property is


merely fulfilling an obligation of the agreement on behalf of his vendee, and the newly-acquired title should inure to the latter's benefit. See C.C. Arts. 1759, 1983 (rev. 1984), and 2474 (1870).

As regards quitclaim deeds and lesion, it is well to recall that the action for lesion is premised on the presumption that the seller would not knowingly sell an immovable for less than half of its value. Before its repeal in 1984, Article 1860 of the Louisiana Civil Code of 1870 provided: “Lesion is the injury suffered by one who does not receive a full equivalent for what he gives in a commutative contract. The remedy given for this injury, is founded on its being the effect of implied error or imposition; for, in every commutative contract, equivalents are supposed to be given and received.” Where the price obtained for the immovable is less than half of its value, the seller is conclusively presumed to have acted in error. See C.C. Art. 2589 (rev. 1992), C.C. Art. 2589 (1870). The presumption is juris et de jure.

However, a sale by quitclaim deed is an aleatory sale. It is akin to the sale of hope. It is a transaction where the seller necessarily gives no warranty. Therefore, no error can be implied, much less conclusively presumed, where the seller makes the buyer take the immovable sold at his peril and risk by means of a quitclaim deed. Like the purchaser of a lottery ticket, the buyer who acquires an immovable by quitclaim deed pays the price therefor knowing that there is no warranty that he will get title to anything of value in exchange for the price he gives. In such a case there is no policy reason militating in favor of protecting the vendee, in the event that he gets nothing of value in return for the price paid, just as there is also no policy reason suggesting that the interests of the other party to the aleatory transaction, the seller, ought to be protected where the vendee actually does get something of value. Revised Article 2502 provides that a sale by quitclaim deed cannot be rescinded for lesion.

4.10 Rights of the Buyer Against the Seller in Case of EvictionFrom a very early date, Louisiana courts have refused to consider appreciation or depreciation in value of the thing sold in assessing the damages to which an evicted vendee is entitled. In Boyer v. Amet, 41 La.Ann. 721, 6 So. 734 (1889), the court stated that part of the reason for refusing to consider appreciation in value of the thing sold in assessing the damages suffered by the evicted vendee lies in the fact that, although the Digest of 1808 contained a provision specifically allowing appreciation damages, the Civil Code of 1825 eliminated that provision, thus giving rise to the implication that the redactors of the Civil Code of 1825 purposely wished to disallow any recovery for appreciation.

In Derouen v. Lebleu, 18 So.2d 207 (La.App. 1st Cir.1944), plaintiff Derouen filed suit alleging ownership of a certain cow and its calf. Defendant Lebleu had sold the cow, clearly pregnant at the time of the sale, to defendant Cormier. Cormier, in turn, prayed for judgment against Lebleu for the value of calf and cow. The court noted the unavailability to an evicted purchaser of damages that represent the increase in value of the object of the sale over the value it had at the time the transaction was entered into. It then held: “The measure of recovery on the part of Cormier as an evicted vendee against his vendor Lebleu is the price paid for the cow in her condition when the sale was


made, and the subsequent birth and growth of the calf cannot be taken into consideration.” 18 So.2d at 210. The court was of the opinion that the restoration of the price placed the vendee “in the same position as he was before the sale insofar as the price is concerned.” Id.

In Jackson Title Corporation v. Swayne, 411 So.2d 690 (La.App. 4th Cir.1982), a notary public had failed to obtain tax certificates before passing an act of sale. The property was subsequently sold for unpaid taxes. Thereafter, the tax sale purchaser filed suit against the original vendee to quiet his tax title. Swayne, the original vendee, third-partied the notary. The court analogized the situation to that of an action for damages by the evicted vendee under Article 2506 of the Louisiana Civil Code. It held that the vendee was entitled to the value of the property at the time of the sale, and not to the value of the property at the moment of eviction. The court explained its decision to limit the vendee's recovery to the value of the property at the time of the sale thusly: “We are not constrained to give appellant the benefit of inflationary economic cycles, just as we would not be constrained to penalize him for deflationary cycles should the Code have provided a remedy different than the return of the purchase price. In this regard, it is noteworthy to point out that the redactors of our Civil Code failed to include Article 1633 of the French Code, which provides: ‘If the thing sold has increased in price at the time of eviction, even independently of any act of the acquirer, the vendor is bound to pay him what it is worth above the price of the sale.’ ” 411 So.2d at 693.

Revised Article 2506 specifically provides that the buyer is not entitled to recover as damages against his vendor an increase in value of the thing lost.

4.10 Restitution of Full Price Despite DeteriorationUnder the rule of Article 2507 of the Louisiana Civil Code of 1870, the vendor had to make restitution of the purchase price of the property, in full, to the evicted vendee, regardless of the condition of the property at the time of eviction, even if it was dilapidated at that time due to the buyer's neglect. Civil Code Article 2508 provided an exception to that seemingly harsh rule for cases where the buyer had derived some benefit from the impairment that he had caused to the thing; for example, where he had sold the materials of a dilapidated building. See 2 Planiol et Ripert, Traité élémentaire de droit civil, pt. 1, 839 (La.St.L.Ins. transl. 1959). Revised Article 2507 reproduces the substance of the former Articles 2507 and 2508 without effecting a change in the law.

While at first blush the rule thus reproduced might seem wanting in rationality, since if the property has decreased in value the buyer appears to get a windfall from the eviction, that is not the case. A buyer is entitled to do with his property as he pleases, within the limits established by law. See C.C. Arts. 477, 667. As a property owner, the buyer does not have the obligation of caring for the thing purchased. qui rem alienam quasi suam neglexit nullius querelae subjectus est. The evicted buyer has lost a valuable right by the seller's breach of warranty; it seems fair that the performance he gave in exchange for the seller's defective performance -- the price -- be returned to him. Planiol, supra, at 838.


4.11 Call in WarrantyThe question of when a buyer must give notice to his vendor in case of eviction in order to protect his right to warranty is not free from difficulty. Article 2517 of the Louisiana Civil Code of 1870 stated that a buyer “threatened” with eviction had to timely notify his vendor of the “interference” in order to preserve his right of warranty. Article 2517 had no equivalent in the Code Napoleon. It was introduced into Louisiana law for the first time in the Civil Code of 1825 as Article 2493 of that Code. While the article seems to have obliged the vendee to notify his vendor whenever his peaceful possession of the thing sold was threatened by the rights of a third party, that interpretation of the article would have meant that the redactors intended a change in the civil law of eviction.

Under French law, both before and after the Code Napoleon, the “call in warranty” could only take place after litigation had been initiated concerning the buyer's right to possess the property sold, either 1) by a third party whose intention was to dispossess the buyer, or 2) by the buyer against a third party who had disturbed the buyer's possession under color of title. See Pothier, Traité du contrat de vente, at 49 et seq. (1806); 19 Baudry-Lacantinerie et Saignat, Traité théorique et pratique de droit civil, at 345 et seq. (1908). That traditional practice of limiting the mandatory notification of eviction to cases where litigation was involved derived from the very definition of eviction at Roman law: Evincere est aliquid vincendo auferre (Eviction is the dispossessing of someone from something by virtue of a judgment). Pothier, supra, at 48.

Louisiana courts have held that under Article 2517 of the Louisiana Civil Code of 1870 a vendee is obliged to notify the vendor of a threatened eviction after he learns of this fact, regardless of whether suit has been filed to evict the vendee by way of a possessory or petitory action or otherwise. See Herring v. Price, 4 So.2d 17 (La.App. 2d Cir.1941); Halley v. Sellers, 347 So.2d 77 (La.App. 2d Cir.1977).

That is certainly the better view, since in many instances eviction occurs without the institution of a lawsuit against the vendee. Thus, in Halley v. Sellers, 347 So.2d 77 (La.App. 2d Cir.1977), the buyer of a timber estate was evicted when the owner of the land refused to allow him to cut the timber. In that case, the court held that the vendee's notification of that fact to his vendor put the latter on notice that his title was in question and complied with the requirements of Article 2517 of the Louisiana Civil Code of 1870. In Herring v. Price, 4 So.2d 17 (La.App. 2d Cir.1941) the property had been sold to a third party at a tax sale for the vendor's unpaid taxes. It was held that the vendee was obliged under Article 2517 of the Louisiana Civil Code to notify his vendor of that fact.

Revised Article 2517 does not change the above law regarding the requirement of notice of eviction.

V. Redhibition

5.1 General PrinciplesThe Louisiana Civil Code of 1870, following the Code Napoleon, dealt with the


problem of unsatisfactory goods under the rubric of “redhibition,” which it defined as “the avoidance of a sale on account of some vice or defect in the thing sold which renders it either absolutely useless or its use so inconvenient and imperfect that it must be supposed that the buyer would not have purchased it had he known of the vice.” C.C.Art. 2520 (1870).

The modern redhibitory action derives from the Roman actio redhibitoria and the actio aestimatoria sive quanti minoris. The actio redhibitoria was the action given by the edict of the Aedile to cancel a sale as a consequence of defects in the thing sold. See Hunter, A Systematic and Historical Exposition of Roman Law 505 (1897). The object was twofold:

1) complete restitution to the seller of the thing sold, with all its products and accessories, and

2) to give the buyer back the price, with interest, as an equivalent for the restitution of the thing and its products.

The seller was required to restore the price before the buyer delivered the thing sold. The actio aestimatoria sive quanti minoris was brought to reduce the price, not to dissolve the sale. When that action was used, it was in the power of the iudex to dissolve the sale. Id.

Under Louisiana law, by the warranty of redhibition the seller warrants that the thing sold is free of hidden defects. A buyer of a thing with such a defect is entitled to have the sale dissolved when he is able to prove that he would not have bought the thing had he known of the defect. According to revised Article 2520 of the Louisiana Civil Code, such a defect must be such as to render the thing sold “useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing, had he known of the defect.”

Louisiana courts have on many occasions held that the warranty against hidden defects includes the warranty of fitness. As stated by the Supreme Court in Rey v. Cuccia, 298 So.2d 840, 842 (La.1974): “In Louisiana sales, the seller is bound by an implied warranty that the thing sold is ... reasonably fit for the product's intended use.” To the same effect, see Smith v. Max Thieme Chevrolet, Inc., 315 So.2d 82 (La.App. 2d Cir.1975); Wolf v. Flanagan, 333 So.2d 663 (La.App. 4th Cir.1976); Hob's Refrigeration & Air Conditioning v. Poche, 304 So.2d 326 (La.1974).

Revised Article 2520 places its focus on the warranty in order to parallel the pertinent article on eviction -- revised Article 2501 of the Louisiana Civil Code. [???] Revised Article 2520 takes a more functional approach than the source, as it sets forth the content of the warranty in a direct fashion. However, most of the language in the source provision, Article 2520 of the Civil Code of 1870, is preserved because Louisiana courts are very used to quoting that Article. See, for example, Ingram v. Freeman, 503 So.2d 640 (La.App. 4th Cir.1987); Napoli v. Gully, 509 So.2d 798 (La.App. 1st Cir.1987); A & B Restaurant Equipment, Inc. v. Homeseekers Savings And Loan, 506 So.2d 137 (La.App. 4th Cir.1987).

5.2 Apparent DefectsIn a way, it may be said that paragraph one of revised Article 2521 states the obvious: Since redhibition is, by definition, an action to rescind a sale for hidden defects in the thing sold, it could hardly be alleged that defects are redhibitory when the buyer knew of their existence or when he was informed Sale: Exposé des motifs (2012 dwg) of 63

of their existence by the seller. Nevertheless, since eliminating the article might create the impression that a change in the law was intended, revised Article 2521 retains the substance of Articles 2521-2522 of the Louisiana Civil Code of 1870.

Since the purpose of the redhibitory action is to make the seller responsible for hidden defects, it follows that the seller should not be responsible for those defects in the thing sold that were apparent upon inspection. Determination of what is an “apparent defect” is not always, however, a simple task. Article 2521 of the Louisiana Civil Code of 1870 defined apparent defects as “such as the buyer might have discovered by simple inspection.” However, that approach only begged the question, since the term “simple inspection” is not technically precise. In Barker v. Tangi Exterminating Co., 448 So.2d 690, 692 (La.App. 1st Cir.1984), the court offered the following definition of “simple inspection” for the purposes of the seller's warranty against hidden defects: a “ ‘simple inspection’ is one made by a reasonably prudent buyer, with no special knowledge, and under no obligation to deface the thing before inspecting it.” That “reasonably prudent” approach to “simple inspection” was also followed in Buck v. Adams, 446 So.2d 895 (La.App. 1st Cir.1984), and Dansky v. Thompson, 415 So.2d 396 (La.App. 1st Cir.1982). See also Fraser v. Ameling, 277 So.2d 633 (La.1973), where the Louisiana Supreme Court stated that there is no obligation on the part of the buyer to inspect with expertise or to deface the thing purchased while inspecting it.

Revised Article 2521 codifies the jurisprudence in that area and provides a more functional approach by describing the type of defect for which no warranty is owed. According to this Article: “The seller owes no warranty for defects in the thing that were known to the buyer at the time of the sale, or for defects that should have been discovered by a reasonably prudent buyer of such things.”

5.3 Thing Not of the Kind Specified in the ContractLouisiana courts have experienced difficulty in distinguishing redhibition problems from problems concerning nonperformance, or faulty performance, of the seller's obligation of delivery. Thus, in Walton v. Katz & Besthoff, Inc., 77 So.2d 563 (La.App.Orl., 1955), the plaintiff had bought from the defendant paint advertised as “mildew resisting,” and which defendant's employee orally asserted to have that particular quality. The paint was fine in every respect, except that it did not resist mildew. The court sustained a plea of prescription over the buyer's objection that the suit was one for breach of contract (which would have rendered applicable the ten year prescriptive period applicable to such an action).

However, that same court in Victory Oil v. Perrett, 183 So.2d 360 (La.App. 4th Cir.1966), where the plaintiff oil company had contracted to supply to the defendant for use in the latter's truck diesel fuel suitable for that purpose, but had delivered, in part, diesel fuel of a different type which caused damage to the trucks, held that the oil company had failed to fulfill its contractual obligations and that the rules of redhibition were not applicable, stating that the seller did not deliver that for which the parties contracted.

In Runers v. Stran-Steel, 317 So.2d 657 (La.App. 3d Cir.1975), a case involving the supplying of incorrect rafters for the construction of steel buildings, the Sale: Exposé des motifs (2012 dwg) of 63

court analyzed the problem as one involving redhibition. It held, however, that since the “defects” in supply of the rafters were corrected prior to bringing suit, such defects could not properly be grounds for redhibition, the appropriate relief being a reduction of the price, or quanti minoris Id. at 660.

The problem of categorizing the issue as either one concerning redhibition or one dealing with breach of the obligation of delivery assumes capital importance because of the different prescriptive periods involved. Louisiana courts have hitherto indicated that three prescriptive periods could be applicable in redhibitory actions: one year from the sale if the vendor did not know of the defect in the thing (former C.C. Art 2534) (now four years; see revised Art. 2534); one year from the discovery of the defect where a vendor knew -- or was presumed to have known -- of the defect (former C.C.Art. 2546; rev. C.C.Art. 2534); or five years from the discovery of the fraud if the vendor had committed fraud (former C.C.Art. 2547). See Russell v. Lake Sherwood Acres, Inc., 388 So.2d 822 (La.App. 1st Cir.1980). However, where the vendor had undertaken an obligation incidental to the sale with respect to the thing sold and had failed to perform that obligation, the 10 year period for nonperformance of obligations might be applicable. Fuselier v. Ardoin, 266 So.2d 531 (La.App. 3d Cir.1972); Primeaux v. Bennet Homes, Inc., 339 So.2d 1251 (La.App. 1st Cir.1976). Thus, there was a strong incentive for plaintiffs who had, for whatever reason, been slow to sue to argue that a delivery of defective goods constituted a full breach of contract, rather than merely a violation of the seller's warranty against redhibitory defects. Conversely, sellers would argue that redhibition should apply in some cases clearly involving breach of contract.

Problems concerning improper performance of the obligation to deliver goods conforming to the contract should not be confused with problems of defect. The redhibitory action was never intended to encompass every dispute involving the breach of the contract of sale. Revised Article 2529 clarifies the law by providing that where the thing delivered is different from that called for in the contract, the issue must be resolved in accordance with the articles governing effects of conventional obligations -- i.e., breach of contract.

5.4 Time of Existence of DefectUnder Article 2530 of the Louisiana Civil Code of 1870, in order to institute the redhibitory action the buyer had to prove that the particular defect on which the action is based had existed before the sale. The reason for this requirement is based on the fact that under the scheme of the Louisiana Civil Code of 1870 risk of loss of the thing sold was transferred from the seller to the buyer at the moment of the sale. See former C.C.Art. 2467. Thus, unless the defect existed before the sale, the seller did not have to answer therefor. See 2 Planiol et Ripert, Traité élémentaire de droit civil, Part I at 820 (La.St.L.Ins. transl. 1959).

In the case of Rey v. Cuccia, 298 So.2d 840 (La.1974), the Louisiana Supreme Court established the rule that where a thing becomes unfit for its intended purpose during normal use, then it shall be presumed to be, and to have been defective, regardless of whether the actual cause of the unfitness or defect is proven or not. According to the court: “However, even where the defect appears more than three days after the sale ... if it appears soon after the


thing is put into use, a reasonable inference may arise, in the absence of other explanation or intervening cause shown, that the defect existed at the time of the sale.” Id. at 843.

The language of revised Article 2530 is consistent with the approach taken by the Supreme Court in Rey. It is also consistent with the new rules concerning transfer of risk. See revised Article 2467.

5.5 Liability of the Good Faith SellerBefore being amended in 1974, Article 2531 of the Louisiana Civil Code of 1870 provided as follows: “The seller who knew not of the vices of the thing, is only bound to restore the price, and to reimburse the expenses occasioned by the sale, as well as those incurred for the preservation of the thing, unless the fruits, which the purchaser has drawn from it, are sufficient to satisfy those expenses.” The 1974 amendment effected two significant changes: 1) It transformed the obligation of the good faith seller to the buyer concerning redhibitory defects in the thing sold into one of repairing or correcting defects that are remediable; 2) In those cases in which the good faith seller was liable to the buyer under the articles on redhibition, it gave the seller an action against the manufacturer which could not be waived by contract.

Revised Article 2531 retains the changes effected by the 1974 amendment of former Article 2531. It is fair to allow the good faith seller to correct remediable defects in the thing sold. To provide otherwise would, in most cases, merely favor the welsher and promote litigation. As the comments indicate, tender of the thing to the seller for repair of defects is only required when the remedy sought is redhibition; [SIC? 'rescission' is the correct word] tender is not required to maintain an action in quanti minoris. Broussard v. Breaux, 412 So.2d 176 (La.App. 3d Cir.1982).

The 1974 bill amending Article 2531 of the Louisiana Civil Code had a companion bill amending Article 2521, which purported to explain the nature of the seller's opportunity to repair. The legislature failed to pass the companion bill, but the reference to Article 2521 was left in the bill that amended Article 2531. Accordingly, Article 2531, as it stood before this revision, contained a meaningless reference to Article 2521. In Jordan v. Leblanc and Broussard Ford, Inc., 332 So.2d 534 (La.App. 3d Cir.1976), the third circuit court of appeal decided to treat the reference to Article 2521 as surplusage. Concerning the right to repair the court stated: “Until the legislature provides specific rules concerning the terms and conditions of the right to repair, there is no alternative in the judiciary but to decide each case on its peculiar circumstances with due regard being given to the competing interests of the consuming public and the retailers and manufacturers.” Id at 538. See also Litvinoff, Sale and Lease In the Louisiana Jurisprudence (2d ed. 1986).

In view of the fact that the reference to Article 2521 set forth in Article 2531 was meaningless, it has been eliminated from the revised Article.

5.6 Notice of the Existence of DefectA defect is, in a broad sense, a nonconformity in the thing sold. Since the good faith seller has a right to correct remediable defects in the thing sold, it is appropriate for the law to provide what amounts to a correlative duty in the Sale: Exposé des motifs (2012 dwg) of 63

buyer to give the seller seasonable notice of the defects in the thing sold. That requirement should not be unduly burdensome to the buyer, since, after all, it is presumably in his best interest to have the defect repaired as soon as practicable.

Where the buyer gives no notice, the seller's opportunity to correct remediable defects may be lost, and this can be particularly undesirable in instances of mechanical problems that are aggravated for lack of prompt remedial action. By the time the buyer files a lawsuit, not infrequently the day before the applicable prescriptive period expires, the opportunity to remedy the defect may, for all practical purposes, be permanently lost to the seller. If the seller is to have the right of repairing correctable defects, then it seems that the buyer ought to notify him promptly, and not by the mere service of a lawsuit filed shortly before prescription runs.

The buyer's failure to give the seller notice as required by revised Article 2522 should preclude him from obtaining rescission in cases where the seller proves that he has been damaged by the lack of seasonable notification.

5.7 PrescriptionAs the comments indicate, revised Article 2534 combines the substance of Articles 2534 and 2546 of the Louisiana Civil Code of 1870. It changes the law in part by eliminating the suspension of prescription provided by the source article for certain cases where the seller is a nondomiciliary.

The starting point for the commencement of the prescriptive period for the redhibitory action provided in revised Article 2534 parallels the policy decision made by the Louisiana State Law Institute whereby delivery was made the critical point for transfer of risk of loss from the seller to the buyer. That appears also to be a more appropriate point from which to measure a limitation period, since before delivery the buyer is generally unaware of defects in the thing sold, and would, therefore, have no reason motivating him to exercise the redhibitory action.

The third paragraph of the source provision, whereby prescription against a nondomiciliary seller is suspended when the latter “has absented himself before the expiration of the year following the sale,” has been eliminated. That provision, somewhat discriminatory against the non-domiciliary seller, makes little sense in the contemporary business world, where the interstate transaction is an everyday occurrence. At any rate, the buyer cannot be seriously prejudiced by the seller's absence, since under Article 3462 of the Louisiana Civil Code liberative prescription is interrupted by the filing of a lawsuit against the obligor.

5.8 Multiple Sellers And Multiple Buyers

I. THE LOUISIANA CIVIL CODE OF 1870

The Louisiana Civil Code of 1870 contained two articles arguably dealing with the divisibility of the redhibitory action: Articles 2538 and 2539. Strictly speaking, they did not address the issue of the divisibility vel non of the action in redhibition. While Article 2538 proclaimed that the action in redhibition “is not divisible among the heirs of the purchaser,” that statement seems to have been more of a doctrinal statement than a rule of law. The actual rule


provided by Article 2538 was that all heirs of the purchaser “must concur in the redhibitory action, and no one of them can bring it for his part only.” While that mandatory concurrence on the part of the creditors characterizes indivisible actions -- see C.C. Article 1819 (1984) -- it is not a trait exclusive to actions where the object is indivisible. Thus, for instance, in the area of redemption, and again in that of lesion, while the seller's right may involve the return of a divisible thing -- say 100 bushels of corn -- or the payment of a supplement to the purchase price -- which would of course be divisible--, the buyer, in each instance, has a right to compel the concurrence of all coheirs of the seller. See C.C.Arts. 2582, 2600 (1870).

The second of the articles of the Civil Code of 1870 that arguably dealt with divisibility of the redhibitory action -- Article 2539 -- provided: “The redhibitory action may be brought against the heirs of the vendor collectively, or against one of them, at the choice of the purchaser.” Article 2539 was ambiguous in that it failed to provide whether one of several heirs of the seller could be sued for the whole in redhibition, or for his pro-rata share or part only. However, in accordance with general principles, and bearing in mind the fact that the object of the redhibitory action is a divisible thing -- i.e., the return of the price -- it would seem that the heir should only be liable for his part. See C.C. Arts. 1796, 1815, 1817 (rev. 1984).

II. LOUISIANA JURISPRUDENCE

Louisiana courts did not have an opportunity to rule on the divisibility of the redhibitory action. Articles 2538 and 2539 of the Louisiana Civil Code of 1870 were never judicially interpreted. In view of the lack of jurisprudence on divisibility in the area of redhibition, it is in order to examine the case law concerning divisibility of its “twin” warranty action: eviction.

In the area of eviction, Louisiana courts have in a number of instances ruled on the issue of the divisibility of the warranty action. The early case of Schultz v. Ryan, 131 La. 78, 59 So. 21 (1912), involved the question whether one of several co-sellers could be held as warrantor of the entire title. The court held that, while each co-seller warranted the entire title, the obligation of returning the price was divisible. According to the court: “The deed of Stephens is the joint deed of Jones, Lamar, and Robertson (the co-seller), with full warranty of title. Such being the case, Jones was the warrantor of the entire title ... It might be well to add that the reason why the obligation of a joint vendor is held to extend to the entire title is that this obligation is from its very nature indivisible; but that this reason no longer applies when it comes to reimbursing the price, for then the obligation, being a mere money obligation is necessarily divisible.” Id. at 22.

Soule v. West, 185 La. 655, 170 So. 26 (1936), involved a petitory action by the heirs of the vendors of an immovable seeking to be recognized as the owners of certain property. The court held that they were bound by the act of their ancestor and held for the defendant. In the course of its opinion the court stated: “The obligation of joint vendors to maintain the vendee in peaceable possession is an indivisible one, though their obligation to respond in money for the purchase price is divisible.” Id. at 30.

Collins v. Slocum, 317 So.2d 672 (La.App. 3d Cir.1975) involved an action by a buyer against co-sellers seeking rescission of the sale of a lot and damages for


the cost of building a home on the lot. Citing Schultz v. Ryan, supra, and Soule v. West, supra, as authority, the court held that the co-sellers were not solidarily liable for the return of the purchase price. According to the court: “Joint owners of immovable property are not subject to solidary judgment for recovery of the purchase price. A joint sale of land gives rise to only joint obligations of warranty.” Collins v. Slocum, supra, at 682. With respect to the damage award, on the other hand, the court held all co-sellers liable in solido to the buyer. Id.

Thus, Louisiana courts appear to have reached a result strikingly similar to that of French jurisprudence and doctrine: Warranty qua warranty is an indivisible obligation. Thus, all co-sellers owe this warranty in toto and it is insusceptible of division among them. Concerning the obligation of returning the purchase price a different rule obtains, in view of the different nature of the obligation. Since the obligation of returning the price is a monetary obligation, and monetary obligations are necessarily divisible, the obligation of returning the price is divisible. Thus, co-sellers are not solidarily liable for the return of the purchase price upon eviction of the buyer by someone with a superior title.

III. THE REVISION

As the comments indicate, revised Article 2538 changes the law in part by providing that the warranty obligation of co-sellers in redhibition is divisible. According to paragraph one of revised Article 2538: “The warranty against redhibitory vices is owed by each of multiple sellers in proportion to his interest.” Under Article 2538, all co-purchasers must concur in an action to rescind the sale on account of a redhibitory vice. Any one of multiple co-purchasers may, however, bring an action for reduction of the price in proportion to his interest.

5.9 Redhibition of Matched Things Sold TogetherWhile the source provision of revised Article 2540 was conceived with the realities of early nineteenth century husbandry in mind, the principle contained therein is still quite useful. Thus, while there may not be very many purchases of a team of oxen or mules in contemporary society, innumerable sales are made every day involving separate things sold as a unit, as, for instance, the sale of the various component parts of a personal computer -- disc drive, printer, etc. -- sold as a “package.” Thus, the utility of the principle contained in the revised Article cannot be doubted.

It is important, however, to distinguish between things sold jointly -- as a group or package -- and things sold in bulk but independent of each other -- as, for instance, ten thousand bars of soap. Revised Article 2540 does not apply to the latter type of sale. That point was made clear by the Louisiana supreme court in the case of Huntington v. Lowe, 3 La.Ann. 377 (La.1848), where the court stated:

“The rule that the redhibitory vice of one of several things sold together gives rise to the redhibition of all, applies to a limited class of cases; those where one of the things would not have been bought without the other. The illustrations given in the Code are a pair of matched horses or a yoke of oxen. The rule is obviously a reasonable one, and we have borrowed it from the Roman law. ‘Quum autem jumenta paria veneunt, edicto expressum est ut, cum


alterum in ea causa sit ut redhibere debeat, utrumque redhibeatur; in qua re tam emptori quam venditori consulitur, dum jumenta non separantur.’ But when things are independent of each other, the redhibitory action lies for that which is affected by the redhibitory vice. The example given by the civilians is a lot of unmatched horses or a flock of sheep.”

Id. at 379-380.

5.10 Quanti MinorisThe buyer's action for a reduction of the purchase price, or quanti minoris, is derived from the Roman actio aestimatoria sive quanti minoris. At Roman law, the actio aestimatoria sive quanti minoris was brought in instances where the buyer, instead of suing for a rescission of the sale, chose to demand a reduction in the purchase price. When that action was brought, it was in the power of the iudex to rescind the sale. See Hunter, A Systematic and Historical Exposition of Roman Law 505 (1897).

As the comments indicate, in an action for quanti minoris, as a general rule, the measure of damages is the difference between the sale price and the price a reasonable buyer would have paid for the thing had he known of the defects. See Capitol City Leasing Corp. v. Hill, 404 So.2d 935 (La.1981) . While that rule works fairly well in sales of movables, it is difficult to apply in sales of immovable property. In view of that difficulty, Louisiana courts have held that, where a reduction in price of an immovable is warranted, the measure of damages is the amount necessary to convert an unsound structure into a sound one. Lemonier v. Coco, 237 La. 760, 112 So.2d 436 (La.1959); Lemoine v. Hebert, 395 So.2d 353 (La.App. 1st Cir.1980); Cook v. Highland Park Const. Co., 168 So.2d 825 (La.App. 2d Cir., 1964); Pursell v. Kelly, 139 So.2d 12 (La.App. 4th Cir.1962).

Under revised Article 2541, as under the source provision, a buyer may seek a reduction of the price “even when the redhibitory defect is such as to give him the right to obtain rescission of the sale.” Article 2541 also preserves the rule that in an action for redhibition the court may limit the buyer's remedy to a reduction of the price.

5.11 Liability of the Seller in Bad FaithThe distinction made in the area of redhibition between good and bad faith sellers -- insofar as liability, burden of proof, and remedies are concerned -- is consistent with the overall policy of the Louisiana law of obligations of treating the breach of the obligor in good faith in a different manner from that of the obligor in bad faith. Thus, while the obligor in good faith who has failed to perform his contractual obligations is liable only for those damages that were foreseeable at the time of the agreement, the obligor in bad faith is liable for all damages sustained by the obligee that flowed directly from the obligor's nonperformance, regardless of whether those damages were foreseeable. See C.C. Arts. 1996, 1997 (rev. 1984). See also C.C. Arts. 1759, 1983 (rev. 1984).

The Louisiana Civil Code of 1870 devoted four articles to the problem of the liability of the bad faith seller, Civil Code Articles 2545-2548 (1870). Articles 2545 and 2547 attempted to make a distinction between the seller who knew of the defect and withheld that information from the buyer, and the seller who intentionally misled the buyer by making a false statement concerning a quality of the thing that he knew it did not possess. In the case where the Sale: Exposé des motifs (2012 dwg) of 63

seller knew and did not reveal, Article 2545 provided that the seller had to reimburse the price and expenses, plus damages and attorney's fees. On the other hand, for the case of the seller who intentionally misrepresented, Article 2547 referred the situation to the law of fraud, adding that, depending on the circumstances, the seller might be liable to the buyer in redhibition or for “a reduction of the price, and for damages, including reasonable attorneys fees.” Revised Article 2545 provides that both these kinds of bad faith sellers are liable for return of the price plus interest thereon and reimbursement of expenses, plus damages and attorney fees. DOESN'T SAY THAT RHN APPLIES!

PRESUMPTION OF KNOWLEDGE; PROFESSIONAL SELLERS AND NATIONAL DISTRIBUTORS

Pothier's dictum spondet peritiam artis -- that is, that by exercising his trade a manufacturer represents that he has the skill of one learned in his art and is for that reason presumed to know of the defects in the things he sells -- , since first expounded by a Louisiana court in Doyle v. Fuerst and Kramer, 129 La. 838, 56 So. 906 (1911), has become a veritable rule of Louisiana law. It would be superfluous to indulge in citations on this point, as the decisions based on the presumption of knowledge that burdens the makers of things are myriad. That being the case, the famous presumption should be given legislative recognition. That is precisely what revised Article 2545 does in its second paragraph.

Pothier cast the same presumption upon professional sellers and modern French jurisprudence goes along with that extended scope. Louisiana courts have not yet reached that point, however. See “Redhibition: An Argument for the Adoption of a Professional Seller Standard for Automobile Dealers,” 43 La.L.R. 1101 (1983). Neither does this revision.

5.12 Exclusion Or Limitation of WarrantyWhile the warranty that protects the buyer against redhibitory vices in the thing sold is subject to waiver, it is well established that three elements must exist before a waiver is held to be effective:

1) the waiver must be clear and unambiguous;

2) the waiver must be contained in the sale and -- where there is one -- the chattel mortgage document; and

3) the waiver must either be brought to the buyer's attention or explained to him.

See Hob's Refrigeration v. Poche, 304 So.2d 326 (La.1974); Roy v. Cuccia, 298 So.2d 840 (La.1974); Prince v. Paretti Pontiac, 281 So.2d 112 (La.1973); Media Prod. v. Mercedes-Benz of North America, 262 La. 80, 262 So.2d 377 (La.1972).

Contractual provisions such as “no warranties of any kind or character” and “sold as is” have repeatedly been held not to have satisfied the requirement that the terms of the waiver shall be clear and unambiguous with respect to the warranty of fitness. See Dunlap v. Chrysler Motors, 299 So.2d 495 (La.App. 4th Cir.1974); Lee v. Blanchard, 264 So.2d 364 (La.App. 1st Cir.1972); McLain v. Cuccia, 259 So.2d 337 (La.App. 4th Cir., 1972); Juneau v. Bob McKinnon Chevrolet, 260 So.2d 919 (La.App. 4th Cir.1972); Stumpf v. Metairie Motors Sales, 212 So.2d 705 (La.App. 4th Cir.1968).Sale: Exposé des motifs (2012 dwg) of 63

As the comments indicate, revised Article 2548 incorporates the rule of that jurisprudence into the text of the Civil Code in order to make it clear that a waiver of warranty may be invalidated without proving fraud on the part of the seller where the Article's guidelines for waiver of warranty are not met.

It is worth noting that in Andrus v. Cajun Insulation Co., Inc., 524 So.2d 1239 (La.App. 3d Cir.1988), a case involving breach of the warranty of fitness in a lease of movable property (mobile telephone equipment), the court refused to enforce a waiver of warranty clause, stating: “It seems clear to us that the validity of the waiver of the expressed and implied warranties of the Civil Code articles governing sales and leases need not be reached where the thing sold or leased is totally and admittedly unfit for the purpose intended. In our view, to allow a lessor in such a case to take advantage of a general disclaimer of warranty while, at the same time, requiring the lessee to perform his duty of paying the lease rentals for the entire duration of the lease, is simply against public policy. It seems to us that in such circumstances an error of law must be presumed, such as to invalidate the contract.” Id. at 1244-1245.

As the Andrus Court candidly admitted, the Andrus decision was contrary to the holding of the Louisiana Supreme Court in Louisiana National Leasing Corp. v. A.D.F. Service, Inc., 377 So.2d 92 (La.1979). It seems, however, that where the thing is utterly useless for its intended purpose one is confronted with a clear situation of failure of cause, for in such an instance the reason for the lessee's (or buyer's) consent to enter the agreement disappears. See La.C.C. Arts. 1966-1967 (rev. 1984); 1 Litvinoff, Obligations 499 (1969).

Thus, the Andrus decision is perfectly compatible with general principles governing contractual relations under Louisiana law.

The right of subrogation to his vendor's rights in warranty that the buyer has under revised Article 2548 parallels the right given to the evicted vendee under Article 2503 of the Louisiana Civil Code of 1870 and of this revision. In a concurring opinion to the Louisiana Supreme Court's decision in Media Production Consultants, Inc. v. Mercedes-Benz of North America, 262 La. 80, 262 So.2d 377 (La.1972), Justice Dixon argued that the subrogation rights of the evicted vendee under Article 2503 should be available to the vendee of a thing that has a redhibitory vice. According to that opinion: “Under C.C. 2503, the buyer is subrogated to the seller's rights and actions in warranty. If C.C. 2503 is applicable, plaintiff Media is subrogated to Cookie's rights against MBNA. C.C. 2503 should be applicable, even though found in the section of the code dealing with warranty against eviction. This court recognized its applicability in dicta in McEachern v. Plauche Lumber & Construction Co., Inc., 220 La. 696, 57 So.2d 405, 408 (1952). See also 14 Tul.L.Rev. 470; 23 Tul.L.Rev. 119, 140. This principle, long recognized as applicable to the warranty of quality, should be available to the plaintiff.” 262 So.2d at 382.

5.13 The Warranty of FitnessSince 1900, Louisiana courts have held that a warranty of fitness is implied in every sale. The first decision so holding appears to have been Fee v. Sentell, 52 La.Ann.1957, 28 So. 279, 282 (1900), in which the Louisiana Supreme Court stated: “We are only announcing a principle which no one denies when we state that the vendor, unless warranty is waived, warrants the thing sold as fit for the particular purpose for which it was bought.” For almost seventy-five Sale: Exposé des motifs (2012 dwg) of 63

years thereafter, Louisiana courts alluded to the existence of a warranty of fitness in Louisiana, without, however, attempting to distinguish that warranty from the Civil Code warranty against redhibitory defects. See, e.g., Crawford v. Abott Automobile Co., L.T.D., 101 So. 871 (1924); Jackson v. Breard Motor Co., Inc., 167 La. 857, 120 So. 478 (1929); Falk v. Luke Motor Company, Inc., 237 La. 982, 112 So.2d 683 (La.1959); Bartolotta v. Gambino, 78 So.2d 208 (La.App.Orl.Cir.1955); Cosey v. Cambre, 204 So.2d 97 (La.App. 1st Cir.1967); Craig v. Burch, 228 So.2d 723 (La.App. 1st Cir.1969); Radalec Inc. v. Automatic Firing Corporation, 228 La. 116, 81 So.2d 830 (La.1955); Media Production Consultants, Inc. v. Mercedes-Benz of North America, Inc. et al., 262 La. 80, 262 So.2d 377 (La.1972).

While only a handful of the above-cited cases alludes to any legislative authority for the warranty of fitness, it seems quite clear that in the mind of the judges the Civil Code Articles on redhibition created a warranty of fitness, seemingly indistinguishable from the warranty against latent defects. See, for example, Media Production Consultants, Inc. v. Mercedes-Benz of North America, Inc. et al., 262 La. 80, 262 So.2d 377 (La.1972), where the court talked about the existence of a “statutory warranty of fitness” which could be no other than the warranty against latent defects (redhibition). According to the court: “The jurisprudence is well settled that warranty limitation provisions in automobile manuals and similar documents delivered with the vehicle have no effect upon the statutory warranty of fitness ... Louisiana has aligned itself with the consumer protection rule, by allowing a consumer without privity to recover, whether the suit be strictly in tort or upon implied warranty ... We see no reason why the rule should not apply to the pecuniary loss resulting from the purchase of a new automobile that proves unfit for use because of latent defects.” Id. at 380-381.

In two cases, both decided in 1974, the Louisiana Supreme Court identified a warranty of fitness as -- seemingly -- separate, though not unrelated to, the Civil Code warranty against redhibitory defects. Rey v. Cuccia, 298 So.2d 840 (La.1974); Hob's Refrigeration and Air Conditioning, Inc. v. Poche, 304 So.2d 326 (La.1974).

Rey involved the sale of a camper-trailer that had come apart shortly after the buyer put it to use. While the supreme court categorically declared that under Louisiana law the seller “is bound by an implied warranty that the thing sold is free of hidden defects and is reasonably fit for the product's intended use,” (Rey at 842) the court failed to clearly delineate the parameters of the warranty of fitness. Under Rey there is a certain symbiotic relationship between the warranty of fitness and redhibition. According to the court: “The buyer must prove that the defect existed before the sale was made to him. Article 2530. However, if he proves that the product purchased is not reasonably fit for its intended use, it is sufficient that he prove that the object is thus defective, without his being required to prove the exact or underlying cause for its malfunction.” Rey at 843.

Similarly, in Hob's Refrigeration and Air Conditioning, Inc., v. Poche, 304 So.2d 326, 327 (La.1974), the supreme court stated: “In Louisiana sales, the seller is bound by an implied warranty that the thing sold is free of hidden defects and is reasonably fit for its intended use. ... a waiver by the purchaser of the law-created implied warranty of fitness in his favor cannot be regarded as waived


in the absence of clear and express agreement on his part.”

Following the Louisiana Supreme Court's decisions in Rey and Hob's, the Louisiana appellate courts treated the warranty of fitness as if it were part and parcel of the warranty against redhibitory vices. Typical of this approach was the decision in Acadiana Health Club v. Hebert, 469 So.2d 1186 (La.App. 3d Cir.1985). Acadiana involved a sale and installation of carpet. The court held that the fact that the plaintiff had used the carpet in its health club for over five years and was still using it at the time of the trial showed that it was not “altogether unsuitable to its purpose.” According to the Court: “In the present case, the defects in the manufacture of the carpet were not such as to render it useless or its use inconvenient to the degree that it was altogether unsuitable to its purpose ... Under the circumstances, the most which plaintiff was entitled to was a reduction in price.” Id. at 1191.

THE WARRANTY OF FITNESS AT COMMON LAW: FROM CAVEAT EMPTOR TO THE ENACTMENT OF THE U.C.C.

Prior to 1815 there was no implied warranty of fitness at common law; in fact, there was no implied warranty of any sort, so it behooved the buyer to heed the traditional warning of the law: Caveat Emptor. 1 Harris & Squillante, Warranty Law In Tort and Contract Actions, 288 (1989). At the outset, the action in warranty was conceived of as an action in tort. 1 Williston, The Law Governing Sales of Goods at Common Law and Under the Uniform Sales Act. 506 (1948). Even today some courts continue to hold that an action in warranty is actually in tort. See Standard v. Meadors, 347 F.Supp. 908 (N.D.Ga.1972); Public Service Co. v. Black & Veatch Consulting Engineers, 333 F.Supp. 538 (N.D.Okla.1972). Occasionally one hears the compromise statement that an action in warranty invokes a hybrid liability under tort and contract. See McDaniel v. Baptist Memorial Hospital, 352 F.Supp. 690 (W.D.Tenn.1971); Maynard v. General Electric Co., 350 F.Supp. 949 (S.D.W.Va., 1972).

A significant inroad on the rule of caveat emptor was made in 1815 in the English decision of Gardiner v. Gray, 4 Camp. 144, 171 Eng.Rep. 46 (K.B.1815). In that case, Gardiner had bought silk of “waste” grade from Gray. However, silk of an even lower grade than “waste” was delivered. The plaintiff argued that he was entitled to goods that could at least be sold under the contract description. The court held that caveat emptor did not apply to a buyer who had not had an opportunity to inspect the goods. According to Lord Ellenborough's opinion, “a purchaser cannot be supposed to buy goods to lay them on the dung heap.” 4 Comp. at 145.

Writing in the latter years of the nineteenth century, the eminent Louisiana jurist, Judah Benjamin, summarized the state of the law thusly: “So far as an ascertained specific chattel, already existing, and which the buyer has inspected, is concerned, the rule of caveat emptor admits of no exception by implied warranty of quality. But where a chattel is to be made or supplied to the order of the purchaser, there is an implied warranty that it is reasonably fit for the purpose for which it is ordinarily used, or that it is fit for the special purpose intended by the buyer, if that purpose be communicated to the vendor when the order is given....” Benjamin, A Treatise On the Law of Sales of Personal Property 738 (4th American ed. 1884).


The U.C.C. provides two different warranties concerning fitness: One is the fitness for ordinary purposes (which is included in the merchantability warranty) and the other is fitness for a particular purpose known to the seller. U.C.C. 2-314 provides in part:

“(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of the kind ...

“(2) Goods to be merchantable must be at least such as ...

“(3) Are fit for the ordinary purposes for which such goods are used ...”

Section 2-315 adds:

“Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to selector furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.”

It is apparent that a tort-law approach prevails in the judicial interpretation of the warranty of fitness under the U.C.C. Thus, for example, in innumerable cases the “unreasonably dangerous in normal use” language of the Restatement of Torts filters into the case law. See, e.g., Trabaudo v. Kenton Puritan Club, Inc., 3 U.C.C.Rep.Serv.2d 89, 517 A.2d 706 (Del.1986); First Nat. Bank of Dwight v. Regent Sports Corp., 42 U.C.C.Rep.Serv. 419, 619 F.Supp. 820 (N.D.Ill.1985). In the same vein, clearly influenced by the language of the Restatement of Torts, many decisions equate breach of the warranty of fitness with the existence of a defect in the thing. See Union Supply Co. v. Pust, 25 U.C.C.Rep.Serv. 134, 583 P.2d 276 (1978); Dienno v. Libbey Glass Division, Owens Illinois, Inc., 4 U.C.C.Rep.Serv.2d 706, 668 F.Supp. 373 (D.Del.1987); Pennington Grain & Seed, Inc. v. Tuten, 36 U.C.C.Rep.Serv. 458, 422 So.2d 948 (Fla. 1982); Rhodes v. R.G. Industries, Inc., 40 U.C.C.Rep.Serv. 1668, 173 Ga.App. 51, 325 S.E.2d 465 (1984). It is also not infrequent to see courts undertaking a proximate cause analysis in determining liability for breach of the U.C.C. warranty of fitness. See, e.g., Mattos, Inc., v. Hash, 21 U.C.C.Rep.Serv. 473, 368 A.2d 993 (Md.1977).

When is a product “unfit for its intended use” under the U.C.C.? Perhaps the best way of approaching that problem is to give examples of particular applications of the warranty of fitness under the jurisprudence.

In Askew v. Howard-Cooper Corp., 263 Or. 184, 502 P.2d 210 (1972), it was held that the servicing of heavy equipment by inserting oil at various points is part of the “intended use” of the equipment. The Delaware Supreme Court in the case of Rudolph v. Huckman, 267 A.2d 896 (Del.1970), held that a boat is not of merchantable quality when because of numerous defects it cannot be used. Bindel v. Iowa Mfg. Co., 197 N.W.2d 552 (Iowa, 1972), holds that there is a breach of the implied warranty of fitness where a rock-crushing machine is not fit for use because it is dangerous in that a rotating axle protruding nine inches is unguarded.

5.14 Revised Article 2524Under revised Article 2524, “The thing sold must be reasonably fit for its ordinary use.” As the comments indicate, under revised Article 2524 when the


thing sold is not fit for its ordinary use the buyer may seek dissolution or damages even though the thing is free from any redhibitory defect. The buyer's action in such a case is one for breach of contract under the general rules of conventional obligations.

VI. Obligations of the Buyer

6.1 General PrinciplesAs provided in revised Article 2549, the buyer is bound to two principal obligations: 1) payment of the price, and 2) taking delivery.

The seller has a right to be discharged from the burden of guarding the thing. The buyer, thus, besides paying the price, must also promptly take possession of the thing he has purchased. See 2 Planiol et Ripert, Traité élémentaire de droit civil francais, Part I, at 849 (La.St.L.Ins. transl. 1959).

6.2 InterestRevised Article 2553 provides: “The buyer owes interest on the price from the time it is due.” Since in a contract of sale the object of the buyer's performance is a sum of money, it would seem that, even in the absence of a particular provision in the law of sales, interest on the price would be payable from the time the price is due. Thus, Article 2000 of the Louisiana Civil Code, in pertinent part, provides: “When the object of the performance is a sum of money, damages for delay in performance are measured by the interest on that sum from the time it is due....”

The principle of Civil Code Article 2000 found a particular application in Article 2553(3) of the Civil Code of 1870, which provided that the buyer owed interest on the price “from the date of the sale when the price is then due.” Section 2 of former Article 2553 provided for the payment of interest “If the thing sold produces fruits, or any other income.” However, the Article did not say whether in such instances interest runs from the date of the sale or from the time the price was due.

It is preferable to establish as a general rule that interest will be owed on the price from the time it is due. That provides for certainty and uniformity, and is also consistent with the general rule of Article 2000. If the parties wish to stipulate that interest will run from some other time, or that it won't run at all, they are, of course, at liberty to do so.

The reference to the Louisiana Consumer Credit Law, as it appeared in Article 2554 of the Civil Code of 1870, has been removed. It seems clear that the Civil Code, as general law, is not intended to affect special laws when they provide rules that are in conflict with the provisions of the code. Nevertheless, out of an abundance of caution, comment (b) to revised Article 2553 makes it perfectly clear that the draft article is not intended to affect dispositions on interest found in special laws, including the Louisiana Consumer Credit Law.

6.3 Liability of the Buyer Who Fails To Take DeliveryWhen the buyer neglects to take delivery of the thing, the seller may sustain special damages directly flowing from that breach, including a number of expenses that may be incurred in connection with the preservation of the


thing. Thus, for instance, the seller may incur 1) transportation expenses, 2) storage fees, 3) inventory taxes, and 4) miscellaneous overhead expenses. Since it is perfectly predictable that the seller will sustain losses of the kind described above as a result of the buyer's breach, it is reasonable to make the buyer answerable for such losses. Thus, revised Article 2555 makes the buyer who fails to take delivery liable “for expenses incurred by the seller in preservation of the thing and for other damages sustained by the seller.”

While revised Article 2555 does not address the issue of mitigation, it is quite clear that the seller -- like all obligees under Louisiana law -- has an affirmative duty to mitigate the damages sustained by him as a result of the buyer's breach. See C.C. Art. 2002 (rev. 1984). Normally, the seller will be expected to resell the thing the delivery of which the buyer has refused to take. Where there is a ready market for the thing involved, it is reasonable to measure the seller's damages for the buyer's breach by the difference between the sale price and the market price at the time of the breach. That has been the approach generally followed by Louisiana courts. See Friedman Iron & Supply Co. v. J.B. Beard Co., 222 La. 627, 63 So.2d 144 (1953); Cyrus W. Scott Mfg. Co. v. Stoma, 10 La.App. 469, 121 So. 335 (La.App. 2d Cir.1929); Wertham Bag Co. v. Roanoke Mercantile Co., 157 La. 312, 102 So. 412 (La.1924); Woodstock Iron Works v. Standard Pulley Mfg. Co., 115 La. 829, 40 So. 236 (La.1905). There are, however, some decisions that hold that the critical time for calculating damages is the time of delivery. Thus, in Mutual Rice Co. of Louisiana v. Star Bottling Works, L.T.D., 163 La. 159, 111 So. 661 (1927), the Louisiana Supreme Court stated: “When a buyer breaches the contract of sale, the measure of damages which the seller is entitled to is the difference between the price stipulated in the contract and the market price at which the goods can be readily sold at the time and place of delivery; and it is the duty of the seller to minimize his loss by reselling the goods as soon as practicable after the buyer has refused to accept.” Id. at 663.

6.4 Dissolution of Sale For Nonpayment of PriceRevised Article 2561 is a particular application of the principle of the law of obligations according to which in a commutative contract the obligations assumed by the parties are correlative; accordingly, where one party fails to perform, the other party may sue for dissolution of the contract. See C.C. Arts. 1911, 2013 (rev. 1984). Thus, for the case of a sale, revised Article 2561 provides in part that where the buyer fails to pay the price the seller may sue for dissolution of the contract.

Upon dissolution of the sale, the parties must be restored, as much as possible, to their juridical status vis a vis the object of the sale as it stood before the sale; in other words, they must be placed in their status quo ante. Ragsdale v. Ragsdale, 105 La. 405, 29 So. 906 (La.1901); Cahow v. Hughes, 169 So. 801 (La.App. 1st Cir., 1936); Louis Werner Saw Mill Co. v. White, 205 La. 242, 17 So.2d 264 (La.1944). That means that the thing is returned to the seller, and, where the buyer has paid a part of the purchase price, that part must be returned to him. Sliman v. McBee, 311 So.2d 248 (La.1975). However, Louisiana courts have held that, while ordinarily in an action to rescind the sale the plaintiff seller must tender so much of the price as has been paid, he need not make such a tender where it is likely that, upon final adjustment, nothing will be owed the defendant. Succession of Delaneuville v. Duhe, 114 Sale: Exposé des motifs (2012 dwg) of 63

La. 62, 38 So. 20 (1905); Cappel v. Hundley, 168 La. 15, 121 So. 176 (1929).

Finally, it should be added that, while the subject of revised Article 2561 is judicial dissolution, that Article does not negate the possibility that dissolution might be effected through some other means provided by law. See C.C. Arts. 2013-2024 (rev. 1984).

Article 2561 of the Civil Code of 1870 was amended by Acts 1924, No. 108 in order to make the right to dissolve transferable. Before the amendment, the established jurisprudence, as represented in the leading case of Swan v. Gayle, 24 La.Ann. 498, 499 (1872), asserted that the right to dissolve was personal to the vendor, and therefore not transferable. In Louis Werner Saw Mill Co. v. White, 17 So.2d 264 (La.1944), the Louisiana Supreme Court took great care in clarifying the legislative history of the article and the amendment. For that reason the revised Article preserves the notion, although with some language changes, in spite of the fact that some inferences from the rule might be seen as obvious.

DISSOLUTION FOR NONPAYMENT: EXTENSION OF TIME IN SALE OF IMMOVABLES

The Louisiana Civil Code of 1870 evinced a clear policy of protecting the buyer of immovables from what, for want of a better word, may be described as the vagaries of real estate financing. First of all, in Article 2561 it established the principle of judicial dissolution for all sales of immovables. Secondly, under Article 2562 the buyer in default could be granted an extension for payment of the price, “provided such term exceed not six months.”

The latter significant protection of the buyer of immovable property may have been justified in the days when long-term real estate loans were a rare occurrence. Thus, a buyer who financed part of the purchase price of a farm expecting to pay the balance out of the proceeds of a particular crop might not be able to pay the balance -- and, consequently, might lose the property -- if, for instance, 1) his crop did not produce as much cash as expected, due to an unexpected change in market prices, 2) the vendee of his crop defaulted on the payment of the price or refused to accept the crop, 3) his vendee's bank refused to honor the vendee's drafts, or any number of other conceivable contingencies. The redactors opted for making available to the buyer of immovable property a judicial respite for payment, which was conceived of as a reasonable balance of all the interests involved.

It is doubtful, however, whether the situation contemplated by the redactors of the Louisiana Civil Code of 1870 obtains in the contemporary world, and in fact the opposite situation is more common. Thus, for instance, where a homeowner sells his home and finances part -- or all -- of the purchase price for the vendee, the vendee's failure to pay installments when due could be financially devastating to the homeowner-seller who is counting on the proceeds of the installment note to make it possible for him to discharge his own obligations. It seems more equitable, therefore, to reduce the length of the term of respite that may be awarded to a buyer of immovables by a Louisiana court from six months to sixty days. Accordingly, revised Article 2562 reduces the maximum term of the grace period that a court may award to sixty days.


The word “summarily,” used in Article 2562 of the Civil Code of 1870 regarding dissolution of the sale, has been studiously avoided in revised Article 2562 because of its procedural implications. The French original uses the expression “tout de suite” which, in the context of the French article, simply means that the court may not grant to the buyer an additional time for payment. From a procedural standpoint, when there is danger of the seller's losing the price and the thing, he may sue for dissolution and request sequestration to forestall materialization of the danger. See C.C.P. Art. 3571.

Under this revision as under prior law, in sales of movables a court is without authority to grant the buyer an extension of time for payment of the price. See revised Article 2564.

VII. Lesion

7.1 General PrinciplesThe ancient concept of lesion had its origin in the Roman concept of laesio enormis, designed to protect the poor against the powerful (potentiores). See Sohm, Institutes of Roman Law 403 (3d ed. 1907); Buckland, Textbook of Roman Law, 483 (1921). Pothier, whose work provided many of the articles in the Louisiana Civil Code, conceived of lesion as a vice of consent. The idea was reflected in Article 1860 of the Civil Code of 1870, which provided that the action for lesion was “founded on its being the effect of implied error or imposition; for, in every commutative contract, equivalents are supposed to be given....” See also Pothier, A Treatise on the Law of Obligations or Contracts 120 (Evans transl. 1806).

Under Article 2589 of the Louisiana Civil Code of 1870, the vendor who had sold an immovable for less than half of its value was conclusively presumed to have acted in error; the presumption was juris et de jure. Louisiana courts have held that a vendor who had sold immovable property for less than half of its value will be regarded as having acted in error or as having been imposed upon by the purchaser, regardless of whether such error or imposition existed as a matter of fact. Foos v. Creaghan, 226 La. 619, 76 So.2d 907 (La.1954). Thus, the only question of fact to be decided in a suit to rescind a sale for lesion beyond moiety is whether the vendor has in fact sold the immovable for less than half of its value at the time of the sale. Montegut v. Davis, 473 So.2d 73 (La.App. 5th Cir.1985); Foos v. Creaghan, supra.

Article 2593 of the Louisiana Civil Code of 1870 specified (1) which sales of immovables were subject to lesion, and (2) what party to the sale transaction was entitled to bring an action to rescind a sale on account of lesion. Article 2594, on the other hand, exempted judicial sales from rescission for lesion beyond moiety. Revised Article 2589 effects a merger of Articles 2589, 2593, and 2594 of the Louisiana Civil Code of 1870, without changing the law. It is believed that clarity will be served by the merger of those Articles.

7.2 Action Against the Vendee Who Has Resold the ImmovableThe Articles of the Louisiana Civil Code of 1870 did not clearly stipulate the rights of the vendor in a lesionary sale where the vendee had alienated the property to a third party at the time the action in lesion was brought. After the vendee alienates the property, he is no longer able to return the immovable.


In instances where the vendee who has resold the property has acted in good faith, the Louisiana Supreme Court has required him to give to the vendor whatever profits he may have realized in the second sale. See O'Brien v. LeGette, 254 La. 252, 223 So.2d 165 (1969).

As under prior law, revised Article 2594 provides that when the buyer has resold the property the seller cannot bring an action for lesion against the second vendee. The seller may, however, recover against the original vendee the profit the latter made in the second sale, but such recovery “may not exceed the supplement the seller would have recovered if the original buyer had chosen to keep the immovable.” C.C. Art. 2594(rev. 1992).

7.3 Peremption of Action For LesionNot all civil codes have incorporated the notion of lesion beyond moiety. The modern trend is to reject the concept of an “objective” lesion, couched in a conclusive presumption if the price fits a legal formula -- such as that provided by Article 1674 of the French Civil Code and Article 2589 of the Louisiana Civil Code of 1870 -- in favor of a subjective test. Under the modern approach, the action for lesion is not limited to sales of immovables, nor is the right of action granted to the seller exclusively. See Article 138 of the German Civil Code, and Article 21 of the Swiss Code of Obligations. Significantly, Article 21 of the Swiss Code provides a prescriptive period of one year for actions for lesion.

Revised Article 2595 makes the limitation period to bring an action for lesion a peremption, rather than a prescription, and shortens the term to one year. The shortening of the limitation period to bring actions to rescind sales on account of lesion should further the policy of security of transactions and help in clearing titles to immovable property. Concerning the problem of fraud, this Article does not affect the remedies available elsewhere.

VIII. Sale With Right of Redemption

8.1 General PrinciplesA sale made with a “right of redemption” is a sale made with a resolutory condition that gives to the seller the right of rescinding the sale by returning to the buyer the purchase price of the thing sold and his expenses. See C.C. Art. 2567 (1870 & rev. 1992); Borda, Tratado de Derecho Civil Argentino, Contratos, I at 254 (1974). It derives from the Roman pactum de retrovendo by which the seller reserved the right to rescind the sale if he could make restitution of the price to the buyer. See II Gerard, Manuel de Droit Romain 765 (1978).

The effects of a stipulation of redemption are that during the period that the right of redemption is reserved any acts of alienation or encumbrance affecting the property entered into by the buyer are ineffective with respect to the seller, should the latter choose to exercise the right of redemption during the time stipulated. See C.C. Arts. 2572, 2588 (1870 & rev. 1992). Thus, during the period allowed for redemption, the property is effectively placed out of commerce.

Revised Article 2567 reproduces the substance of the source provision without changing the law. According to revised Article 2567, the right of redemption is “the right to take back the thing from the buyer.”Sale: Exposé des motifs (2012 dwg) of 63

Louisiana courts have recognized the fact that in many cases a sale with a right of redemption is not, in fact, a transaction intended by the parties as translative of ownership, but is rather one that is hypothecary in nature. Thus, the jurisprudence has established the principle that where in a sale with the right of redemption the seller continues in possession as owner during the period allowed for redemption, the transaction will be regarded as a security agreement. See Malbury v. Colbert, 105 La. 467, 29 So. 871 (1901); Woods v. Stoma, 242 So.2d 320 (La.App. 2d Cir.1970). Where that is the case, the court declares the simulated alienation to be ineffective as a sale. See Malbury v. Colbert, supra.

In some instances the fact that the transaction was made under great financial stress on the part of the alleged seller is quite clear. See, for example, Delcambre v. Dubois, 263 So.2d 96 (La.App. 3d Cir.1972).

Revised Article 2569 establishes that a transaction which purports to be a sale subject to redemption is, in fact, a simulation when it is shown that the true intent of the parties was to enter into a security agreement.

8.2 Liability For Deterioration At the Time of RedemptionUnder Article 2578 of the Louisiana Civil Code of 1870, the buyer was liable to the redeeming seller for deterioration of the thing sold if such deterioration was caused by the buyer's fault, even though the fault might be but a very slight one. That was the so-called culpa levissima of the Roman law. Revised Article 2578 replaces that unduly burdensome standard with the more realistic “prudent administrator” standard, the bon pére de famille of French civil law.

The Louisiana Civil Code is replete with examples in which a duty of care in the preservation of the thing is imposed on one who holds a thing subject to the right of another. Thus, with respect to the negotiorum gestor, or manager of another's affairs, Article 2298 provides: “In managing the business, he is obliged to use all the care of a prudent administrator.” That standard of care is also applicable to the buyer in the contract of rent of lands (C.C. Art. 2784); to the depositary in a contract of deposit (C.C. Art. 2945); to the pledgee in a contract of pledge (C.C. Art. 3167); and to all those who hold a thing that belongs to another or is subject to another's rights (C.C. Arts. 1759, 1983 (rev. 1984)).

Before the 1984 obligations revision, the prudent administrator standard to which all those who hold another's property or a common thing are subject was explicitly spelled out in Article 1908 of the Louisiana Civil Code. That article provided:

“The obligation of carefully keeping the thing, whether the object of the contract be solely the utility of one of the parties, or whether its object be their common utility, subjects the person who has the thing in his keeping to take all the care of it that could be expected from a prudent administrator.

“This obligation is more or less extended with regard to certain contracts, the effect of which, in this respect, are explained under their respective titles.”

Although Article 1908 was repealed by the 1984 Obligations revisions, the ideas that it expresses must still be considered to be part of Louisiana obligations law, since the prudent administrator standard is a corollary of the overriding duty of good faith. Since the duty of good faith has been expanded Sale: Exposé des motifs (2012 dwg) of 63

by the 1984 revision to encompass all obligations and not merely those arising from contracts -- see Civil Code Article 1759 -- it seems quite clear that, far from abolishing it, the revision has strengthened the prudent administrator standard.

It seems more in keeping with the reasonable expectation of the parties to establish the prudent administrator standard as the applicable standard of care to which the buyer must answer in redemption cases. Any higher standard would be unduly unrealistic and burdensome. Accordingly, revised Article 2578 changes the law in part by introducing the prudent administrator standard as the measure by which to gauge the buyer's conduct vis a vis the thing sold pending redemption.

IX. Assignment of Rights

9.1 General PrinciplesIn his monumental treatise on the civil law, Planiol defines an assignment of rights as follows: “The assignment of credits is the contract whereby a creditor voluntarily transfers his rights against the debtor to a third person who becomes creditor in his place. The person who transfers takes the name of transferor or assignor. The person who acquires the credit is the transferee or assignee. The debtor against whom the credit exists and which is the object of the cession is called the ‘cede’.” Planiol et Ripert, Traité élémentaire de droit civil, Part 1, n. 1, at 890 (La.St.L.Ins. transl. 1959). Revised Article 2642 provides in part: “The assignee is subrogated to the rights of the assignor against the debtor.”

In early Roman law, obligations were regarded as strictly personal rights, and therefore insusceptible of assignment. Even after transfer mortis causa of rights was admitted by the law, the prohibition of assigning a credit or other incorporeal by an act inter vivos persisted. The evasion of this prohibition through the use of a special type of mandate, the procuratio in rem suam, is an example of the ingenuity of the Roman legal mind.

In modern doctrine, an assignment of rights is viewed as a transaction whereby a new creditor is substituted for the original one by way of a transfer. Where the transaction involves the payment of a price in money, it is a sale. IV Messineo, Manuale di Diritto Civile e Commerciale, vol. 2, Part II, Section 136 (8th ed. 1952).

The assignment may involve the transfer of a credit, but it may also involve any other incorporeal, such as a copyright, a license, a patent, a real right, or the like etc. The debtor's consent vel non to the transfer does not affect the validity of the assignment, since, as a general rule, the identity of the creditor should be immaterial to the debtor who owes a performance. See Messineo, supra.

9.2 Delivery of TitleLouisiana jurisprudence has been to the effect that delivery of title between transferor and transferee is essential to the validity of the assignment of the right involved. In Scott v. Corkern, 231 La. 368, 91 So.2d 569, 571 (La.1956), the Louisiana Supreme Court stated: “Article 2642 of the Civil Code provides that delivery of an assignment takes place as between transferrer and Sale: Exposé des motifs (2012 dwg) of 63

transferee by the giving of title. Accordingly, a vesting of title in the transferee is essential to an assignment.” The court ignored its earlier decision in Marshall v. Parish of Morehouse, 14 La.Ann. 689 (1859), which had held that a transfer of rights without delivery of title was perfectly valid as between the transferor and the transferee.

While the delivery of the title evidencing the claim is certainly an obligation arising from the contract of assignment, the assignor's failure to deliver the required instruments should not affect the validity of the assignment. Rather, the assignee should be entitled to enforce his right to obtain the necessary documentation by demanding specific performance and, where appropriate, damages. Under revised Article 2654 the assignor of a right is obligated to deliver to the assignee “all documents in his possession that evidence the right.” Failure by the assignee to deliver such documents does not affect the validity of the assignment.

9.3 Notification of the Debtor in Assignment of Rights

1. ARTICLE 2643 OF THE LOUISIANA CIVIL CODE OF 1870

Before its amendment in 1984 and 1985, Article 2643 of the Louisiana Civil Code of 1870 provided: “The transferee is only possessed, as it regards third persons, after notice has been given to the debtor of the transfer having taken place. The transferee may nevertheless become possessed by the acceptance of the transfer by the debtor in an authentic act.”

Article 2643 was amended in 1984, and again in 1985, in order to create certain exceptions to the requirement of notification for the case of partial assignment. As amended by Acts 1985, No. 97, former Civil Code Article 2643 read:

Art. 2643. Delivery as regards third persons, notice to debtor

The transferee is only possessed, as it regards third persons, after notice has been given to the debtor of the transfer having taken place.

The transferee may nevertheless become possessed by the acceptance of the transfer by the debtor in an authentic act. A partial transfer and assignment is effective as to the debtor without the necessity of giving notice thereof.

The legislative history of the amendments to former Article 2643 is obscure. The enacting clause of Act 97 of 1985 does provide a clue, however, concerning legislative intent. It states: “To amend and reenact Civil Code Article 2643, relative to the assignment or transfer of credits and other incorporeal rights, to eliminate the requirement that a debtor consent to the assignment of part of a debt to a third party, to provide for notice of partial transfer and assignment, and to provide for related matters.”

While it seems clear that the legislature did intend to eliminate the requirement of notification in cases of partial assignment, the enacting clause appears to indicate that the author of House Bill 562 of 1985, which became Act 97 of that year, was of the opinion that the debtor's consent was also necessary for the effectiveness of a partial assignment. This is a mistaken view. Under the civil law as properly understood, the debtor's consent is never necessary; the debtor need only be notified of the assignment.


2. PURPOSE OF NOTIFICATION; FRENCH DOCTRINE

According to French doctrine, the purpose of the Civil Code requirement that the debtor be notified of the assignment is to let the debtor know that he has changed creditors and to tell him who the new creditor is. See XIX Baudry-Lacantinerie et Saignat, Traité théorique et pratique de droit civil 813 (3d ed. 1908). The notification may be made by either the assignor or the assignee. Ordinarily, the assignee will be more interested than the assignor in making certain that the notification is effected, since it is only from the time that notice is effected that the assignment will be effective vis-à-vis third parties. Id. at 815.

The requirement of notification in assignment cases, besides adding publicity to the transaction, is an element of fairness which ought not be lightly altered. A buyer who owes the price should know who the creditor is in order that he might discharge the obligation by paying that party. There seems to be no logical or policy reason for exempting partial assignments from the requirement of notification.

3. DEBTOR'S CONSENT TO PARTIAL ASSIGNMENT OF A CREDIT

While a creditor may freely assign a credit without the debtor's consent, there has been some question as to whether he may also -- in the absence of agreement -- validly transfer only a part of the credit without such consent.

At common law, partial assignments were unenforceable if the obligor objected because of the rule against splitting the cause of action. Standard Discount Co. v. Metropolitan Life Ins. Co., 321 Ill.App. 220, 53 N.E.2d 27 (1944). An added reason given by most courts for the prohibition of partial assignment was that such a practice had the potential of subjecting the debtor to a multiplicity of suits. Andrews Elec. Co. v. St. Alphonse Catholic Total Abstinence Soc'y., 233 Mass. 20, 123 N.E. 103 (1919). However, the law, as a result of modern procedural rules, has changed; the law is now to the effect that the partial assignee may sue the debtor provided the procedural rules pertaining to joinder of parties are complied with. See Schwartz v. Horowitz, 131 F.2d 506 (2d Cir.1942); Zurcher v. Modern Mach. Corp., 24 N.J.Super. 158, 93 A.2d 778 (1952), affirmed 12 N.J. 465, 97 A.2d 437 (1953); Prudential Fed. Savings & Loan Association v. Hartford Acc. & Indem. Co., 7 Utah 2d 366, 325 P.2d 899 (1958). According to one commentator: “Today ... the partial assignee may sue at law provided that all of the interested parties have been joined, or the assignee complies with procedural rules that dispense with the necessity of joining other partial assignees because it is fair to do so under the circumstances.” Calamari & Perillo, Contracts 755 (3d ed. 1987).

Louisiana courts have uniformly held that an obligation may not be partially assigned without the debtor's consent. Mahaffey v. Benoit, 118 So.2d 162 (La.App. 1st Cir. 1960); Marmol v. Wright, 62 So.2d 528 (Orl.App. 1953); Salter v. Walsworth, 167 So. 494 (La.App. 2d Cir.1936); Staples v. Rush, 99 So.2d 502 (La.App. 2d Cir. 1957); Red River Valley Bank & Trust Co. v. Louisiana Petrolithic Const. Co., 142 La. 838, 77 So. 763 (1918); Meyer v. Vicksburg, Shreveport & P. Railway Co., 35 La.Ann. 897 (1883); LeBlanc v. Parish of East Baton Rouge, 10 Rob. 25 (1845); Cantrelle v. LeGoaster, 3 Rob. 432 (1843); Miller v. Brigot, 8 La. 533 (1835). In Miller v. Brigot, supra, the Louisiana Supreme Court expressed the rationale for the rule against partial Sale: Exposé des motifs (2012 dwg) of 63

assignments thusly:

“No debtor is bound to pay a debt by portions, and it follows as a corollary, that no partial transfer can be made by a creditor, so as to be binding on a debtor, even when notice is given, except by express consent of the latter. 8 La. 536.”

Concern over the debtor's exposure to a multiplicity of suits if partial assignments were allowed has also been expressed in several of the above-cited Louisiana cases. See, e.g., Marmol v. Wright, 62 So.2d 528 (Orl.App.1953).

Aside from procedural considerations, it is questionable whether, in the absence of the debtor's consent, an obligation having a single debtor and creditor is capable of partial assignment under the substantive law of Louisiana. Article 1815 of the Louisiana Civil Code provides: “An obligation is divisible when the object of the performance is susceptible of division. An obligation is indivisible when the object of the performance, because of its nature or because of the intent of the parties, is not susceptible of division.” Article 1816 adds: “When there is only one obligor and one obligee, a divisible obligation must be performed as if it were indivisible.”

Thus, it could be argued that under Articles 1815 and 1816 of the Civil Code, at least in instances where there is only one obligor and one obligee, an obligation may not be partially assigned without the debtor's consent, since in such situations the obligation must be performed as if it were indivisible.

The law has been otherwise where the assignee is partially subrogated to a particular obligation. That has been so, because the articles of the Louisiana Civil Code appear to contemplate -- and allow -- that particular type of assignment. See Civil Code Article 1827, comment (e), and Article 1826. Paragraph two of Article 1826 provides: “An original obligee who has been paid only in part may exercise his right for the balance of the debt in preference to the new obligee.”

In Cox v. Heroman & Co., Inc., 298 So.2d 848 (La.1974), involving a situation of partial subrogation, the Louisiana Supreme Court held that the rule against partial assignments without the debtor's consent did not extend to cases where subrogation -- whether legal or conventional -- was involved. According to the Court:

“There is a substantial conceptual difference between, on the one hand, an ‘assignment’, which has the nature of the sale and acquisition of a credit so as to permit its enforcement of the assignee, and, on the other hand a conventional ‘subrogation’, which has for its primary purpose the negotiated discharge of a debt due to the creditor. Civil Law Translations (Aubry & Rau, Obligations), Section 321 (1965); Comment, 25 Tul.L.Rev. 358, 368-69 (1951). Thus, in a subrogation the interest of a creditor (here, Reulet) in receiving payment of his debt in return for subrogating the third party to his right to recover it, outweighs the interest of the debtor (here, Cox) in avoiding the division of the debt he owes into multiple claims, the policy of preventing partial assignments. No authority is cited to us which prevents partial subrogation. The Civil Code, in fact, recognized that a partial subrogation can take place in the case of a legal subrogation, Article 2161, and that, in the case of both legal and conventional subrogation, a partial subrogation may take place, Article 2162.... We could find no decisions which held that the Sale: Exposé des motifs (2012 dwg) of 63

consent of the debtor was necessary for the creditor to subrogate part of the debt due by receiving payment from the third person. On the other hand, we found decisions such as R.M.Walmsley & Co. v. Theus, 107 La. 417, 31 So. 869 (1902) and numerous collision insurer subrogation cases which without discussion allowed a partial subrogation by the creditor unconsented to by the debtor. 298 So.2d at 856.”

The collision carrier subrogation cases alluded to in Cox are easily reconcilable with the articles of the Louisiana Civil Code on indivisible obligations because in the collision cases there is more than one obligor, and therefore the obligation involved is not within the purview of Article 1816. But there would seem to be an inconsistency in, on the one hand, allowing partial subrogation in cases where there is one creditor and one debtor and yet, on the other, disallowing partial assignment in such cases where there is no subrogation. If Cox was correctly decided, then the only thing an assignor who wishes to assign a part of an obligation without the debtor's consent need do is to grant a partial subrogation to the assignee. The legislature's 1984 and 1985 amendments to former Civil Code Article 2643 moreover, showed that the intent of the legislature was to allow partial assignment without the debtor's consent. See Acts 1984, No. 921; Acts 1985, No. 97. Revised Articles 2642 and 2643, conforming to a contemporary commercial practice, permit validity of the partial assignment without the consent of the debtor.

4. THE REVISION

Revised Article 2643 establishes the principle that, in order for an assignment of a right to be binding on the debtor, he must have knowledge of the assignment. Elementary notions of fairness compel such a result, for otherwise the debtor could never be certain whether payment would bring about a discharge of the obligation, since the original creditor might well no longer be the obligee of the performance involved.

When the debtor has knowledge of the assignment, it seems useless to make him accept by authentic act or give him formal acknowledgment of having received notice of the assignment. Thus, under revised Article 2643, knowledge by the debtor of the assignment binds the debtor.

With respect to third persons -- i.e., primarily the creditors of the assignor -- revised Article 2643 continues the rule that the assignment is effective against such persons only after the debtor has received knowledge or notice of it; even though in principle it is hard to see how the absence of a formal notice to the debtor informing him of the assignment could prejudice them. The assignee may not, of course, do -- or knowingly tolerate the doing of -- anything which will deceive third persons into believing that the assignment has not taken place. Thus, for instance, where the titles evidencing the debt are not delivered to the assignee contemporaneously with the assignment, the assignee may be under a duty to demand delivery of the titles; failure to do so may furnish the basis for an estoppel to deny that the assignor was still the owner of the debt on grounds of venire contra factum proprium, where third persons have relied to their detriment on an apparent state of affairs that the assignee willingly or negligently tolerated.


9.4 WarrantyThe object of the warranty of the assignor of a credit right is merely the existence of the right at the time of the agreement. He does not, therefore, warrant the debtor's solvency or the collectability of the debt. 2 Planiol et Ripert, Traité élémentaire de droit civil, Part I, at 904 (La.St.La.Ins. transl. 1959).

Since that warranty may be modified by agreement, it is possible for the assignee to waive the limited warranty owed by the assignor. That might be done, for instance, in case the right assigned were of doubtful soundness or subject to a contingency that rendered it aleatory.

In Ratcliff v. McIlhenny, 157 La. 708, 102 So. 878 (La.1925), the Louisiana Supreme Court held that the assignor of an option to buy immovable property warrants only the existence of the option, but not the ability of the grantor of the option to deliver title to the property.

With the exception of Ratcliff v. McIlhenny, supra, there have been no reported decisions construing Articles 2647-49 of the Louisiana Civil Code of 1870 in over 100 years. Historically, the greater portion of the litigation in this area has dealt with obligations in warranty of sellers of commercial paper. See, e.g., Hewitt v. Waterman, 3 La.Ann. 716 (1848); Martin v. McMasters, 14 La. 420 (1840); Barthet v. Andry, 14 La. 30 (1839); Romero v. Segura, 7 La. 307 (1834); Rippey v. Dromgoole, 8 Mart. (O.S.) 709 (1820) ; Winston v. Tufts et al., 10 La.Ann. 23 (1855); Fonda v. Garland, 7 La.Ann. 201 (1852). That jurisprudence is now inapposite, since the obligations in warranty of one who sells or otherwise assigns negotiable instruments or other commercial paper are governed by R.S. 10:3, especially R.S. 10:3-413 through 418.

Under revised Article 2646 an assignor of a right warrants the existence of the right at the time of the assignment. The assignor does not warrant the solvency of the debtor.

X. Giving in Payment

10.1 General PrinciplesGiving in payment is a mode of sale in which a debtor gives a thing to his creditor in payment of an antecedent debt. Revised Article 2655 defines giving in payment as a “contract whereby an obligor gives a thing to the obligee who accepts it in payment of a debt.” In such a transaction the debtor is the seller, the creditor the buyer, and the price of the thing is the amount of the debt being discharged. See 1 Litvinoff, Obligations -- 670 (1969); 6 Aubry & Rau, Cours de droit civil français 230, 238 (5th ed. 1920); 7 Planiol et Ripert, Traité pratique de droit civil français 658-663 (2d ed. 1954); 2 Planiol et Ripert, Traité élémentaire de droit civil, Nos. 522, 528 (La.St.L.Ins. transl. 1959).

Giving in payment, or dation en paiement as it is more widely known in Louisiana legal practice and in the civil-law world, is conceptually similar in some respects to novation. But while in novation obligor and obligee contract for a promise of giving something different in payment of a sum due, in giving in payment one party delivers and the other accepts a thing in payment of a preexisting debt. See 1 Litvinoff, Obligations 670-71 (1969); Dunaway v. Spain, 493 So.2d 577 (La.1986). It should be added that giving in payment has


the same extinctive effects as novation. See Litvinoff, supra, at 671.

The critical factor in determining whether the parties -- creditor and debtor -- agreed to enter a giving in payment -- and therefor to extinguish the debt involved -- is their intent. Dunaway, supra, at 579. Particular attention should be given to the intent of the creditor, since the creditor is the party who has the right to demand exactly what was due to him and need not accept the substituted performance.

An act of giving in payment has the effect of transferring ownership of the thing given in payment just like an ordinary sale. Quality Finance Co. of Donaldsonville, Inc. v. Bourgue, 315 So.2d 656 (La.1975); Jones v. First National Bank, Ruston, La., 215 La. 862, 41 So.2d 811 (La.1949). As in other sales, the transfer of a thing in payment conveys the thing cum onere, that is, burdened with any previously or subsequently recorded mortgages and other encumbrances. Quality Finance, supra; Third District Building Association v. Forschler, 174 La. 828, 141 So. 849 (1932).

In hard economic times, giving in payment becomes a useful and convenient tool for both lender and borrower of money secured by a mortgage on immovable property. For the lender, it allows him to avoid the vagaries, expenses, and delays of foreclosure and, frequently, intervening bankruptcy proceedings. For the borrower, it extinguishes a debt that he can no longer afford to pay and may save him from facing economic ruin or financial embarrassment. It is well to note, however, that giving in payment is not without drawbacks. From the creditor-lender's vantage point, aside from the possibility of a suit for revocation by the seller on grounds of lesion, the creditor may face the possibility of having, unbeknownst to him, assumed liability for monies borrowed by the debtor from savings and loan institutions, pursuant to L.S.A. R.S. 6:824(A)(4). That section presently provides:

(4) In every case in which property burdened with a mortgage or vendor's privilege in favor of an association is sold, the effect of the sale, whether or not the payment of the mortgage or vendor's privilege is assumed, constitutes the vendee as fully liable for the payment of the amount due the association as if he had originally contracted the loan. However, where in order to participate in or be eligible under any lending or financing program under the direction of or authorized by any federal governmental department, agency, or corporation, it is necessary for an association to use a standard mortgage form and promissory note, as for example, but not limited to, standard mortgage forms of the Federal Home Loan Mortgage Corporation, then in such event a borrower to whom the association loan is made shall repay the loan as provided in such approved standard mortgage form.

The requirement of delivery for the perfection of a giving in payment is the most significant difference between that transaction and other forms of sale. Under both the regime of the Louisiana Civil Code of 1870 and that of the revised articles on sales, a sale is normally perfected upon the mere consent of the parties. Under revised Article 2656, on the other hand, delivery is essential to the perfection of a giving in payment: Ownership is not transferred until delivery is accomplished. See Durnford v. Brooks' Syndics, 3 Mart. (O.S.) 222 (1814); Wilson v. Smith, 12 La. 375 (1838).

Otherwise, since giving in payment is a mode of sale, it follows that the rules governing sales in general also apply to the giving in payment.


10.2 Giving in Partial PaymentFor a long time the feasibility of effecting a partial giving in payment -- that is, of entering into a dation en paiement that would only partially extinguish an antecedent debt -- was a matter of considerable uncertainty. Presumably, since parties may make any type of agreement that they choose, provided that it is not prohibited by law, it would seem that there would be no theoretical impediments to their entering into a partial giving in payment, provided that the intent of the parties to do so were clear.

The question of the validity of a partial giving in payment under Louisiana law was put to rest by the Louisiana Supreme Court in the fairly recent case of Dunaway v. Spain, 493 So.2d 577 (La.1986), where the court gave judicial recognition to a partial giving in payment. In holding that a partial giving in payment was perfectly valid under existing law, the court stated: “Although we have not found instances in the jurisprudence in which a thing was given to a creditor in partial fulfillment of a debt, there is no logical reason why a debtor and creditor cannot legally agree to such a transaction.” Id. at 581.

When the parties enter into a partial giving in payment it is necessary to determine the extent to which the antecedent debt is thereby discharged. If the parties fail to stipulate the extent to which the antecedent debt is discharged, then the courts must have a mechanism by which their presumed intent is to be determined. Revised Article 2657 establishes a rebuttable presumption that the parties intended a reduction equal to the fair market value of the thing given in payment. That result is consistent with the holding in the Dunaway decision, where the court determined the extent of the discharge by the fair market value of the thing.

XI. Agreements Preparatory To the Sale

11.1 IntroductionThe revision contains a new chapter devoted to contracts that frequently precede acts of sale: the option, the contract to sell, and the right of first refusal. See revised Articles 2620-2629. In the interest of clarity, and for systematic purposes, it was deemed important to provide rules to govern those three “preparatory” contracts in the same chapter.

11.2 The Option: General PrinciplesLouisiana courts have not been consistent in providing a definition of option under Louisiana law. A line of decisions defines the option as: “an offer, which upon acceptance, ripens into a binding contract to buy and sell, and such contract must be specific as to the thing, price and terms.” McGill v. Gem Builders, Inc., 393 So.2d 409, 411 (La.App. 1st Cir.1980); Herring v. Pollock, 339 So.2d 510 (La.App. 2d Cir.1976); McMikle v. O'Neal, 207 So.2d 922 (La.App. 2d Cir.1968). Other decisions have, on the other hand, labeled the option as a contract. Deville v. Opelousas General Hospital, 432 So.2d 1131 (La.App. 3d Cir.1983); Rogers v. Metrailer, 432 So.2d 390 (La.App. 1st Cir.1983); Moresi v. Burleigh et al., 170 La. 270, 127 So. 624 (La.1930). In Rogers v. Metrailer, the court defined the option as: “an agreement by which one binds himself to perform a certain act, usually to transfer property, for a stipulated price within a designated time, leaving it to the discretion of the


person to whom the option is given to accept upon the terms specified.” 432 So.2d 391.

While former Civil Code Article 2462 (1870) (as amended by Act 249 of 1910) introduced the notion of the option to buy into the Louisiana Civil Code, that code did not contain a definition of option in general until the revision of the law of obligations in 1984. Current Article 1933 of the Louisiana Civil Code provides: “An option is a contract whereby the parties agree that the offeror is bound by his offer for a specified period of time and that the offeree may accept within that time.” Thus, Article 1933 has adopted the contract notion of the option. The characterization of the option as a contract rather than as a mere offer is very significant. While a contract may be assigned and gives rise to rights and obligations to the heirs and legatees of the parties to it, an offer expires at the death of the offeror, does not pass to the heirs or legatees of the offeree, and cannot be assigned. It should also be noted that the nontransferability rule applies even with respect to irrevocable offers. See official comment “b” to Article 1933 of the Louisiana Civil Code.

Revised Article 2620 preserves the definition of the option as a contract. It also adopts the rule developed by the Louisiana jurisprudence that prohibits perpetual options. Thus, under the revised Article, the option must specify “a stipulated time” as its term.

Revised Article 2620 also recognizes the fact that the option must be sufficiently specific with respect to the thing offered for sale and the price that must be paid therefor to allow for a contract to sell -- and, eventually a perfect sale -- to be completed upon the optionee's election to exercise the option.

Revised Article 2620 also makes it quite clear that its provisions are applicable to options to buy and sell. The source article -- Article 2462 of the Louisiana Civil Code of 1870 -- was incomplete and confusing on this score.

11.3 Time When Option Becomes EffectiveRevised Article 2621 provides, first of all, that the acceptance of an option is effective when received by the optionor. That result parallels the one reached under Article 1934 of the Louisiana Civil Code for irrevocable offers. Bankston v. Estate of Bankston, 401 So.2d 436 (La.App. 1st Cir.1981), and other cases holding that an acceptance of an option is effective when notification thereof is sent to the offeror are overruled. The same approach is taken by the Restatement of Contracts, Second Section 63(b) (1981).

Like the source article -- Article 2462 of the Louisiana Civil Code of 1870 -- revised Article 2621 provides that, upon acceptance, the option turns into a contract to sell. Thus, an act of sale would still be needed in order to perfect the sale. While the requirement of a further act following acceptance of the option seems indispensable for immovables, it would also appear to make perfect sense for the transfer of certain movables, such as a drilling rig or shares of stock. At any rate, this is not a mandatory rule, and the parties are always at liberty to provide otherwise in their agreement. See La.C.C. Arts. 7 (rev. 1987), 1983 (rev. 1984).

The second paragraph of revised Article 2621 provides that a rejection of an option terminates the option. Thus, under that Article, upon the optionee's rejection the option terminates, regardless of whether the time stipulated for


exercise of the option has expired. The weight of authority at common law is to the effect that an option, supported by consideration, does not expire upon the optionee's rejection. See J.R. Stone Co. v. Keate, 576 P.2d 1285 (Utah, 1978); Ryder v. Wescoat, 535 S.W.2d 269 (Mo.Ct. of App.1976); Humble Oil & Refining Co. v. Westside Inv. Corp., 428 S.W.2d 92 (Texas, 1968). The Restatement of Contracts has codified that rule thusly: “... the power of acceptance under the option contract is not terminated by rejection or counter-offer ... unless the requirements are met for the discharge of a contractual duty.” Restatement of Contracts, Second, Section 37 (1981). However, at least one commentator believes that it is quite doubtful whether the same result would obtain under the U.C.C., particularly where the optionor has relied on the rejection. See Farnsworth, Contracts 175 (1982). At civil law, the solution given by the revised Article may be justified through application of general principles. Thus, upon rejection of the option the optionee has taken a juridical position that he cannot change without violating the overriding principle of good faith. See C.C. Arts. 1759, 1983 (rev. 1984). The optionee is precluded from attempting to exercise the option thereafter by the principle of venire contra factum proprium.

11.4 Warranty of The Assignor of An OptionUnder revised Article 2622, the assignor of an option warrants the existence of the option but does not warrant that the person who granted it can be required to make a final sale. The revised Article changes the interpretation and application of the law made by the jurisprudence in Ratcliff v. McIlhenny, 102 So. 878 (1925) and its progeny, since the Article provides that, if the grantor of the option proves unable to make a final sale when the option is exercised by its assignee, the assignee has against the assignor the same rights as a buyer without warranty has against his seller; that is, the assignee of the option may recover whatever he gave for the assignment, but he may not recover other damages from the assignor.

In Lemoine v. City of Shreveport, 184 La. 221, 165 So. 873 (1936), the defendant had assigned to the plaintiff without recourse a promissory note secured by a mortgage on immovable property. Upon the plaintiff's inability to execute a judgment on the note, he demanded from the defendant a return of the purchase price of the note plus attorney's fees as stipulated in the note. The court held that although the plaintiff was entitled to a return of the purchase price for breach of warranty, he had no right to recover attorney's fees as stipulated in the note, since the note was issued without recourse.

11.5 Contract To Sell: General PrinciplesThe expression “contract to sell” has been adopted by Louisiana courts. A contract to sell is an agreement to buy and sell where the parties are looking forward to a sale to take place in the future, but which is not yet a sale and does not transfer ownership. See Litvinoff, “Of the Promise of Sale and Contract to Sell,” 34 La.L.Rev. 1017, 1068 (1974); Bornemann v. Richards, 245 La. 851, 151 So.2d 741 (1964); Scott v. Apgar, 238 La. 29, 113 So.2d 457 (1959); Davis v. McCain, 171 La. 1011, 132 So. 758 (1931); Buckman v. Stafford, Derbes & Roy, Inc., 167 La. 540, 119 So. 701 (1929).

The notion of the contract to sell in Louisiana law arose from Article 2462 of


the Civil Code of 1870, and is the same as a bilateral promise of sale. See Smith, “An Analytical Discussion of the Promise of Sale and Related Subjects, Including Earnest Money,” 20 La.L.Rev. 522, 529 (1960). Revised Article 2623 codifies the expression “contract to sell”, but also preserves the notion of a bilateral promise of sale.

11.6 Deposit And Earnest MoneyOne of the strongest presumptions in Louisiana law is that any sum paid by the buyer in connection with a contract to sell is earnest money, -- that is, a sum of money given by the buyer to the seller with the understanding that the buyer may validly recede from the contract by forfeiting that sum. That presumption has traditionally applied unless the parties specifically stipulated to the contrary. See Litvinoff, “Of the Promise of Sale and the Contract to Sell,” 34 La.L.Rev. 1017, 1073-1074 (1974). The presumption obtains even when the sum paid is referred to by the parties as money given to bind the contract or as payment on account of the purchase price. See Maloney v. Aschaffenburg, 143 La. 509, 78 So. 761 (1917); Haeuser v. Schiro, 235 La. 909, 106 So.2d 306 (1958); Ducuy v. Falgoust, 228 La. 533, 83 So.2d 118 (1955); McCain v. Hicks, 150 La. 43, 90 So. 506 (1922). That jurisprudentially-created presumption had no basis in the legislation and, in many cases, was in fact contrary to the intention of the parties. Moreover, it frequently led to unconscionable and impractical results.

Revised Article 2624 abandons the presumption favoring earnest money adopted by Louisiana courts for one more in tune with the presumptive intention of the parties. Thus, under the draft article a sum of money paid in connection with a contract to sell is presumed to be a deposit towards the purchase of the thing involved. However, where the evidence indicates that the parties intended the sum paid to be earnest money the presumption of deposit does not apply.

One of the most significant prior decisions on earnest money was that in the case of Ducuy v. Falgoust, 228 La. 533, 83 So.2d 118 (1955), where a seller sued for specific performance of a contract to sell immovable property. On original hearing, the Louisiana Supreme Court held that the seller had to return to the buyer “the deposit,” since the seller's title was unmerchantable. Upon the buyer's application, the court granted a rehearing limited to the issue of whether the buyer was entitled to double the “deposit” as liquidated damages.

After a detailed examination of “earnest money” under Roman and French law, the court proceeded to determine whether the deposit involved in Ducuy was earnest money under Article 2463 of the Louisiana Civil Code of 1870. The language used in the contract to sell provided that: “In the event ... the vendor does not comply with this agreement to sell within the time specified, purchaser shall have the right either to demand the return of double the deposit, or specific performance.” In the court's view, such a clause negatived any presumption that the deposit was intended by the parties as earnest money. According to the court: “Thus, it may be seen that the parties did not intend the deposit as earnest. It was not given for the purpose of securing to the parties the privilege of withdrawing from the contract, for neither was free to withdraw. Both specifically reserved to themselves the right to demand


specific performance, at their option.” 83 So.2d at 122-123 .

Although the above-quoted language suggests that the court would have ordered specific performance of the contract to sell therein involved, it did not do so, since it found that a cloud on the seller's title furnished grounds for dissolving the contract to sell. With respect to the remedy to which the buyer became entitled as a result of the seller's failure to deliver merchantable title, the court stated: “Consequently, inasmuch as the plaintiffs cannot specifically comply with the agreement they entered into, being without a valid and merchantable title to convey, the defendant is entitled to the return of the $780 deposited by him, plus an equal amount as stipulated damages.” 83 So.2d at 124.

The Ducuy court's assumption that a reservation of specific performance is necessary in order to make that remedy available in cases where a deposit is given in connection with a contract of sale is totally unwarranted. Nowhere in the law is there a basis for establishing the presumption in favor of earnest money which underlies that conclusion. The obligation to perform the contract to sell arises by virtue of the contract itself, there being no need for a specific reservation to that effect. See C.C. Art. 1986, 2046 (rev. 1984).

In addition, the court's characterization of the deposit in Ducuy as a “stipulated damages” sum was totally unwarranted. That is so because, first of all, the court made a specific factual finding that the buyer had given the sum involved as a deposit on the purchase price and not as earnest money. Thus, Article 2463 of the Louisiana Civil Code of 1870 was inapplicable to that situation, either directly or by analogy. Secondly, there was no basis in that case for presuming that it was the intention of the parties for the sum deposited to constitute a stipulated damages figure.

Accordingly, in instances where the sum given by the buyer in connection with an agreement to purchase is indeed a deposit on the purchase price, the buyer, in instances where the seller is unable or unwilling to transfer good title to the property, should be allowed to recover whatever damages he has actually sustained as a result of the seller's breach. On the other hand, in instances where the sum given in connection with an agreement to purchase is, in fact, earnest money, it makes perfect sense to regard this sum as liquidated damages when one of the parties is unable to perform for reasons other than a fortuitous event. Revised Article 2624 follows that approach.

11.7 Right of First Refusal: General PrinciplesA right of first refusal, or pacte de preference, may be defined as “a promise whereby the promisor obligates himself to give the promisee a first choice to make a certain transaction should the promisor ever decide to make that transaction.” See Litvinoff, “Consent Revisited: Offer Acceptance Option Right of First Refusal and Contracts of Adhesion in the Revision of the Louisiana Law of Obligations,” 47 La.L.Rev. 753 (1987). See also 2 Litvinoff, Obligations 187-188 (1975). Thus, in the law of sales, a right of first refusal is a promise to offer a first chance to buy a thing to another when and if the seller desires to sell that thing.

Promises involving rights of first refusal, or preemption, were once fairly common in situations where the vendor of a thing wished to preserve the


opportunity of repurchasing it in the future if the vendee ever wanted to put it up for sale. Thus, Article 1072 of the Civil Code of Austria provides: “A person who sells property upon the condition that the buyer must offer it for sale to him in the event that the buyer wishes to sell it again has a right of preemption.”

While there exist certain similarities between the option and the right of first refusal, upon closer scrutiny it seems quite clear that there are marked differences between the two types of agreement. Thus, while the grantor of an option to buy is unconditionally bound to sell the thing to the optionee from the time the optionee elects to accept the offer contained in the option, the grantor of a right of first refusal is only conditionally bound: all that the promisor of a right of first refusal promises is to offer the property to the promisee if the promisor ever wishes to sell it. See Litvinoff, “Consent Revisited: Offer Acceptance Option Right of First Refusal and Contracts of Adhesion in the Revision of the Louisiana Law of Obligations,” 47 La.L.Rev. 753-754 (1987).

Revised Article 2625 defines the right of first refusal as an agreement whereby a party commits himself not to “sell a certain thing without first offering it to a certain person.” That Article makes it crystal clear that the right of first refusal may be enforced by specific performance.

11.8 Time Limitations For Exercising Options And Rights of First RefusalWhile Louisiana jurisprudence asserted that rights of first refusal for a perpetual or indefinite term were null -- see, e.g., Crawford v. Deshotels, 359 So.2d 118 (La.1978) -- there was no legislation or jurisprudence limiting the length of the duration of an option or a right of first refusal. A limitation on the duration of options and rights of first refusal is desirable, since options and rights of first refusal take valuable property out of commerce, frequently for fairly lengthy time periods. Revised Article 2628 places a limitation on the duration of options and rights of first refusal on immovable property by setting their maximum length at 10 years.
