sales and real estate

Authority - aside from capacity problems, sales can be affected by problems of authority. Sales entered into on behalf of another can be unenforceable unless certain rules are satisfied.

Mandate, art. 2989 ▪ Form → Equal Dignities Doctrine, art. 2993 - form of mandate must comply the form requirements for the underlying act. • i.e. Contract of mandate authorizing sale of real estate must be made in writing. ▪ Substance → general grant of authority generally ok, but express authority required for certain transactions. • Express authority required for alienation, encumbrance, acquisition, or lease (2996). This doesn't mean you must list all things mandatary is permitted to sell, but need conveyance language (i.e. right to alienate all my movables). • Also need explicit authority for self-dealing (2998).

o-Part Test to Determine NonPecuniary Damages (art. 1998):

Non-pecuniary Damages (art. 1998): 1. contract, because of its nature, is intended to gratify a significant non-pecuniary interest and a. Non-Pecuniary Interest = buying that particular home on that corner lot; saving for a home 2. because of circumstances surrounding the formation or non-performance of the contract, the obligor knew or should've known his failure to perform would cause this kind of loss.

(2) Incapacity of Enjoyment → inability to acquire or hold certain rights, either on one's own behalf or through another person acting one one's behalf.

o Generally, all rights may be assigned, except those pertaining to obligations that are strictly personal. The assignee is subrogated to the rights of the assignor against the debtor. (art. 2642) o Litigious Rights Definition, art. 2652 = a sale is litigious when contested in a suit already filed. ▪ Lawsuit must be pending at time of sale, if not there is no sale of litigious rights. (McClung v. Long). o Prohibition in art. 2447 - officers of a court cannot purchase litigious rights in their jdx. The purchase of a litigious right by an officer is null and makes the purchaser liable for all costs, interest, and damages. ▪ Reasons for Prohibition: effects value of right, creates conflict of interest, gives appearance of impropriety. o Effect of Incapacity → this is a nullity that can be invoked only by the party to the suit against whom the right is exercised (the D). Kind of sounds like relative nullity, but there is a lot of debate that it should actually be considered an absolute nullity. o Exception for Contingency Fees, R.S. 37:218; RPC 1.8(i) - Under this statute, an attorney may acquire as his fee an interest in the subject matter of a suit, proposed suit, or claim of his client. Such an interest is not an ownership interest but operates as a privilege to secure the fee.

CONSENT - prerequisite to every contract. In sales, there is a difference between consent to essential terms and consent to auxiliary terms.

• Consent to Essential Terms o Essential Terms → (1) the thing and (2) the price o Marcantel v. Jefferson Door (5th Cir. 2002) - dispute about material used for wood cabinets; court finds no "meeting of the minds" on the agreement of the thing. o D.B. Orban Co. v. Lakco Pipe & Supply, Inc. (1986) - dispute about method of payment for pipe; court finds no "meeting of the minds" as to price of the thing. o Comparative Note - Why Not Error? Instead of using error in cases described above, Louisiana courts use the American framework of a "meeting of the minds" to describe problems of error so profound that the contract never comes into existence in the first place.

Registered Movables - art. 525 provides that arts. 520-25 do not apply to movables that are required to be registered in the public records → so WDK what law applies to registered movables (v. little case law), options:

(1) Whoever Has Title Wins - Registry rule could suggest that as to third parties, transfer of ownership is not effective until the vehicle is registered in the name of the purchaser. One unreported federal decision espouses this approach. OR o (2) Equitable Estoppel - "nevertheless, LA courts have accorded protection to a GF acquirer of a vehicle despite non-compliance with provisions of Vehicle Certificate of Title Law." (525, cmt. b). (i.e. Flatte v. Nichols).

▪ (1) Incapacity of Exercise → inability to exercise certain rights on one's own. (generally, another person can exercise rights on behalf of the incapable person).

3 groups of people who don't have capacity of exercise: (1) un-emancipated minors; (2) interdicts; ' (3) person's deprived of reason (PDRs) • Capacity is presumed, prove incapacity "quite convincingly and by the great weight of the evidence." (Meadors) • Effects of Incapacity → contract made by a person without capacity is relatively null and may be rescinded only at the request of that person or his legal representative. (Art. 1919) o Exceptions: 1920, 1923, 1924, 1925, 1926

Content of the Act of Sale - need parties' consent + property description (price not needed)

(1) Parties Consent - need language in contract indicating parties intent to buy & sell. • Chauvin v. Bohn (La. 1982) o Notation on check - "Deposit for 12 Winning Drive, Selling Price - Deposit = Balance." o Court finds the check is insufficient to serve as act of sale because the notation on the back of the check did not contain contractual language to show consent. ▪ (2) The Thing: Property Description • General Rule - Louisiana courts have stated that "[t]he description in a deed must be such that the property intended to be conveyed can be located and identified, and ... that the description must fully appear within the four corners of the instrument itself, or that the deed should refer to some map, plat, or deed as a part of the description, so that the same may be clear." Hargrove v. Hodge • 3 Major Types of Legal Descriptions o (1) USPLS/Rectangular Survey - state divided by grid lines running N to S (range lines) and E to W (township lines); lines are 6 mile intervals from one another. Descriptions identify the township and range, then the section, then the portion of the section in which the property is located. ▪ i.e. "N half of NE quarter, section 15, township 23N, range 16 W" o (2) Metes and Bounds Description - identifying landmarks, then draw the map by moving from landmark to landmark with a compass. ▪ First landmark - point of beginning o (3) Plats of Subdivision - reference to plat map recorded in public records. o Note - a municipal address is not a legal description, although it may be sufficient to support a valid sale. • Sufficiency of Description/Eking Out Title by Parole - in many cases we don't have a perfect property description, but sale can be still upheld. o Lemoine v. Lacour (La. 1948) - 9 receipts which stated "payment on place" issued by purported seller to buyer. ▪ Holding - insufficient property description; parole can't come in. ▪ Sufficient if description "rests substantially on written document such that we can identify the piece of real estate and differentiate from surrounding property, and to flesh out details, we eke out description thru parol." o Examples of Sufficient Property Descriptions: ▪ "the Judie Lewis Place (Sanders) ▪ "a certain 80-acre tract of land laying broadside with the 160-acre tract that he now lives on" (Guice) - closer call ▪ "124 Stella Street, on grounds measuring about 60x150, as per title."(Walker) - strongest because referenced seller's deed o City Bank & Trust of Shreveport v. Scott (2nd Cir. 1991) - property description references an auction number, and court finds it was invalid. ▪ Court said result would have been different if it was a named thing (i.e. Judie Lewis' place) ▪ Case seems a bit surprising especially considering Guice, shows the murkiness in this area of the law. • Omnibus Descriptions = describe property as all of the property owned by a person in a particular parish, township, or section. o Williams v. Bowie Lumber (1948) - Vendor transferred "all of the property owned by him in the Parish of Lafourche, except certain described land." He died, and his heirs are now the P's, suing to say the transfer was invalid because of the description. ▪ Held - valid and enforceable between the parties, but not adequate to give notice to 3rd persons (heirs NOT third persons). • Bowie Lumber needs to either reform the deed or quitclaim deed. o Rule - omnibus description can be enforceable between the parties if we can identify person & locate all property they owned in certain parish. • Effective Between the Parties, but NOT as to Third Persons (case-by-case basis) o Nitro Energy v. Nelson Energy (2nd Cir. 2010) ▪ Woodard → Smith (Aug. 2002); 2 mineral leases executed • (1) Nelson mineral lease - fails to record before Faust • (2) Faust - records first - but only referenced 1 parish that lease was on (not both). ▪ Held - valid property description & Faust lease sufficient to put 3rd parties on notice ▪ Reasoning - incorporation by reference • Reformation of Erroneous Property Descriptions o Matthews v. Emerson (2nd Cir. 2014) - reservation of mineral rights dispute, buyer and seller had mutual understanding that mineral rights were reserved it just wasn't memorialized in act of sale. ▪ Holding - Court finds this was mutual error, and allows Matthews to reform sale. o Reformation for Act of Sale - party seeking reformation must prove mutual error by clear and convincing evidence. ▪ Subject to 10-year liberative prescription

Sales Subject to Resolutory Conditions [discuss 2 most common]

(1) Sale or Return (buyer) - seller places goods in a buyer's possession for resale or use. The sale is complete as to goods that the buyer is able to resell or use; unused or unsold goods are "returned" to the seller. • i.e. A sells B 100 widgets. A and B agree that B will return to A any widgets that B cannot sell by March 15 for a refund. • Distinguished from Consignment o Consignor = owner; consignee = holds goods & sells them. o Consignee doesn't buy goods from owner, but rather serves as mandatary. ▪ (2) Sale with Right of Redemption ("ROR") (seller) - a sale made with a resolutory condition that gives the seller the right of rescinding the sale by returning to the buyer the purchase price and his expenses. Not done frequently, but reason to do it could be for security ("poor man's mortgage"), but then we would have to re-classify as security agreement. Could also do it for sentimental reason. • Applicable Rules, art. 2567 o Accomplished by agreement between the parties o If redeemed, seller must return price & expenses (cmts. c & d). o Price seller will redeem → default rule is original purchase price, but parties can agree on higher or lower sales price (cmts. c & d). o TIMING - preemptive, parties CANNOT contract a longer time, if they do would reduce to these maximums. ▪ 10 years for immovables ▪ 5 years for movables • Rights of Third Parties o Immovables → PRD controls (2572, 2588) (contrasted with lesion which absolutely protects 3rd parties) ▪ Must be recorded in conveyance records. ▪ HYPO - A sells Blackacre to B and reserves ROR. Written Act of Sale explicitly recognizes A's right to redeem. A recorded Act of Sale in the public records. Before A redeems property, B sells to C. If A later attempts to redeem, can A reclaim the property from C? • C cannot rely on absence in public records because A filed the act of sale. Therefore, A can reclaim property from C. o Movables → effective against third persons who, at the time of purchase, have actual knowledge of the existence of ROR (2572). • Miscellaneous Rules o Buyer has rights to all fruits and products (2575). o The buyer has the right to all improvements that can be removed or the enhanced value of the thing (2577). o Buyer gets expenses of the sale (i.e. closing costs) & cost of repairs necessary for preservation of the thing (2587). o But, the buyer is a "prudent administrator" prior to redemption, and is liable for any deterioration in value caused by lack of care. (NEED CODE ARTICLE). • ROR Distinguished from Security o Possible that a purported "seller" in a sale is actually a "borrower" of funds and that the thing "sold" is actually collateral used to secure the loan. If this is the case, ownership does not transfer to "buyer" because no sale was intended (2589). o Tyler v. Rapid Cash (2nd Cir. 2006) - Tyler "sold" Camry for $225 (way below market value), agreement permitted T to pay $225 back to "buyer" to get car back, but seller did not give over possession of the car. ▪ Issue - a sale with ROR or simulation? • If sale with ROR → buyer had right to sell car to 3rd party. • If simulation (security device) → "sale" should be held absolutely null & ownership would have never transferred. ▪ Holding - simulated security device. • Relies on art. 2480 presumption (if "seller" keeps thing after sale, presumed to be simulation). • Also looked to low sales price, clearly did not pay FMV. ▪ NOTE - no claim for lesion because lesion does not apply to corporeal movables.

• Sales Subject to Conditions o In General

All of general rules of conditions apply to sales subject to suspensive conditions. ▪ Canal Motors, Inc. v. Campbell (4th Cir. 1970) - buyer purchased a car from an auto dealer. Sale was made subject to a condition. Car was delivered to buyer, and seriously damaged in an accident. The loan company refused to make a loan after the car was damaged. • Buyer argues financing condition was suspensive. o If resolutory → K enforced immediately (if condition is not met, K disappears). o If suspensive → suspend enforcement of K until suspensive condition occurs, financing conditions are typically suspensive. • Holding - genuine issue of fact, remand to determine fact question of whether loan was approved. ▪ Review of Rules Applicable to Conditions • Can be suspensive (K unenforceable until uncertain event happens) or resolutory (K is immediately enforceable but will end if uncertain event occurs) (1767). • Condition can be clearly expressed OR can be implied by law OR parties' intention can imply condition (1768). • Positive Conditions (1773) = want something to happen o HYPO 1 - On Mar. 1, Buyer and Seller agree to sale of a car subject to Buyer securing financing on Mar. 15. Parties agree that Seller will hand over possession of car once the loan is approved. On Mar. 2, Buyer applies for financing with Bank. Bank approves financing on Mar. 16. Is sale enforceable? ▪ No because condition did not occur within fixed term/time. o HYPO 2 - On Mar. 1, Buyer and Seller agree to the sale of a car subject to Buyer securing financing. Parties do not discuss a date by which financing must be secured. On Mar. 2, Buyer applies for financing with the Bank. Bank approves financing on Mar. 16. Is the sale enforceable? ▪ Yes, so long as 16-days is a reasonable time (we'd need to know more facts to determine this) ▪ Variation: How does it affect your answer if the Bank does not approve financing until May 16? Less reasonable • Negative Conditions (1774) = things that are not going to happen o HYPO 3 - on Mar. 1, Buyer and Seller agree to the sale of a car with the proviso that Buyer may return the car if unable to secure financing by Mar. 15. On day their agreement is made, Seller delivers car to Buyer. On Mar. 2, Buyer applies for financing. As of Mar. 16, the Bank has not yet approved financing. Is the sale enforceable? ▪ Conditional event = no financing, return car ▪ Here, resolutory condition fulfilled, so no K, byer can return car. • Fault of a Party - a condition is regarded as fulfilled when it is not fulfilled because of the fault of a party with an interest contrary to fulfillment (1772). o This rule imposes an overriding duty of GF. o HYPO 4 - On Mar. 1, Buyer and Seller agree to sale of a car subject to Buyer securing financing by Mar. 15. On Mar. 2, Buyer discovers same car available from a different seller for a better price and, in order to avoid his contract with Seller, intentionally fails to apply for a loan. On Mar. 16, Buyer notifies Seller that he regards K null and void as a result of his failure to secure financing. Is the contract enforceable? What recourse does Seller have against Buyer? ▪ K is enforceable because the reason condition not fulfilled is because of Buyer's fault. Seller can regard K as fulfilled or could sue for breach of K. • Retroactivity - fulfillment of a condition has effects that are retroactive to the inception of the obligation (1775). o Does not affect 3rd persons rights. But has effects as to parties to the K. o HYPO 5 - On Mar. 1, Buyer and Seller agree to sale of a car subject to Buyer securing financing by Mar. 15. Parties agree Seller will hand over possession of the car once the loan is approved. On Mar. 2, Buyer applies for financing with Bank. Bank approves financing on Mar. 10. On Mar. 11, Seller delivers the car to Buyer by handing over the keys. Identify the timing of the transfer of ownership and risk of loss. ▪ ToO = Mar. 1 because of retroactivity provision ▪ Risk/Loss = Mar. 11, risk doesn't pass until delivery o HYPO 6 - On Mar. 1, Buyer and Seller agree to sale of a car, with proviso that Buyer may return car if unable to secure financing by Mar. 15. On Mar. 1, Seller delivers car to Buyer. Buyer unable to secure financing returns car to Seller on Mar. 16. When, if at all, did ownership and risk pass to Buyer? ▪ ToO & Risk/Loss = never • Waiver/Renunciation - Louisiana courts have held that a condition may be renounced by the party for whose benefit it has been established. o i.e. Buyer and Seller have conditioned the sale of Seller's car on Buyer's ability to secure financing. Buyer pays cash instead. Is the sale enforceable? Yes, B simply waiving condition that was for his benefit.

• Perfection of the Contract of Lease

Consent as to Thing & Rent ▪ Auxiliary terms may be added, but acceptance would have to match that offer exactly. ▪ If the only terms are thing & rent, that is enough. All the other rights & obligations of the parties will be governed by suppletive law. o Thing ▪ All things, corporeal or incorporeal, susceptible of ownership may be object of lease, except those that cannot be used without being destroyed by that very use, or those the lease of which is prohibited by law (2673). ▪ Lease v. Loan for Consumption - when a thing may be destroyed by its very use, then it is not an appropriate object of a lease. However, if a consumable thing is conveyed in an attempted "lease" it may be possible that the parties intended a "loan for consumption." • Loan for Consumption = K by which a person, the lender, delivers consumable things to another, the borrower, who binds himself to return to the lender an equal amount of things of the same kind and quality (2904) (i.e. crops of apple) • Difference in Transfer of Ownership o Lessor remains owner of thing. o In loan for consumption, borrower becomes owner. Then give back things of the same kind. ▪ Ownership of Leased Thing (2674) - Lessor does NOT have to be the owner of the thing. • Lease is a personal K, lessor promising to give use of possession to lessee, and if he can't give possession then it's just breach. • Comes up frequently in (1) sublease & (2) when leased thing is sold by lessor. o (1) Sublease - A (owner) →[ B → C] - B's sublease is totally separate from A & B's K. o (2) Sale of Leased Thing ▪ A (owner, leases) → B , A (sells to) → C (after lease) ▪ K between A → B is still fully enforceable, because it doesn't matter that A doesn't own the property. • Parties can contract around this rule (2674, cmt. c). o Rent ▪ Forms of Rent - any material advantage that is sufficient to be onerous contract can constitute rent (different from sale where price must be in money) (2675). • Onerous - cannot gratuitously make a lease (that's a loan for use). ▪ Agreement as to Rent (2676) • Initial Agreement as to Rent o Rent may be a sum certain. o Rent may be determinable through method agreed by the parties. o Allow a third party designated by the parties to fix the rent (*different from sales). If third person is unable or unwilling to fix the rent → lease fails • Redetermination of Existing Rent - court may either fix rent or provide a similar method in accordance with intent of parties (2676). o Term ▪ Terms in Leases, Generally - in general, leases may involve 2 different kinds of terms. • Every lease requires a resolutory or extinctive term (that extinguishes K). • Leases are also often (but not always) subject to suspensive terms which suspend the exigibility of rent payments (i.e. A leases a house to B for 1 year, and parties agree that rent is due in equal installments on the first of every month). o Default Rule → rent is due at beginning of the term (in full) (2703). • Leases do not require that the payment of rent be subject to a suspensive term. However, leases do require an extinctive term. ▪ Lease Terms can be either (1) conventional (agreed by parties) OR (2) legal (2678). • If parties intend the lease is perpetual → lease is null. • Note - If they don't put a date, will be set by court. ▪ Fixed v. Indeterminate Terms (2678) • Fixed = parties agree lease will terminate at a designated date or event. • Indeterminate ("periodic" in common law) = ultimate end-point unclear. o Conventional Indeterminate Term Lease - parties may agree to an indeterminate term. o Legal Indeterminate Term Leases - if parties do not supply a term, law provides the indeterminate term. ▪ All legal terms are indeterminate. ▪ Art. 2680 - what term the law will apply: • (1) An agricultural lease shall be from year to year. • (2) Any other lease of an immovable, or lease of a movable to be used as a residence, shall be from month to month. • (3) Lease of other movables shall be from day to day, unlessrent was fixed by longer or shorter periods, in which case term shall be one such period, not to exceed 1 month. o i.e. A lease of a backhoe is generally from day to day, unless, parties agreed that rent would be paid weekly, then, lease would be week to week. • Significance of Distinction o In general, fixed term leases end at their determinable term. o Indeterminate term leases are terminated by notice. o Form - a lease (EVEN OF AN IMMOVABLE) can be verbal, no writing required (because no transfer of ownership).

Sales Conditional Upon Payment of Price (common law → conditional sale)

Courts struggle with sales conditioned on full payment of price because they are set up in a way that if buyer never pays full price, ownership wouldn't transfer. • But our default rule on TOO is consent as to thing and price. ▪ Movables → do NOT allow sales conditional upon payment of price for movables. • Historical Approach o Ventre v. Pacific Indemnity Co. (3rd Cir. 1982) - Ventre purchased an airplane in his name. V had agreement with Moody, whereby Moody purchased ½ interest in plane on installment basis. When M made his first payment, the check bounced. M later flew the plane and crashed it. ▪ V filed suit to recover his loss under insurance policy on the plane. • According to the policy, if Moody was not an owner of the plane, then the crash was covered. • If M was an owner of the plane, the crash was not covered. ▪ V argued there was no TOO because M didn't pay him in full. ▪ Holding - Court decided that the condition that ownership didn't pass until Moody paid the full price for a ½ interest should be struck from the contract. Once struck, general rule applied: ownership transferred at consent. ▪ Black letter Rule for Movables → in a sale where transfer of ownership is conditioned on payment of price, the condition is struck and ownership transfers at consent. o Explanation of the Rule, Barber Asphalt (La. 1908) - LASC first articulation of disproval of sales of movables conditioned on payment of price. ▪ Court focused on 2 reasons for hating these conditions: • (1) legal impossibility - very definition of sale includes TOO. If there is no transfer, you can't owe a price, and there isn't a sale. • (2) mutuality of obligation - obligations of a sale (TOO & pay price) are reciprocal obligations that need to be performed simultaneously. Otherwise, not fair to buyer, who is paying price without owning the thing - lopsided. ▪ Criticisms of Barber: • Fairness - why would seller want to TOO of a thing when he hasn't received the price? • The code does not say anywhere that reciprocal obligations have to be performed simultaneously. In many onerous contracts, one party owes a performance immediately and the other owes a performance later. • These sales allow seller to retain ownership in the thing as a form of collateral. They allow a buyer to enter into a purchase without having to get financing. • Theoretically flawed & unusual, but there are exceptions. • Modern Approach o UCC Article 9 → adopted in LA in 1990s, allow seller to take security interest in thing sold. ▪ Thus, under UCC 9, although a sale conditioned upon payment of the price transfers ownership to the buyer immediately, seller retains a SI, which can be perfected through proper filing. o Louisiana Lease of Movables Act ("LMA") ▪ Purpose - allow lessor in financed lease to retain title (prevent historical approach from being applied). • Financed Lease = lease with option to purchase. B would pay in installments over time, and then would have option to become owner usually for no add'l price. ▪ Under current law, if a lease qualifies as a "financed lease" under terms of the LMA, then lessor retains "full legal and equitable title and ownership" in leased goods unless and until the lessee exercises the option to buy those goods. • To maintain this protection, lessee is required to "perfect" a SI in leased goods under UCC 9 (i.e., proper filing of a UCC financing statement). • To distinguish between FL & sale - Look to term of lease, and if at end of term lessor doesn't want thing back because outdated → sale NOT financed lease. ▪ i.e. A leases B some equipment for 5 years at a rent of $1000/ month. At end of the lease, B has option to "buy" equipment for $1. A does not perfect a SI in leased equipment by filing a UCC 9 statement. As a result, ownership of the goods passes to B immediately upon the consent of the parties notwithstanding A's attempt to prevent the transfer of title. • If, however, A had properly filed financing statement, then A would retain ownership of equipment under the LMA. o Exclusion of Rental-Purchase Agreements —"Rental purchase" agreements are rent to own agreements involving household items for an initial term of 4 months or less. These are not governed by LMA, but instead by the Louisiana Rental-Purchase Agreement Act, which explicitly exempts those transactions from treatment as "conditional sales." ▪ Conditional Sales of Immovables (a.k.a. Bond for Deed) → permitted • Trichel v. Homes (La. 1924) - T sold home to C, in which C would pay in installments for house. Ownership would transfer once C pays full price. Fire destroys house before C had paid full price. o Holding - conditional sales of immovable property are different from movables, and therefore, permitted to have cond'l sales of immovables, and TOO did not occur yet because C hadn't paid full price. o Reasoning ▪ Formalistic distinction for TOO - for immovables we need deed v. movables only need consent. ▪ Classify as contract to sell (promise to sell). • Litvinoff suggests we treat immovables differently because it is less likely the property will be sold out from under the transferor because of the public records doctrine. • Bond for Deed Act, 1934 - regulates these txns by protecting buyers. o Bond For Deed, R.S. § 9:2941 = K to sell real property, in which the price is to be paid by the buyer to the seller in installments and in which the seller after payment of a stipulated sum agrees to deliver title to the buyer. o If property has preexisting mortgage, payments made by the buyer must be paid in escrow account to ensure payment of mortgage. (§ 9:2943) o Cancellation → if buyer defaults, seller may cancel, but must provide written notice of cancellation by registered or certified mail. ▪ After notice, buyer has 45 days to cure. ▪ If after 45 days B has not cured, S may evict B. ▪ Retention of Payments After Cancellation - La jurisprudence has held that after a seller cancels a bond for deed contract, seller is not entitled to retain all payments made by the buyer, but instead is entitled to retain only "fair rental" payments. • Classification Problems - Courts in recent years have struggled with classification of Ks as bond for deed or something else. o McCoy v. Robinson (2nd Cir. 2008) - Robbins entered into a K to sell 13 acres to McCoy. PA stated $60K price, but did not provide for payments or closing date. McCoy moved onto property & remodeled it. She paid $200/month in "rent" until she could obtain financing. 3.5 years later, parties never completed a closing. Robbins attempted to evict McCoy. ▪ Held - No evidence that $200/month was to go to purchase price, nor was there any evidence of bond for deed. Therefore, not a sale or bond for deed but verbal month-to-month lease. • Notation of "house payment" on some of the $200 rent payments not enough. o Bergeron v. Parker (1st Cir. 2007) - Bergeron & Parker entered into an agreement titled "lease w/ option to purchase." Parker took possession of property. Bergeron later filed suit for "back due rent" & eviction. ▪ Trial court ruled in favor of Bergeron & evicted Parker. Parker appealed, arguing this was not lease but instead bond for deed K. ▪ Holding - reversed trial court & found this was a bond for deed K. • Majority's analysis focuses on language at the end of the K that referred to an option to purchase. • But they had to really read between the lines, because there is also a lot of language referring to this as a lease. o Hybrid-Innominate Contract - some courts have also explored the possibility that when a K doesn't meet all the BFD requirements, it can be classified as a hybrid-innominate K. ▪ Some courts still apply the BFD's provisions (Montz), while others don't apply rules for leases or BFDs (Keyes).

Consent to Auxiliary Terms

General Rule Immovables → mirror image rule, an acceptance not in accordance with the terms of the offer is deemed to be a counteroffer (1943). ▪ LaSalle v. Cannata Corp. (1st Cir. 2004) • Facts o (1) Cannata signed a listing agreement, listed property for $45,000 (cash). o (2) LaSalle signed Purchase Agreement for $43,000 + 3 conditions (one was Cannata's written acceptance). Cannata did not respond. o (3) LaSalle then prepared a "counter offer" for $45,000 with the same conditions still applying. He tried to close the sale, but Cannata said no sale, LaSalle tried to sue for specific performance. • LaSalle attempting to argue that his "counteroffer" was an acceptance of Cannata's offer (listing agreement). o Flaw with the reasoning - listing agreement is generally not an offer, but rather an invitation to negotiate. But even if there was an offer, there was no acceptance by LaSalle because it added new terms. • Holding - no binding contract to sell because Cannata didn't expressly consent to the new terms.

o FIXED TERM LEASES

In General —"A lease with a fixed term terminates upon the expiration of that term, without need of notice, unless the lease is reconducted or extended as provided in the following articles." (2720) ▪ Exception - Reconduction = transformation of a fixed term lease into an indeterminate term lease that must be terminated by giving proper notice. • How this occurs (2721) - "holdover" and transforming lease into periodic lease • If, after the expiration of the term: o The lessee remains in possession AND o Without notice to vacate or terminate or other opposition - we have reconduction. • i.e. A leases an apartment from B for a term of 1 year on January 1. On Dec. 31, B does not move out; A thereafter does not seek to evict B. After some period of time, the lease reconducts and becomes an indeterminate term lease. • Time of Unopposed Possession [how long lessee has to stay for reconduction to occur] (2721) o Agricultural Lease - 30 days o Fixed term longer than one week - 1 week o Fixed term equal to or shorter than one week - 1 day o i.e. A leases his Garden District house to B on Jan. 1 for a term of 6 months. On June 30, B does not move out; A does not oppose B's possession. If B remains in possession for one week (until July 7), the lease is reconducted. • Determining New Indeterminate Term (2722-23) o Agricultural Lease - year to year o Fixed term of 1 month or longer - month to month o Fixed Term 1 day or longer - day to day o Fixed Term Less than One Day - periods of expired term o HYPO - Annoying Bar Exam Example: Mark leased a motorcycle to Larry for a five-week period ending on January 8. The lessee remained in unopposed possession until January 19. ▪ How long did the lessee have to stay in possession? 1 week ▪ What is the new indeterminate term? New term - month-to-month ▪ How much notice is required to terminate the lease? 10 days • Continuity of Lease - the reconducted lease is the same lease as the original fixed term lease in all respects, except the term (2724). o i.e. A leases a building to B for commercial purposes for a fixed term of 1 year. The lease provides that B will procure fire insurance. After 1 year, the lease reconducts as a month-to-month lease. It is still B's obligation to procure fire insurance. ▪ Exception - Amendment • Leases may also be amended through mutual modification by the parties. • Any aspect of lease can be changed: term, obligations of the parties, even the rent. • Thus, an amendment can extend the term of the lease. • Does an amendment create a new lease? Probably just original lease. o Must remember distinction between amendment v. novation of K ▪ Novation = parties change some aspect of their K so fundamentally, that they extinguish their original K & have new K. ▪ Can objective or subjective (change parties) novation. o NEVER PRESUME NOVATION, must be express. o i.e. A leases a shopping center to B for 1 year beginning on Jan. 1. In Dec., B contacts A and asks to remain in the premises for another month while he looks for new space. B agrees. The lease now terminates on Jan. 31 (13 months after lease began) ▪ Probably same lease, even though we've changed term we don't have express intent of a novation. ▪ Exception - Extension (2725) • A lease may be extended (a.k.a. renewed) pursuant to a provision in the K of lease. • An extension clause is an option to lease (governed by the rules on options). o i.e. A and B agree to a lease of a shopping center for fixed term of 1 year. Parties agree that before the fixed term ends, B may exercise an option to extend the lease for an additional year. • When a lease is extended the lease is the same lease, except that the lease continues for the new term and under any new conditions provided in the option. • Exercise of the Option o The exercise of an option may be oral or written (no form req'd by law) o Option must be affirmatively exercised prior to expiration of the original term unless the contract provides for "automatic" extension/renewal. o Distinguishing From Reconduction - if the lessee does not exercise the option and yet remains on the premises unopposed, the lease is simply reconducted. ▪ i.e. A and B agree to a commercial lease of an immovable for 1 year. B has the option to extend for an additional 3 years. B does not exercise option, either verbally or in writing, before end of the fixed term, but remains in possession and continues to pay rent. • This option was never exercised • The lease is reconducted as a month to month lease

Recitation of Price - no requirement that price be articulated in act of sale.

It is customary in Louisiana for the parties to recite the actual sales price. ▪ But some parties prefer the sales price to be omitted and instead phrase it as "$100 and other valuable consideration." • To avoid rescission of such a sale, desirable to execute a separate "Acknowledgment of Sales Price" that recites the actual sales price that can be used to prove the validity of the sale and protects the buyer against a claim of lesion.

Sale Distinguished from Security Device

Main issue → whether ownership transfers. ▪ Factors that Suggest It's a Security Device: low price; seller remains in possession of thing "sold"; presence of counter-letter

3) Warranty Against Redhibitory Defects

Responsibility for defectsin thing sold. Louisiana is unique because we have been using this remedy for a while. And although common law adopted "caveat emptor" (buyer beware), our remedy is more robust. o Warranty Against Redhibition is implied in every sale (2520). o Types of Redhibitory Defects, redhibitory vice or defect that either: [objective inquiry] ▪ (1) renders thing useless or so inconvenient that Buyer would not have bought thing • Justifies rescission. Buyer does have option to seek either rescission or reduction of the price (2541). ▪ (2) diminished usefulness or value so that the Buyer would have bought for lesser price • Justifies reduction in the price, or quanti minoris. • Court has discretion to determine which type of defect it is, and can force type 2, causing only a reduction in a price (2541). o Additional Prerequisites: ▪ (1) Defect must be hidden (2521) • Buyer can NOT have actual knowledge of defect. • Even if no actual knowledge, if the defect could have been discovered (apparent defect) → not covered by redhibition. o Imposes a duty to inspect on buyers. o Reasonable Inspection (3 factors from Royal): ▪ (1) knowledge and expertise of the buyer ▪ (2) opportunity for inspection ▪ (3) assurances made by seller • Dage v. Obed (2nd Cir. 2005) - Dage bought commercial property from Obed. Turns out the roof leaked. Dage seeking reduction in price (cost to repair roof). o Held - leaky roof was apparent, and should've been discovered by Dages. ▪ Court looked to the multiple inspections the Buyer did, one of which the inspector said they need to hire structural engineer to look at roof (which they did not do). ▪ Further, the Dage's should've contracted roofer PRIOR to sale. • Shows us duty of inspection includes looking into other Ks if buyer has other facts that should make B concerned. ▪ Also, the Dage's exchanged no warranty for a lower price. ▪ Buyer also told the Dages that he had a 30-50 year warranty - which is NEVER a thing. • Royal v. Cook (4th Cir. 2008) - Cook sold home to Royals that was infested with rodents, Royals seeking rescission. o Creative argument by Cooks - Royals must show the thing was redhibitory AND defective, and rats don't necessarily cause structure defect. Court ultimately disagreed, only focusing on redhibitory nature. o Apparent Analysis (because no actual knowledge) - Court concludes the Royals shouldn't have known because they performed 2 inspections. And where rodents were (in walls, buried in the attics) is not part of inspection. ▪ (2) Defect must have existed at time of delivery. • If the defect manifests within 3 days from delivery then it is presumed to have existed at delivery. • Courts have relaxed this 3-day rule for practical purposes: o (1) if defect appears shortly after thing is put into use there is a reasonable inference that defect existed at time of delivery (Rey v. Cuccia). ▪ Rey (La. 1974) - Rey bought a trailer from Cuccia and drove it home, less than 10 miles. 8 days later, he took it on a 125 mile trip. On return trip 2 days later, it broke down in the road. he trailer body came loose from the frame, frame was buckled. • Plaintiff doesn't need direct evidence of timing, rather the court found that Rey proved enough circumstantial evidence that the defect existed at time of sale. o (2) when defects arise that do not result from ordinary use (Griffin). • Expansive approach, buyer's almost always win on this prong. • HYPO - A buys a car from B. Car suffers from an electrical problem that prevents the car from starting consistently. The problem could not be ascertained through a reasonable inspection. What if: o The defect does not manifest until 2 days after sale? Ok, even though it might not be 3 days from delivery. o The defect does not manifest until 3 months after sale? Depends, have to see if defect didn't arise from ordinary use. • Also, buyer can always present evidence that defect existed before delivery, even if buyer doesn't meet presumption.

Effects of Preparatory Contracts

Time Limitations o Necessity of Term for Validity ▪ Option Contract - term required for their validity (2620) • If no term stated → null. ▪ ROFR - typically not required (but see comment b) • If no term stated → ok, but super-impose 10-year outer limit. ▪ "A RoFR or an option to buy for a perpetual or indefinite term is null." (2628, cmt. b) • Only cases the comment cites is option contracts, but we should be cautious because courts & bar examiner love to cite to comments. ▪ Contract to Sell - term does not need to be stipulated in K, if it is not must be performed with a reasonable time. o Duration of Term ▪ General Rule for Immovables → 10-year outer limit for RoFR & Options (2628) ▪ EXCEPTION - The term of an option or ROFR of an immovable may be granted for longer than 10 years if granted in connection with a contract that gives rise to obligations of continuous or periodic performance. (i.e. lease) • K of continuous or periodic performance must itself have a definite term (Becker). • Becker v. Lou-Ark Equip. Rentals (La. 1976) - (pre-revision) Lou-Ark leased heavy equipment (movable) to Becker for a minimum term of 30 days & also granted an option to buy equipment. Becker eventually tries to exercise option, and Lou-Ark balks. Becker sues for specific performance. o No term for this option, but argument made that term was tied to lease, thereby saving the option because it would last as long as lease. o Holding - option null because indefinite term lease, but option can't be saved with this indefinite term lease because the attendant contract needs a fixed term. • Youngblood v. Rosedale (2nd Cir. 2005) - (post-revision) Plaintiffs owned 363 acres of undeveloped real estate. In June 1996, it sold 15 acres to defendant. Plaintiff granted an option to defendant to purchase remaining acres at same price per acre adjusted by CPI. Term of option was 3 years; however, it provided for an extension for an additional 3 years. Later, plaintiffs sued for declaratory judgment that option was null because it provided for an "endless stream" of 3 year extensions in violation of the law. o Problem with this option - longer than 10 years and indefinite term. o Holding - reduces term to 10-years. Until 2628, indefinite terms resulted in nullity. Now we can save an option K with an indefinite term by imposing a statutory maximum. • Problem - 2628 imposes statutory max for immovables. But problem is we don't have a max term for movables. So, if the jurisprudence continues in this way, we would have 2 different rules, which doesn't make any sense. o Prescription ▪ Prescriptive Period for Preparatory Contracts → 10-years from date of breach (3499). ▪ Special Legislation: Contracts to Sell, La. R.S. 9:5645 • "An action for the breach or other failure to perform a contract for the sale, exchange, or other transfer of an immovable is prescribed in 5 years." • Might apply to other preparatory contracts because it doesn't make sense to have different prescriptive periods for preparatory contracts. o "Other transfer of an immovable" implies it could apply beyond K to sell.

Distinction from Breach of Contract - contrasting redhibition with other obligations regarding the quality of the thing sold.

Warranty of Fitness (2524) ▪ This article is a mess because prior to 1993, La courts long lumped together defective things and things although not defective were not "fit for their use." ▪ Two Warranties of Fitness • For Ordinary Use - everything sold must be reasonably fit for its ordinary use. • For Particular Use - 2 criteria must be met: o (1) When seller has reason to know the particular use the buyer intends for the thing, or the buyer's particular purpose for buying the thing, AND o (2) buyer is relying on the seller's skill or judgment in selecting it, the thing sold must be fit for buyer's intended use or for his particular purpose. ▪ If the thing is not so fit, buyer's rights governed by general rules of obligations. • GF Seller in Redhibition - 1 to 4 year prescriptive period, rescission, no damages • GF Seller Liable in Breach of K - 10 year prescriptive period, damages ▪ Courts are really struggling to distinguish between something that is defective and something that although not defective, is not fit for its ordinary use. • Cunard Line v. Datrix, Inc. (3rd Cir. 2006) - sale of lighting system on a cruise ship from Datrix, missed the redhibition deadline, so they are arguing not fit for use. o Court said how could lights not work unless something is wrong with them? This is a redhibition claim, not cumulative remedies - one or the other. o As a threshold matter - is the problem with the thing a true defect or not? 3 2323 = comparative fault applies to all kinds of claims, any kind of injury, no matter the law - very broadly formulated. Two-Part Test to Determine NonPecuniary Damages (art. 1998): 1. contract, because of its nature, is intended to gratify a significant non-pecuniary interest and a. Non-Pecuniary Interest = buying that particular home on that corner lot; saving for a home 2. because of circumstances surrounding the formation or non-performance of the contract, the obligor knew or should've known his failure to perform would cause this kind of loss. o Rare to see cases with warranty of fitness for ordinary use - usually turns out to be a defect. o Difference in Kind or Quality (2529) - thing isn't defective, but it's not as the parties expected; conformity issue NOT redhibition. ▪ When that thing doesn't conform, can sue for breach of K on general rules of K. ▪ Courts here too are struggling with classification between something not meeting qualifications vs. something being defective. • PPG Industries v. Industrial Laminates Corp. (5th Cir. 1982) - PPG buys these panels that were delaminating, not supposed to happen. PPG sues Industrial for damages. o Court found reason it was delaminated is because it was defective, and If it's defective, court is putting it in redhibition category. o Different consequences depending on classification. ▪ Art. 2545, bad faith seller - if something does not have a quality, even if not defective, but the seller says it does knowingly, it's redhibition NOT art. 2529. • So, art. 2529 is only applicable where the seller is innocent, GF. • This doesn't make any sense, because GF seller is "more liable" because they have longer prescriptive period, more damages, etc. ▪ No resolution to this issue!

• Capacity in General

incapacity of exercise incapacity of enjoyment

Nature & Essential Elements of Lease • Nature of Contract of Lease

o Lease is a synallagmatic (bilateral) contract by which one party, the lessor ("landlord"), binds himself to give to the other party, the lessee ("tenant"), use and enjoyment of a thing for a term in exchange for a rent that the lessee binds himself to pay. Consent of the parties to the thing and the rent is essential but not necessarily sufficient for a contract of lease (2668). ▪ Bilateral = both the parties to the lease (lessor and lessee) are mutually and reciprocally bound, and their performances depend on one another. ▪ Personal (NOT real) Relation - Lessee gets use and enjoyment of thing • Common Law - lease is property right, right is in the thing. • Civil Law - lease is a contractual right, we don't have rights in the thing, but rather rights against the lessor. o Five Types of Leases (2671) - classification depends upon the agreed use of the leased thing. When a thing is used for multiple purposes, the dominant use prevails. ▪ (1) Residential - when the thing is to be occupied as a dwelling, appliesto both immovables and movables such as mobile homes. ▪ (2) Agricultural - when the thing is a predial estate to be used for agricultural purposes. Applies only to predial estates (only lease of ground), not to equipment that may be used. ▪ (3) Mineral - when the thing is to be used for the production of minerals. This type of lease is governed predominantly by mineral code (art. 2672 & cmt. b). ▪ (4) Commercial - when the thing is to be used for business or commercial purposes. ▪ (5) Consumer - when the thing is a movable intended for the lessee's personal or familial use outside of his trade or profession. o Contract to Lease (2670) - can have binding & enforceable K to lease, options, or RoFR for leases

CONTRACTS PREPATORY TO SALE - These Ks are not sales, but Ks people enter into in advance of a sale. (1) Option Contract • In General

o Option Contract (1933) = an option is a K whereby 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. o Option Contract v. Irrevocable Offer ( = offer that the offeror has to leave open for a certain period of time, and the offeree has the right to accept that offer within that period of time). ▪ Option Contract - assignable, heritable ▪ Object of the option contract is an irrevocable offer, it's just a stronger version (K v. offer). • Option to Buy or Sell o Option to buy, or an option to sell, is a contract whereby a party gives to another the right to accept an offer to sell, or to buy, a thing within a stipulated time (2620). ▪ Can be granted to potential buyer OR potential seller. o Common Use in Sales - real estate development; lease with option to purchase o Prerequisites (2620) ▪ Thing - option must set forth a thing ▪ Price - sufficient to support a sale ▪ Form - must meet formal requirements of the sale it contemplates ▪ Term - "accept an offer...within a stipulated time." • No term → option absolutely null and unenforceable ▪ "Consideration" - non-requirement, but in common law tradition, options require consideration but NOT today in Louisiana (old law said "consideration"). o Exercise of the Option (2621) ▪ Acceptance / rejection upon receipt. ▪ If contract is accepted, the contract is turned into a contract to sell. ▪ If reject offer and option, option is terminated. But if merely a counteroffer is made, option is not terminated. • A grants B an option to buy A's house for 5 yr term. In yr 1, B rejects the offer contained in the option. B cannot later exercise the option. (rejection) • A grants B an option to buy A's house for $100K for 5 yr term. In yr 1, B offers to buy A's house for $95K, A refuses. This counteroffer does not terminate the option. o Lesion ▪ When Lesion is Applicable • Prior to the Exercise of the Option → doctrine does NOT apply • After the Exercise of the Option → may be raised as an affirmative defense to an action for specific performance brought against a seller by a buyer. May also be claimed after the parties execute the sale contemplated by the option. ▪ Calculation of Fair Market Value (2590) - look at date when the option was entered into. o Distinguished from Right of Redemption ▪ Right of Redemption - seller gets the property back if Seller wants to by giving back the price. Nature of this K is almost indistinguishable from option contract. ▪ But there are several key differences: • Resolutory Condition vs. New Sale—If the agreement is an option, the seller's repurchase is an entirely new sale, whereas if a right of redemption, then the seller's repurchase operates as a resolutory condition on the original sale. • Requirement of Term—Options require a term, under penalty (probably) of nullity. Rights of redemption do NOT require a term; if no term is stipulated the maximum time set forth art. 2568 will apply. • Length of Term — time limits for exercise of these rights differ from one another. o RoR → period of 10 years for immovables and 5 years for movables (2568). o Option Contract → sets forth a period of 10 years for immovables ▪ No time limit for movables (2628) ▪ Method of Distinction - WDK how to tell the difference, no authority so just argue whatever is better for your client.

SELLER'S OBLIGATIONS: (1) delivery; (2) warrant buyer ownership and peaceful possession of the thing (warranty against eviction); (3) warrant the buyer the absence of hidden (redhibitory) defects in the thing; and (4) to warrant the buyer that the thing sold is fit for its intended use. (art. 2475)

→ NOTE - we have a buyer-friendly law, any ambiguity resolved in favor of buyer and against the seller (2474). (1) Delivery • Necessity of Delivery - failure of delivery may signal a breach of K on part of seller. o If no delivery, general rules of K apply and seller owes buyer either: specific performance or dissolution and buyer may seek damages (2485). o Beware of Simulation - if seller remains in corporeal possession of thing sold presumed to be a simulation. Parties must show that their contract is not a simulation (2480). • Time, Manner, and Place of Delivery o Movables ▪ Manner - many ways including: physical dispossession, "keys to the place," negotiating title, or mere consent (2477 is merely illustrative). ▪ Timing - can be subject to a term, but in absence of term, according to general obligations rules performance is due immediately. • Courts have interpreted "immediately" to mean "perform in a reasonable time," which depends on the facts and circumstances of the sale and the parties. ▪ Place of Delivery - if no contract → delivery at place where thing is (so, seller must make thing available to pick up) (2484). Immovables ▪ Manner - delivery occurs at execution of the writing that transfers ownership (2477). ▪ Time - at the moment of delivery, the buyer is entitled to immediate corporeal possession. • Matthews v. Gaubler (La. App. 1951) - Matthews agrees to buy home from Gaublers At closing, Gaublers state that they need more time to vacate the home, because of a sick child. Matthews sues for breach of K. o Holding - Gaubler's breached contract, because delivery of immovable requires actual corporeal possession at act of sale (2477). • Note - parties can enter into a delayed occupancy agreement, specifying how long the seller may stay in the property following execution of act of sale. ▪ Place - where the land is physically located. o Incorporeals - if incorporated into an instrument, delivery takes place by negotiating such instruments to the buyer. If other incorporeal movables (i.e. credit rights), delivery takes place upon transfer (consent) of those movables. (2481). o Costs of Delivery ▪ In absence of K, making delivery is paid by seller and taking of delivery (i.e. shipping or cost of picking it up) is paid by buyer (2483). ▪ If seller not in possession of thing at time of sale, must obtain possession at his cost and deliver thing to buyer (2482). • Seller's Right to Delay Delivery (2487) o Here, we are not delaying the transfer of ownership (that's already happened), but seller can withhold possession of thing until buyer pays. o Term for Payment - if there is a term for a payment this right to delay does NOT apply. Generally, only applies to sales where prices is due immediately. ▪ EXCEPTION - unexpected change in financial position makes it look like Buyer can't, Seller can then delay delivery or demand and reasonable amount of security. (2487, cmt. b). o Stoppage in Transit (2614) - in the cases of movables involving a carrier, seller may stop delivery of the things in the possession of a carrier or other depositary when he learns that the buyer will not perform the obligations arising from the contract of sale or is insolvent. ▪ EXCEPTION - bills of lading (cmt. d) • Conformity o In General ▪ Seller must deliver the thing in condition that the parties agreed or expected. (2489) ▪ Sale of a thing includes all "accessories" and component parts thus, accessories must be delivered as well (2461). • Including real rights with property (i.e. predial servitudes) NOT personal rights. o Movables ▪ Seller's Obligation to Deliver Conforming Goods (2603) • Things do not conform when they are either (a) different than parties agreed or (b) different kind, quality or quantity from the one agreed. • Note any determination of a certain kind, quality, or quantity as agreed by the parties must be made in light of past dealings and prevailing usages. (cmt. b) • If no quality specified, seller doesn't have to give best quality, but he can't give the worst (1869). ▪ Buyer's Right of Inspection (2604) - "reasonable" inspection ▪ Acceptance and Rejection of Nonconforming Things • Can be partial or full • Rejection - must give notice of rejection in reasonable time o Failure to reject in reasonable time deems Buyer's acceptance ▪ Exception - if B alerted S and S says he will cure but never does, we want to protect B. o **Once buyer rejects goods → risk transfers to seller (ownership remains with buyer). o If Goods Are Rejected... ▪ Merchant buyers must handle goods as prudent administrators (note - consumers have a lesser duty) ▪ Buyer can "cover" (2609) - difference between contract price and new price. • Note that this rule allows for more accurate assessments of damages. If Buyer does not "cover" then when he rejected the goods he would be entitled to damages in the amount of the difference between the contract price and the market price at the moment of the breach. ▪ Seller can "cure" (2610) - if rejection before term for performance has expired, S can cure non-conformity & during this time B cannot produce substitute goods.

Seller's Remedies for the Buyer's Failure to Perform

(1) Specific Performance & the Vendor's Privilege ▪ Seller may demand the buyer pay the price or take delivery of the thing (1986). ▪ Practically, if B fails to pay price, specific performance isn't practically useful. So, the vendor's privilege serves as the way to secure specific performance of the price. • Movables - the vendor's privilege is effective in sales of movables for as long as the seller has possession of the goods. • Immovables - vendor of an immovable only preserves his privilege on the object when he records the act of sale in the mortgage records. The act must not state that the price has been fully paid. ▪ Failure to Take Delivery - if Buyer fails to take delivery, the seller may transfer risk by moving items from their possession after providing notice to the Buyer (2612). • Buyer on the hook for costs of storage. o (2) Dissolution of the Sale, art. 2561 - seller can dissolve, rights to dissolve transferred via assignment of right to collect price. ▪ Refresher on Dissolution: • Effects Against the Parties - unwinding the sale, putting parties back to their original position. So, Buyer gets the price & Seller gets the thing back (2018) o Seller may also be entitled to fair rental value for Buyer's use of the thing, which includes fruits & products. • Effects Against Third Persons o For Immovables → the PRD governs, third parties are allowed to rely on absence of indication that seller has a right to dissolve. ▪ Thus, if act of sale says price was paid, and act is recorded in conveyance records, 3rd parties are protected against dissolution. o For Movables → good faith controls (2021, ¶1);4 3rd parties are protected if they purchase by onerous title in "good faith"— without knowledge or reason to know seller has a right to dissolve for nonpayment of price. ▪ i.e. A sells to B. C, believing that B has paid A, purchases the thing. A then sues B for dissolution. B cannot return property, but an award of damages for value of property will be made to the seller. ▪ Remember → GF is presumed. ▪ Prescription • Generally, 10 years from failure to pay (2561) (default Ks rule). • But if sale evidenced by promissory note (which it almost always is), prescription matches the promissory note, which is 5 years (3498) o When it begins to run depends on whether it's a demand or time note. ▪ Time Instrument = pay within a certain period of time • Begins to run when 1st payment is due (and then prescription runs only for that payment); and on and on. ▪ Demand Note = "due on demand," pay whenever creditor asks. • 5 years runs from date of execution. ▪ Judicial Dissolution • In general, under art. 2013 courts' have discretion in determining whether to dissolve an obligation. o Litvinoff/Waesco Factors for Dissolution: ▪ (1) the extent and gravity of the failure to perform; ▪ (2) the nature of the obligor's fault; ▪ (3) the good or bad faith of the parties involved; and ▪ (4) the surrounding economic circumstances. o Application of factors in Robertson: 4 Similar to the Bona Fide Purchaser Doctrine ▪ (1) extent - Ms. R had to take over mortgage, financial hardship, lose her property ▪ (2) nature - paying mortgage is central to contract ▪ (3) bad faith - buyer just left town; Ms. R is presumed to be in GF. ▪ (4) economic circumstances - we want property taxes to be paid, buyer is not doing it, and S is willing too. • Limitation on Dissolution in Sales of Immovables - Court may only allow the buyer an additional 60 days to pay price, but only if the seller is not in "danger that the seller may lose the price and the thing," o If there is a danger that seller will lost price/thing → no extension • Restriction on Dissolution in Sales of Movables - no add'l time allowed (2564). ▪ Extrajudicial Dissolution - no court involvement, parties have express dissolution clause. • But for immovables → Buyer still has the right to pay the price late so long as the Seller has not given B notice of use of extrajudicial clause (default) (2563). o (3) Damages - Buyer who fails to perform contract is liable for expenses incurred by the seller and other damages, including compensatory, moratory, and/or nonpecuniary damages, according to general law of conventional obligations (2555). ▪ Friedman Iron & Supply Co. v. J.B. Beaird Co. (La. 1952) - Beaird sought to buy scrap steel at price of $41/ton from Friedman. B then notified Friedman that it would not go through with sale. Seller sued for specific performance, and in the alternative, damages. • Issue - amount of damages due to the Seller. • Look at date of breach of contract, and determine market price on that day. o Pittsburgh - cost was $37/ton o Shreveport - deduct freight charge ($13/ton) (Buyer is liable for shipping because in order to resell it Seller has to have the steel). o "Market Price" = $24/ton - subtract that from contract price. • Sellers Damages = Contract Price - Market Price (at date of breach) o When B breaches, the Seller is not automatically entitled to whole K price, only entitled to whole K price if the contract is enforced. • Fluctuation in price of steel - dispute in case as when to measure damages o Rule → measure damages at date of breach of contract. o Think about why buyer breached - because of decline in steel price. Want to ensure B pays for his conduct. ▪ Determining Market Price • Look at other similar sales in the area • If seller had resold goods, the resale price would be the market price. • NOTE - Court has vast discretion to determine damages, about approximating market price at time of breach. ▪ Elazab v. Bryant (4th Cir. 1967) - same test from Freidman Iron for measuring damages applies to immovables. o (4) Other Remedies ▪ If buyer fails to pay the price, the seller can refuse delivery (2022, 2487). ▪ Sales of Movables • Deposit by Seller - if the Buyer does not take delivery, the Seller can request court authority to put the things out of his possession to transfer risk, but notice must be given to Buyer (2612). • Stoppage in Transit - Seller can stop delivery of things in possession of a common carrier when he learns Buyer will not perform. o Important Exception - when bill of lading has cosigned goods to buyer. • Right of Resale - when B refuses to pay and refuses delivery, seller entitled to resell goods (2611). But seller will want to ensure B has breached. o Seller's Recovery - Contract Price - Resale Price; and any other damages suffered minus any expenses saved as a result of buyer's failure to perform. o Sale must be made in reasonable time and good faith o Seller must give reasonable notice of the resale. ▪ Although not required if things are perishable or subject to rapid decline in value. o Resale is NOT required ▪ If the seller chooses not to resell, then in order to recover lost profits he must prove that he suffered a loss vis-à-vis the market price on date of breach. ▪ Leon Godchaux Clothing Co. (1929) - right to resell is an option unless the goods are perishable. The buyer, the court held, has the right to bring an action for dissolution and damages (with the burden of proving loss), resell the property, or bring an action for specific performance/payment of the price.

Treatment of Different v. Additional Terms

Additional Term = when it contemplates a matter not addressed in the offer (like when acceptance names date for delivery, but offer doesn't). o Different Term = when it varies a term contained in the offer (like when offer names a date for delivery, but the acceptance names a date that does not coincide with the one in the offer). Art. 2061, cmt. f o Between Non-Merchants ▪ In the common law, different terms are treated as proposal for modification, implemented in two ways: • (1) Fall Out Rule - term in the acceptance that is different from the term in the offer "falls out" of the contract (unless accepted by the offeror). Terms of offer control. • (2) Knock Out Rule - different terms cancel each other out, so that neither term is in the K, and instead, provisions of suppletive law control. [majority approach] ▪ In Louisiana, 2601 cmt. C suggests that fall-out rule applies, cmt. c says a K is formed on the original terms of the offer unless the offeror assents to additional or different terms contained in the acceptance. o Between Merchants ▪ Common Law - UCC 2-207, like 2601, suggests that only additional terms automatically become part of a K b/w merchants. CL courts take 2 approaches to different terms in K's between merchants: • (1) Treat different terms exactly like additional terms. They automatically become part of the K unless one of the 3 exceptions apply. [minority approach] • (2) Different terms do not automatically become part of K. [majority approach] ▪ Louisiana - grey area (STILL UNCLEAR) • 2601 ¶1, which deals with non-merchants, mentions different and additional terms. • ¶2, dealing with merchants, only mentions additional terms. This suggests that "different" terms do not automatically become part of a contract between merchants. o Instead, the "general" (non-merchants) rule applies: different terms become proposals for modification that must be accepted by the offeror in order to become part of the contract.

Categories of Sale and Modification of the Warranty - extent of rights of buyer depends on type of sale.

Category Definition Effects Warranty Sale Default rule Full extent of remedies Non-Warranty Sale Warranty excluded Rescission/return of price No damages Peril & Risk Warranty is excluded AND 1 of 3 things satisfied: (1) buyer aware of danger of eviction (2) buyer declared peril and risk (3) obligation to return price excluded No recovery whatsoever o Effect of the Buyer's Knowledge of Eviction Category Effect of Buyer's Knowledge of the Danger of Eviction Warranty Sale Return of the price, no damages *if encumbrance, no recovery Non-Warranty Sale No recovery Peril & Risk No recovery ▪ Warranty Sale - effect of knowledge depends on whether the eviction is occasioned by a 3rd persons' full ownership interest in the thing sold OR an encumbrance. • If eviction results from 3rd person's full ownership of all or part of thing sold → knowledge precludes damages, but can get return of price. • If eviction results from an encumbrance → warranty against eviction does not apply, no recovery. ▪ Non-Warranty Sale → no recourse. o Seller's Liability for Own Acts - whenever the warranty is modified, "the seller is liable for an eviction that is occasioned by his own act, and any agreement to the contrary is null." (2503). ▪ HYPO - Seller conveys Blackacre to Buyer 1. Act of Sale states: "The parties agree that this sale is made without warranty of title and without recourse of any kind against Seller." Buyer 1 fails to record Act of Sale. Days after the sale to Buyer 1, Seller conveys Blackacre to Buyer 2, who records. Does Buyer 1 have an action for breach of warranty? To what recovery is he entitled? • Buyer 1 still has warranty of eviction even though the eviction occurred after sale and waived warranty, buyer entitled to price, rescission, damages, fruits, etc. o Because the eviction has been occasioned by the seller → buyer gets all the recovery. • Note - this sale is probably a non-warranty NOT peril & risk.

(2) Warranty Against Eviction • Introduction and Scope

Definition of Eviction, art. 2500 ▪ (1) Eviction is either the buyer's: • Loss of the Thing = judicial decree that 3rd person is the owner of the thing OR • Danger of the Losing the Thing = third person has perfect title to the thing. o Bologna Brothers v. Stephens (La. 1944) - Stephens transferred property to family LLC, Stephens Realty. Property description was not complete. He later transferred same property to Bologna Bros. After Stephens died, his wife and children through Stephens Realty conveyed the property to Bankston. Bankston contacted Bologna Bros., who paid Bankston $1,000 to quiet their title. Bologna then sued Stephens' heir for breach of warranty. ▪ Holding - unclear whether there is an eviction here; remanded to determine whether property description can be "eeked out by parole" (thereby, potentially making it perfect title, entitling Bologna to eviction). • **Eviction is NOT necessarily physical dispossession. ▪ (2) Eviction must occur because of a third person's legal right in a thing that existed at the time of the sale. • Eviction is not accomplished by trespassers (no legal right). ▪ (3) Right must exist at the time of the sale. Seller is only going to be liable to the buyer for the rights of third parties that existed at the time of the sale. • Two Exceptions: o (1) Right Commenced Before Sale but Perfected After through Negligence of Buyer → this is acquisitive prescription. (2500) ▪ Hypo - A sells Blackacre to B. 29 years prior to the sale to B, C began possessing a portion of the property. One year after the sale, C acquires the portion by acquisitive prescription. Does B have a claim against A for eviction? • Depends on whether B was negligent, if B was negligent in failing to notice a possessor on his property for a year, then there is not going to be an action for eviction. ▪ Variation - Same facts, except C began possessing property 29 yrs and 364 days prior to sale between A and B. After B acquires ownership of portion, does B have claim against A for eviction? • Buyer probably not negligent here, because he had very little time to ascertain that third person was on his property, therefore an action for eviction is possible. o (2) Seller's Own Act - (more frequently used) even if a 3rd person rights in the land arises after the sale, if it arose because of some act of the seller, then it is still actionable (implicit authority in 2503) ▪ Hypo - A sells to B, who does not record. A then sells to C, who does record. Does B have a claim against A for eviction? • B has essentially been evicted; vis-a-vie third persons C owns the land. Although this all happened after the sale to B, because it was A's fault, B has an action against A. o A had the duty to record the Act of Sale. ▪ Clark v. O'Neal (La. 1858) - In March of 1849, Clark sold a tract of land to O'Neal. O'Neal did not record. Later, suit was filed by a creditor of Clark for the seizure of the property, and it was sold at auction. Clark sued O'Neal for payment of the purchase price. • Held - eviction has occurred, entitled to rescission & price. o Because Clark's actions allowed for the foreclosure (she didn't contest action). o But even if she had vigorously contested, wouldn't matter because seller has duty to record AoS. • *Overview → What we need generally for an eviction is for buyer to either lose or in danger of losing a whole or part of the thing because of a legal right of a third person that existed at the time of the sale (unless one of the 2 exceptions is met).

form movables

FORM • Movables o No formality required, can even be entirely implied if we have the rights facts. o Therefore, focusing on the rules of proof because no formality required: ▪ Burden of proof lies with person seeking to have contract enforced (1831). • Preponderance standard ▪ Method of Proving • If contract is less than $500 - only need competent evidence • If contract is worth more than $500 - need 1 witness + other competent evidence o But you can be your own witness • Peter Vacari (5th Cir. 2002) - question of fact; manifest error standard (very hard to overturn trial court). ▪ Parol evidence rule applicable to movables if there is a written contract involved (even though one is not required). • Testimonial or other evidence may generally not be admissible. o Exceptions → oral modification; vice of consent • Immovables o Writing Requirement (2440; 1839) - sales of immovables generally must be made in writing ▪ Purpose of Writing Requirement • (1) proof - immovable viewed as more important, so heightened proof required. • (2) solemnity - want you to carefully consider consequences of your actions. ▪ Scope - Applies to ANY promise to sell an immovable (i.e. contract to sell (PA); option, etc.) • Also applies to any modification of those contracts (equal dignities rule). • Termination of K of sale does NOT need to be in writing (Frank v. Motwani). ▪ Features of the Requirement → Authentic Act OR Act Under Private Signature • Authentic Act (1833) • Act Under Private Signature o The actual agreement is what must be in writing. We can't just have written evidence that we agreed verbally to the sale, must have written contract of sale. (Shoreline - letters of a previous verbal agreement is NOT enough). o Signature of the Parties (1837) - parties don't actually have to write K, just "must be signed by them." ▪ EXCEPTION - only 1 party's signature is enough when there are other outward manifestations of acceptance (1837, cmt. b), need some change in position. Millman v. Peterman (5th Cir. 1988) o Petermans signed written agreement to buy Millman's home. Milliman's didn't sign the agreement, but engaged in other conduct evidencing their assent. Later, Petermans refused to go forward with the sale o Holding - binding contract to sell. ▪ Millman's availed themselves of K by accepting rent and allowing Peterman's to move in. ▪ Sending telegram would probably not been enough (no change in position). • Note this exception should apply neutrally but all of the cases on this have only involved signature of buyer. o Interaction with Parol Evidence Rule [see above in movables] ▪ EXCEPTION to Writing Requirement → Delivery + Admission • Requirements - Actual Delivery + Seller Recognizes Transfer Under Oath (1839) • Martin v. Brister (2nd Cir. 2003) - valid verbal sale (driveway) o (1) actual delivery - Martin's got permit from DOTD to build driveway & seller made no objection ▪ For actual delivery looking for some relinquishment of control. o (2) confession under oath - Brister admitted to sale at trial

• Sellers in Good or Bad Faith

Good Faith Seller = one who did not know that the thing had a defect (2531). ▪ Given opportunity to fix defect. Buyer must give Seller notice of defect. ▪ If defect cannot be repaired, Buyer granted rescission + interest & expenses. ▪ GF seller can also get credit for use, deduct from seller's liability the fair rental value of the property. o Three Kinds of Bad Faith Sellers [must be precise]: ▪ (1) Actual knowledge of defect & failed to disclose ▪ (2) Seller declares thing it has a quality he knows it does not have (broad) • This applies to things that are not per se defective, but if seller affirmatively lies about quality of thing, seller is in BF. ▪ (3) Manufacturers → ALL manufacturers are deemed (irrebuttable) BF sellers. • Manufacturer includes assembler of things manufactured by another (Spillers). • Developer of a subdivision is considered a manufacturer. • Bearly v. Brunswick Mercury Marine Div. (DATE)—Bearly purchased a boat from Reeves marine. He had problems with the motor, brought it in several times. Ranger was the assembler of a boat and another motor. The court found Ranger liable as a manufacturer, presumed to know. o Significance of the Distinction ▪ Opportunity to Repair • GF sellers → only one with right to repair. ▪ Remedies • GF sellers → if GF seller cannot/does not want to repair, must return price + interest + expenses in preservation & of the sale. • BF sellers → in addition to rescission + interest + expenses, BF sellers owe damages and attorney's fees. o This might include non-pecuniary damages in some cases. ▪ Credit for Use • GF sellers automatically entitled to credit for use or fruits that buyer retained. • BF sellers → discretionary (2545, cmt. g) ▪ Seller's Right to Notice • General Rule - GF sellers entitle to notice. If no notice given, only entitled to reduction in price NOT rescission. o But manufacturer entitled to receive notice. But WDK the consequences if B fails to give mfr. notice, because courts haven't grappled with the issue. • David v. Thibodaux (1st Cir. 2005) - Davids purchased property from Thibodeaux. There was terminate damage. Ds' sued for rescission & in alternative reduction. o Termite damage was redhibitory defect. o Determining if seller was in GF - tricky issue, but trial court found she was in GF even though it "slipped her mind." o Davids' failed to give notice, so no rescission granted, only a reduction in price. Court should've discussed cost because of Ds' failure of notice. • Also, right to notice effects risk of loss (2532) o If thing destroyed by redhibitory defect → buyer still recovers. o Fortuitous Event → notice determines who bears risk of loss ▪ If notice given (REGARDLESS OF GF/BF) → liability on seller • Practice Tip - you should always give notice. ▪ If notice NOT given → liability on buyer. ▪ Prescription (2534) • Good Faith Sellers o General Rule → 1 year from discovery with 4 year cap from delivery. o BUT residential or commercial immovables → 1 year from delivery (signing act of sale). • Bad Faith Sellers & Manufacturers → 1 year from discovery. o Cmt. b says there's 10-year cap (general rule), but that doesn't apply here. • Interruption - repairs restart prescriptive period & prescription doesn't begin to run until Buyer gets thing back. o Buyer's Obligations ▪ Return/Prudent Administrator ▪ Loss Because of Redhibitory Defect → buyer still entitled to remedy.

Party Personally Bound by Obligation (generally, referring to successors)

Hypo 2: A is the record owner of Blackacre. A sells to B. B fails to record. A dies, leaving an heir, C. C files a petitory action against B. Who will prevail? • Successor (C) stands in the shoes of the party (A) and becomes personally bound to act. C is not a 3rd person and cannot rely on PRD.

Sale of a Future Thing v. Sale of a Hope

If the contemplated thing does not come into existence, then... • In Sale of Future Thing o There is no contract of sale o Both the buyer and the seller are "off the hook" ▪ unless one of parties prevented the coming into existence of the thing through his fault. • In Sale of a Hope o There is a contract of sale o The seller is not in breach, and the buyer still owes the price

Subrogation (2548)

Identical rule to eviction, can go back through the chain of title all the way to manufacturer if buyer an prove defect existed in mfrs. care (2548). o Media Production v. Mercedes-Benz North America (La. 1972) ▪ Germany (mfr.) → DBNA (importer) → MBNA (distributor) → Cookies (dealer) → Media ▪ Car defective and Media (buyer) is trying to go after MBNA because Cookies is insolvent. ▪ MBNA argues that there was no privity of K with Media, so they can't be held liable. ▪ Holding - held MBNA liable, citing "consumer protection" rule, a public policy rule aligning sales law with products' liability law. • Treats MBNA as mfr. because of all things that MBNA did with car in their care. ▪ Concurrence - not just an issue of public policy, extends principals of subrogation by drawing analogy from eviction (2503).2 o Liability of Remote Sellers ▪ If GF seller waived warranty in chain of title should not be held liable for damages & attorney's fees. ▪ Although, Buyer should not be able to "up" chain of title to recover more than what they could have recovered from immediate seller. In the public policy world of "consumer protection," that's probably not true. • MBNA (BF mfr.) → Cookies (GF) → Media o MBNA still liable for damages and attorney's fees even though Media could not have recovered that from Cookies. o Solidary Liability ▪ Co-Sellers Distinguished from Remote Sellers - co-sellers are jointly liable (in proportion to their interest) (2538). ▪ Traditional Approach to Solidarity - sellers in chain of title have been held solidarily liable (Media Prod. v. MBNA (La. 1972)). 2 Subrogation article for redhibition is relatively new and was not in code at time of this decision. • When the thing sold contains a RD, manufacturer and seller are solidarily liable to buyer for return of the purchase price (2545, cmt. d) ▪ Aucoin v. Southern Quality Homes (La. 2008) • Southern sold Aucoins land + defective mobile home, Dynasty was the manufacturer. Southern went bankrupt, so Aucoins suing Dynasty for redhibition. • Dynasty's defense to lessen their responsibility → they are not solidarily liable. o Art. 23233 raised a new argument to traditional app. of solidarily liability. o Louisiana appellate courts struggling whether comparative fault undoes solidary liability in the context of redhibition. ▪ BUT LASC dodges the circuit split, so WDK the answer to the comparative fault question. • Holding - Dynasty is independently liable for redhibitory defects that existed at the time of manufacturer of the mobile home (which is all the defects) o Dynasty liable for attorney's fees, damages, return of price, etc. • Land Argument - Buyer arguing land is useless to them without the home (2540). o But, buyer's argument fails because: ▪ No failure to the utility of the land, can use land for something else. ▪ Manufacturer had nothing to do with the sale of the land, only person that could be liable for the land is Southern (only seller). • Non-Pecuniary Damages - buyer seeking mental anguish damages for both aggravation & loss of the American dream (saving up for a new home). o Huge body of jurisprudence on American dream non-pecuniary damages. o But they lost because they didn't meet the art. 1998 standard (see text box). Home ownership in general is not a non-pecuniary interest, need something more

mechanics of lesion

Rights of the Buyer, art. 2591 • Buyer elects to: o Return the thing OR o Pay the supplement (up to FMV of the immovable) ▪ **Supplement is to FMV not up to the lowest non-lesionary price. • i.e. Seller conveys Blackacre, worth $150K, to Buyer for $65K. Seller sues for rescission. Buyer may return Blackacre OR pay Seller supplement of $85K. • If Buyer Returns Immovable (2592, 2597, 2599) o Must return fruits from demand for rescission o Seller returns price with interest from same demand o Reimbursement for expenses of sale and improvements (even those improvements that did not enhance the value of the property). ▪ Buyer can retain immovable until he gets reimbursement. • If Buyer Pays Supplement (2592) → must pay interest on supplement from date of demand for rescission. ▪ Rights of Third Persons - third persons are protected in almost ALL cases. • This is not a public records rule, it is a rule of absolute protection. • When Buyer Has Sold Immovable, art. 2594 o When buyer has sold immovable, seller may not bring an action for lesion against a 3rd person who bought immovable from original buyer. Seller still has a claim against buyer, but only for supplement the seller would have recovered if the original buyer had chosen to keep the immovable. (2594). ▪ *NOTE → only third persons who are absolutely protected are buyers; donee's are NOT protected. o HYPO 1 - Buyer purchased Blackacre from Seller for $35K. At time of sale, Blackacre was worth $100K. Buyer resold to Third Person for $75K. Then, seller brought an action against Buyer for rescission of sale. ▪ 3rd person is absolutely protected, seller won't get land back. ▪ Buyer owes seller $40,0000 supplement (only owes his profit) o HYPO 2 - Buyer purchased Blackacre from Seller for $35K. At time of sale, Blackacre was worth $100K. Buyer resold to 3rd Person for $125K. Seller then brought an action against Buyer for rescission of sale. ▪ 3rd person is absolutely protected. ▪ Buyer owes Seller $65,000, owes his profit but only up to the supplement he would have had to pay if he had kept the immovable. • When Buyer Has Granted a Right, art. 2596 - when 3rd persons receive a right in immovable through an onerous K (i.e. mortgage, lease), they are protected. Seller may get his property back, but it will be burdened by those rights to 3rd persons. o Seller who receives back the immovable encumbered by a real right is entitled to recover from the buyer any diminution in value because of third person's rights. ▪ Recovery cannot exceed supplement seller would have recovered if the buyer had not encumbered immovable & decided to keep it. o HYPO 3 - Buyer purchased Blackacre from Seller for $35,000. At time of the sale, Blackacre was worth $100,000. Buyer granted a mortgage to Third Person securing a debt of $50,000 (Assume that the mortgage reduces the value of the property by $50K). Then, seller brought an action against Buyer for rescission of sale. ▪ 3rd person absolutely protected, mortgage will remain on property. ▪ Buyer owes Seller land plus $50,000 OR he can keep and pay supplement of $65,000. ▪ Condition of the Immovable, art. 2597 - buyer is NOT liable for any deterioration or loss sustained before the demand for rescission was made unless the buyer has gained an advantage as a result of deterioration say through the removal of products sold for profit, then the buyer may need to reimburse the seller so that the land + reimbursement = value of the land at the time of sale. ▪ Peremption, 2595 → lesion has 1 year peremptive period from the time of sale. • Since this period is preemptive (not prescriptive) it cannot be suspended or interrupted, it is an absolute period after which the right to lesion ceases to exist. ▪ Heritability & Divisibility, art. 2600, Rogers v. Reed → lesion is heritable and divisible. • Heritable - seller's successors may bring an action to rescind on grounds of lesion provided the seller's rights' have not been perempted. • Divisible - if there is more than one seller, or after the seller's death more than one heir, then each person having the right to rescind may bring an action for his share of the immovable.

Exceptions to the Law of Registry

These two exceptions fall under this rule → if a right in an immovable is acquired by operation of law as opposed through an instrument, then those rights need not be recorded to effect third persons. o (1) Inheritance Rights - do not need to be recorded in the PR to be effective against third persons. ▪ Hypo - A owns Blackacre. A dies, survived by B and C. Unbeknownst to C, B goes to court, stating that he is the only surviving relative of A, and a JOP is rendered identifying B as A's sole heir. B records the judgment of possession and sells Blackacre to X. In fact, C is A's heir. Who is entitled to Blackacre: X or C? • C is going to win, despite the fact that there is no evidence in the PR that C owns the property. • General rule of art. 3338 does NOT apply. ▪ Knighten v. Ruffin (1st Cir. 1971) • Timeline: o 2/2/1965 - JOP names Calip as heir; presumably JOP is recorded o 2/2/1965 - Calip mortgages property to Allstate o 6/9/1965 - Lillie initiates probate proceedings. o 7/9/1965 - Allstate forecloses o 9/15/1965 - Lillie files petition to amend JOP o 10/21/1965 - Allstate sells to Henry Ruffin o 1/11/1967 - JOP is amended recognizing Lillie o 6/28/1967 -Lillie files suit against Ruffin • Ruffin makes a PRD argument - absence of an indication in the JOP that Lillie is the record owner. • Court rejects this argument. HELD - Lillie owns ¼ property because she is a legatee and successor's rights don't have to be filed to be effective against 3rd persons. o Remedy - partition by licitation, sold and she will receive ¼ of the profit • Problematic about this position → heirs and legatees could show up at any time and claim rights to the property. ▪ RELEVANT PRESCRIPTIVE PERIODS • 10 and 30-year acquisitive prescription o But note that JOP is not just title • 30-yr. lib. prescription on claim to recognize inheritance. • Special Prescriptive Period - RS 9:5630, 2-year prescription o Applies to claims by successor against third person who acquired immovable by onerous title o 2 years runs from date of JOP in which successor was not recognized. o Applied to Knighten (wasn't in effect then) ▪ 2/2/65 - JOP recognized Calip ▪ 2/2/67 - L's action would have prescribed o (2) Community Property Rights - spouse's co-own property that is acquired by either spouse (no recordation required). ▪ H acquires property with community funds during the marriage to W. H sells to Buyer without W's consent. W discovers the sale and seeks to be recognized as owner of an undivided ½ interest in the property. Will she prevail? • W should be able to proceed against 3rd person & get her property back. ▪ R.S. 35:11 - non-consequenting spouse cannot attack subsequent onerous transfers to a 3rd person in GF. • ¶A requires marital status, presume is correct (¶B) • Applies only to notarial acts (recorded or not.) • Note this is not a PR rule, but reliance rule for notaries. • Hypo - H acquires immovable property with community funds during marriage to W, and recites in act of purchase that he is unmarried. Later, H sells to Buyer without W's consent. Buyer does not know that H & W were married at the time H acquired the property. W discovers the sale and seeks to be recognized as owner of an undivided ½ interest in property. Who will prevail: W or Buyer? o Buyer, assuming he acted in GF. ▪ Double Declaration - declaring spouse bought land with separate funds, but sometime this is done incorrectly or fraudulently. • Art. 3342 governs when a spouse falsely declares in an act of acquisition that an asset (1) was purchased with separate funds and (2) is separate property. o If other spouse does not concur in this declaration, he or she can contest this declaration, but 3rd persons who acquire thing by onerous title are protected. • Applies to all double dealers, whether recorded or not. • Hypo - H acquires Blackacre with community funds during marriage to W. In the act of acquisition, he states that Blackacre is separate property, acquired with separate funds. He records his act of acquisition. H then sells Blackacre to 3rd Person without obtaining W's consent. W discovers sale and seeks to be recognized as owner of ½ of the property. Will she prevail? Not against 3rd party, potentially has action against H. ▪ Reservation of Fruits, 2339 - natural and civil fruits of SP are CP. Nevertheless, a spouse may reserve them as SP by declaration in AA or act under private signature. • As to the fruits of immovables, this declaration is effective as to the spouse and third parties when it is provided to the spouse & filed for registry in conveyance records where immovable is located. o Recordation required for enforcement between spouses. (usually not the rule)

OBJECT: THINGS WHICH MAY BE SOLD • In General

You can sell any corporeal or incorporeal thing. (2448) ▪ Incorporeal can be real or personal rights. • Real Rights - including all dismemberments of ownership (i.e. predial servitudes) • Personal Rights - can be sold so long as they are not strictly personal, governed by assignment of rights. o Limitation → can't sell anything prohibited by law, including also public policy rules. i.e., sale of a succession of a living person is absolutely null, just like the sale of illegal drugs.

Who is Protected - Third Persons - art. 3338 states third persons are protected, but we must determine who is a third person under this article.

"A third person is a person who is not a party to or personally bound by an instrument. A witness to an act is a third person with respect to it. A person who by contract assumes an obligation or is bound by contract to recognize a right is not a third person with respect to the obligation or right or to the instrument creating or establishing it." (3343) o Parties, Witnesses & Notary ▪ Hypo 1: A is the record owner of Blackacre. A sells to B. B fails to record. A files a petitory action against B. Who will prevail: A or B? • A is a party, therefore, not protected by PRD. B prevails. ▪ Notary NOT a third party ▪ witness = third party

No Price and Price Out of Proportion with the Value of the Thing

"There is no sale unless the parties intended that a price be paid." Further, "The price must not be out of all proportion with the value of the thing sold. Thus, the sale of a plantation for a dollar is not a sale, though it may be a donation in disguise." (art. 2464) o Thus, a missing or entirely inadequate price may lead to one of 3 consequences: ▪ (1) Disguised Donation (Relative Simulation) = if the parties do intend a transfer of ownership, but intend that no price is paid or a low price is paid, then the sale is a relative simulation: a donation in disguise, effects different than those recited in contract. • A relative simulation produces effects intended between the parties if all requirements for those effects have been made (2027). (i.e. must meet requirements for disguised transaction) • Proving Relative Simulation - can use parol evidence (1849) • Mixed Cause Transactions o Onerous Donations (1526) = donee gives an advantage to the donor in return for the donation. o Remunerative Donation (1527) = donor gives donee property to pay for donee's past services that conferred an advantage on donor. ' o Determining a Mixed Cause Transaction: (1526) ▪ If the price is less than 2/3 the value of the property → donation ▪ If the price is 2/3 or more the value of the property → sale o i.e. Stanley, who has 4 kids wishes to donate Blackacre to 1 of them: Buster. Stanley is concerned his other kids jealousy, so he executes an Act of Sale purporting to sell property to Buster. Stanley and Buster agree that Buster will pay a low price ($30,000) for Blackacre (worth $90,000). ▪ This is a donation because the price is less than 2/3 the value of $90,000 (2/3 value = $60,000). ▪ (2) Absolute Simulation = if the parties intend that no price is paid AND that ownership will not transfer, produces no effects (2025, 2026). • Parol Evidence Problem - to prove an absolute simulation of immovable property a counter-letter is required. (1849) o Exception → when simulation is presumed verbal testimony could then be used to prove absolute simulation. (1849) ▪ Simulation presumed when seller remains in possession (2480). ▪ (3) Absolutely Null Sale • Classification of a contract requires an investigation into the parties' true cause. o Disguised donation requires gratuitous cause. (must be proved by strong and convincing evidence). o Absolute simulation requires true cause to be no transfer. • What if parties intend a transfer but gratuitous cause is lacking? Absolutely null • Moore v. Wilson (2nd Cir. 2000) o Moore filed an action to rescind a sale of his immovable property to his grandkid. Act of Sale recited that the buyer paid $10 for real estate. o Holding - Because the buyers failed to prove that Moore had a gratuitous cause for the transfer, the contract was properly classified as a sale and the lack of a price was a fatal flaw, rendering the contract unenforceable.

preparatory contracts Effects Against Third Parties

Immovables ▪ Law of registry applies to these preparatory contracts (2629). Must file these preparatory contracts in conveyance records in the parish where the immovable is located. ▪ Special Legislation: Contract to Sell, La. R.S. 9:5609 • Contracts to sell lose effect of recordation after 1 year. o i.e. B has K to buy and records it on Jan. 1, 2018. Along comes C, who wants to buy property from A, effect of recordation ceased Jan. 1, 2019. • Exception - Re-inscription before or by the 1-year date, file notice of re-inscription in the public records, giving him the benefit of another year. o Movables - effective against 3rd persons if they had actual knowledge of preparatory K (2629)

BUYER'S OBLIGATIONS: (1) pay the price and (2) take delivery of the thing (2549) • In General: The Buyer's Two Obligations (2549)

In General: The Buyer's Two Obligations (2549) o (1) Pay the Price ▪ Default Rule - price is due at time and place of delivery (2550), but this can be contracted around by the parties. ▪ Buyer owns interest on price from time it was due (2553). If no interest rate set by contract, use judicial interest rate. ▪ Buyer's does have the right to withhold the price in cases of eviction, but the seller can post security and then require the buyer to pay price (2557). • Although, the parties can contract around this, and say that if price must be returned in cases of eviction. o (2) Take Delivery - If Buyer fails to take delivery, the Buyer is liable for Seller's out-of-pocket expenses incurred in storing the thing (2555)

2 Classification Problems:

(1) Sale of Existing Thing v. Sale of Future Thing • Plaquemines Equip. v. Ford (La. 1963) - Plaquemines purchases specialty truck. Ford ships parts & truck to dealership. Dealership is in financial trouble and can't assemble truck. Buyer requesting writ of sequestration for truck & parts. o Holding - buyer did not own truck because object of sale was completed truck in its deliverable state. (making this a sale of a future thing) o Not discussed but would the buyer have some other right of recovery? Unclear whether Ford could be liable. ▪ (2) Sale of a Certain, Future Thing v. Sale of a Hope • Losecco v. Gregory (La. 1901) o A buyer purchased the next 2 years of farmer's orange crop. Partway through 1st year, bad freeze killed the trees. The buyer claimed he didn't have to pay, because it was a sale of a future thing, he contracted for oranges and didn't get any. ▪ The seller said no, you contracted for the chance of oranges, so you got what you paid for (sale of a hope). o Holding - sale of a hope o Important Factors for Court in Determining Sale of Hope v. Future Thing: ▪ Knowledge, background, and experience of the parties ▪ Foreseeability of the trees dying ▪ Language of Contract • "whatever oranges the trees may produce" - chance that trees may not produce oranges. • "purchaser assumes all risks" - court struggles with this o 2nd rehearing - all risks means ALL risks. ▪ Price Differential - how much would a crop of oranges normally cost? Need to know how many oranges & the price per orange. • Most imp. factor that court didn't have enough evidence. • If value of oranges was significantly higher than what this man paid → hope of oranges.

Principal Obligations of the Parties

Obligations of Lessor (2682) ▪ (1) deliver the thing ▪ (2) maintain the thing in a condition suitable for purpose for which it was leased ▪ (3) to protect the lessee's peaceful possession for the duration of the lease • Cousin to eviction o Obligations of the Lessee (2683) ▪ (1) pay the rent ▪ (2) use thing as a prudent administrator & in accordance with purpose ▪ (3) return the thing at end of lease in the same condition (except for wear and tear)

• Takeaways on Tests/Distinction → no one test is determinative.

Problems with Value Test - it's too formalistic. o Problems with Duhon Test - this is imprecise, and factor #3 will almost always be met in these kinds of cases (that's why it's in dispute). o The significance of the distinction has waned in sales of residential real estate due to statutory law such as the New Home Warranty Act (exclusive remedies). o Remains significant for other immovables and for movables

Explication of arts. 2601 & 2602: [consent hypo completed in class]

TWO-PART ANALYSIS: o (1) Is there a contract? (can be formed in 2 ways) ▪ (a) parties' communications agree as to thing and price (though not necessarily to all aux. terms) OR ▪ (b) parties' conduct establishes a contract of sale o (2) What are the terms of the contract?

Lesion o In General

The sale of an immovable may be rescinded for lesion when the price is less than half of the fair market value of the immovable. Lesion may be claimed only by the seller and only in sales of corporeal immovables. It cannot be alleged in a sale made by order of the court. The seller may invoke lesion even if he has renounced the right to claim it." (2589) ▪ (1) Lesion is limited to sales of corporeal immovables. Why? Most "valuable" property; most susceptible of economic duress/exploitation; incorporeals are too speculative • NOTE → Lesion may not be claimed in court-ordered sales (i.e. foreclosure) ▪ (2) Right of the Seller Only - right is entirely unavailable to a buyer. ▪ (3) Less than Half the Fair Market Value • Time of Valuation → looking to worth of property at the time it was sold. • This is a bright-line rule. o A sells Blackacre (worth $100K) to B for $49,999 - lesion available o But if A sells Blackacre (worth $100K) to B for $50K - lesion NOT available. ▪ (4) No Renunciation in Advance - this is a rule of public order, therefore, it cannot be contracted around by the parties.

Sale Distinguished from Lease

▪ Main difference → a sale is a transfer of ownership. ▪ Confusing in leases with options to purchase. • Lease with Option to Purchase → transfer of ownership takes place at end of K. • Hypo - Alex and Bette agree that Alex will "lease" his car to Bette for $500/month over a term of 5 years, at which point Bette will automatically become the owner of the car. Is this a sale, or a lease with an option to purchase? → SALE

Conditions in Contract to Sell

Common Contingencies ▪ Financing - usually very specific, buyer can specify max interest rate and/or max term. ▪ Predication Clause - buyer must be able to sell their property ▪ Appraisal - will want to adjust offer based on appraisal. ▪ Inspections - set forth time period to conduct investigations. Buyer must only reject in GF OR request reduction in price or for seller to fix problems discovered in inspection ▪ Merchantable Title o Non-Fulfillment of Conditions ▪ General Rule - When a contract to sell is made subject to a condition, the parties are excused from performing the sale and any money paid in connection with the contract to sell is returned to the party who furnished it. • Exception, Fault - if the reason a condition was not satisfied was because of the fault of a party, then the condition is considered fulfilled (1772).

o Contract Formed by CONDUCT under 2602 - When contract is formed through conduct of parties, contract is governed by: (1) terms on which the communications of the parties agree; and (2) suppletive (standard) law.

i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that late accounts will be charged 15% interest. The Acknowledgment states that that acceptance is conditioned on the Buyer's written acceptance of the additional term. The buyer does not issue another document accepting the additional term. Seller ships the goods. Buyer takes delivery of them. • This is a contract of conduct, the additional term does not come in, and suppletive law controls.

Sale of a Thing Already Owned (2443)

A person cannot purchase a thing he already owns. Nevertheless, the owner of a thing may purchase the rights of a person who has, or may have, an adverse claim to the thing." (2443) ▪ i.e. Annie owns a tract of land, Blackacre. A learns that Beatrice has an adverse claim to a portion of the property stemming from an ancestor in title's possible acquisitive prescription. A is uncertain as to the merits of the claim, but she does not wish to litigate, so she instead offers to purchase B's adverse claim, thereby extinguishing B's right to assert this right against A. This is a valid assignment of rights. o Really a way to clear up adverse claims in a chain of title.

PRICE • In General - there are 2 key reqs for the price of any sale: (1) price of a sale must be "in money," and (2) price must be determined or determinable either through a method or a 3rd person agreed upon by parties.

A Price in Money - Sale is a contract whereby a person transfers ownership of a thing to another for a price in money. The thing, the price and the consent of the parties are requirements for the perfection of a sale. (2439). ▪ This requirement is one of classification, not validity. ▪ Price in Money Requirement Not Met, Sale Can Still be Enforceable → if the performance of the transferee is something other than the payment of money, the contract may be: • (1) Exchange, art. 2660 o Sales and exchanges are closely analogous, difference is that counter performance in an exchange is giving of a thing rather than payment $$. o Mix of Exchange & Sale - If one party to an onerous contract transfers ownership of a thing and, in return, other party transfers ownership of a thing plus a sum of money, we must classify contract as exchange or sale: ▪ Art. 2464, cmt. b - solution depends upon the relative value of the things and money given in Bob's counter performance. • If value of things > value of money → exchange • If value of money > value of the things he gives → sale ▪ i.e. Sally & Bob agree that Sally will transfer Blackacre (worth $200K) to Bob & Bob will transfer Whiteacre (worth $150K) and $50K cash to Sally → exchange because Whiteacre > $50K • (2) Giving in Payment (dation en payment) = existing contract between creditor/debtor instead of paying the debt, parties agree that the debtor will transfer ownership of a thing to the creditor for satisfaction of that debt. (2655) o Giving in payment can be partial or total. • (3) Innominate Contract = transfer of a thing in return for services to be rendered, or an obligation of support, is not a sale but an innominate contract (2464, cmt. c) o Theilman v. Gahlman (La. 1907) ▪ Man conveyed real estate to his nephew in return for promise that nephew would give him a place to live for rest of his life and would bury him. After his death, his heirs brought suit against the nephew claiming the "sale" was null because it lacked a price, that the property never left the patrimony of the decedent, and that because it formed part of his estate at death, they had inherited it. ▪ Held - although not a sale, contract was fully enforceable as an innominate contract.

Assignment of Rights ("AoR") = sale of incorporeal, personal rights

All rights may be assigned except those rights that are strictly personal. (2642) ▪ Can really just be thought of as subrogation in sale context. Assignee (buyer of right) subrogated to rights of assignor. ▪ For conventional obligations, assignee can collect fully from debtor even if assignee pays less. o Often AoR is a sale of hope because the purchaser is buying the chance to collect. o Seller of right guarantees only that the right exists (does not guarantee collection/solvency) (2646). o Sales of Litigious Rights → a special problem with AoR ▪ Need pending and contested lawsuit for right to be litigious. • Contested - petition AND answer filed. ▪ When a litigious right is assigned, the debtor may extinguish the obligation by paying to the assignee the price paid for the assignment. (2652). • i.e. A owes a debt of $100 to B. B sues A to collect the debt. B then sells the debt to C for $50. A can extinguish the obligation (and end the litigation) by paying C the sum of $50. ▪ Purpose of the Sale of Litigious Rights • To discourage speculation in litigation • To protect creditors who, being in necessitous circumstances, are coerced into selling their claim for less than its fair market value • Provides an avenue to limit litigation, which places a burden on public resources ▪ Clement v. Sneed Brothers (La. 1959) - Clement sued Sneed for cancellation of an oil & gas lease on her property. District court rules in favor of Clement for $60,000. Pending appeal 2 of Clement heirs sold their rights to Branch for $5,000. Now defendant seeks to remand to having a finding of fact on price of Branch's litigious rights. • Holding - remanded to determine price. o Redemption of litigious rights does not have to bring an end to litigation. • Rejects all of plaintiff's arguments including: delay, defendants didn't seek to settle with plaintiffs (doesn't matter); can't settle part of litigious right (you can).

(1) double-dealing seller- same seller selling same thing to 2 different people.

As between the parties transfer of ownership takes place at consent; but as to 3rd parties ToO takes place when the possession of the movable is delivered to the transferee (art. 518). o Two Requirements for 3rd party to Take Possession Under 518: ▪ (1) 3rd party must be in good faith (see art. 523) (opposing party must prove 3rd party was not in GF). ▪ (2) C must have possession of the thing. • In determining possession under 518, look to 2477 on delivery: (1) physical transfer or (2) constructive delivery. o HYPO - On Monday A and B agree that B will buy A's bicycle for $100. A and B agree that B will collect the bicycle later in the week. On Tuesday, C approaches A and offers to buy the bicycle for $200. A agrees, and C physically removes the bicycle from A's residence. On Wed., B learns that A has sold the bicycle to C. Who is entitled to the bicycle: B or C? ▪ B never took delivery, so he never perfected his right of ownership of bike as to third parties. ▪ Because C did take delivery, C gets the bike. o Cameron Equipment v. Stewart & Stevenson (3rd Cir. 1996) - sale of 2 diesel engines to 2 parties. Cameron (1st party) never picked up engines after 1 year, but S&S (other party) did promptly take delivery. C seeking to argue they did take delivery, but court rejects all their arguments: ▪ (1) agent via precarious possession, but no contract of mandate; ▪ (2) "hand over the keys" theory, but C was never given access to place where engines were stored; ▪ (3) engines were not susceptible of transport but other party picked it up the same day they bought it. ▪ Holding - S&S owns engines (even though GF was not discussed). o **Must make the distinction of ToO between the buyer and the seller AND the ToO vis-a-vie 3rd persons - 2 separate issues.

Management of Community Property

General Rule → equal management (2346), each spouse acting alone may manage, control, or dispose of community property unless otherwise provided by law. ▪ EXCEPTIONS • Concurrence of the Other Spouse (2347) - need agreement of BOTH spouses to dispose for: alienation, encumbrance, or lease of community immovables; standing, cut, or fallen timber; furniture or furnishings while located in the family home; all or substantially all of the assets of a community enterprise; movables issued or registered in the names of the spouses jointly; community timber; donations of community property (2349). o BUT note a spouse may renounce the right to concur, can be made irrevocable for 3 years (2348). • Exclusive Management - occurs when one spouse alone has authority to act with respect to community property. o Assets of a community enterprise solely managed (2350) o Movables registered in name of one spouse alone (2351) o Partnership and LLC interests of a spouse (2352) • Judicial Authorization of Act - in certain circumstances, a spouse who does not normally have the authority to act, either in lieu of or without the concurrence of the other spouse, may be given that authority by a court. o Without Concurrence (2355) ▪ Best interest of the family - Other spouse arbitrarily refuses to concur or physical incapacity, mental incompetence, commitment, imprisonment, temporary absence, or absent person o Property of Sole Manager (2355.1) ▪ Best interest of the family ▪ Absent person ▪ Effects of Unauthorized Alienation General Rule → relative nullity (2353) • But other spouse may ratify the act done without the required authority.

Effects of Contract Lacking Authority

General Rule → relatively null • EXCEPTIONS o Apparent Authority - one who causes a 3rd person to believe that another person is his mandatary is bound to the other person who in good faith contracts with the putative mandatary. (art. 3021) ▪ Tedesco v. Gentry Develop. (La. 1989) - apparent authority does NOT apply to sales of real estate. • Also, no apparent authority if NOT in proper form. o Agency by Estoppel - common-law doctrine that results in the enforceability of a contract made by mandate who lacks proper authority when the other party relied on the conduct of the principal and that other party changed his position to his detriment on the basis of that reliance. ▪ Change in Position = patrimonial loss (i.e. payment of money, expenditure of labor, suffering of loss) ▪ i.e. Kyle wants to sell his car. While negotiating with Linda, Kyle is accompanied by Jason. Kyle tells Linda, "Jason is my most trusted advisor; he represents me in all of my business dealings." After the negotiations, Jason calls Linda and agrees to a sale of the car for $5,000. Linda goes to the bank and gets a loan for that amount. Kyle is angry because he did not give Jason permission to sell his car. However, he is estopped from rescinding the sale because Linda changed her position in reliance on Kyle's representation. o Ratification - a contract made without the requisite authority may also be binding if it is "ratified" by the principal (art. 1843). ▪ Ratification must be clearly proven by the party seeking enforcement of the K. ▪ Contracts for sale of immovables → split in the authority on whether the ratification of a sale of real estate that is null for lack of the requisite authority must be made in writing or whether tacit ratification may suffice. o Prescription - R.S. 9:5647 provides a 5-year prescription for an action to annul a contract made by a mandatary without the requisite authority. ▪ Begins to run from the date the instrument is recorded in records

Implied Warranty of Merchantability

In sales of immovables, the seller's obligation to deliver also includes an obligation to deliver "merchantable title" ( = not suggestive of litigation; no facts & circumstances that suggest 3rd persons may have rights to the property that could be litigated) ▪ Young v. Stevens - other circumstances that can result in problems suggestive of litigation • Concrete strip belonging to property owner encroaching on the lot in question • Fence belonging to another property owner encroaching on the lot in question ▪ WDC how de minimis the problem is, if it could give rise to litigation, it's good. ▪ Difference from Eviction: Timing - before the act of sale is passed a buyer is afforded the right of warranty of merchantability, and remedies governed by that body of law. • After act of sale is passed, can no longer complain about merchantability, must use law of eviction. o If there are facts & circumstances suggestive of litigation before the execution of sale, buyer entitled to damages & dissolution of contract.

A Sum Either Certain or Determinable

Like any contractual object, the price in a sale must be determined or determinable as to quantity. (see arts. 1973 and 1974). ▪ According to arts. 2464 and 2465, a price must be one of the following: • (1) expressed as a "sum certain"; i.e. Sale of Blackacre for $50,000 • (2) determinable through a "method" agreed upon by the parties; or o Method must be one that removes the fixing of the price from the parties' volition or power. o i.e. 10 widgets at a price of $10/widget o Princeville Canning Co. v. Hamilton (1st Cir. 1963) ▪ Facts - Princeville canning contracted to buy sweet potatoes from Hamilton and Morris. The contract recites a price of "$1.80 per CWT. Minimum Price Delivered." The K also said "Contract Price will Increase According to Market Rise." Defendants failed to perform and Princeville sued for breach of contract. The defendants argue that the contract is invalid for lack of a price. ▪ Holding - found the sum indeterminable, and therefore unenforceable after finding that the parties had not agreed how market price would be determined. • (3) left to the determination of a third person. o No method required for third person's determination. o Failure to Name Persons/ Failure of Third Person to Fix Price - the price may be determined by the court (2465). ▪ Parties can contract around this rule. ▪ If the price is not determined or determinable in one of the above ways, then the sale, in general, is unenforceable. • EXCEPTION → No Price Fixed - Sales of Movables (2466) o When Applicable: ▪ Only applies in to sales of movable things habitually sold by seller. ▪ Only applies in cases where the parties say nothing about the price OR left it to be agreed later and they fail to agree. • Gap-filling provision o Price to be set is a reasonable price at the time and place of delivery. ▪ Quotations or price lists can be used to set reasonable price. o Benglis Sash & Door Co. v. Leonards (La. 1980) - possible for the parties to impliedly consent to a reasonable price in a sale. ▪ The court based its determination on the parties' history of dealings and the fact that the windows were custom ordered.

Lessor's Warranty Against Vices and Defects - Lessor warrants the lessee that the thing is suitable for the purpose for which it was leased and that it is free of vices or defects that present its use for that purpose. This warranty also extends to vices or defects that arise after delivery of the thing and are not attributable to fault of the lessee (2696).

No distinction between redhibition and warranty of fitness in lease law. o Later arising defects are actionable in lease. o Knowledge of the Parties ▪ Lessor Knowledge - doesn't matter, liable for defects he did not know. ▪ Lessee Knowledge - may recover regardless of whether he knew of the defects at the time the lease was entered and regardless of whether he later acquires knowledge of the defects. However, if he learns of a defect and fails to timely notify he lessor, his recovery may be limited. o Persons Protected (2698) - In a residential lease, the warranty provided in the preceding articles applies to all persons who reside in the premises in accordance with the lease. ▪ Warranty covers even those who don't have contractual privity with lessor. ▪ Also, been used to award personal injury damages for breach of K as opposed to tort even though they don't privity (because #prescription). o Waiver of Warranty ▪ Distinction Between Vices/Defects & Repairs - a repair is something that is acute, where as a vice is a structural defect OR deterioration that occurs over time. • Repair = pipes burst because of freeze • Vice = pipes burst because they are super old • We care about distinction because if it's a repair, can shift responsibility to tenant, but that same language will not waive vices/defects. ▪ Prerequisites for Valid Waiver - must be clear & unambiguous & brought to attention of lessee (2699). ▪ Limitations • (1) To the extent it pertains to vices or defects of which the lessee did not know and the lessor knew or should have known. o This prevents fraud in the inducement of the waiver. • (2) To the extent it is contrary to the provisions of Article 2004. o Recall, 2004 prohibits waivers of "intentional or gross fault" as well as waivers of "liability for physical injury." (i.e. faulty wiring causes house to burn down, injuring tenant and family members.) • (3) In a residential or consumer lease, can't wave warranty against vices/defects that seriously affect health or safety. o No waiver is allowed of defects that merely threaten health or safety, even if no one is actually physically injured. (i.e. faulty wiring causes house to burn down; no one is hurt but all property is destroyed.)

Succession of Noah Cloud (La. 1988) - a broad application of RPC

Noah Cloud sells land for $250 to Urzula. Urzula later sells interest in the land to pay her attorney, Sanders. Cloud dies & kids are arguing property remained in Cloud's estate because 1964 sale was an absolute simulation. • Overview of Simulations: o Absolute = produces no effects o Relative = effects different than stated intentions. • Court finds this $250 sale to be an absolute simulation, meaning that it never left patrimony of Noah Cloud. N ▪ But Sanders (atty) is relying on PRD (relied on absence of proof that 1964 sale was a simulation in public records). ▪ Therefore, the only way to get property, free of Sanders' claim is to find Urzula/Sanders txn was invalid. • Court finds Urzula/Sanders transaction null because Sanders violated RPC 1.8(i) (no proprietary interest). • Court broadly defined 1.8(i) by including claims genuinely disputed and likely to become subject of litigation. • Other Incapacities of Enjoyment: (1) sale of succession property by succession to succession representative; (2) sale of the property of a minor to his tutor; (3) sale of the property of an interdict to his curator

Rights of the Buyer

Note - discussing maximum remedies (full recourse), if the parties modify the warranty the buyer might not have access to all of them. o (1) Rescission of the Sale/Return of the Price (2506) ▪ Buyer entitled to rescission (really dissolution), buyer gets $, seller gets property back. ▪ Only entitled to price actually paid (regardless of fluctuation in value). • Exception - If buyer has benefitted from diminution in value caused by his own act, the amount of that benefit must be deducted from the total amount (2507). o i.e. if the buyer of a car has obtained the benefit of driving it, then the award should be reduced by the fair rental value of the car for the period of time that the buyer owned and used the car. ▪ Buyer not entitled to any increase in value of the thing. ▪ Interest on the Price - CC silent on whether buyer entitled to interest on the price of the thing, however, most commentators agree interest is allowable from point of eviction (which could be the entire time the buyer owned the property, because the point of eviction begins not at point of judgment obtained, but from date of default). ▪ Sale by Co-Owners - will be held liable jointly for the price according to their ownership interest, but will owe damages solidarily. o (2) Right to Withhold Price (2557) - if buyer hasn't paid the full or part of the price, may withhold payment of the price if he is evicted. ▪ Seller then has right to give security, at which point the buyer would have to pay the price. ▪ If no security posted, seller can ask buyer to deposit the price to the court. ▪ Note - if the buyer and seller waived this remedy, a buyer cannot withhold payment. o (3) Damages - buyer may recover damages occasioned by the eviction, in addition to any consequential damages the buyer is entitled to: ▪ Reimbursements in Fruits and Products (2506) - buyer may recover the value of any fruits that he had to return to the third person who evicted him. • depends on buyer's good/bad faith ▪ Reimbursement for Improvements (2508) - good faith seller must reimburse buyer for useful improvements (enhance value of property); if seller knew at time of sale that the thing belonged to 3rd person (bad faith seller), he must reimburse the buyer for ALL improvements (useful or not). ▪ Call in Warranty (2517) - buyer has duty to alert seller when he has been evicted or sued by 3rd person, seller has obligation to defend buyer. If buyer doesn't alert seller in a timely manner, if seller can come in later and show the 3rd person never had a right, then the buyer doesn't get to recover. • Open questions as to the application of this article (but not on bar exam).

(1) Is there a contract?

Parties Communication ▪ Basic Rule - as long as we have consent as thing and price, we have a contract of sale. (2601, ¶1) • i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that parties will arbitrate any and all disputes. Under traditional doctrine, this term defeats existence of K. But under 2601, we still have a K because thing and price are there. ▪ EXCEPTION - "Conditional" Acceptance = "unless acceptance is made conditional on the offeror's acceptance of the additional or different terms." (2601, ¶1) • If the accepting party (the offeree) conditions acceptance on the offering party (the offeror's) acceptance of the offeree's additional or different terms, then a contract is not formed (rather this is a counteroffer) between the parties on the documents unless condition is satisfied (i.e. unless offeror accepts offeree's additional terms). • i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that parties will arbitrate any and all disputes. The Acknowledgment states: "This contract is conditioned upon the buyer's acceptance in writing of all terms contained in this Acknowledgment. To accept the terms contained in this form, sign this document and return to seller within 10 days of receipt." The buyer does not respond with another communication. There is no binding K of sale unless that acceptance is forthcoming. • Note - It is sometimes difficult to determine whether an acceptance is "made conditional." o Dorton v. Collins & Aikman Corp - buyer ordered rugs from seller by phone. In return, seller sent an acknowledgement stating "the acceptance of your order is subject to all of the terms and conditions on the reverse side, including arbitration, all of which are accepted by buyer, it supersedes buyer's order form." The court found that "subject to" was not enough to make this a conditional acceptance. o Diamond Fruit Growers Inc. v. Krack - buyer ordered tubing from seller, sending purchase orders to seller for quantities of tubing at list price. Seller sent back AF stating "seller's acceptance of purchaser's offer is hereby expressly made conditional to purchaser's acceptance of the terms and provisions of the AF." Court found this language WAS a conditional acceptance - but the offeree cannot require offeror to assent through silence and inaction. o Conduct of the Parties - If no contract formed under 2601, a contract can still be formed through the conduct of the parties under art. 2602. ▪ i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that parties will arbitrate any and all disputes. Acknowledgment states: "This contract is conditioned upon the buyer's acceptance in writing of all terms contained in this Acknowledgment." Buyer does not respond with another communication, but accepts the goods when they are shipped. No contract under communication of the parties, but if the seller ships, and the buyer takes the delivery and acts like there is a contract, under 2602 we have a K formed through conduct.

Exceptions to the General Rules

Things Not Individualized - "When the object of a sale is a thing that must be individualized from a mass of things of the same kind, ownership is transferred when the thing is thus individualized according to the intention of the parties." (2457) ▪ i.e. A, a textile manufacturer in NOLA, buys cotton from B, a farmer in Shreveport. B's warehouse holds thousands of bales of cotton. A and B agree to a sale of 100 bales of cotton for $1000. When does ownership of the 100 bales transfer to A? • Transfer of ownership does not occur at consent because we don't know which bales are the buyers. ▪ Appropriation (jurisprudential concept) - means by which seller individualizes thing sold. • "There must be some act by the vendor isolating the goods from a general mass which involves an element of irrevocability, so that he no longer has complete control over the destination of the goods." • At the very latest, the seller loses dominion over thing sold when delivered to the buyer, but other circumstances when appropriation can take place: • Appropriation may occur at when the thing sold is delivered to a common carrier - George D. Witt Shoe Co. v. J.A. Seegars (La. 1908) - Appropriation of shoes occurs at delivery of the shoes to a common carrier for shipment to the buyer. • Appropriation may occur before delivery under the right set of facts - Edgwood Co. (La. 1922) - appropriation of whiskey occurred when whiskey was prepared for shipment, gauged by government, and marked with the buyer's name and address. ▪ Sales by Weight, Tale, or Measure ("WTM") OR Sale by Lump (2458) • Lump Sales (2458, ¶2) → transfer of ownership at consent, because we know exactly which items are transferred. o A, a textile manufacturer in New Orleans, buys cotton from B, a farmer in Shreveport. B's warehouse holds thousands of bales of cotton. A and B agree to a sale of all of B's cotton for $10,000. When does ownership of the cotton transfer to A? at consent o Need lump sale and lump price (court-imposed requirement) (Gulf Rice Milling v. Sonnier (3rd Cir. 2006)).1 ▪ i.e. "All cotton for $10/bale." - no lump sale because WDK price. ▪ i.e. B purchases all of A's laptops for $1 million - lump sale because we have a lump thing AND lump price. o If B guaranteed to A that warehouse contained at least 10,000 bales of cotton, under 2458 cmt. (c), there can be weighing/counting/measuring for purpose of seeing whether seller performed in full (serve as guarantee) • Sales by WTM (2458, ¶1) → transfer of ownership upon weighing, counting, or measuring + some other act of appropriation. o Disagreement About the Article; 2 Views on 2458: ▪ (1) Act of weighing, counting, or measuring is a necessary step but need some other act of appropriation for ownership to transfer. ▪ (2) Art. 2458 only applies to sales of lump things at a unit price, and ownership can pass immediately upon counting. o Most Sales of WTM (and bar examiner) = appropriation. ▪ i.e. A, a textile manufacturer in NOLA, buys cotton from B, a farmer in Shreveport. B's warehouse holds thousands of bales of cotton. A and B agree to the sale of 100 of B's cotton for $10/bale. When does ownership pass? • At a minimum we need to count cotton (2458), probably also need some further act of appropriation (2457) for ownership to transfer

Contract to Sell

Unlike an option where the sale is conditioned on the will of one party, a K to sell there is really no "choice" but rather satisfaction of certain conditions in order for sale to take place (2623). We assume the sale is going to take place, assuming these contingencies are met. • Prerequisites o Must meet all the prerequisites of sale: thing, price, formalities. o Term is not required, but if no term we use default obligations rule performed within a reasonable time, so best practice is to set term. • Effect of Contract to Sell o Right to Specific Performance → K to sell does not immediately transfer ownership, but does give the parties the right to demand specific performance (1986). ▪ If specific performance is impracticable, the court may allow damages. • Impracticable Requirements: o (1) specific performance is impossible; o (2) cost of specific perf. is disproportionate to damage suffered by obligee; o (3) specific performance is not in the obligee's best interest; and/or o (4) specific performance is detrimental to the interests of third parties. o Surrounding economic impact may be considered (J. Weingarten v. Northgate Mall, Inc.) o Deposit v. Earnest Money ▪ Default Rule → money given by buyer to seller in relation to K to sell is treated as deposit. ▪ Exception - Earnest Money - if parties stipulate that the money is earnest money rather than a deposit, then either party may recede from the contract without any liability except for return of earnest money (i.e., negating right to specific performance). o Fortuitous Event ▪ When a party does not perform because of a fortuitous event, then nonperformance is excused, and that party may "walk away" from K without penalty. ▪ Impossibility of performance requires the event be "fortuitous" (not have been reasonably foreseen by parties at time of contracting) and that performance be truly impossible, not just more difficult or burdensome for the obligor. • Payne v. Hurwitz (1st Cir. 2008) - must show (1) contract is actually impossible to perform and (2) impossibility is cause by fortuitous event (difficult to prove).

Sale of Movable Thing Pending Litigation (2453)

When the ownership of a thing is the subject of litigation, the sale of the thing during the pendency of the suit does not affect claimant's rights." (2453) o Hypo - Alice sells her car to Betty; Betty pays with a "hot check" in an effort to defraud Alice. Alice thereafter sues Betty for rescission of the sale on account of Betty's fraud. While the suit is pending, Betty sells the car to Candace, who pays fair value and has no knowledge of Alice's pending lawsuit. Alice thereafter prevails in her suit for rescission. Who is entitled to the car: Alice or Candace? ▪ Although text of 2453 seems to suggest it would be Candace, courts (Richardson Oil) interpreted 2453 to mean mere existence of lawsuit is CONSTRUCTIVE NOTICE of claimant's rights, so Alice would get car.

o Sale on View or Trial (specific type of implied suspensive condition)

When the buyer has reserved the view or trial of the thing, ownership is not transferred from the seller to the buyer until the latter gives his approval of the thing (2460). • Buyer doesn't want to be bound until he approves thing; "sale on approval" • Buyer still has obligation to act in GF, and may not reject things arbitrarily, only disapprove based on parties' expectations (cmt. b). ▪ American Works v. Boland (La. 1948) - plaintiff agreed to 24 pilings, just after the pilings were loaded onto the barge, they caught fire and were destroyed. • Conditional Event - buyer's acceptance based upon inspection o Did this event occur? No • If this is a sale on view on trial & will not be enforceable unless buyer accepts goods, then sale is not enforceable & risk of loss didn't transfer, so seller bears cost. ▪ Distinguished from Buyer's Right of Inspection - implied in every sale of movables (2604). • Buyer has right to have a reasonable opportunity to inspect the things, even after delivery, for the purpose of ascertaining whether they conform to contract (2604). • i.e. Seller and Buyer agree to a sale of 10,000 red widgets. When widgets arrive at Buyer's place of business, he may inspect to determine if they conform (i.e., are red). If Widgets are blue, Buyer may reject goods. o This does not dissolve the K. K is still enforceable, and the parties now have some rights and obligations. • True sale on view or trial is going to occur only in narrow circumstances. Must determine if sale is predicated on condition. o A general right to inspect → NOT a condition. • Tunica Biloxi Tribe of Indians v. Bridges (M.D. La. 2006) - Involves taxation of the sale of a van. If the sale was completed (i.e., ownership passed) on an Indian reservation, it is not taxable, therefore, the precise timing of transfer of ownership is important in this case. Van was ordered by buyer "contingent upon inspection." o Holding - not a sale on view or trial, sale not predicated on a condition. o Also, sale on trial/view needs to be unequivocal (make clear) that the buyer doesn't intend to be bound at all if specifications not met.

• Repairs- leases

o General Rule → the lessor is bound to make all repairs that become necessary to maintain the thing in a condition suitable for the purpose for which it was leased, except those for which the lessee is responsible (2691) (suppletive law). ▪ Lessee bound to repair to fix damage that his fault OR other persons fault and repair any deterioration resulting from his or their use to the extent it exceeds the normal or agreed use of the thing (2692). o Lessor's Right to Make Repair (2693) - also has right to repair if repair cannot be postponed, even if this causes the lessee to suffer inconvenience or loss of the use of the thing. ▪ But lessee can probably get abatement or rent or if long enough terminate lease. o Lessee's Right to Make Repairs (2694) - if landlord doesn't make repairs in a reasonable amount of time, lessee can hire their own repairperson & can demand reimbursement OR apply that amount to the payment of the rent so long as the repair was necessary and expended amount was reasonable (repair and deduct). ▪ Repair & Deduct - lessee does not have right to refuse to pay rent until issue is fixed.

EFFECTS OF THE CONTRACT OF SALE • In General

o Transfer of Ownership ▪ Between the Parties - ownership is transferred as soon as there is agreement as to thing and price (2456). *there are numerous exceptions, discussed below ▪ As to Third Persons • Movables - effective against 3rd parties when thing sold is delivered to buyer (518). • Immovables - effective against 3rd persons when filed in public records (517). o Transfer of Risk of Loss ▪ General Rule → the risk of loss of the thing sold owing to a fortuitous event is transferred from the seller to the buyer at the time of delivery (2467). • If the thing is destroyed when the seller bears the risk, the sale becomes impossible and the buyer is relieved of the obligation to pay the price. • If the thing is destroyed when the buyer bears the risk, the sale is enforceable and the buyer must pay the price despite the destruction of the thing. ▪ Determine When Delivery Takes Place: • Delivery of Movables - many ways including: physical dispossession, "keys to the place," negotiating title, or mere consent (2477). o HYPO 1 - A and B enter into a sale of A's Corvette. On Aug. 1, A and B enter into a verbal K for sale of the Corvette for a fixed price. The parties agree that B will pick up the Corvette at A's place of business on Aug. 10. On Aug. 5, A's place of business is struck by lightning and the building and all of its contents are completely destroyed. Is B relieved of paying the price? ▪ Buyer relieved of paying because risk never transferred. • Delivery of Immovables - execution of act of sale (2477). o HYPO 2 - A and B enter into a sale of B's home. On Aug. 1, A and B enter into a written act of sale, valid in form, for a fixed price. On Aug. 5, before A takes possession of the home, the home is struck by lightning and completely destroyed by fire. Is A relieved of paying the price? ▪ No because risk of loss already transferred at delivery (which occurred Aug. 1). ▪ Old Law - res perit domino (thing is lost to the owner), risk of loss mirrored transfer of ownership rules (transfer at agreement as to thing and price), was fundamentally unfair for movables.

2 Tests to Differentiate: both trying to determine fundamental obligation of the contract.

(1) Value Test - compare the relative values of the 2 obligations, if the underlying thing costs significantly more than the labor, it will probably be a sale. o Hunt v. Suares (1836) - one party hired another party to install marble hearths and mantle pieces. Before the hearths were delivered they were destroyed in a fire. The court compared the value of the marble pieces and hearth to the value of installation. ▪ Held → Because the value of the work was "trifling" in comparison to value of marble, court held this to be a sale. o Austin's of Monroe, Inc. v. Brown (2 nd cir. 1985) - One party hired another party to provide and install a cash register system and provide training on how to use it. The system turned out to be faulty. ▪ Court used Hunt reasoning and found that although the value of the work (1/5 of the total cost) was more than trifling when compared to value of cash register system, this was still a contract of sale because of the relative values of the labor v. materials. • (2) Duhon Test - this method is increasingly being used more. o Duhon v. 3 Friends (3rd Cir. 1981) - defective home. ▪ Court looks to 3 Factors to Determine Type of Contract: • (1) buyer control over specifications o more control → contract to build. o Note - no need for control over everything. • (2) negotiations take place before construction. (if so, more like a CTB). • (3) supply materials AND skill/labor (leans to CTB). ▪ Held → contract to build by applying the 3 above factors: buyer had control over floorplan/color scheme; negotiations took place before; and 3 friends provided materials and skill/labor.

o Nature of Lesion

- lesion is properly characterized as a vice of consent. ▪ But it has a limited application, art. 1965, only permitted when provided by law. ▪ In the context of sale, lesion may be claimed: (a) only in sales of corporeal immovables, and not in judicial sales; (b) only by seller; and (c) only if the price paid is less than ½ the FMV

• Termination via Term

2 sets of rules depending on whether lease had a fixed or indeterminate term. o INDETERMINATE LEASE = goes on periodically for set periods indefinitely, terminated by notice. ▪ Notice Must Be: • Timely and • In Proper Form • NOTE - party may terminate lease even if other party has done nothing "wrong." ▪ Notice Timing Requirements • Can ONLY end indeterminate leases at the end of its periods or terms. o i.e. A leases an apartment to B on a month-to-month basis beginning Jan. 1. Lease will continue on a periodic basis, with each period beginning on first day of the month and ending on last day of month. If A wishes to terminate the lease in June, lease will terminate on last day of June (June 30), provided A gives proper notice. • Notice Periods: [applies to both conventional and legal indeterminate terms] o Longer than a Month - 30 calendar days o Month-to-Month - 10 calendar days 'o Week-to-Week (or longer) - 5 calendar days o Shorter than Week-to-Week - any time ' • Counting Time - when the term for performance of an obligation is not marked by a specific date but is rather a period of time, the term begins to run on the day after the contract is made, or on the day after the occurrence of the event that marks the beginning of the term, and it includes the last day of the period (1784). o HYPO 1 - A leases an estate to B for farming purposes, on Jan. 1, 2015. No term is specified by the parties. In Nov. of 2015, A decides to terminate the lease. If A issues notice on Dec. 1, 2015, when will the lease terminate? ▪ Law supplies term (parties said nothing) = year-to-year ▪ Must give notice 30 days before Dec. 31st . • December 1 would be timely to give notice. ▪ If A issues notice on Dec. 15, 2015, would have to wait an entire year for lease to terminate. ▪ begin counting on day after I give notice & include last day of period. o HYPO 2 - A leases his house in the Garden District to B on January 1, 2015. No term is supplied by the parties. On April 1, A decides to terminate the lease. If A issues notice on April 1, 2015, when will the lease terminate? Terminate April 30, 2015. ▪ Indeterminate term - month-to-month ▪ If does not give notice until Apr. 25 - will not terminate until end of May. o HYPO 3 - A leases a refrigerator to B to go into the Garden District house on Jan. 1, 2015. On April 1, 2015, A decides to terminate the lease. If A issues notice on April 1, 2015, when will the lease terminate? ▪ Term Supplied - day-to-day ▪ Can terminate at any time, no notice period required. ▪ What if, according to the parties' agreement, B is paying rent on the refrigerator every week? Must give 5 days-notice • Week-to-week lease can terminate on the 21st, 14th, 7th, etc. Must have 5 days-notice. ▪ Form of Notice • If for immovable or movable used as residence → must be in writing • Everything else → can be oral • If lessee "surrenders possession" → can be notice, provided it's in a timely manner. o "surrender possession" = voluntary, not in breach

3) Right of First Refusal ("ROFR")

A right of refusal is a contract of which the object is the right to receive an offer of sale on certain terms. o Right to Receive Offer of Sale (2625) ▪ Whereas an option is a contract the object of which is an irrevocable offer, a right of first refusal is a contract the object of which is the duty to make an offer. ▪ However, this duty is conditional. If the seller decides to sell, he must first offer to sell the thing to the grantee of the right of first refusal. o Terms of Offered Sale (2626) ▪ Absent a special agreement, the seller cannot sell to anyone other than the grantee without first offering the thing to the grantee on the same terms. • i.e. A grants B a right of first refusal on land. C approaches A & offers to buy property for $100K. Before proceeding with C, A must approach B & offer to sell property to B for $100K. Only if B declines sale on those terms can A sell to C. • Prerequisites o Thing must be specified (2625). o Price is not necessary. Rather, the price and other terms of the anticipated sale will be supplied by the third party offer that the grantor is required to match in making an offer to the grantee. o Formalities - no explicit rule, but well accepted that ROFR involving real estate must be made in writing to be enforceable. o Term - historically has not been required for ROFR. But now art. 2628 sets forth max terms. • Exercise of Right of First Refusal o Mechanics ▪ Offer - grantor must first offer to grantee, and it may be revocable or irrevocable. ▪ Acceptance • Time for Acceptance - if no time specified, 10 days for movables and 30 days for immovables. (note this is suppletive law, and can be altered by parties). • If the grantee does not respond within the permitted time period, the grantor may sell to another party on the same terms within 6 months. o After 6 months, grantor must come back to grantee with offer. ▪ Rejection of an option kills the option, but this is not necessarily true for ROFR. • If grantee refuses offer made by the grantor, then grantor has 6 months which to conclude a contract to sell or a final sale with a third party on the same terms. • If he does not, the right of first refusal continues in the grantee. o Effect of Exercise - if grantee accepts offer, the parties are bound by a K to sell. o Requirements for an Offer, Robichaux v. Boutte (3rd Cir. 1986)[didn't discuss]

o EXCEPTION → Sale of Movables

Background: Battle of the Forms • Most commercial sales involve multiple documents, which contain varying terms. A buyer's "purchase order" will often conflict with the seller's "acknowledgment." o Example - Buyer wishes to buy microchips from Seller. Buyer sends a "purchase order" requesting a certain number & type of microchips, after having reviewed a price list or online catalog. Buyer's purchase order indicates the number of items requested & the price. Buyer's document also contains a number of additional boilerplate terms: delivery date, payment terms, warranties, etc. Upon receiving Buyer's document, Seller issues a "confirmation" of the agreement reflecting the quantity of microchips ordered by Buyer at the list price. This confirmation also includes additional boilerplate terms. • "Last Shot" Doctrine - in these commercial sales then the last communication (last shot) before the buyer accepts the goods is treated as the contract of sale. o Getting Around Last Shot: ▪ Common Law - UCC 2-207 (p. 46) ▪ Louisiana Law - arts. 2601 & 2602

o Immovables - for immovables, the problem with delivery is that the land has either more or less land than described in Act of Sale.

Characterization of the Land in Act of Sale Determines Remedy: • (1) Sale by Measure • (2) Sale by Lump • (3) Sale per Aversionem ("SPA") ▪ (1) Sale by Measure (2492) - extent of premises + price per measure (i.e. $100/acre). • Remedy → reduce or supplement price (2492) o If overage is > 1/20 of total land → buyer can seek dissolution • i.e. 10 acres at $1000 per acre. What are the rights of the parties if: o 9 acres is delivered? B pays $9,000 o 10.25 acres? B pays supplement of $250 o 11 acres? B can pay $1000 supplement OR may seek dissolution because an additional acre is > 1/20 of total land. ▪ (2) Sale for Lump Price (2494) - indication of the extent for a lump price. • General Rule for Remedy → no remedy (2494) o UNLESS there is a surplus or shortage of more than 1/20 of the total land. o If there is a surplus > 1/20, buyer can recede OR supplement. ▪ RECSISION ONLY APPLIES TO SURPLUSES. • i.e. 10 acres at $10,000. What are the rights of the parties if: o 9 acres is delivered? Reduction permitted because the shortage (1 acre) is > 1/20 of total land. o 10.25 acres? No remedy o 11 acres? Buyer can either supplement or recede from sale. ▪ *PRESCIRPTIVE PERIOD → 1 year from day of sale (2498). ▪ (3) Sale Per Aversionem (2495) - lump price + describe the sale as "distinct body." • "Distinct Body" = naming it (i.e. Barber Plantation); indicate property by boundaries (even when extent of premises is given) (i.e. "The Barber Plantation, consisting of 10 acres, more or less.") o NOTE - enclosed boundary required, but that doesn't mean you need all 4 boundaries (i.e. if the land is triangular Cornish). ▪ Fitzgerald v. Hyland (La. 1942) - description only included clear boundaries for N/S, but court still found SPA because the disputed boundaries were the N/S boundaries. • If we have both a lump price + distinct body description → NO REMEDY. ▪ Differentiating Between Categories, Laister v. Gaharan (3rd Cir. 1996) - Lasiter bought a piece of property from the Garahans. Property was described as containing 80 acres "more or less." Price was $50,000. Discovered later than the property contained only 43.20 acres. Trial court ordered a diminution of the price. • G's argue this is a SPA, but court disagrees saying this is a sale at a lump price because there are no boundaries given in description. • Remedy for Lump Price - court did their own thing here, but the way a reduction/supplement should be determined is by dividing the lump price by the alleged number of acres (so here, $50K/80 = $625 acre), then multiply that price per acre by the number of acres not included (here around 36 * $625 = deduction). • Also, note that Laister can NOT back out of the sale because rescission only applicable for OVERAGES.

• (2) If there is a contract → What are the terms of that contract? - rules differ depending on whether contract was formed by communication or by conduct

Contract Formed by COMMUNICATION under 2601 - depends on whether the parties are merchants or non-merchants ▪ General Rule (where at least 1 party is NOT a merchant) - the additional/different terms are regarded as proposals for modification and must be accepted by the offeror in order to become a part of the contract. • i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that parties will arbitrate any and all disputes. The seller is a merchant; the buyer is not. The arbitration clause is a "proposal," and must be accepted by the buyer to become part of the contract. ▪ EXCEPTION when Both Parties' are Merchants - between merchants, add'l terms automatically become part of the contract UNLESS: (1) they alter offer materially, (2) offer expressly limits the acceptance to the terms of offer, (3) offeree is notified of offeror's objection to additional terms w/i a reasonable time. (art. 2601, ¶2) • (1) Terms in Acceptance Alter the Offer Materially o "Alter Offer Materially" = additional terms alter the offer materially when their nature is such that it is presumed that the offeror would not have contracted on those terms. (2601, ¶2) ▪ UCC 2-207 - terms are material alterations when they would cause hardship and surprise. o Examples - arbitration clauses, clause relative to extent of liability, stipulation of damages. (cmt. g) ▪ Hard to determine in abstract, must look to trade customs & history b/w parties. o i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that parties will arbitrate any and all disputes. Both parties are merchants. • (2) Objection in a Reasonable Time - if the offeror objects to additional terms in the acceptance in a reasonable time, then the additional terms do NOT become part of K. The objection to these terms doesn't defeat contract just the inclusion of those terms. o Unclear what a reasonable time is. Merchant = when he habitually manufactures or buys and sells things of the kind involved in the contract. NOTE - a merchant in one area can be a consumer in another (depends on the thing sold). (art. 2601, cmt. h) o i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that late accounts will be charged 15% interest. Upon receipt of Acknowledgment, Buyer immediately notifies Seller that it objects to the inclusion of the new term. ▪ Additional term does not come in. So, between parties, no rule about late fees: suppletive law (gap fillers) comes in. • (3) Offer Limited to Own Terms - if the offer limits the contract to its own terms, then additional or different terms do NOT automatically become part of the K, but are instead proposals for modification. o i.e. Buyer faxes a Purchase Order requesting 100 widgets for $10 each. Seller faxes an Acknowledgment for 100 widgets at $10 each, but provides that late accounts will be charged 15% interest. The Purchase Order contains a clause stating, "This Purchase Order is limited exclusively to the terms contained herein." ▪ Add'l term on purchase order is a proposal for modification. ▪ Highly criticized, looks like a "First Shot Doctrine," giving the offeror full power.

Encumbrances - eviction covers circumstances in which the buyer gets something and comes to him burdened with a real right or quasi-real right.

Covered by Warranty (broad scope of this warranty mortgages) • real rights - privileges, liens, servitudes, building restrictions, mineral royalties, mineral leases • quasi-real right (not technically real rights but which, when recorded in public records, simulate real rights) - leases, options to buy, rights of first refusal, and contracts to sell. • **Conventional (arise by contract), Non-Apparent, Undeclared Servitudes and Encumbrances → covered by warranty against eviction. (i.e. pipeline servitudes) ▪ Not Covered by Warranty • Declared Servitudes = those included in the written act of sale; encumbrances appearing in maps or plats annexed to the act of sale are also "declared;" buyer has actual knowledge of the servitude. o BUT if seller simply declares the existence of an encumbrance it will not be covered by warranty against eviction. o Mere recordation of servitude is not enough (aka constructive knowledge) because PRD is not designed to impute knowledge to someone. • Apparent Servitudes = perceivable through exterior signs, works, or constructions, including: roadways, window in common wall, aqueduct (770). o **If whatever the burden is perceivable by exterior signs → not covered by warranty of eviction (buyer's duty to inspect). o Apparent Encumbrance, Richmond v. Zapata (La. 1977) - any apparent encumbrance is NOT covered by warranty against eviction. ▪ Richmond bought land with an undeclared oil and gas lease (although it was recorded), and now seeking rescission. ▪ Court looks to purposes of exclusion of apparent servitude (that Buyer is supposed to inspect the property, and if he can servitude it shouldn't be subject to eviction). Here, the property was full of oil and gas stuff, which was sufficient to place B on notice. ▪ No recovery allowed for Richmond because this oil and gas mineral lease was an apparent encumbrance • Note different rule if Buyer knows about 3rd persons ownership interest, in that case B could get price & rescission of the sale. • Natural and Legal Servitudes = any servitude that arises by nature of the estate or by operation of law (i.e. drain).

THE NATURE OF THE CONTRACT OF SALE

Definition of Sale, art. 2439 - transfer of ownership of a thing in a return for money. o Onerous = an act providing an advantage in exchange for something. ▪A sale is onerous because the seller obtains money & the buyer retains right to the thing. o Bilateral/Commutative = reciprocally binds 2 or more persons; things depend on one another. o Sales are governed by titles on obligations, contracts & sale • Contrast with Other Contracts o Technical Contrast = same sales rules apply ▪ Exchange, art. 2660 = transfer of things in return for things, rather than money. ▪ Dation en Payment, art. 2665 = "giving in payment," transfer of something in return a forgiveness of debt. ▪ Innominate Contracts = no special name given o Sale Distinguished from Contract to Build = different rules apply. ▪ Requirements for Contract to Build, art. 2756 - "to build by a plot, or to work by the job, is to undertake a building or a work for a certain stipulated price." ▪ The distinction effects → obligations of the parties; effects of contracts; available remedies; prescriptive period • One of the biggest differences is in the area of defects/warranty: o For sales → redhibition applies, so either 1 or 4-year prescriptive period. o For a contract to build, it's a contract for work. Defects are a breach of contract, also seek dissolution & damages → 10-year prescriptive period. ▪ Primary Distinction to Identify CTB v. Sale → the fundamental obligation controls the classification of the contract. (Hunt v. Suares (1836)). • CTB → obligation to do • Sale → obligation to transfer ownership.

Quit-Claim Deeds - seller conveying any rights he may have in a thing (assignment of rights) (2502).

Distinguishing from Sale ▪ Warranty Sale [of a thing]; Non-Warranty Sale [of a thing]; Sale [of the thing] at buyer's peril and risk - for all of these the object of the sale is thing itself. ▪ But a quitclaim deed's object of sale → right in a thing. o *May not rescind quitclaim deed for lesion. ▪ Remember lesion does not apply to incorporeals, which this is because it's an AoR. o Warranty of eviction does NOT apply to quitclaim deeds. o Quitclaim deed can serve as just title for purposes of acquisitive prescription, and does not automatically give rise to a bad faith on part of transferee (2502, ¶2). o DIFFERENT INTERACTION WITH PRD, Simmesport State Bank v. Roy (3rd Cir. 1993) ▪ Tanners → Bank (didn't record until Aug. 8, 1991). May 1991, Roys purchased property at tax sale. Roys approached Tanners, who told them about the bankruptcy sale. Tanner then quitclaimed to Roy, the Roys recorded. Then the bank recorded. Then they redeemed the tax sale and proceeded against the Roys to quiet title. ▪ Holding - unrecorded sale has the same effect as a recorded sale on the validity of a QC deed. The Tanners lost their interest in the property when it was sold to bank, therefore, they had no interest to convey when they executed QC deed to Roys. • Roys had no interest in the property. ▪ **Recordation does not matter for purposes of QC deeds because, in a QC deed you are selling only the rights you actually have (not what's evidenced in the PR).

Cook v. Mixon (2nd Cir 1997) ▪ Cook sold timberland to the Mixons for $84K. 4 months later, Mixons sold property for $225K to Williamette. Cook sues for lesion (the difference between $225K and $84K)

Held - reversed trial court, which found a lesionary transaction, because the trial court failed to consider factors besides the price Williamette paid & Cook didn't meet her BOP. • To Determine FMV - must also look what other market participants would have paid and the evidence of quantity of harvestable timber. • Cook (plaintiff) must prove by a practical certainty (high standard) volume and price of timber because of nature of timber akin to the sale of movable property which can be counted and priced to determined FMV (unlike speculative nature of land). o Note there are inconsistencies in LA courts applying this BOP, but we know it's higher than preponderance

(4) precarious possessor - NO BRIGHT-LINE RULE / GREY AREA - someone possessing on behalf of someone else with their consent, i.e. lease, deposit.

Hypo - A leases his bicycle to B. While B has possession of bicycle, B sells the bicycle to C. A later learns of the sale to C. Who gets the bike? WDK o Rules are Unclear: ▪ Pre-Revision Law - applied equitable estoppel (Flatte v. Nichols). ▪ Article 520 (article that never was) - subsequent purchaser of thing gets ownership of thing as long as they were in GF & paid FMV. o NOW - WDK what the rule is, Potential Options: ▪ (1) apply general rule (2452) sale of a thing belonging to another does not convey ownership. ▪ (2) apply art. 522 (vice of consent rule) by analogy ▪ (3) apply art. 521/24 (stolen thing) by analogy - negative inference of 521 is that precarious possessor could convey ownership. ▪ (4) apply pre-revision equitable estoppel. o Livestock Producers v. Littleton (2nd Cir. 1999) - Smith sold Litteleton 200 cows, Littleton rebranded, tagged, & numbered them. Cows were pregnant, so he & Smith agreed that the cows would stay on Smith's property until calves were born. Smith then sold 74 of cows at auction to Livestock Producers/Stratton. Littleton found out and sued everyone. ▪ Court applies art. 524 (lost/stolen thing) & examined GF of subsequent purchasers, LP and Stratton. Found they were not in GF should've noticed the branding, should've been alarmed that Smith was trying to sell them off quickly. ▪ Holding → Littleton owner of cattle; does not need to reimburse subsequent purchasers. o Louisiana Lift & Equip. v. Eizel (2nd Cir. 2000) - LA Lift and Eizel entered into a rent to own agreement for forklift. The contract forbade Eizel from selling the forklift, but E sold it to Creamer. LA Lift wants its forklift back. ▪ Majority treats it as lost/stolen thing - finds Creamer in GF, meaning LA Lift gets the forklift after reimbursing Creamer. ▪ Dissent says NOT stolen thing and legislature never intended Art. 524 to apply here. We need to either apply 2452 rule or focus on what true owner did or didn't do (failed to file paperwork establishing his o'ship interest under UCC 9) - estoppel approach. o Comparison to Common Law - UCC § 2-403(2) provides specifically for the circumstances article 520 would have governed (#cool).

(2) lost or stolen thing - seller selling thing that was lost or stolen; never actually owned thing, just had possession. (NOTE - to be stolen, must be taken without consent of owner. This doesn't apply to fraud situations).

Hypo - A leaves his bicycle outside of a store while he shops, and it is stolen by B. B then sells the bicycle to C. A reports the bicycle stolen, and it is found in the possession of C. Who is entitled to bicycle? ▪ A is owner of the bike (521); C may be entitled to reimbursement. o In order for A to get possession of his bike back, art. 524 sets forth additional requirements: ▪ If seller is merchant who customarily sells similar things OR if buyer had bought item an auction → A would have to reimburse C for bike to get possession back. o If purchase price is never reimbursed, can C ever become the owner of the bike? potentially via acquisitive prescription o Brown v. Southeast Equip. (1st Cir. 1985) - loader, owned by Brown was stolen. Southeast later bought loader from an equipment dealer that year (B → Dealer → Southeast). ▪ Who owns loader? Brown, 521/524 doesn't set forth exception. ▪ But SE might be entitled to reimbursement if they can show (1) bought from merchant and (2) good faith (presumed). ▪ B attempts to argue SE not in GF (scratched out serial # and low price) were not enough to prove SE was in BF, therefore, SE entitled to reimbursement if B wants loader back. o 2nd sentence of art. 524 (never comes up) - "The former owner of a lost, stolen, or abandoned movable that has been sold by authority of law may not recover it from the purchaser." (refers to police auctions, etc.)

(3) vice of consent, error or fraud

Hypo - A sells his bicycle to B. B pays by check, but knows at the time of the sale that the check will bounce, and in fact, he never intends to pay for the bicycle. B then sells the bicycle to C. A learns of the fraud. Who is entitled to bicycle, A or C? ▪ A could proceed against B to have the K rescinded or if we can't but parties back to original state then A could get damages (A's not going against B because B is a "gone pecan") ▪ A really wants bike back, so needs to proceed against C. Art. 522 governs and allows C to retain ownership if: • (1) C was in GF (i.e. did not know B was fraud) and • (2) Paid fair value ▪ When A sold to B, ownership passed immediately to B (different from 1&2), so C is retaining ownership. o This article has not been applied in the jurisprudence, so we're looking at cases before the legislature enacted this article. o Jeffery Motor Co. v. Higgins (La. 1956) - Jeff. Motor sold car to Dabbs, who pays by bank draft (credit right); Dabbs then sells car to Higgins. Jeff. Motor never gets money, so they are trying to get car back from Higgins. ▪ Did Dabbs engage in theft? If he did, it would be a lost or stolen thing (in which Dabbs couldn't have conveyed ownership). • Court finds this is not a stolen thing for property law because Court doesn't apply criminal definition of theft. Original seller gave car over with consent to Dabbs. ▪ Holding - ownership transferred from Dabbs to Higgins. Original seller can proceed against Dabbs, but not Higgins. o Flatte v. Nichols (La. 1957) - Flatte → Murphy → Nichols, Flatte wants to get car back when he realized M paid for it with a hot check. ▪ Holding - Nichols gets the car. ▪ Application of equitable estoppel → because of Flatte's actions, giving the car to Murphy, proof of payment, open title certificate, and the license plates, F clothed Murphy with enough indica of ownership. Flatte's negligence caused this whole thing, so Nichols shouldn't suffer. o Can't rectify Jeff. Motor and Flatte, because Jeff ignored estoppel. That's when the legislature enacted arts. 520-25, to create bright-line rules.

o Assume an Obligation (typically in lease context)

Hypo 3: Alice leases Blackacre to Betty for 5 years. The lease is unrecorded. In year 1, Alice sells Blackacre to Carlos, who agrees in the Act of Sale to assume Betty's obligations under the lease. Can Carlos evict Betty before the lease expires? • Carlos is now acting as lessor, so he can't evict B. ▪ Remember Assumption by obligor & third person (1821): • Need not be in writing to be enforceable between obligor and 3rd person BUT must be in writing to be enforceable between obligee and 3rd person. • Obligor not released; obligor & 3rd person solidarily bound. ▪ Assumption by Agreement between obligee & third person (1823) • Must be in writing to be enforceable by anyone • Obligor not released; obligor & 3rd person solidarily bound.

Bound by Contract to Recognize a Right - 3rd person can acquire rights in immovable subject to another person's preexisting, but unrecorded rights, without also taking on other obligations.

Hypo 4: Alice leases Blackacre to Betty for 5 years. The lease is unrecorded. In year 1, Alice sells Blackacre to Carlos, who purchases "subject to" Betty's lease. Can Carlos evict Betty? • C can't evict B, but if B's pipes burst this is A's problem. • C taken on quasi-real rights in the property and those can bind the subsequent purchaser of the property subject to the lease without C assuming the obligation. ▪ Contrast with Assumption - no assumption of personal liability but agrees to recognize an unrecorded right in a thing. ▪ Bradley v. Sharp (2nd Cir. 2001) • Facts o Seller = Brown o Sale #1 - Bradley bought the timber (servitude, limited real right to remove and sell the timber) o Sale #2 - a few days later Browns sell land to Sharp • Sharp argues he wins under 3338 because he filed 1st and an instrument affecting rights in an immovable property has no effect against 3rd persons (Sharp) if not recorded. • But court disagrees because Sharp acknowledged the timber deed in his act of sale, through this Sharp is bound by K to recognize a right pursuant to art. 3343. Legally speaking, Sharp is no longer a 3p protected under 3338. o Acknowledgment of servitude of limited duration

Leases that Terminate at Will

If the parties provide their lease will terminate "at will" or at the option of either party, it is indeterminate (2679) ▪ If the parties provide a fixed term and provide that the parties can terminate "at will" the term is: (2718) • Fixed, if neither party terminates before the arrival of the term • Indeterminate, if either party terminates at will ▪ i.e. A leases an apartment to B for a term of 1 year on January 1, but the contract provides that B can terminate the lease earlier if she chooses. • If B does not terminate lease before Dec. 31, lease terminates on Dec. 31. • If B wishes to terminate earlier, we must treat as an indeterminate term lease: o Must pretend there is no term and determine default rules (here, month to month). Indeterminate term would be "month to month" o Notice must be given in writing 10 calendar days before end of a month.

leases- effects against third parties

Immovables → PRD applies. ▪ i.e. A on Monday leases to B (Lease #1) and on Tuesday, A leases land to C (Lease #2). If B records his lease before C, then B will have right to use and possession of the property. • If B did not timely record, C, although 2nd in time to lease, if first in line to record will have right to use and possession. B would have claim against A for breach of peaceful possession. ▪ "Subject To" and Assumption Clause - provides that a "third person" is one who is not a party to or personally bound by an instrument. Thus, even if a lease is not recorded, if a subsequent lessee/purchaser takes the property "subject to" existing rights or "assumes" the obligations of lessor under the lease, then that subsequent lessee/purchaser is not a third party entitled to protection under the public records doctrine • If lease not recorded, and no assumption/subject to clause → lease has no effect on 3rd person. • Assumption = take on obligations of landlord, but doesn't transfer rights (like right to collect rent), we would need subrogation. o When a third person agrees to assume an existing obligation, the 3rd person becomes bound as the landlord. But, without a novation, the original obligor is still bound, and they are solidary bound. ▪ If an instrument is recorded, and it is the exercise of an option or right of first refusal, a tacit acceptance, or a termination of rights that depends upon the occurrence of a condition, then you don't have to record another document to evidence that thing has happened. (3339) • Including exercise of an option. • i.e. A leases to B for 5 years, and B records the lease. Lease contains an option to renew for another 5 years, as long as this option is renewed before the expiration of the initial term. B exercises his option during year 5, but does not record any evidence of this. In year 6, A sells the property to C. Is B's lease effective as to C? o Yes, 3rd persons can be bound by that lease for up to 10 years, without the need to record anything else. o Movables - didn't discuss

Immovables - the Public Records Doctrine ("PRD")

In General - for immovable property, rights of competing parties to the ownership of a thing are governed by public records doctrine (a.k.a. law of registry). o Hypo - A record owner of Blackacre. On Monday, A sells Blackacre to B. B does not record Act of Sale in public records. On Tuesday, A sells Blackacre to C. C records Act of Sale in public records. Who owns Blackacre: B or C? ▪ C is the first to record, so C wins. But, B can sue A for breach of warranty and get the price back + damages. ▪ C does NOT have to be in good faith. o Rules Governing: ▪ 517 - general rule for all immovable transfers - effective between the parties upon consent; effective between 3rd parties when filed in the conveyance records. ▪ 2442 - sales article also mandating recordation ▪ **3338 - Any instrument that effects real rights or leases in an immovable MUST be recorded to have effects against 3rd persons. o PRD is a NEGATIVE DOCTRINE → recordation of an instrument does not create rights. Instead, instrument has no effect UNLESS filed for registry. ▪ 3rd party can rely on absence of an instrument from PR. o McDuffie v. Walker (La. 1909) - landmark PRD case ▪ Emma sells land to Walker (doesn't record). She dies and her heirs sell the land to McDuffie (records 1st). ▪ Holding - McDuffie owns land because he recorded 1st . ▪ RULE - An unrecorded interest in immovable property has no effects against third persons, even those with actual knowledge of the unrecorded interest. • EXCEPTION - Fraud - if buyer induced to not record by seller or if 2nd buyer had engaged in some scheme to use PRD to engage in fraud PRD will not protect. o BUT mere knowledge that seller is not owner + unrecorded = NOT fraud. o Only have 1 case (Mercer (1st Cir. 1984) (p.125)). o Pure-Race Doctrine - only factor considered is who filed first. Louisiana is in the minority in our approach. ▪ Policy - importance of immovables; clarity of title; stability ▪ Other Approaches - Notice; Race-Notice

• Doctrine of After-Acquired Title

Jurisprudentially-recognized doctrine, when a seller who has converted something that he or she does not own later acquires ownership of that thing, the seller's rights vest automatically in the buyer, thereby curing the eviction. ▪ Doctrine intended to reduce litigation. o St. Landry Oil Co. v. Neal (La. 1928) ▪ Facts • Garrett executed a mineral lease on 5 acres of land to Eastham. Eastham assigned to Neal, who assigned to St. Landry. Garrett later instituted suit against heirs of Bridgeman to have recognized a correction deed from the Bridgemans to Garrett. A judgment was rendered recognizing the Bridgemans as owners of the land. • Neal then obtained from the B's a ratification and confirmation of the lease executed by Garrett. Neal recorded the act, but St. Landry refused to accept it. Instead, St. Landry sued Neal to recover the price of the assignment, plus damages. ▪ Holding - Because Neal ratified before St. Landry sued, title vested automatically to St. Landry (owner), and St. Landry is prevented from suing Neal for warranty of eviction. ▪ RULE • Before suit is filed → title vests automatically, cannot bring subsequent suit. • After suit is filed by buyer → can bring suit and seek remedies from seller OR accept the after-acquired title (thereby extinguishing the lawsuit). o General rule that after-acquired title only applies in full warranty sales (Waterman (La. 1947)). ▪ Unclear whether doctrine of after-acquired title could apply to non-warranty/peril & risk, but the leading commentators say the doctrine should apply to any sale in which the seller is bound to return the price in the event of an eviction. o After-Acquired Title does NOT apply to quitclaim deeds (2502, ¶3).

Lesion in Other Contexts

Lesion in Exchange, arts. 2663 & 2664 - in an exchange, any transferor who transfers a corporeal immovable has the right to rescind for lesion if the value of the property received for that corporeal is worth less than ½ of the value of the immovable. • Who can demand rescission is the only unique rule, all other general rules apply. • i.e. Sonya transfers Blackacre (worth $300K) to Britton in return for $90,000 worth of stock in Apple, Inc. o Because the shares of stock are worth less than ½ the FMV of Blackacre, Sonya can demand rescission of the exchange. ▪ Lesion in Partition, art. 814 • Permitted only in extrajudicial partitions (not judicial partition) • Action is allowed if the co-owner received less by more than ¼ the amount he should have received. (confusing language) o i.e. Property is worth $80K, two co-owners partition. Each is to receive ½ ($40K). After partition, co-owner 1 learns that he received a tract worth only $28K ($12K less than the value he should have received.) Can CoOwner 1 demand rescission? ▪ Yes, because co-owner 1 should have received a tract worth $40K. • ¼ of $40K = $10K • $40K - $28K (amount co-owner 1 actually received) = $12K • $12K > $10K (1/4 of $40K), so she received less than ¼ of the FMV she should have received. • Takeaway → co-owner gets to rescind if he receives less than ¾ of the FMV of the property. This is a generous rule, and one that is more generous than for sales. ▪ No Rescission for Lesion • Sales of Mineral Rights (R.S. 31:17) - no rescission for lesion because they are incorporeal immovables & risk is inherent in purchase of mineral rights. o But Louisiana courts have recently held that sales of a tract of land containing minerals can be rescinded for lesion as long as those minerals are solid (non-fugacious). Therefore, when FMV is calculated, the value of the solid minerals can be taken into account. • Compromise, art. 3082 - no rescission for lesion. o i.e. Plaintiff and Defendant settle a dispute through a compromise. P claimed that D owed her $90K in damages. D transferred P land worth $230K to settle. D may not rescind this compromise on grounds of lesion.

Other Remedies - know other remedies exist for buyers' outside of the law of sales, but won't be tested on the nuances of them.

Louisiana Products Liability Act ("LPLA") - exclusive theory of recovery for products' liability in LA. ▪ "exclusive theories of liability for manufacturers" - so, how can we hold Dynasty's liable for redhibition if this said they are only liable under LPLA? • Answer is how we define "damage" under LPLA, we mean everything other than the damages buyer can get in redhibition. o Lemon Law - provides certain remedies, such as car replacement, refund of purchase price, and rental reimbursement, for aggrieved car purchaser if car does not conform to an express warranty. o New Home Warranty Act ("NHWA") - provides exclusive warranties by builders to purchasers of residences, applies only to "builders." The statutory regime limits the liability of builders while at the same time clearly defining the scope of available warranties. The statutory regime essentially exonerates a builder from liability if it has complied with applicable building standards. ▪ Also, the statutory regime provides warranties of limited time (1, 2, and 5 yrs) and if the builder breaches a warranty, he is liable for cost of repair, attorney fees & court costs. Repair costs can't exceed purchase price of the home. These warranties may not be waived.

Waiver of Warranty Against Redhibitory Defects (2548)

Prerequisites ▪ (1) clear and unambiguous - court's take this requirement seriously, seems like you need "redhibition" in the waiver. ▪ (2) brought to buyer's attention (i.e. big, bold font; separate signature will prove this) ▪ (3) contained in K of sale - if sale is in writing, waiver of redhibition must also be in writing. o Waivers are only applicable to hidden defects that are not disclosed. o When Waiver Ineffective (exceptions) ▪ Fraud (2548) - expansive view of fraud includes affirmative and negative fraud (silence, fraud through omission). • Must be proved by preponderance of evidence. • Shelton v. Standard/700 Associates (La. 2001) - Shelton bought condo from Standard. Turns out the roof leaked. Shelton signed a waiver of warranty against redhibitory defects. Shelton now arguing waiver ineffective because of fraud on the part of the sellers. o Shelton's fraud argument - realtor (remember, can impute agent's acts to seller) concealed the leaky roof (omission). o Holding - Shelton failed to prove fraud by a preponderance. o Dissent seeks to argue that because Sellers fixed the roof 8 months before Shelton moved in, and then fixed it multiple times after Shelton alerted them that his was enough evidence to show negative fraud. ▪ But it's ok that seller's tried to fix roof (not proof in it of itself). • Valobra v. Nelson (La. 2014) - seller's lied about their knowledge while filling out property disclosure by checking "no" rather than "no knowledge," which the court found constituted fraud. o Scared the real estate commission, now the property disclosure only has "yes" and "no knowledge" boxes. ▪ Manufacturers (2531) - waiver by manufacturer vis-a-vie the seller is not applicable.

• Sale of a Thing of Another

Sale of a thing that does not belong to seller does not convey ownership. (2452) ▪ Old 2452 - sale of a thing of another was null. o EXCEPTIONS to the General Rule ▪ Movables → the Bona Fide Purchaser Doctrine ("BFPD") - Generally, if the purchaser was in good faith, the purchaser will still have some rights. • Good Faith is overriding principle of BFPD and is central to determining rights of a purchaser of a thing that it bought it from someone who was not the true owner. o Two important things: (1) good faith is presumed and (2) good faith has objective and subjective elements: what did they actually believe, and what were the circumstances? (art. 523) • 4 Situations to Contemplate: (1) double dealing seller; (2) person who sells stolen things; (3) one who obtains a thing from a seller in a K affected by a vice of consent; (4) seller who sells something he is holding as a precarious possessor

Partial Eviction (2511) - buyer loses less than full ownership of entire thing sold (more common).

Remedies • Right to Rescission is Limited - Buyer can only obtain rescission if he can prove he would not have bought the thing without that part from which he was evicted from. • If no rescission, buyer is entitled to diminution of the price in proportion to the value the part lost bears to the value of the whole at time of sale (2511). • Distinguish this remedy from failure to deliver the full extent of the property (entitled to diminution in price, calculated proportionally, never had the land to begin with) BUT with eviction the land is real, someone else just owns it. That part might have a little bit of value or the bulk of the value relative to the whole. ▪ Taylor v. Fuselier (3rd Cir. 2005) • Fuselier buys a lot in a residential neighborhood, discovers that the city owns part of the corner lot and has placed an obnoxious pumping station, and now she is seeking rescission, while the buyer is arguing only a diminution in value. • Holding - allowed for rescission because Fuselier proved that portion of land was central to the sale. o Court looked to her testimony, and because no evidence presented from seller, that was enough. She also paid more for the corner lot. • Damage Options - $200 improvements, seller must be in GF + enhance value. But because seller was in BF (knew city owned part of lot) → liable for all costs. ▪ Guthrie v. Rudy Brown Builders (5th Cir. 1982) - holding: no mental anguish damages or attorney's fees because the object of a contract of sale of a house is primarily physical gratification not intellectual gratification (which is required for mental anguish/nonpecuniary damages).

Lis Pendens, 2453- if PR do not reflect existence of claimant's rights, then 3 rd person may obtain ownership of the thing clear of the claimant's rights.

Rules on Lis Pendens, LA CCP 3751-3753 (p. 172) • Merely filing a lawsuit is NOT notice to 3rd persons. (3751) o Note that in BFPD (CC 2453 - sale of a thing during pendency of lawsuit) the mere existence of lawsuit is enough to put 3rd parties on notice. o NOT THE SAME IN PR CONTEXT • Requirements of Lis Pendens (3752) o Must be in writing and signed by the party o Must contain pertinent information about the claim and a property description o Must be recorded in the mortgage records of parish where the property is located. o Effective for 10 years; may be resinscribed (then effective for 5 years from date of resinscription) • Cancellation of Lis Pendens (3753) ▪ Effect of Third Person's Actual Knowledge of Pending Litigation • Cannata v. Bonner (3rd Cir. 2008) - 3rd person who has actual knowledge of pending lawsuit is bound by it despite the absence of a lis pendens in the PR. o On surface, this case looks super wrong, but it's possible that the lis pendens statute is not drafted carefully enough to allow for this result. o Art. 3751 does not say actual knowledge is notice, so this might be a loophole.

Sales of Future Things and Sales of Hopes

Sales of Future Things (2450) ▪ The entire contract is conditional → the coming into existence of the thing is a condition that can be sold. (2450) ▪ Sale of future things are predicated on implied suspensive conditions. • Suspensive - obligation isn't enforceable until conditional event occurs • Resolutory - obligation immediately enforceable but may come to an end if conditional event happens. If the future thing does not come into existence, then neither party is bound to perform. • Exception → Fault of a Party - unless the party, through is fault, prevents the coming into existence of the thing. (1772) o Sale of a Hope (2451) ▪ Buyer is buying the opportunity; chance of thing. Object of contract is the hope of the thing. ▪ This contract is not conditional, but it is aleatory. (1912) • Aleatory = because of its nature or according to parties' intent, performance of either party's obligation, or extent of obligation, depends upon uncertain event. • Only seller's performance is uncertain, but buyer's performance is certain because they are bound to pay the price no matter what happens. ▪ If the thing does not come into existence, then the seller is not liable, but the buyer must pay the price.

Special Problems in the Law of Registry

Secret Claims & Equities, art. 3342 - claim asserted by 1 party to a recorded instrument against other party cannot be enforced against 3rd persons unless the basis for that claim is apparent in the instrument itself. This means a transferor cannot assert the following claims against 3ps: ▪ (1) Nullity (absolutely or relative) - claim that may be asserted by one party to a recorded instrument against other party is that contract evidenced by instrument is relatively or absolutely null. • Hypo 1 - Seller conveys Blackacre to Buyer, who records Act of Sale. B then conveys Blackacre to 3rd Person. Seller brings a claim against B for rescission on grounds of error and prevails. Is Seller entitled to the return of Blackacre? o Although this is relative nullity (error) and should result in rescission, because the error is not evidenced in the deed the 3rd person is protected. o Seller will have action for damages (2033) • Hypo 2 - Donor attempts to donate Blackacre to Donee in written Act of Donation. Act is not witnessed or notarized. Donee sells Blackacre to 3rd Person. Donor later brings a claim against Donee and 3rd Person for recognition of Donor's ownership of Blackacre. Will Donor prevail? o Absolute nullity, Donor will prevail because the act of donation filed in PR clearly evidences a form problem, apparent in the instrument itself. • EXCEPTION - Forgery - a claim that a recorded instrument is a forgery may always be enforced against 3rd persons, even if fraudulent nature of instrument is not evidenced on the face of PR. ▪ (2) Simulation (absolute or relative) • Remember absolute simulation produces no effects and relative simulation produces only intended effects. o Recorded counter-letter required to have effects of absolute simulation for immovable property against 3rd parties (2025). o Parol Evidence, 1848 - need counter-letter to prove absolute simulation of immovable property. ▪ EXCEPT - when simulation presumed OR as necessary to protect the rights of FHs. • Hypo 3 (based on Owen v. Owen (La. 1976)) - Owen conveyed real estate to his son, W.H. Parties executed an Act of Sale. The sales were recorded. Owen died. W.H. sold the property to Charles and Wayne Bush. Owen's other 6 kids bring an action for declaration of simulation, arguing that the sales were actually donations... o Because we cannot tell from the face of the instrument that its D.O.B., Bushes are protected. ▪ (3) Dissolution - another claim that may be asserted by a party to a recorded instrument is that the contract evidenced by the instrument is or should be dissolved. • Hypo 4 - Seller conveys Blackacre for $100K to Buyer in a "credit" sale. Act of Sale recites simply that the price of $100K was "paid." Buyer fails to pay price. Seller seeks to dissolve sale, but before judgment is rendered, Buyer sells Blackacre to 3rd Person. Is Seller entitled to Blackacre? o Normally this would be a breach of contract claim subject to dissolution by the Seller, but 3rd person relied on absence in PR (said price was paid), so Seller is not entitled to Blackacre. o Prevention Method - seller can protect himself by saying the price has not been fully paid.

• Place and Manner of Recordation

Where Registration is Made ▪ Proper Parish - Parish Where Immovable is Located • If immovable located in multiple parishes, the instrument must be filed in all those parishes. ▪ Proper Records = Mortgage or Conveyance Records (3346) • Mortgage Records - mortgages and pledges of leases and rents. • Conveyance Records - everything else filed in conveyance records. (i.e. leases, servitudes) • If not filed in the proper records → nullity. o Time of Filing ▪ Effect of recordation arises when it is filed with the recorded. An instrument is filed when the clerk accepts the instrument in his office. (art. 3447) • Additional Steps (NOT part of filing, happens after filing) o Clerk time-stamps instrument and assigns a # o Clerk indexes the instrument so that it can be located later • Subsequent errors/omissions are irrelevant. ▪ Failure to Endorse; Effect (3349) - if recorder fails to endorse date and time on filing, we can presume date and time based on the registry number of other instruments. ▪ Presumption - "When the date and time of filing cannot be determined under Articles 3348 and 3349, it is presumed that the instrument was filed at the first determinable date and time that it appears in the records of the reporter." (3350) ▪ Indexing • Instruments are indexed using the names of the parties. • Imperfect system because we are not doing the indexing by property description. • NOTE - since the indices are not part of the public records, the failure of the clerk to properly index an instrument does not deprive it of the effect of registry. (even though we might not be able to find it). ▪ Wede v. Niche Marketing USA, LLC (La. 2010) • Wede secured a judgment against Whitney and attempted to create a judicial mortgage by filing in public records, but it was filed in conveyance records (WRONG PLACE). Wede attempts to enforce judicial mortgage in 2007 by pursuing Whitney's property. o But Whitney sold the disputed property to James' (and it was properly recorded). Wede sought enforcement of mortgage against the James'. • Wede arguing that under 3347, he has filed the judgment and misclassification is a subsequent error and omission. • Holding - money judgment cannot be enforced as a judicial mortgage against the James' (3rd party purchasers) because it was not recorded in the right place required under art. 3338. • Textual Argument - the court relies on art. 3347 in conjunction with art. 3338. o Court says the stuff about subsequent errors and omissions (3347) effects when and not where the doc. must be recorded to have the effect of filing. o Art. 3338 (which focuses on rights of 3rd parties) specifies where the document must be recorded, and it is therefore clear, that the instrument must be recorded in the correct place to have effect against third persons. • Fairness Argument - flaws in this because the James' can (and should) search all the records before purchase. • *Big Takeaway from Wede → person filing their instrument MUST ensure it was recorded in correct place.

Things in Transit = movable things sold when parties are a distance & common carrier acts as intermediary.

i.e., Buyer, located in NOLA, agrees to buy 10,000 widgets from Seller, who is located in Shreveport. The parties agree that the widgets will be shipped by railway. • Seller delivers to railway, receives bill of lading • Bill of lading made out in name of seller or buyer • The person named in the bill of lading can retrieve the goods from the carrier after shipment ▪ Transfer of Ownership - determined by form of bill of lading (2613). • Bill of Lading o Serves 3 Functions: (1) Contract of Carriage; (2) Receipt of Goods; and (3) Document of Title. o Either negotiable or non-negotiable. ▪ Straight Bill of Lading = non-negotiable (only person who the goods are cosigned to can pick them up). ▪ Order or Bearer Bill of Lading = negotiable • If bill of lading cosigns goods to buyer → the buyer owns. • If bill of lading cosigns goods to seller → the seller owns. o Why would a seller want to do this? ▪ control of the goods/hedge against risk; ▪ secured transactions • Buyer's UCC9 primes seller's vendor's lien • Seller's creditor may have UCC 9 in goods, thereby requiring seller maintain ownership. 1 Unsatisfying area of the law, unclear why a lump price is required. We think it's because of comments to the article, French doctrine, and old law of res perit domino. ▪ Transfer of Risk of Loss (2616) - determined by the designation of the contract as either shipment or destination contract. • Remember general rule for transfer of risk of loss → delivery. So here we're trying to determine when delivery occurs. • Shipment Contracts = default; risk of loss transfers when sellers places things in hands of common carrier. • Destination Contracts = risk of loss transfers when handed to buyer by carrier. • Determining Shipment v. Destination Contract - intent of parties control, so we look to commercial symbols that evidence that intent. o Free on Board ("FOB") - Look to place of destination following FOB to determine when risk of loss transfers, can be shipment or destination K. ▪ If shipment K → named place following FOB is seller's place of business. • Risk transfers at shipment • Seller pays expenses of putting carrier in possession • Buyer pays freight ▪ If destination K → named place is buyer's place of business. • Risk transfers at destination • Seller pays expenses and freight. ▪ FOB restricted to water-based transactions. o Free Carrier/At Named Place ("FCA") - can be shipment OR destination K. ▪ Ie. FCA Seller's Warehouse, Harvey, LA ▪ Like FOB, but for any mode of shipment o Free Alongside Ship ("FAS") - always a shipment contract. ▪ Delivery to Carrier = placing goods alongside ship at port ▪ Risk of loss transfers at delivery. ▪ Seller pays to get goods to dock & get receipt o More on Commercial Symbols ▪ C&F (Cost & Freight) = seller pays cost & freight of shipment K. ▪ CIF (Cost, Insurance, Freight) = seller pays cost & freight of shipment K and procures insurance for the buyer (since buyer bears risk of loss).

Subrogation - "The buyer is subrogated to the rights in warranty of the seller against other persons, even when the warranty is excluded." (2503)

o Legal subrogation, in which seller's rights passes through the sale to the buyer. o Hypo 1 - A sells Blackacre to B, then B sells to C, then C sells to D, then D sells to E. While B was owner of the property, X acquired a strip at the boundary by acquisitive prescription, and X has owned that property ever since. Who is liable to E for breach of the warranty against eviction? ▪ Under 2503, E can bring action against D, C, B, and/or A, but limited in remedy to price paid. o Hoggatt v. Holcomb (2nd Cir. 1971) ▪ Dr. F → Weston → Concordia → Halcomb. Hoggatts filed action against Halcomb asserting their ownership. Halcomb brought in F & W. F argued that a vendee must proceed in an "orderly manner" through his own vendor back through chain of title and that he cannot "indiscriminately select" any prior vendor for suit. He also argued action had prescribed. ▪ Holding - Holcomb can sue F, doesn't have to exhaust remedies before proceeding to F, but Holcomb is limited in remedy to the price F received for that property. • Liberative prescription - 10 years (default rule for breach of K), but begins to run from buyer's knowledge of eviction. o Two Limitations on Price: ▪ (1) Buyer can only get what he paid ▪ (2) Seller can't be held liable for more than he received. o Tricky Issues & Unanswered Questions Surrounding Eviction ▪ Differences in Price Paid by Buyers in the Chain of Title • Hypo 2 - A B C D E $1000 $2000 $3000 $4000 o E can recover $4000 from D; $3000 from C; $2000 from B; $1000 from A. • Hypo 3 - A B C D E $4000 $3000 $2000 $1000 o Even if E jumps over to C he cannot get more than $1000. • Hypo 4 - Seller 1 sells Blackacre to Seller 2 in a full warranty sale for $100,000. Seller 2 then sells Blackacre to Buyer in a full warranty sale for $150,000. After the sale, Buyer learns that Third Person is the true owner of Blackacre. Buyer proceeds against Seller 1 for recovery. To what amount is he entitled? o $100,000 price, no damages because 2506 makes clear an increase in value can NOT be damages. • Hypo 5 - Seller 1 sells Blackacre to Seller 2 in a full warranty sale for $150,000. Seller 2 then sells Blackacre to Buyer in a full warranty sale for $100,000. After the sale, Buyer learns that Third Person is the true owner of Blackacre. Buyer proceeds against Seller 1 for recovery. To what amount is he entitled? $100,000 ▪ Differences in Modification of the Warranty Owed to Each Buyer in the Chain of Title - limited by modification of warranty in his own act of sale. • Hypo 6 - Seller 1 sells Blackacre to Seller 2 in a non-warranty sale. Seller 2 then sells Blackacre to Buyer in a full warranty sale. After the sale, Buyer learns that Third Person is the true owner of Blackacre. Buyer proceeds against Seller 1 for recovery. To what elements of recovery is Buyer entitled? o price but no damages. • Hypo 7 - Seller 1 sells Blackacre to Seller 2 in a warranty sale. Seller 2 then sells Blackacre to Buyer in a non-warranty sale. After the sale, Buyer learns that Third Person is the true owner of Blackacre. o May Buyer proceed against Seller 1 at all? If so, what recovery is he entitled? Yes, but limited to price only. o Variation: Would Buyer be entitled to proceed against Seller 1 if Buyer had bought "at his peril and risk"? No recovery.