Civil Code > TITLE XII CONTRACTS IN GENERAL 6

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Chapter 6. Third Parties in Relation to Contract

Art. 1952.__ Relative effect of contract.

(1) Except in the cases provided in this Code, contracts shall produce effects only as between the contracting parties.

(2) Nothing in this Article shall affect the provisions relating to extra contractual liability (Art. 2056).

(3) Nothing in this Article shall affect the provisions relating to agency (Art. 2179-2265).

Section 1. Promises and Stipulations Concerning Third Parties

Art. 1953.— Option to substitute third party.

At the time of the making of a contract, a party may reserve the option to substitute for himself another person assuming the rights and obligations under the contract.

Art. l954— Effect.

(1) Where the appointment thus provided is made within the following three days, the contract shall be effective as if it had been entered into by representation.

(2) Where the appointment is not made within three days, the contract shall be effective as between the parties who made it.

Art. 1955. — Promise for third party.

A person may stand promisor for a third party by omission by the said third party.

Art.1956.—Effect.

(1) Where the third party ratifies the promise concerning him, the person who stood promisor shall be released.

(2) Unless otherwise agreed, such person shall not guarantee the proper performance of the contract.

(3) Where the third party does not ratify the contract, the person who stood promisor for him shall he liable towards the other contracting party for the damage resulting from the non-performance of the contract.

Art. 1957. — Stipulation for benefit of third party.

Parties to a contract may stipulate that one of them shall perform an obligation for the benefit of a third party.

Art.l958. — Rights of stipulator.

(1) Unless otherwise agreed, he who stipulates for the benefit of another may reserve for himself the benefit of die contract or appoint a new beneficiary wider the stipulation, as long as the option has not been offered to the third party mentioned in the contract, or where the said party has benefit the benefit of the stipulation.

(2) Where the beneficiary of the stipulation has accepted it, the stipulator shall retain the right to vindicate the rights resulting from the non-performance of the contract where the promisor fails to perform his obligation.

Art. 1959. — Option of beneficiary.

The person for whose benefit the stipulation was made may, when the option is offered to him in accordance with the contract, accept or refuse as he pleases the benefit of the stipulation.

Art. l960. — Heirs of stipulator.

(1) Where the obligation undertaken by the promisor is to be performed upon the death of the stipulator, the person whom the latter appointed as beneficiary of the stipulation shall, where he claims the benefit of the stipulation, acquire his right against the promisor on the day of the beneficiary's death.

(2) The heirs of the stipulator may not revoke the appointment made by him of the beneficiary of the stipulation.

Art. 1961. — Rights of beneficiary.

(1) Upon his acceptance, the beneficiary of the stipulation shall irrevocably acquire the rights which the contract confers upon him as against the promisor.

(2) The promisor may set up against him any defences of a purely personal nature which he may have against the stipulator.

Section 2. Assignment of Obligatory Rights and Subrogation

Art. 1962. — Assignment of rights.

A. creditor may assign his rights to a third party without the consent of the debtor, unless such assignment is forbidden by law or the contract, or is barred by the very nature of the transaction.

Art. 1963. — Scope of assignment.

Arrears of interest shall he deemed to have been assigned with the principal of the debt.

Art. 1964. — Warranty.

(1) Where the assignment is for consideration, the assignor shall guarantee the existence of the right at the time of the assignment.

(2) He shall not guarantee the solvency of the debtor, unless he expressly accepted such liability.

(3) Where the assignment is gratuitous, the assignor shall not guarantee the existence of the right.

Art. 1965. — Scope of guarantee.

(1) An assignor bound by the guarantee shall be liable to the assignee only to the extent of the amount he received in principal and interest.

(2) He shall in addition be liable for the costs of the assignment and of any unsuccessful proceedings against the debtor.

Art. 1966. — Valid defences.

(1) The debtor may set up against the assignee, as he could have done against the assignor, any defences which were available to him upon his becoming aware of the assignment.

(2) Where he had a claim against the assignor which was net yet demandable at the time, he may invoke a set-off, provided his claim does not fall due later than the, assigned claim does.

Art. 1967. — Opposability of assignment to debtor.

(1) The debtor shall be released where, before the assignment was brought to his knowledge either by the assignor or the assignee, he pays the assignor in good faith.

(2) Where the same claim was assigned to several assignees, regard shall be had to the date on which the assignments have been notified to the debtor or agreed by the latter in a document with an authenticated date.

(3) The debtor shall pay to the assignee who avails himself of the earliest date.

Art.1968.— Subrogation by creditor.

(1) A creditor who is paid by a third party may subrogate him to his righto.

(2) Subrogation shall be express and effected at the time of payment.

Art. 1969. — Subrogation by debtor.

A debtor who borrows money or other fungible things to pay his debt may subrogate the lender to the rights of the creditor, even without the consent of the latter.

Art. 1970. — Conditions.

(1) Subrogation by the debtor implies that the instrument evidencing the loan bears an authenticated date and that the use of the sum lent to expressly specified therein.

(2) The receipt for the loan shall bear an authenticated date and include an express .statement that the payment was made by means of the borrowed money.

(3) The creditor may not refuse to include this statement in the receipt where the debtor so requires him.

Art. 1971. — Legal subrogation.

Subrogation to the rights of the creditor shall take place by virtue of the law, to the extent of the amount paid:

(a) for the benefit of any person who, being bound with other or on behalf of others for the payment of a debt, discharged the debt and is thereby entitled to indemnity, or contribution from his co-debtors; and

(b) for the benefit of any person who, being owner of a property or enjoying over it a right of lien, mortgage or pledge, paid a creditor who enjoyed over the same property a right of lien, mortgage or pledge; and

Art. 1972. - Partial payment.

(1) Subrogation may not be made to the detriment of a creditor who has been only partly paid.

(2) The creditor may exercise his rights in respect of the balance still due in priority to the person from whom he received partial payment.

Art. 1973, - Effect of subrogation or assignment.

(1) The subrogated creditor or the assignee of a right may exercise the liens, securities and other accessory right attached to it.

(2) He may not enter into possession of the thing received in pledge by the creditor without the consent of the pledger.

Art. 1974. — Duties of original creditor.

(1) He who assigned a right or was paid by a third party shall hand over to the assignee or to the subrogated creditor the document of title relating to the debt and furnish him with any available means of proof, as well as with the necessary information enabling him to vindicate his rights.

(2) In cases of partial alignment or payment, the original creditor shall supply a copy certified by two witnesses of the documents evidencing the claim.

Art. 1975. — Exceptions.

(1) Nothing in the preceding Articles shall affect the special rules governing, the assignment of certain specified rights.

(2) Nothing shall affect the cases where the claim is embodied in a registered document or an instrument to order or to bearer.

Section 3. Delegation, and Assignment of Obligations

Art.1976.— Principle of delegation.

A. debtor may with the consent of the creditor, or without such consent in case provided by law or usage, delegate to another the performance of his obligations.

Art. 1977. — Acceptance by creditor.

(1) Unless the contrary has been expressly stipulated, the creditor who has agreed to such a delegation shall retain his right against the original debtor.

(2) He way not demand satisfaction from the original debtor before demanding it from the delegate debtor.

Art. 1978. — Acceptance fey delegate.

Subject to usage, the delegate shall not be broad to accept the delegation notwithstanding that he is the debtor of the person appointing him as delegate.

Art. 1979. — Revocation of Delegation.

(1) The delegator may no longer revoke the delegation after the delegate accepted the liability towards the creditor or effected the payment.

(2) The delegate may accept the liability or perform the obligation even after the death of the delegator or after the delegator having become incapable.

Art. 1980. — Rights of delegate.

(1) The delegate may not set up against the creditor defences deriving either from his personal relationship with the delegator, or from the relationship between the creditor and delegator.

(2) He may set up against the creditor defences deriving from his personal relationship with him.

Art. 1981. — Insolvency of delegate

(1) A creditor who has released the original debtor has on remedy against him where the delegate debtor becomes insolvent, unless the delegation in point.

(2) He shall retain his remedy against the original debtor where the insolvency of the delegate had been already judicially recorded at the time of the delegation.

Art. 1982. —Securities.

Third parties who hare secured the debt upon their property or are guarantors shall not be liable to the creditor unless they consented to the delegation.

Art. 1983. — Assignment of estate.

(1) He who acquires an estate or an undertaking with assets and liabilities shall be personally liable for the debts to creditors as soon as he notified them of the transfer or published it in the newspapers.

(2) The former debtor shall be jointly liable with the new debtor for a period of two years.

(3) This period shall run, a respect of mature debts, from the day of the notification or publication and, in respect of other debts, from the date of maturity.

Art. 1984. — Amalgamation of undertakings.

Where two undertaking amalgamate by the mutual transfer of their assets and liabilities, the new undertaking shall be liable for all the debts of each of them.

Art. 1985. — Formation of partnership.

(1) The provisions of Art. 1984 shall apply where an individual undertaking is converted into a general or limited partnership.

(2) The new partnership shall he liable for the debts of the individual undertaking it absorbed.

Section 4. Heirs of the Parties

Art. 1986. — Principle.

The heirs of a person shall be substituted for him in contracts to which he was a party, unless the contrary was stipulated or flows from the nature of the contract

Art. 1987. — Stipulation for benefit of third party.

A stipulation tor the benefit of a third party shall be performed for the benefit of his heirs where he dies after having accepted it but before it was performed.

Section 5. Creditors of the Parties

Art. 1988. — attachment.

(1) The performance by the debtor of his obligations shall be secured by all his assets, with the exception of those which cannot be attached at law.

(2) The rules relating to attachment, and in particular to the attachment of claims vested in the debtor, are contained in the Code of Civil Procedure.

Art. 1989. — Agreements entered into by debtor. — 1. Principle.

(1) Agreements entered into by a person may be set up against his creditors.

(2) Agreements entered into by a person in respect of a certain thing may be set up against third parties who acquire from that person a particular right in respect of such thing, as from the time their date is authenticated or, where the law provides for the publication of such agreements, as from the day of publication.

Art. 1990. — 2. Preferred creditors.

The provisions of Art. 1989 shall not apply where the law so provides, in particular where a preferential right or lien is conferred upon the creditor by law or contract, or where the debtor has been deprived, by judicial decision, of the management of his properties,

Art. 1991. — 3. Apparent acts.

(1) The provisions of Art. 1989 shall not apply in cages of simulation.

(2) Counter-deeds shall bind the contracting parties only.

(3) The creditor of one of the parties may avail himself of such apparent act on the basis of which he contracted.

Art. 1992. — Preservatory measures.

A creditor may take in the name of the debtor any preservatory step required with a view to preventing the extinction of a right of the debtor.

Art. 1993. — Exercise of debtor's rights.

(1) A creditor may, with the authorisation of the court, exercise as representative of the debtor all the rights of the debtor so as to prevent such impoverishment of the debtor as would jeopardize the payment of the debt.

(2) The authorisation to act shall be refused to the creditor where the right he intends to exercise is, by nature or under the law, inherent in the person of the debtor.

(3) The authorisation shall be refused where the creditor's rights are not imperilled by the inaction of the debtor whose insolvency is not in view.

Art. 1994. — Simulation.

A creditor may have established, by judicial decision, that a transaction effected by a debtor was a simulated one which, by agreement, was not intended to be carried out.

Art. 1995. — Debtor's fraud.

A creditor may, in his own name, challenge the validity of acts whereby the debtor, in fraud of the creditor's righto, alienated property or entered into obligations.

Art. 1996. — Fraudulent acts.

(1) An act shall be deemed to have been done in fraud of the rights of creditors where it was done by the debtor so as to become .insolvent, or with the knowledge that he was thereby increasing his insolvency.

(2) The payment of mature debts may not be challenged by the creditors.

Art. 1997. — Third parties in good faith.

A third party who is prejudiced by the creditor's action may set up his good faith as a defence against such action where the act which is challenged, or a contingent act conferring rights on the third party, was done for consideration.

Art. 1998. — Time.

The creditor's action shall be brought within, two years from the date of the act which is challenged.

Art. 1999. — Effect.

(1) A debtor's act declared to be fraudulent may not be set up against the creditor who brought the action.

(2) It shall remain valid as between, the parties and in regard to other creditors.

Art. 2000. - Bankruptcy

The provisions of the preceding Articles shall not affect the rules concerning the exercise by creditors of the debtor's rights or the action of creditors against the debtor's fraudulent acts in the event of the tatter's bankruptcy.

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