Contract

CONTRACT. - By legal definition the contract is the agreement of two or more parties to constitute, regulate or dissolve between them a juridical relationship of a patrimonial nature (art. 1321 of the Italian Civil Code). According to modern doctrine, it forms part of the category of juridical transactions (v.). The modern contractual system derives in general from Roman law in which, however, the general category of contract was lacking, but there was a very numerous list of acts and agreements that produced obligations. Therefore to the Roman derivation one must add all the reflection carried out over the centuries.

The contract is generally a source of obligations (v.) for each of the two parties, or at least for one of them; the obligation, however, may derive not only from the contract but also from the law, from the so-called quasi-contracts (v.), from delict (v.), or from other facts to which the law attributes such an effect.

II. ESSENTIAL AND ACCIDENTAL ELEMENTS OF CONTRACT

The elements of a contract can be essential (that is, those without which the contract is null, or changes its kind), natural (that is, those which are present unless the parties will otherwise), accidental (which may, that is, be present or not).

a) Essential elements are consent (v.), the object, the cause, the capacity of the contracting parties, and the form.

The thing or the performance included in the contract must be in commerce (such are not, for example, public domain goods); physically, juridically, and morally possible; determined or at least determinable in its kind or in its quality, according to the different contracts; lawful, that is, not contrary to mandatory rules of law, to public order, and to good morals.

The cause of a contract is the objective juridical reason for which the legal order deems that contract worthy of legal protection.

In moral theology the question is raised concerning a base cause of a contract (for example, hiring a person to beat or kill another): if the case is considered before execution, it is evident that no obligation can exist; there can be no juridical bond to perform a morally reprehensible action. The question then turns on this point: whether, once the base action has been performed by one party, the other party has the obligation to pay (note that the baseness must be intrinsic to the object: if the malice were inherent in a secondary, extrinsic element [having someone work on feast days], there is no doubt that the agreed action must be remunerated). The negative opinion goes back to Hadrian of Utrecht; the affirmative one was upheld by Alexander of Hales, who turned his attention to the economic value that an action contains, even if sinful. Thus today moralists break down such a juridical transaction into two contracts: one invalid, de re malo; one valid, de pretio. D'Annibale brought a contribution to the question, affirming, along the lines of Roman law, that the controversy has reason to exist only when the baseness is on the part of both contracting parties. If instead it were only on the part of the one who gives (for example, promising a remuneration with a secretly bad intention), then one must pay; if it were only on the part of the one who receives (promising a gift to a blackmailer so that he abstains from setting a plot in motion, and thus redeeming oneself from an extortion), then not only is there no obligation to give, but there is the right to reclaim what had already been paid over.

From the point of view of natural law, all persons who have the use of reason are capable of contracting. According to civil law, however, those incapable of contracting are: minors who are not emancipated, and persons under interdiction, and moreover, for certain contracts, emancipated minors and persons declared incapacitated; all of whom therefore cannot validly contract except through or with the assistance of a parent, guardian, or curator. Furthermore there are persons whom the law forbids to stipulate certain contracts, for example those who administer the property of others, the guardian or the parent who exercises paternal authority, the administrators of municipalities or provinces; but it is doubtful whether these are cases of incapacity.

Both in the case of incapacity and in the other cases just seen, the contract is voidable (arts. 1425-26).

On form, as an element of the contract, v. the following number, letter d.

b) Accidental elements of a contract can be all those clauses that the parties may freely insert or not insert in the contract. Of these elements, particular importance have, being governed by general principles that hold for every contract, the condition, the term, and the mode or charge (v. NEGOZIO GIURIDICO).

III. DIVISION AND SPECIES OF CONTRACT

Civil law regulates with particular rules (generally derogable by the parties) certain types of contract (typical contracts); but the parties may also conclude contracts that do not belong to any of these types, provided they are directed at realizing interests worthy of protection under the legal order (atypical contracts; art. 1322 of the Civil Code). Despite, however, the great variety that the free will of the parties can give to the content of the contract, it is nevertheless possible to group the individual concrete figures of contract into various categories.

The principal distinctions, in modern doctrine, are the following:

1) Unilateral and bilateral contracts: the former are those that produce obligations on the part of only one of the parties toward the other (for example, loan for consumption, deposit, donation); the latter are those in which both parties mutually assume obligations (for example, sale, lease).

2) Gratuitous and onerous contracts: in the former one of the two contracting parties procures an advantage for the other without receiving any consideration (for example, donation, interest-free loan, commodatum); in the latter each of the two contracting parties receives from the other a consideration for himself or for a third party (for example, sale, loan with interest, insurance).

Bilateral contracts are all onerous, and gratuitous contracts are all unilateral; but there can be unilateral onerous contracts (for example, loan with interest), although more often they are bilateral.

3) Aleatory and commutative contracts: the former occur when the advantage that one or each of the two contracting parties expects from the other depends (in its existence or in its measure) on chance (for example, insurance, life annuity, stock-exchange differential contracts), the latter when such advantage is certain and determined from the outset.

4) Solemn and non-solemn contracts: the former are those that are not valid unless made in a certain form determined by law (a form which, in modern law, generally consists in a written act, or in a public act); non-solemn are those that can validly be made in any suitable form: civil law is accustomed to require special forms only for certain contracts that are more important or more dangerous for the patrimony of one or of both contracting parties (for example, donation, many contracts relating to immovable property, etc.), while all the other contracts for which the law does not prescribe a determined form are non-solemn contracts.

5) Consensual and real: the former are those that are perfected by consent, without the delivery of the thing being necessary (in modern law almost all contracts are consensual); in the latter, on the other hand, the contract is not perfected except by the delivery of the thing (such are, in current Italian law, the repurchase agreement, the estimatory contract, the deposit, the commodatum, the loan for consumption).

6) Obligatory and real, according as they have as their effect only the arising of obligations (lease, commodatum, deposit, etc.), or also the transfer or the creation of rights in rem (sale, repurchase agreement, loan for consumption, emphyteusis, etc.).

7) Preliminary and definitive: the former (also called compromessi) are those by which the parties bind themselves to conclude another contract (promise of sale, of loan, of lease, etc.); all the other contracts are definitive. For preliminary contracts, cf. arts. 1351 and 2932 of the Civil Code.

IV. EFFECTS OF THE CONTRACT

Legally formed contracts have the force of law for those who have stipulated them; they cannot be revoked except by mutual consent; they must be performed in good faith (art. 1375). Ultimately, therefore, the general effect of the contract is the obligation, which must be fulfilled (on pain of compensation for damages) with due diligence.

The obligation can be satisfied and thus extinguished in various ways: a) positive: payment, novation (substitution of a new obligation for a previous one, which is thereby extinguished), set-off (when two persons are obligated toward each other, the two debts are extinguished for the corresponding amounts); confusion (in the case of the merging of credit and debt between the de cuius and the heir: a case of succession mortis causa); b) negative: remission of the debt, loss of the thing owed; annulment; rescission; fulfillment of the resolutory condition; prescription.

Default or delay belongs to the one who allows the term to expire without fulfilling his obligation. And here opens up the whole legal casuistry of overburdened debtors, of insolvencies, of bankruptcies, of compositions with creditors.

V. INEFFECTIVENESS OF A JURIDICAL ACT

Since it was necessary to mention the essential elements without which the contract either does not exist at all (nullity), or exists but can be annulled (voidability), it is appropriate to emphasize that civil law has from natural law the power to invalidate, annul, rescind contracts so that they, after the judge's sentence, are deprived of their force. This power is demanded precisely by the common good, which requires in certain cases that all efficacy be removed from juridical acts: as a penalty for juridical faults, for having, for example, vitiated the consent of the contracting party (error, fraud, violence); or to annul agreements contrary to the common good; or to favor equity and justice, removing excesses and abuses.

The validation of a contract. - A contract null with absolute nullity cannot be made effective but must be redone; whereas an invalid contract (relative nullity) can be healed either expressly (by means of confirmation or ratification which, in substance, is the renunciation of the right to demand annulment), or tacitly (he who could have sought annulment executes the contract knowing its defect, or else lets the term for contesting it lapse).

Grazioso Ceriani