Understanding Debt and Payment in Civil Law

Posted on Nov 29, 2024 in Law & Jurisprudence

Item 6: Concept of Liability, Sources, and Related Items

Concept of Required Relationship

The obligation, or debt, owed to the creditor can be the sole content of a mandatory relationship. For example, if A pays €100 to B without interest, there is no obligation to repay the sum. However, the obligation is usually one component within a larger legally binding relationship.

Characteristics of the Required Relationship

  • Dynamism
  • Temporality
  • Good faith

Characteristics of the Creditor’s Right

  1. It is a means to obtain performance from the debtor.
  2. The principle of potior tempore, prior jure (first in time, first in right) does not apply in the same way as with real rights. If multiple creditors have claims against the same debtor, substantive law establishes a priority that may not align with the origination date of the respective rights.
  3. These rights grant the power to demand specific behavior.

Characteristics of Duty

Not all legal obligations are identical. Key characteristics include:

  1. A corresponding right of credit (not always present).
  2. Derivation from a single event, not an individual’s status.
  3. The duty to perform any of the many acts within an individual’s activity.
  4. Capability of economic assessment.

Law of Obligations

Obligation is the legal relationship between two or more persons where a debtor is bound to perform a benefit for a creditor to satisfy a protected interest. The creditor has the power (right of credit) to seek and require this provision. If the debtor does not voluntarily comply, they may be forced to do so (Art. 1911, Civil Code).

Sources of Obligations

The law assigns specific effects to certain facts, creating a causal link. When the effect is the birth of an obligation, the producing fact is the source. Art. 1089 of the Civil Code lists these sources:

  1. Acts
  2. Contracts and quasi-contracts
  3. Acts and omissions involving illicit fault or negligence

Unilateral Will as a Source of Obligations

Legal doctrine debates whether a person can be bound by a mere declaration of intent (promises). Supreme Court case law is unclear on this matter.

Required Elements of the Obligation

  1. Personal elements
  2. The provision
  3. The link
  4. Responsibility

Natural Obligation

A natural obligation is a duty with weaker effects than a perfect obligation. Examples include Art. 1756 and Art. 1901 of the Civil Code. It represents a bond where repayment is not legally enforceable.

Item 7: Payment and Compliance

Concept of Payment

Payment is the fulfillment of the due benefit, extinguishing the obligation.

Active Subject of Payment

While the debtor should ideally pay, anyone can make the payment on their behalf.

Persons Receivable from Payment

Payment should be made to the creditor or an authorized representative.

Place and Time of Payment

Place

  1. Where explicitly or implicitly stated in the agreement.
  2. If no place is specified, payment is made where the item existed at the time of the obligation’s creation (for specific items).
  3. Otherwise, payment is at the debtor’s domicile.

Time

As soon as the obligation arises, unless otherwise agreed.

Expenses and Form of Payment

Expenses

Expenses are generally the debtor’s responsibility (e.g., transport, storage), unless otherwise agreed.

Form

Payment must align with the obligation’s nature, good faith, customary practice, legal requirements, and specific agreements.

Proof of Payment

Receipt

Payment of Monetary Debts: Nominal Principle

The Civil Code’s nominalist principle dictates that the debtor delivers the nominal value regardless of inflation or devaluation. However, this can disadvantage the creditor in long-term obligations.

Stabilization Clauses

To address the nominal principle’s shortcomings, stabilization clauses are used, particularly in lasting obligations. These clauses adjust the nominal amount based on a benchmark or index to maintain a fair balance.