Property Law

I took this course this summer, here are excerpts from my notes

Property Rights

Rights are interests that are protected by law. They exist where other legal positions (permissions, duties, prohibitions, powers, and immunities) are grouped together. Either rights against a person, rights on an object, or human/fundamental rights.

If you are owed something the debt is a personal claim/right and can only be direct at whoever owes you that thing.

Obligation: counterpart of the claim and result of the claim as a result of the contract/tort. Refers to what the debtor owes (that would benefit) the creditor. Obligations are directed while duties are not-there are no claims responding to duties.

If someone violates a duty and someone incurs damage the law can attach an obligation to compensate the damage to this violation (claim).

Claims: several legal positions joined together attached to a claim-holder of a claim has the competence to waive their rights. A claim held by a creditor involves a number of competences foro the claim holder. The claim can be transferred where the content of the corresponding obligation is adapted and the associated competences move with the claim to the new holder.

Property rights: where claims correspond to obligations and therefore rights that correspond with doing or not doing something. Relations between the right holder and the object of the right or the property. A right regarding an object. Invokes a general prohibition against everyone except the right holder to use, damage, or destroy the h object of the right.

Claims are only invokable against the specific person who is bound by the corresponding obligation. Property rights, however, can be invoked against everyone. The right to follow the object wherever the object (and whoever is in possession of this object) may find itself.

Holders of property rights can transfer their property right to somebody else. Could give another person’s permission to do things that under normal circumstances would be right infringements.

Fundamental Rights/Human Rights: rights against governments. The government bears a duty corresponding to the right. Relative rights, specific to a legal subject. The right does not belong to a broad obligation and does not originate from a specific event. Individuals cannot transfer these rights and these rights cannot be taken away. Freedom of expression is an immunity, the prohibition for the government to withhold expression, it’s not a permission.

The right holder enjoys an immunity against having their permission to express being taken away because the government lacks the competence to prohibit that right. The right holder can only waive their right to the extent that it is a right against private individuals (Nondisclosure agreement).

Right of Health Care differs from bodily integrity. The right holder cannot transfer their rights and lacks the competence to waive their rights. Immune from having this right be taken away by the government.

Bodily integrity, free expression, and health care involve a different combination of duties, permissions, competences, and immunities. There is no measure of what a fundamental right is. They protect the interest of the right holder and they function as points in the legal space where duties, obligations, permissions, competences, and immunities are tied together.

Contract is where one party gives something to another party and receives something in return. The exchange is facilitated by the belief that both parties benefit: each gets more value than they exchanged (goods are worth more than money and money is worth more than goods).

Gratuitous contracts: promise to make a gift-this is enforceable even if only one party benefits.

Parties have freedom to contract (enforceable rights and obligations can be decided among the parties) so each party can decide if they want to contract and determine the contents of their contract.

General Conditions: parties use standardized sets of rules that are suited to their own interest. Economically this saves parties from having to draft contrast conditions for every new contract: standardized contract.

The law provides default or facilitative rules that are automatically applied if the parties do not contract about these conditions (did not make other arrangements). Mandatory rules flow from governmental/official sources that limit what individuals can contract about (contracts are void or avoidable by one of the parties-like murder for hire).

It’s impossible and impracticable for parties to imagine all the contingencies that might occur during the lifecycle of the contract.

European legislature can adopt measures that harmonize national provisions (object of establishment and functioning of the internal market). This fractures European contract law: it only deals with specific contracts and only with certain aspects of these contracts. Article 114 Treaty on the Functioning of the European Union.

The United Nations Convention on Contracts for the International Sale of Goods (CISG) applies for cross-border transactions among contracting parties (unless the parties have explicitly excluded this) that reside in a country where CISG has been ratified.

Informal rules: contract law has been increasingly influenced by rules that are not officially binding (soft law) these model rules can influence formal institutions.

Unidroit Principles of International Commercial Contracts (UP) of 1994, Principles of European Contract Law (PECL) of 1995, and the Draft Common Frame of Reference of European Private Law (DCFR) of 2009. These identify commonalities among jurisdictions (not formally binding), blueprint for the future legislative instrument form of European Code of Contracts.

A contract is binding if there is an exchange of goods, if a party promises to do/give something in the future. A promisee can go to court and force the promisor to deliver the goods at the agreed terms. A promise is a binding contract if there is an intention for an agreement to be legally binding (if the parties intend to be legally bound and reach a sufficient agreement). Contracts are enforced if they meet consideration (the promise met all the requirements for its enforceability and the parties are subjected to almost the same value or if the parties are sophisticated business people who care for their own interests).

The law is suspicious of altruism and presumes that a party will only bind itself legally if it has something to gain from the transaction. Most civil law jurisdictions require a purely gratuitous promise (gift) to be put in a notarial deed: forces the donors to think about their act of benevolence and allows an independent notary to warn the donor. Gratuitous promises lack consideration.

Consideration requires a quid pro quo that a promise is given for a counter promise or performance of the other party.

Decisive: whether the promisee could reasonably expect the words/conduct of the

promisor that the latter intended to be bound. Dependent on the reasons for making the promise, consequences if the promise is determined unenforceable. If someone was promised a job and that someone moved and that job offer was reneged that someone can sue.

Consent has an offer by the offeror and the acceptance of this offer by the offeree.

A proposal is an offer if it is intended to result in a contract if the other party accepts it and it contains sufficiently definite terms to form a contract.

Offer and Acceptance

1. When can a proposal be qualified as an offer?
2. Can the offeror go back on its offer before acceptance by the offeree (revocation)?
3. At what moment in time does the acceptance of the offer lead to a binding contract?

An offer only exists if it reflects the intention to be legally bound and is sufficiently clear about the contents of the resulting contract (contains specifics). Internationally this depends: an advertisement for goods on sale is not a binding offer under English/Polish law but is under French law. Under French law the seller cannot go back on intention (interest to the prospective buyer) but unfair to the seller if they are forced to sell the product.

A proposal (or advertisement) to supply goods or services at stated prices is presumed to be an offer to sell or supply at that price until the stock of goods or the supplier’s capacity to provide the service is exhausted. Art. 2:201 s. 3 PECL

Revocation: German, French, and Dutch Civil Codes (§ 145 BGB, art. 1116 CC, Art. 6:219 BW) protect the offeree by making it irrevocable for the period that is fixed in the offer unless the offer explicitly states that it is freely revocable. European model rule in Art. 2:202 PECL. English law allows an offer to be revoked at all times: one cannot be bound if the other party has not done or promised something in return.

Acceptance: parties should know when they are bound to a contract (rights and obligation follow). Acceptance concludes when the contract reaches the offeror.

When acceptance is sent by mail the contract concludes when the acceptance is dispatched by post. The offeree can no longer be confronted with the revelation once the offer is in the mail. This does not apply to instantaneous communication. Art. 2:205 s.1 PECL

If the consent of the parties is sufficient for the contract to be binding then additional formalities are not needed. It’s difficult to prove what was concluded orally but oral contracts are valid as a matter of law.

Customer Protection: formalities protect the party who is presumed to be weaker than the other party. The professional party bears the burden to provide their customers with information on their product and the right to withdraw from the contract. Withdrawal Rights enable a party to cancel a contract without a given reason. Usually this manifests with contracts between consumers and businesses: return of goods or notice of cancellation within cooling-off period (14 days)-this is not legally required.

The law protects incapacitated persons (children and mentally ill) from entering into valid legal transactions. Contracts entered by minors and persons that are formally incapacitated can be invalidated by their legal representatives. However contracts that are in favor of the minors and incapacitated persons are seen as valid if they are to the benefit of the incapacitated person. The court views these transactions are normal and necessary.

Courts remedy informational asymmetries or deny parties to invoke a contractual clause as a result of substantive or procedural injustice.

PreContractual Liability: in some situations a party might justifiably rely on the conclusion of the contract and be subsequently disappointed in this reliance as the other party fails negotiations. The reliant party might be owed compensation for costs that have been incurred. This creates a microcosm that both parties are incentives to work towards a common goal.

Other legal theories have proposed that the point of no return in contracting passes when the contract is actually formed. However, each party is entitled to pursue their interest and a duty to negotiate in good faith is inherently inconsistent with the adversarial position of each party.

Interpretation: either gives preference to the intitno of the promisor or gives priority to the declaration of external expression of the intention (only thing that’s apparent to the other party).

Difference between the party’s subjective intention and its objective declaration.

Art. 1188 of the French Civil Code requires the court to find the common intention of the parties but it considers where the intention cannot be discerned, the contract is to be interpreted in the sense that a reasonable person placed in the same situation would give it to them. The aim of interpretation is to discern the real intention but the interpretation should take place in accordance with fairness and reasonableness as understood in good commercial practice.

Reasonable person: contracts should be interpreted in a way that a reasonable person would understand it.

1. A contract is to be interpreted according to the common intention of the parties even if this differs from the literal meaning of the words.
2. If it is established that one party intended the contract to have a particular meaning, and at the time of the conclusion of the contract the other party could not have been unaware of the first party’s intention, the contract is to be interpreted in the way intended by the first party.
3. If an intention cannot be established according to (1) or (2), the contract is to be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances.

Fairness and Reasonableness: if a party did not know the true value of good it is allowed to ask for it back. Procedural Unfairness: devices that avoid procedural unfairness (exists if the party is not able to form its will in a manner that is sufficiently free aka made under duress). There is a balance between the duty the buyer has to investigate what shape the product is in and the duty of the seller to inform the prospective buyer about defects. General Conditions: contractual terms should be expressed fully, clearly, legibly aka fair dealings that one party should not take advantage of the other. Substantive Fairness: the contract is invalid if it causes a significant imbalance to the parties rights and obligations under the contract (emphasis on intent). The law of obligations recognizes and enforces that contracting parties should act in good faith (fairness and reasonableness).

Performance: a party that does not abide by a court decision to perform can be forced by an official who takes goods or money from the defaulting party and gives it to the creditor.

Objective impossibility is if performance is only useful if it manifests before a fixed date like a wedding dress on a wedding day. Performance is still possible but it would cause unreasonable effort or expense.

Claim cannot be brought where performance requires specific personal qualities like artist ability. Provisions exist but they only allow for the other party to bring a claim for damages or termination in breach of contract. Under English law can sue for damages (except for performance) the promisor has to pay damages if the promised act does not come to act-the promisor can break the contract.

If damages are inadequate the court can grant a claim for performance, this allows the creditor to force the other party to perform in specie. English law has a higher bar for damage claim as the buyer has to satisfy that these goods are not unique and can’t be easily found elsewhere (differs from Dutch, German, and Italian law).

If a professional seller delivers goods to a consumer that are not in conformity with the contract, the consumer can require the seller to have the goods brought into conformity by repair or replacement.

Nonperformance: if the contract does not take place at all or if it is too late/defective the creditor could have the possibility to claim damages for nonperformance of the contract (the aggrieved party should be brought to the position that they would have been if the contract had been performed).

Common law holds the non-performing party liable because it didn’t perform (thus gives liability). Have they performed or not? Civil law allows claims for damages if the party was at fault or is held responsible for the nonperformance. A party can free itself from liability if it can prove that it used its best efforts in performing the contract.

The seller gives a guarantee that the goods are fit for its purpose.

Termination for Nonperformance: if a party claims damages instead of performance it had to perform its obligations. If it loses all confidence in its counterpart then it’s no longer bound to it (if the act is already performed then they could ask for the money back).

English law holds that the breached contract term must be essential while German law only allows termination in case of nonperformance of a main obligation or after a grace period (that allows the debtor to perform).

If strict compliance with the obligation is the essence of the contract the non-performance deprives the aggrieved party of what it was entitled to expect under the contract. The non-performance is intentional and gives the aggrieved party reason to rely on the other party’s future performance-this is fundamental.

English contract is more geared towards the interests of like-minded commericall parties while civil law jurisdictions attach the high value to remedy an unequal position among the contracting parties.

Relative or personal rights are rights against a particular person.

Absolute rights are rights that always pertain to something that this something is called the object of the right. Property rights are not directed at any particular person because they pertain to an object that has an effect against everyone else. Like a car.

Droit de suite or the right to follow. If the object of a right falls into the hands of a person who does not have the right the right holder could exercise their right against that person. It’s possible to have exclusive rights that prevent someone from using it.

Property rights facilitate free circulation of the good by enabling the good to change ownership: each individual is free to acquire and dispose of their own property. Property law establishes this assumption.

Tragedy of the commons: its each individual’s interest to maximize their use but the damage to the common is shared by the entire group. If all herders make the individually rational economic decision the commons will be depleted or destroyed to the detriment of all. It is in the interest of the commons for a third party (government) to decide what will happen with the land (restrict access) with permission from the owner.

Property Rights in Civil law and Common law: Primary property rights, secondary property rights, secondary security rights, secondary rights to acquire property rights

Ownership: property right that a person has in respect to some object. It’s an immaterial relationship between a person and the object without the need for physical equipment.

Possession: factual relation between a person and an object. The person possesses an object and exercises factual control over it. The ownership and possess often coincide so that the owner is also the possessor. Property law allows someone who disposes to recover possession.

Theft is a means to obtain ownership and therefore the thief is the possessor (in bad faith) but not the owner.

Detentorship: exercise of factual control over a good not on behalf of himself, they recognize that they are holding factual control for someone else. They recognize the right of someone else. The possessor can retrieve the property with possessory action.

Feudal System: government system and property law system. In a Feudal System the landholding lord grants feudal rights (fees) to a vassal who further grants the fees to a sub-vassal. The fee held by the vassal is a property right on the land and included in the duties that the vassal has toward their lord.

Unitary System: one system of property law that applies to land and goods alike. The right of ownership is the same right of the ownership regardless whether it’s held on a car or on a piece of land. Civil law property systems are unitary. There is one right (on tangibles) and that is the right of ownership-ownership is a comprehensive right.

Primary property rights are the most comprehensive property rights.

Ownership is the right to enjoy and dispose of things in a complete manner given that they are not used in a way prohibited by statute or regulations. The owner can do what they wish with the object and exclude others from interfering.

1. Ownership is the most extensive right which a person can have in a corporeal object.
2. To the exclusion of all others, the owner is free to use the object provided that this use does not violate the rights of others and that it respects the limitations based upon statutory rules and rules of unwritten law.
3. Without prejudice to the rights of others, the owner of the object becomes the owner of the fruits the object produces, once separated.

Objects of Ownership: corporeal and incorporeal objects (claims). Under French law if A owns a car and is the owner of a tort right against B who is liable. German and Dutch law restrict the concept of ownership to corporeal objects-ownership claim is impossible. B would have a claim against A but would not own the right.

Vindication: primary property rights are absolute meaning that they can potentially be invoked against everyone. Primary property rights are the most comprehensive rights as the owner and invoke their right against everyone. The owner can vindicate their good meaning that the right holder can reclaim the position of the object. The owner is restored in factual power over the object that she owes.

Civil law holds that there is only one right of ownership with respect to an object. If someone holds the right of ownership then all other persons are not owners.

Specific protection: property right ownership has specific enforceability (duties that follow from the right that should be enforced).

Torts of Conversion force the tort-feasor the person who interferes with someone else’s property to choose between paying damages or returning the object or ensign the interference with it. Outside of torts, property law is also protected by criminal law.

Law of Property Act of 1925: limited and standardized the available property rights with respect to land. Fee simple is absolute in possession aka freehold. The most extensive right a person can have is a fee simple absolute in possession which entitles the holder to the exclusive possession for an unlimited duration of time. Fee for a terms of years aka leasehold. The holder derives a secondary property right in the form of a fee for a fixed term of years.

Title is the primary right (personal property law). Entitlement is the exclusive right of possession of a chattel.

Relativity of title: possible that more than one person is entitled to the same chattel. The person with the stronger entitlement will receive possession. Relativity of title does not exist in civil law systems.

There is a difference between the owner and whoever grants permissions. A could own a car and grant B to use it. B has a personal right against A to use the car, A cannot vindicate or take back the car on the basis of A’s ownership. If A sells the car to C, C could vindicate the car because B’s personal right is with A not C. If D is detentor (possession on behalf) B could not claim the car from D but A could vinndicate car from D.

With a trust, management powers and enjoyment rights relating to property are separating and divided between a manager (trustee) and one or more beneficiaries (beneficiary owners)

Primary rights: limitation on the scope of ownership for things that are of value to the holder and the rest of society. It can’t convert building commercial to residential, and needs a special permit that grants permissions.

Secondary Property Rights: comprise permissions and competencies/powers that normally belong to the holder of the primary right and can be exercised by the holder of the secondary right instead of or next to the holder of the primary right. Secondary rights to use entitled the holder to use of the object for a short or long period of time-limited duration of time

Usufruct: the right to use and enjoy an object that is owned by someone else. It consists of the permission to use and enjoy the ownership of the owner who does not hold the permissions themselves. Then the owner holds bare ownership which signals that they have given away their permission to use and enjoy the object. This entitles the person to use the object as if they were the owner for the duration of their life. It is not a personal right against the person who granted it to be the right that follows the object.

Servitude: Secondary rights used for a longer period of time have less extensive content. The right of servitude limits the ownership of the land which the servitude runs. The owner is allowed to exclude everyone but agrees to not exclude the right holder of the servitude when they are exercising their right. When the right of servitude is sold and transferred to someone else the new owner is bound by the right of servitude.

Property security rights are created to secure the payment of a monetary claim. Created on an object that the debtor of a claim has a primary right.

1. The right of pledge, which can be created on most
   movable objects (for instance, jewelry or cars) and on
   particular kinds of rights
2. The right of hypothec (or mortgage), which can be
   created on immovable objects (land and all that is attached to it, like houses) and on some special movable objects (e.g., ships or airplanes) paritas creditorum. When creditors claim money from a debtor, they are generally treated equally.

Legal institution insolvency secures the correct division of money that a debtor cannot pay all of its debts. Use in the ratios of how much is owed. Meaning that if I owe someone 500 and another 100 I will pay both in a 5/1 ratio. The probability the creditor will receive their money depends on the claims of other creditors.

Property Security Right: breaks the paritas creditorum rule by giving the holder the power to take possession and sell the object of the right. Transfers the primary property right of the debtor to a new owner. Satisfies the debt from proceeds. Any surplus must be paid back to the debtor

Holders of a personal right are treated equally in insolvency (paritas creditorum). Holders with a secondary right for security might claim the money before creditors who hold personal rights. (secondary security rights give priority).

Who owns the hypothesis determines who gets and in what order. If there is no hypothec then ratios if there is a hypothec then the owner gets paid first then other.

Legal persons (companies with limited liabilities) can create strong rights because they would thereby bind other persons who are not involved in creating these property rights.

The consequence of specificity is fungible objects (generally not the object of individual property rights if they are mixed with other objects of the same kind).

Immaterial things are less easily identifiable than material objects.

Debts can be invoked against anyone holding the property (against new owners).

Publicity is realized (with land) through land registry.

Registration systems either operate on basis of simple registration of deeds (drawn up by notary received by registry and officiated) or cadastre systems (negative registar systems with only a marginal check of the formal validity of the contents).

Positive systems (title registry) as the registrar actively checks the contents of the deeds offered to them. The registrar updates the registry which constrains information about who holds the property law entitlement (title). Registration of land only occurs when land is transferred between parties or passed upon inheritance. A full registration system results from this.

Movable objects: mostly owned by the person who actually has them in their possession. Property relations are made public when the property right on a movable object is transferred and done by the transfer of possession. A person who owns a thing can transfer the full ownership of it, but the holder of a mere right of usufruct may be able to transfer the right of usufruct but cannot trans- fer the full ownership of the object. A person transferring a property right must have the competence to dispose of that right. When the competence to dispose is lacking, this person cannot transfer the right to someone else.

Competence to dispose of the property is different than the property itself. The holder of the property is competent to dispose of it and nobody else. The holder could be in a state of insolvency (lack competence) or someone outside of the holder could have competence to dispose of the right. like holders of a right of pledge who can transfer ownership of the object under the pledge if they have to seal the object for the payment of a debt. like when a bank sees property to make up for the default on a loan.

Prior Tempore Rule: older property rights trump newer rights. The holder of the older hypothec gets paid from the proceeds of the land and the holder of the second right comes after the first hypothec holder (but before the creditors who do not have a property right on the land). Specific to property law as personal rights generally compete against with an equal status (paritas creditorum).

Bank B holds the older property right (pledge) and may therefore exercise the right of pledge. Bank C must wait to see if there is anything left of the proceeds of sale after Bank B has satisfied its claim

It should be noted that with regard to these left-over proceeds, Bank C has priority over other creditors who do not have a security right. For this reason it makes sense for a creditor to accept a second pledge (or hypothec, for that matter) on an object.

A primary property right can originate when an object that previously belonged to no one is found and taken into possession by the finder

Creation: when sufficient labor is invested in a new object the person who provided the labor becomes the primary right over the new object.

Mixing: the new primary right will be shared by the parties previously holding primary rights on the object that was mixed by one single party. The total amount belongs to the single owner.

Accession: what belongs to the land becomes part of the land.

Prescription: the exercise of factual power for oneself (for an extended period of time). If the holder of the primary right has not objected or taken legal action against the adverse possession the possessor will acquire a primary property right of the possessed thing. Discrepancies between the factual situation (possession) and legal situation (title). The legal situation is adapted to the factual one. A is in possession of the piece of land of B for a long duration of time (say 30 years), A becomes the owner of that piece of land and B loses his right of ownership

When the possessor is in good faith (believed that they could exercise a right) the prescription period will generally be shorter than when it is not a case.

For property rights being transferred there are two requirements. It needs to be clear between the transferor (person who transfers) and the transferee (acquirer) the former has lost the property right and that the later has acquired it. Has to be explicitly clear.

Principle of publicity plays a role: third parties should know that a transfer of property took place. Need to publish the transfer and their difference can be seen as an outcome of different ways to manage the publicity requirements.

Consensual transfer systems require property between the seller and the buyer. Means of the conclusion of the contract sale will transfer the property right from the transferor to the transferee or acquirer.

When you buy something from a store you immediately become the owner of the sales contract. Owner has the obligation to give you the products because you become the owner of the contract.

With movable objects the buyer becomes the owner immediately upon conclusion of the contract. With immovable objects the property right is transferred (only effect between parties). Contract in the form of a deed has been registered and the property will have an effect against the rest of the world.

The property right can be transferred but will only have an effect between the parties. Enforceability happens when the official document is registered.

In traditional systems, the contract of sale initiates the transaction (does not affect property laws)-contract/title is the transferable object. Requirement of a special act to transfer. Title (reason why a property right should be transferred, the title of the object is ownership). Titles can be gifts-not objects in contracts of sales.

Termination: when the object that the property right rests ceases to exist independently. Claims stop existing if the duty has been fulfilled or if the claim was waived by the creditor. Without the object, ownership ends.

Property right on an object can cease when it is waived or abandoned by the right holder. Usually movable objects or claims, not usually immovable rights (land). Also be terminated by law. If a piece of land belonged to A, but B used the land as if it was his own for a long period (say 30 years or more), and if A did not protest or undertake any legal action, A loses his title to the land. Normally B would gain the title.

Right of usufruct ends if the holder of the right dies and leaseholder ends if the term has passed (leaseholder has a fee for a set number of years).

Property rights can be terminated by agreement of parties involved. If A is the owner of a piece of land and B is the owner of the neighboring land, who in this capacity enjoys the right of servitude that he may cross A’s land, A and B (officially the owners of the two pieces of land) can end this right of servitude by mutual agreement.