13.

Invalidity of contract

A contract is invalid when is affected by a major flaw, which undermines its enforceability at
law.
VOIDNESS/NULLITY AVOIDANCE/RECESSION
A voidable contract is effective until avoided; if
A void contract is per se ineffective.
so, it is retrospectively (ab initio) reversed.
The party who is “innocent” can avoid the
Each contracting party (even a third party/the
contract by 1. bringing a court action against
Court) can claim that a contract is void.
or 2. giving notice to the “responsible” party

Non-performance of any party is excused. In Only non-performance of the “innocent” party

case of performance, each party can claim is excused. After avoidance, each of the party
restitution, even from a sub-purchaser. can claim restitution of any performance.

It may be remedied by affirmation (or

confirmation) when the “innocent” parties
It may not be remedied (some exceptions)
knowingly renounce their claim. Voluntary
performance means affirmation.

Grounds for voidness/nullity are categorized as:

1. Effectiveness of the agreement between the parties
• is merely apparent, lacking the parties’ actual consent;
o Apparent agreement is a misunderstanding between the parties where an
exchange of wills did not actually place, or a situation where one party was
forced to sign a document
• its subject-matter does not exist, or is not possible; (not in common law!)
o Contracts whose specific performance is impossible are generally not
enforceable in civil law jurisdictions, unlike common law jurisdictions
o CASE [Jourmand Reef, Common law]: The court sentenced seller to
compensate damages
• it does not meet the formality requirement, if any
2. Illegality and immorality
• infringement of a mandatory rule, prohibiting both parties from entering a contract;
• the agreement violates public policy, including morality
Grounds for avoidance/recession are categorized as:
1. Incapacity of one of the contracting parties
2. Vitiating factors (not in common law!)
• Mistake
o Civil law: “intention approach”, leaving more room for avoidance. The mistaken
party can claim avoidance of contract in case the mistake is material (a main
point of the contract) or if the other party knew of the mistake, or could have
known of it (had he/she acted in good faith).
o Common law: “expression approach”, immunizing it from ‘unilateral’ mistakes,
unless caused by a misrepresentation (only then is a remedy granted).
o CASE [Green oats, Common law]: Racehorse trainer’s case was dismissed.
• Deceit or fraud
o Occurs when one of the contracting parties is intentionally induced into a
mistake (either through fraudulent misrepresentation or silence, the latter only
being applicable to civil law jurisdictions).
o Claim for avoidance: If correctly informed, the mistaken party would not have
concluded the contract. Avoidance is granted when the fraud is committed by
the other contracting part (or his/her agent). If committed by a third party,
avoidance is granted if the other contracting party knows about the deceit.
o Claim for damages: If correctly informed, the mistaken party would have
concluded the contract, although on better terms (damages are assessed
according to the better terms that the mistaken party would have bargained).
o CASE [Thor Steinar, Civil law]: Court upheld landlord’s claims against the shop.
• Duress
o Duress consists in threats of harm to a would-be party’s life/limb/honor/property,
or economic interests, which induces that party to enter the contract.
o CASE [Gallaher cigarettes, Common law]: CTN sued for repayment after it was
determined that the risk of the lost cigarettes was not on them.
o Civil law: Avoidance is granted not only when threats are made the other
contracting party (or his/her agent), but also when they are made by a third
party, even if the other contracting party was in good faith.

2
14. Unfair standard terms

The market for standard terms can be assimilated to the “lemon market”.
• Standard terms deal with unlikely, non-core contingencies.
• A party confronted with them does not try to understand or negotiate them (high costs).

UNFAIR TERMS
Control systems for unfair terms:
1. Formal control [Art.]: “Unfair terms have no effect unless specifically approved in
writing”
2. Substantial control [BGB]: “Provisions in standard business terms are ineffective if they
unreasonably disadvantage the other party to contract with the user”
Article 3(1) provides for a general test [an unfairness test] that refers to
• A “significant imbalance in the parties’ rights and obligations arising under the
contract…”: It must be taken into consideration which rules of national law would apply
in the absence of an agreement by the parties.
• “… contrary to the requirement of good faith”: The national court must assess whether
the seller could reasonably assume that the consumer would have agreed to such a
term in individual contract negotiations.
• CASE [ParkingEye]
REMEDIES
Art. 6(1): Unfair terms shall not be binding on the consumer. The contract shall continue to
bind the parties upon those terms if it is capable of existing without the unfair terms.
ENFORCEMENT
Art. 7(1): Member States shall ensure that, in the interests of consumers and of competitors,
adequate and effective means exist to prevent the continued use of unfair terms in contracts
concluded with consumers by sellers or suppliers.
• Individual enforcement: Individual litigation between traders and consumer calls for
certain deviations from ‘classical’ civil procedural law.
o National court is required to examine, of its own motion, the unfairness of a
term.
o A consumer may choose whether to take advantage or not of the declaration.
o The binding effect of the term is remitted on the consumer (i.e. the person in
the best position to know what should be the outcome of the judge’s
assessment).
• Public/collective enforcement: The imbalance between the consumer and the seller or
supplier may only be corrected by a positive action unconnected with the actual parties
to the contract (carried out by public authorities or consumer organizations).
o Actions may be directed 1. separately or 2. jointly against a number of sellers
from the same economic sector or their associations.
o Main instrument: Injunction (prohibiting the continued use of the unfair term).
15. Breach of contract

Types of breaches of contract:

1. Anticipatory breach of contract: A party declares its intention not to perform the
contract before the performance is due (non-performance)
2. Actual breach of contract: The breach occurs on due date of performance or during
the course of performance (defective performance, delay in performance)
REMEDIES
The promisee is entitled to a set of remedies if expectations are not met and the contract is
broken. Remedy: A court order that seeks to uphold someone’s right or to redress another’s
illegal action.
The availability or remedies for breach of contact depends on the role of contract law:
1. Moral approach: “Promises must be fulfilled”. In case of non-performance, the legal
system firstly imposes the fulfilment of the debtor’s duty as remedy.
2. Economic approach: “People conclude contracts to increase their welfare”. Instead of
performing, the debtor may prefer to bring the other party to the financial position which
it would have had, had the contract been properly performed.
Types of remedies:
1. Specific performance: The party can be forced to perform by the court of law.
2. Termination of contract: The non-breaching party may ask for the dissolution of the
contract, refuse to perform, or claim the restitution of what it has already paid.
3. Damages: Monetary reward that will bring the aggrieved party to the same utility
position in which it would have been, had the contract been properly performed.
• Damages can be autonomous or coupled with actions for
performance/termination.
Civil law approach [Specific performance]: If a party does not abide by the court decision
to perform, an official has the power to seize the good owed and deliver it to the other party.
Exceptions to using this type of remedy are: 1. Impossibility to perform, 2. Disproportionate
costs and 3. Contracts involving personal services.
Common law approach [Damages]: A party should be allowed to break contract and pay
damages if that would be economically be more efficient than performing the contact itself (i.e.
efficient breach of contract).
• Performance is not usually applied as a remedy, but is available in the case of
contracts concerning specific goods. Generic goods are not entitled to performance
remedy.
If [termination] is allowed by law, no performance is due by either party, and in the case that
performance already happened, it will be given back by the recipient.
Agreed rights of termination:
1. Explicit dissolution clause: The parties explicitly agree that the contract will be
dissolved if a specified obligation is performed in a designated way, attributing
fundamental importance to the obligation.
2. Time essential: If the time fixed for performance by one party, which has been
contractually designated as essential, is not complied with, the contract is dissolved.
Civil law approach: Breach of contract may lead to termination if it is material and
fundamental (i.e. a minor failure to carry out an “exact” performance does not entitle a
dissolution of contract).
Common law approach: Contract terms include
1. Conditions: If major terms of the contract are breached, the innocent party is entitled
to terminate the contract (and claim damages).
2. Warranties: If minor terms of the contract are breached, the innocent party is entitled
to terminate the contract (but not to claim damages).
3. Innominate (intermediate) terms: For terms which are not classified as major or minor,
a breach entitles the innocent party to damages only, unless the effect of the breach
is to deprive the other party of the whole benefit of the contract, in which termination
is allowed.
• CASE [Hong Kong Fir ship, Common law]: The breach only entitled damages,
as the charterers still got to have the boat for 20 more months.

2
16. Damages; liquidated damages

The creditor may have the possibility to claim damages if performance of the contract does
not take place, is late, or is defective.
Positive interest: This remedy is in line with the principle that an aggrieved party should be
brought back to a position it which it would have been if the contract has been properly
performed.
Expectation damages: The general principle of this remedy is that when a party sustains a
loss by reason of breach of contract, the party is, as far as money can achieve, to be placed
in the same situation, with respect to damages, as if the contract had been performed (i.e. full
compensation). Compensation covers:
1. The loss which the aggrieved party has suffered.
2. The gain which the aggrieved party has been deprived of.

FORESEEABILITY
The extent that courts should go when charging the defaulting promisor is determined by
foreseeability. Courts compensate the aggrieved party only for those injuries which were
foreseeable or within the contemplation of the parties at the time the contract was made.
Two types of injuries are deemed to be foreseeable:
1. Injuries that flow naturally from the breach in the ordinary course of events.
2. Injuries that arise from the aggrieved party’s special needs or circumstances of which
the other contracting party has knowledge/reason to know
• Foreseeability does not require actual foresight but only reason to foresee
• Example [Delayed delivery of mill shaft]: The miller is not entitled to damages
because the carrier did not have reason to know the delay would have caused lost
profits.
The aggrieved party cannot recover those losses which the party could have avoided by a
reasonable effort. The gains that the aggrieved party could have made by reasonable effort
are deducted from the amount that the party could otherwise recover.
• Only reasonable effort to mitigate damages is required. The doctrine does not require
that the efforts must be successful [example: licensed nurse case].
LIQUIDATED DAMAGES CLAUSES
Parties agree, as one of the terms in their agreement, that in the event of a breach, the
culpable party should pay a specified amount to the injured party. Liquidated damages
represent the parties pre-estimate of the extent of probable damages, and are usually an
inaccurate forecast.
Functions of this provision:
1. Convenient method of determining the amount to be paid (a “good faith pre-estimate”).
2. Coercing a party to perform its obligation (the sum stipulated will generally be greater
than those actually likely to be suffered).
3. Diminish the amount of loss to be borne by a party in breach (the amount of loss under
this provision will be less than the probable amount of damages).
Common law approach:
• Liquidated damage clauses are enforceable as their function is to pre-estimate the
probable extent of damages.
• Penalty clauses are not enforceable as their function is to coerce the defaulting party
to perform his/her obligation.
Civil law approach:
• Clauses that are not pre-estimates of damages are enforceable.
• Civil law usually does not distinguish between “penalty” and “liquidated damages”
clauses, only providing for one type of clause.
• Judges have the power to reduce the amount determined by the parties if it is
excessive, or in the case of partial execution of the contractual obligation – this rule is
mandatory.
• CASE [Delayed gun carriage delivery]: The US govt. is entitled to damages as the
compensation is of a reasonable formula.

IMPOSSIBILITY
Impossibility is an excuse for the non-performance of duties under a contract based on a
change in circumstances (or the discovery of preexisting circumstances) that makes
performance of the contract literally impossible. Cases are considered either subjectively or
objectively impossible.
CASE [Destruction of music hall]: Both parties are freed from the obligation to perform due to
radically changed circumstances.

2
17. Functions of tort law, grounds for liability

Tort law covers situations in which victims who suffer economic harm want compensation for
the loss. Tort law consists of remedies granted to the injured parties by those who caused the
harm.
Common pattern:
• Before the damage occurs, the parties are not linked by any formal legal relationship.
• Tort liability (i.e. non-contractual liability) is different from liability that arises from the
non-performance of previously defined contractual duties.
• It covers cases where the act of one individual is causally linked to harm suffered by
another individual.

Why are we shifting harm from one individual to another?

THE FUNCTIONS OF TORT LAW
Victims themselves bear the loss unless there is a good reason to allocate these costs to
another natural or legal person. There are three main functions of tort law:
1. Compensation (distributive justice): requires that the allocation of goods among people is
organized and ensured in accordance with the relative merits of the parties.
• It would be unjust to not restore the injured party’s original wealth (ex post)
2. Sanction/reaction of public authorities (retributive justice): requires that those who commit
wrongful acts be proportionally punished.
• Restoring damage caused is the proportionate reaction of the legal system (ex
post)
3. Deterrence/prevention of future damages (efficiency): by imposing liability, tort law
influences the conduct of rational agents.
• It is efficient to prevent the occurrences of accidents (ex ante)
The rationale for tort law is not theoretical, but is connected to the fundamental regulatory
choices that every legal system implements in order to define the scope and conditions used
to assess liability and connected duties.
• Retributive justice: If the goal of tort law is to punish the tortfeasor, a basic principle
of the system should be the requirement of her/his fault
• Distributive justice/deterrence: If the goal of tort law is to compensate the victim, or
create incentives not to cause accidents, then liability arises despite the absence of any
subjective elements of intention or negligence supporting the tortfeasor’s conduct
At what condition?
THE ELEMENTS OF LIABILITY IN TORT
SUBJECTIVE ELEMENTS
1. FAULT: cases where the tortfeasor acted wrongfully and has to compensate for the
damage that resulted from the wrongful behavior (liability for one’s own fault).
• Intentional behavior: the harmful event is the result of an act/omission that is foreseen
and desired by the agent as a consequence of his own act/omission.
• Negligence: the event, even though foreseeable, is not desired by the agent and
occurs because of carelessness, imprudence, lack of skill or failure to observe laws,
regulations, orders or procedures.
What is the criteria used to assess fault?
• Common law: Breach of duty of care (case made law)
o If [burden < cost of injury x probability of occurrence], the standard of care has
not been met
o If [burden ≥ cost of injury x probability of occurrence], the standard of care may
have been met
• Civil law: Statutory interpretation (rules are formed in statues and are relatively
uniform)
To be considered liable for one’s own fault:
o There must be an act/omission that unlawfully violated a legally protected interest;
o The unlawful act/omission must have caused damage of a type that qualifies for
compensation.

2. VICARIOUS LIABILITY: cases where someone is liable for the damage that was caused
by a different tortfeasor (liability for a tortfeasor’s fault). Examples include: employers,
parents, school teachers, people who monitor activities of impaired persons etc.
Fundamental elements:
• Relationship between tortfeasor and vicariously liable person
• Connection between this relationship and the tort committed
CASE [Driver of petrol tanker]: The duty of the driver is to his employer, so the same
liability is imposed on the employer as if the employer had committed the negligent act
himself.

3. STRICT LIABILITY: cases where a tortfeasor is liable for the damage caused by an animal
or by an object for which the tortfeasor is responsible (strict liability). Sometimes there are
reasons to shift the damage from the victim who suffered it to someone else.
Reasons: Fairness, possibility to recover damages, prevention of damages, economic
efficiency, increase of accidents during Industrialization etc.

Civil law: Forms of tort are introduced based on the risk principle and strict liability
Common law: Under UK Common Law (case law), cases of strict liability are rare
compared to UK Statutory Law; CASE [Reservoir flooding]: Rylands is liable for the
damage to the mines.

2
18. Objective elements, scope of protection

THE ELEMENTS OF LIABILITY IN TORT (cont.)

OBJECTIVE ELEMENTS
1. INJURER: Activity / behavior (intentional or negligent)
• In tort law, legal effects are connected to conscious and voluntary conducts (unless
the unconscionableness and involuntariness were due to negligence).
2. CAUSATION: Causation is about linking the event triggering the liability or the defendant
with the damage suffered by the victim. There are two main approaches to a problem:
1) 2.A [“but for” causation]: This requires that the damage would not have occurred
in the absence of a given activity or event, however, by applying this parameter,
the scope of causal chain could be extended almost ad infinitum.
2) 2.B [“adequate cause” theory]: Conduct of the injurer is adequate cause of the
damage if it is in general apt:
i. to produce a result such as what happened; OR
ii. to significantly increase the probability of such result happening
CASE [Sinking of Edelweiss]: The plaintiff’s claim was dismissed on the ground of
the “adequate cause” theory – the mistake of the rescue personnel was the
adequate cause for damage. “But for” causation would have imposed the full
burden of consequences on the HH9 operator who initiated the issue. “Adequate
causation” allows individual events that are conditions for a result to be eliminated
from causation (i.e. conditions ≠ cause)
3. DAMAGE: Compensable losses relevant in tort liability do not cover any kind of harm.

Which kind of “harms” are eligible for compensation?

THE SCOPE OF TORT LIABILITY
Different tort law systems:
1. Rule-based (typical) approach in tort law: The legal system is characterized by a
series of causes of action delineated by the law (e.g. Common law tradition, German
system)
2. Principle-based (atypical) approach in tort law: Abstract rules are formulated to
provide a comprehensive discipline of tort liability (e.g. French, Italian systems).
The limitation of the legal interests that can be protected by tort law (i.e. the loss suffered by
individuals/the legal notion of compensable damages) is set ex-ante in a rule-based system,
whereas it is derived from case-law interpretation of the general law in a principle-based
system. Despite differences, all western legal systems allow for compensation for “absolute
rights”.
The scope of protection evolved to award damages for economic losses deriving from
relative rights. CASE: Comparing the case of the Torino soccer team plane crash to the case
of the death of a famous footballer due to car accident.
19. Remedies and product liability

How to compensate for harms?

REMEDIES
• Monetary damage: This is pecuniary compensation amounting to the value of the loss
suffered by the plaintiff (the loss sustained and the lost profits resting on causation).
• Restitution to the original position: This is the restoration to the situation the plaintiff
would have been in, had the fact grounding the liability not occurred, when it is materially
feasible and when it is not too burdensome (costly) for the debtor.
MONETARY DAMAGES
2 forms of monetary damages:
1. Compensatory damages (i.e. equal to the harm suffered by the victim)
The purpose of this kind of damage is to help the victim recover what was lost, and is
based on the idea that tort liability is based on compensation and distributive justice (the
injured party must prove the suffered damage).
2. Punitive damages (i.e. higher than the loss suffered by the victim)
This form of damage is intended to punish the tortfeasor – it is designed to set an
“example” deterring others from doing the same conduct, as well as deterring the tortfeasor
from repeating conducts. Punitive damages aim to compensate victims from an otherwise
non-compensable loss, and is intended to cover the attorney fees of the harmed person.
• Common law: Punitive damages are usually recognized.
• Civil law: In principle, tort law has only a compensatory function.
CASE [BMW US vs. Gore]: $4000 in compensatory damages and $4 million in punitive
damages. For punitive damages to stand, the damages must be reasonably necessary.

NON-PECUNIARY LOSSES
Compensation of non-pecuniary damage is justified in cases where the victim has suffered
personal injury (or injury to human dignity, liberty, or other personality rights). Persons having
a close relationship with a victim suffering a fatal or very serious non-fatal injury can be entitled
to this kind of compensation as well.
Assessment of a non-pecuniary damage:
• There exists a degree of comparability in the treatment of similar cases.
• It is impossible to draw up rigid tariffs of awards.
• The gravity, duration and consequences of the grievance are the central issues.
• Some tort systems take into account the conduct of the tortfeasor.
• Methods of assessment are different: Schedules are usually used to quantify
impairments, sometimes the law fixes precise amounts.
CASE [Major Cox’s widowed wife, German vs. English approach to losses]: German law
applies.
• Pecuniary loss: Damages under the BGB will take into account any legal right to
maintenance by virtue of a subsequent remarriage or non-martial relationship following
the birth of a child. The Fatal Accidents Act expressly excludes these factors.
• Non-pecuniary loss: Under the BGB, the widow is not entitled to solatium – she may
be entitled to compensation for her own pain and suffering only if her suffering goes
beyond normal grief. The Fatal Accidents Act quantifies non-pecuniary loss as a lump
sum.

PRODUCT LIABILITY [Special case]

Product liability is tort liability connected to damages caused by defective products.
e.g. Exploding microwave oven gifted to Mr. White
• No direct contractual relationship: Prevent Mr. White from suing the manufacturer.
• Burden of proof in tort law:
o Subjective elements: Fault
Was the defect in in the production process technically avoidable?
o Objective elements: Causation
Did the defect originate during production or subsequent distribution/sale?
European tort law: A product is defective when it does not provide the safety which a person
is entitled to expect, taking all circumstances into account. A producer is not liable if he proves
that:
• He did not put the product into circulation.
• The defect appeared after the product was put into circulation.
• The product was not manufactured to be sold or distributed for profit.
• The defect is due to compliance with mandatory regulations issued by public
authorities.
The law applies to damage caused by death/personal injuries, or to an item of property.
Burden of proof for the consumer is limited to the actual damage, the defect in the product,
and the causal relationship between damage and defect.
Development risks are only dangers that emanate from the design of a product, but not
defects which cannot be avoided during the manufacturing process.

2
20. Property law

3 kinds of rights concerning property law:

1. Right against the buyer
2. Right against the tortfeasor
3. Right to the property itself (not a right against a particular person)
Common goods are goods that are rivalrous and non-excludable (e.g. grazing cows in a free-
access area of land). The tragedy of the commons indicates the inefficient outcome
determined by the overuse of partially rival resources when freely accessible.
Property law consists of legal rules governing the allocation among individuals of exclusive
rights of use and disposal of resources. This provides incentive to work, incentive to
maintain and improve things, and avoids disputes and efforts to protect things.
Property interests: Property rights are valid erga omnes. Basic features of property rights:
• The right-holder is assigned an exclusive right on his/her items.
• The right-holder may exclude anyone from interfering with his enjoyment.
• The right-holder is given specific recovery for his/her goods.
• Voluntary transaction is required to remove entitlement.
OBJECTS OF PROPERTY
1. MOVABLE/IMMOVABLE GOODS
Movable: Property that can be moved from one location to another without being altered.
Immovable: Property that cannot be moved without destroying/alerting it.
Civil law: “Ownership is the primary property right on goods.” – A unitary system covering all
types of assets, where both movable/immovable goods fall under the absolute right of
ownership.
• Full-fledged power on goods: Anything goes unless expressly told not to.
• Exclusive power on goods: Owners have absolute right on the enjoyment of their
goods.
Common law: Feudal tradition stemming from the relationships between people regarding
land has prevented the emergence of a unitary system encompassing different categories of
assets.
• Land law: Absolute rights over immovables
o No formal right of ownership: The Crown is still considered the owner of all land.
o The Property Act limited and standardized land property rights. Only two types
of feudal rights remain in common law:
1) Fee simple: entitles the holder to exclusive possession for an unlimited
duration of time (like civil law ownership)
2) Term of years: grants exclusive possession to someone else for a
limited duration of time (like civil law usufruct)
• Personal property law: Applies to movable goods (chattels) and choses in actions.
o Title is the right of exclusive possession to a chattel.
2. INTANGIBLE GOODS
Property law formally refers to tangible goods. Intellectual property law is regarded as an
autonomous area of law, regulating exclusive rights of use and disposal of intangible
resources.
• Copyright law
• Patent law
• Trademark law
CASE [Myriad Genetics]: Patentability requires novelty, usefulness, and non-obviousness –
genes cannot be patented, whereas the isolation of BRCA sequence can.

2
21. Property protection, property interests

OWNERSHIP & PROTECTION

Ownership is an absolute right. Protection erga omnes is based on:
1. RECOVERY ACTION: The right of the owner to assert his right and to claim the return of
the object from any third party
• CASE [Buildings]: Hellot is entitled to request the removal of the encroaching
building and the return of his property, irrespective of the state of the properties
and of the actual harm suffered.
• CASE [Fence]: Houssin is entitled to request the removal of the encroaching fence
and the return of his property. The degree of encroachment is of no relevance.

2. INJUNCTIVE ACTION: The right of the owner to prevent or to remove any interference
with his proprietary interests
• CASE [Polluted property]: The operator of a facility that caused soil contamination on
a neighboring piece of land remains responsible even after it shuts down, and can be
ordered to remove the contaminants interfering with the owner’s enjoyment.
• CASE [Neighbor’s brothel]: The claim was denied, as injunctive action does not cover
property interferences of a genuine moral nature.

PROPERTY INTERESTS
1. Primary property rights: Encompass the full bundle of powers that the holder may have
on goods (Ownership, Intellectual property).
2. Secondary (lesser) property rights: Encompass only some of the powers that the owner
may have on goods (Secondary Right of Use, Secondary Security Rights)

LIMITED PROPERTY RIGHTS

Limited property rights are property rights with erga omnes effect derived from a right of
ownership on a movable or immovable thing. It is the process of subtraction of particular rights
from his/her original bundle, granting those rights to third parties. Common features include:
• Protection erga omnes: Absolute rights are enforced.
• Run with the asset: Limited property rights bind subsequent owners of the asset.
• Numerus clausus: Limited property rights are only created by the law.
Two categories of limited property rights:
1. LIMITED PROPERTY RIGHTS OF ENJOYMENT: These grant a holder specific, although
limited, rights to make use of the object. In particular:
• Use-habitation
• Servitudes (Easement in common law): Servitudes consist of burdens imposed
on a land for the utility of another land belonging to a different owner. Servitudes
are rights in rem – they do not bind to the owner personally (run with the asset).
o Affirmative servitudes: The owner of the dominant land may do something
on the servient land (e.g. servitude of way).
o Negative servitudes: The owner of the dominant land may prevent
something from being done on the servient land (e.g. servitude not to build
on land).
o The duty imposed on the servient land cannot consist in an obligation upon
the owner to do something.
• Usufruct (comparable to term of years in common law): This is a property right
that grants its holder the right to use and enjoy a thing owned by someone else, as
well as to take the fruits that the thing produces.
Ownership is fragmented between
a) The usufructuary has the right to use the good and receive its fruits.
o Usufruct is always limited in time.
o The main obligation of the usufructuary is to respect and preserve
the economic substance and function of the good.
b) The “bare” owner has the right to sell the good and receive it back at the
end. of the usufruct period.
o The bare owner has no right to use and enjoy the good until the end
of the usufruct period.
o The bare owner retains the right to sell during the usufruct period.
o Full ownership cannot be sold – only bare ownership. If the bare
owner sells it, the usufruct will remain, binding the purchaser until it
expires (run with the asset).

2. LIMITED PROPERTY RIGHTS OF SECURITY: These are created to secure the payment
of a claim, and are usually created by the debtor/owner on an object in favor of his
creditors:
• Hypothec/Mortgage
• Pledge

2
22. Security rights, possession

Security property rights are created to secure the payment of a claim. Two main types:
1. The right of pledge: created on most movable objects and on particular kinds of rights
(e.g. credits).
2. The right of hypothec (or mortgage): created on immovable objects and on some
special movable objects.
The security right is held by the creditor of the claim and gives the holder the power to sell the
object through a judicial procedure, and to satisfy the debt from the proceeds.
Two prerogatives:
1. Run with the asset (as with all other property rights): The subsequent purchaser of an
object is still encumbered with the security burned on the original creditor.
2. Priority (unique feature of security property rights): Secondary security rights give their
holder the right of priority in insolvency. Generally, creditors are treated equally in
insolvency, but holders of a property security right may claim their money before the
creditors who only hold personal rights.

POSSESSION
Possession is the fact that a person has actual control over of a good, irrespective of whether
the possessor is legally entitled to the good or not (e.g. stolen goods, buyer of a good under
a void contract, goods taken from the owner in bad faith). If somebody behaves as if he were
the owner, then he possesses the right of ownership.
Protection of possession grants the possessor the right to defend his position, while also
defending persons not having the right of ownership of interest. Possession is protected
irrespective of the situation at law in order to ensure a peaceful and orderly society, as the
State fundamentally has a monopoly on the use of force. Protection can take place in the form
of:
• Self-help: The possessor is entitled to defend his position by self-help in limited cases:
1. Through proportionate self-defense (against third parties’ violent acts).
2. Through physical recovery of his possession, immediately after the interfering act
has occurred.
• Legal protection: Whenever the previous conditions are not met, protection of
possession is granted only through judiciary actions.
o Restoration action: A possessor who have been violently or secretly deprived
of his physical control of the good may sue the dispossessor in order to restore
possession.
1) Restoration of possession (state of facts): The legal system, firstly
although temporarily, orders the restoration of the possession.
2) Restoration of ownership (situation at law): Protection of possession
works only temporarily, as the owner may then bring a recovery action
against the possessor.
Protection of possession in the case of MOVABLES:

The general principle is that nobody can transfer a property right that he did not have himself
in the first place. However, any person to whom movables are transferred by one who is not
the owner, acquires ownership provided that:
1. The movable is delivered to him (possession)
2. He is in good faith at the time of the transfer
• Rationale: Transparency and reliability of transactions
3. There is a “suitable title” for the transfer of the right of ownership.
Protection of possession in the case of IMMOVABLES:

ACQUISITIVE PRESCRIPTION
The continued and uninterrupted possession over a predetermined period of time leads to the
acquisition of a right of ownership (or property interest) on any good, be it movable or
immovable. Some elements may vary according to the specific rules of each jurisdiction (e.g.
the period of time, the subjective element).
• Rationale: 1. To promote the active use of resources and 2. To promote certainty
CASE [Graham family’s claim on Pye’s land after occupying it]: Although there was an
interference with the right to property, it was a proportionate and thus permissible interference.
Acquisitive prescription is still considered compliant with human rights.