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PART I

TANFORD L

THE NATURE OF CONTRACT

§ 1. Agreement and Obligation. A contract is the agree ment of two or more persons by which an obligation is created between them. The essential elements of a contractare therefore agreement and obligation. To know what a contract is we must ask, what is an obligation and what is the nature of the agreement that gives birth to an obligation. Every contract is an agreement but every agreement is not a contract. Agreement is the genus of which contract is the species. Every contract is an obligation, but every obligation is not a contract.

An agreement is the accord or consent of two or more persons upon a certain matter and that kind of agreement which is made for the purpose of creating an obligation and which is sufficient in law to create it is a contract. The requisites of the agreement which results in a contract are: (1) The existence of a legally enforceable right to demand that a person shall do or abstain from doing something. (2) A person who possesses this right, who is the active subject of it. (3) Another person who is under the obligation to do or forbear, who is the passive subject of the right. (4) A thing to be done or forborne which is the object of the agreement.

§ 2. Rights in Rem and in Personam. A right is the power, $ faculty or capacity which the law confers upon a man of doing, not doing, or exacting anything. The acquisition, change or loss of a right is caused by facts or events; and every controversy turns in the first place upon their existence. The facts which create or destroy rights are those to which the law attaches a meaning or effect. This legal significance is generally one inherent in the real nature of the fact to which it is attributed. The ultimate basis of most rights, especially those created by contract, is ethical. When two men make solemn promises to one another, good faith and

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natural equity deinand that the promises should be performed. This natural right is enforced by law when the promise is made under certain prescribed conditions.

Since law is a function of reason and justice is the foundation of the State, all those rights are enforced which the State considers should reasonably and in justice to both parties, and with due regard to the public welfare be enforced. Therefore a particular right is created when all the circumstances concur which the law has endowed with the power of creating a right of that kind. Consequently the maxim, ubi jus, ibi remedium, really means that if there is no remedy afforded by the law in a given case, then no legal right exists, or in other words, that all the facts necessary for the creation of the right do not exist.

There can be no right without a corresponding obligation. In some cases this correlative obligation is laid upon all the world indiscriminately, and consists merely in the duty of forbearance. Such is the case when the right is that of ownership in a house or a book or other subject of property, and the right is then called a jus in rem, or in re.

In other cases there may be no definite ascertained thing to which the right is attached, but the person entitled has a right to demand the payment of a sum of money or a performance of some sort from another. In this case the right consists in the faculty of demanding such payment or performance, and of controlling the action of the other person thereto. This right is called a jus in personam. Its immediate object is the control of another's will, and not dominion over an object.

In the case of a jus in rem there is no person who is individually the passive subject of the right, so that in its analysis we find, apart from the world at large, which is merely under a duty to abstain from interference, only one person, the active subject, and a thing, the object of the right. The relation of others to the owner is only this, that they are not owners. Every right in rem, however, acquires a definite opponent, a passive subject by its violation. So soon as a definite person has put himself in conflict with it, the right

in rem seizes upon this person in the same way that the right i. e., it may be intentionally created in that one party growing out of a contract fastened upon a definite person from the beginning. A relation exists analogous in all respects to a claim arising ex contractu,-a certain act of a pecuniary character is demandable from a certain person. In the case of a jus in personam, there exists a person who is specially and individually bound. By force of such a right it may be demanded that another shall determine. his will to act in a certain way, shall do or not do a certain thing. This is its immediate object. A right in personam is extnguished when the corresponding obligation has been performed. But a right in rem continues to exist although the obligation created by its infringement has been fulfilled. This is because the control over another is not the immediate object of such a right, but rather that the will of a person over a given thing shall have free scope.

The person obliged in a right in personam is in a relation of dependence upon the other. He is bound, attached; there is a tie between them. The idea of a personal bond is seen in the metaphorical expressions which are used to designate the relations, vinculum juris, obligation, contractus, (from contrahere). The true subject of an obligation is not a certain thing, but a certain act or performance, which the promisee may demand from the person obliged. This is the fundamental cardinal principle of the law of obligations.1

An obligation is therefore the legal tie or bond between two or more persons by virtue of which one or more of them are required to do or refrain from doing something in respect of the other. Property is the legal relation existing between a person and a thing. An obligation is the relation between persons. It is a jus in personam from the point of view of the passive subject.

1 Obligationum substantia non in co consistit ut aliquod corpus nostrum aut servitutem nostram faciat, sed ut alium nobis obstringat ad dandum aliquid vel faciendum vel praestandum. Digest 44. 7. 2

2 Obligatio est juris vinculum quo necessitate adstringimur alicujus solvendae rei secundum nostrae civitatis jura. Institutes, 3. 13

$3.

Classification of Obligations. Obligations are designated according to their different modes of origin. An obligation may be founded in the free will of the parties; promises a certain thing to another who accepts the promise. An obligation may also arise from unauthorized acts, or from an act voluntarily done and not illegal, but which was not the result of an agreement to create an obligation or again from particular circumstances and relations between the parties.

Rights arise, therefore, either (a) from the will of individuals; or, (b) from the will of the law. But even in the first case as previously shown, the real origin of the right is not so much the individual will as the fact that the law says that under certain circumstances such will shall create a right and obligation.

Thus the sources of obligations may be reduced to the following classes:

1. The mutual consent of the parties. This creates an obligation ex contractu.

2. Circumstances by which one person may have injured another, or infringed some right belonging to another,cases governed by the maxim that one ought to repair the evil which he has wrongfully caused. These create obligations ex delicto, or torts.

Circumstances in consequence of which one person finds himself, either voluntarily or involuntarily, enriched by the property, or benefited by the act of another. These create obligations quasi ex contractu.

4. Certain relations between persons in the constitution of the family or of society.

§ 4. Obligations ex Contractu. We are concerned only with those obligations, called contracts, which are created by the voluntary act and common consent of two or more persons. The obligatory principle of such agreements lies only in the union of the wills of the parties that an obligation shall exist between them. We are to consider as of primary importance not the thing promised, but the performance.

"The specific mark of contract is the creation of a right, not to a thing, but to another man's conduct in the future."1

2

Savigny exhibits the essential characteristics of a contract by the analysis of a case where it obviously exists,—a contract of sale. "The first thing that we remark," he says, "are several persons in the presence of one another. In this particular case, as in most contracts, there are exactly two persons, but sometimes, as in the contract of a partnership, the number of persons is undetermined, and so we must let the general idea of plurality remain. It is next necessary that these persons should will a thing, and the same thing, for as long as there is doubt or disagreement between them the existence of a contract cannot be admitted. The consent of the persons should be manifested, that is to say they should reciprocally declare their will, for a decision made but held secret cannot be accounted as one of the elements of a contract.

"Moreover attention must be paid to the object of their will. If two persons agree to sustain one another by their mutual advice or example in the pursuit of virtue, or of science, or of art, the name of contract if given to such agreement would be altogether improper. This convention differs from a sale, which is a true contract, in this, that in a sale the will of the parties has a legal relation for its object, while here the object is of a different nature.

"But it is not sufficient that the object of an agreement should be a legal relation. When the members of a tribunal, after long debates, agree upon the judgment to be pronounced, all the conditions enumerated above are united, and the object of their agreement is a legal relation,—still that is not a contract. This is because the legal relation is not personal to them, does not affect them personally as in the case of a sale.

"These different conditions may be resumed in the following definition: A contract is the agreement of several persons

1 Pollock, Contracts, p. 1

2 System. § 140.

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