Учебный год 22-23 / Alpa_Italian_Private_Law_University_of_Texas

172 Transactions and Contracts

transactions calculated to circumvent the law. The parties usually attempt roundabout means to achieve an illicit objective that could not be realised by a transaction that produced it directly. Transactions calculated to circumvent the law are therefore indirect, but the corollary does not follow: not all indirect transactions are calculated to circumvent the law. For example, before the law prohibiting gifts between spouses was repealed (Art 781 civil code) a husband intending to make a gift to his wife could make her a bailee of the item without requiring her to account for it. It achieved the objective, but the prohibition was avoided. In these cases the rules are ex hypothesi mandatory, not subject to derogation, otherwise a straightforward transaction would be effective. In the same way, the aim of the law infringed must be considered: a transaction that gets around tax law is not void, because tax fraud is a violation for which sanctions are provided in the fiscal regime itself.

Transactions calculated to circumvent the law are void.

7.6.3. Fiduciary transactions

A fiduciary transaction is one that incorporates two relationships. One is a relation in rem that transfers a right and the other, the trust covenant, a relation of obligation based on trust, by which one party, the trustor, places a duty on the other, the trustee, to transfer the right either back to him or to a third party or parties.

The reasons why the trustor decided to carry out the fiduciary transaction are of great importance. A fiduciary transaction effectively carries a transfer within itself. There is no apparent transfer created and yet it is not the same as a sham transaction. When the trustee transfers the right to third parties a real intermediation, as opposed to the fictional intermediation referred to above, takes place.

Fiduciary transactions are of two kinds: ‘with a friend’ and ‘with a creditor’.

With a friend means that as a matter of trust, the fiduciary transaction is normally concluded with persons in whom one can place confidence, since it transfers property to all intents and purposes, and the trustee acquires the legal title. If A, for example, has to go abroad on a long journey, he can enter into a fiduciary sale contract with B, transferring his title in land to B who undertakes to sell it back to A on his return.

With a creditor means that the fiduciary transaction can operate as a means of guarantee, for example, in the form of a mortgage. C urgently needs a sum of money he does not possess, so he turns to D for a loan. D requires guarantees of repayment so he asks C to sell him a flat. The sum realised on the sale becomes the loan. D becomes owner of the flat immediately, but will sell it back to C on repayment of the loan.

This situation should not be confused with the prohibited covenant of forfeiture. This was the name given to an agreement whereby the creditor became owner of property immediately upon the debtor defaulting on repayment. In practice, however, it is not always easy to tell a mortgage from a covenant of forfeiture.

It should be noted that with Law no. 364 of 1989 Italy has ratified the Hague Convention on trusts. In these years this typical common law figure has been seeping in Italian legal practice. Very recently an Art 2625 ter has been introduced in the civil code in order to allow a segregation of one’s estate for lifetime or for 90 years bringing about a result very similar to that of a trust.

7.6.4. Indirect transactions

A transaction is indirect when the parties conclude it with the intention of bringing about by oblique means the outcome of a different transaction. The means adopted by the parties are said to fall outside the scope of their intended outcome.

As an example, M wants to give property to N, but for various reasons does not wish to execute a deed of gift. So he concludes an irrevocable agency contract with N with no duty to account. N acquires the property and may dispose of it as he wishes even if he is not the actual owner. The desired outcome is achieved, even though by a means (agency) different from the normal and direct means of a gift.

Indirect transactions are therefore not a typical form of transaction. It takes one of the various forms which the parties employ with the intention of achieving by indirect means the outcome that they could have accomplished directly by other means.

Indirect transactions are to be distinguished from unlawful transactions, because the outcome sought by the parties may be lawful; and they are to be distinguished from sham transactions, because there is a genuine outcome sought by the parties.

7.6.5.Mixed and complex transactions. Linking of transactions

Imagine the situation where A wishes to have some friends stay as guests for several months and puts a flat at their disposal without charging them any rent. The friends B and C, however, want to contribute to the expenses that A will incur in putting them up for a prolonged period and so they pay each month a modest sum, less than the market rent would come to, to defray these expenses. The transaction is partly a loan for use, because this corresponds to what A provides, but it is also partly a letting, because while the use is free the friends pay a small sum of

174 Transactions and Contracts

money. So the contract is of a kind which combines two standard types (loan for use and letting) and which is known as ‘rewarded sufferance’.

In this instance the transaction is described as both mixed and complex. A complex transaction results from combining different forms of transaction which the parties consider as one because it represents a single operation with one purpose and function, a single and self-contained agreement.

A sophisticated distinction can be made between mixed and complex transactions, since the former (for example, selling at a price so low as to appear almost like a gift) is based on just one form of transaction (sale) but imports variations in the guise of clauses borrowed from another form.

What rules apply to between mixed and complex transactions? There are two criteria. Absorption obtains when one of the forms employed is so predominant that the others are subsumed into it. Prevalence obtains when the forms are equally significant but the parties foreground one of them on account of the end sought.

Linked transactions should be distinguished from mixed and complex transactions. Two different and mutually independent transactions may be linked by what we may term functional considerations. It is only the practical purpose that the parties seek to accomplish that links them, whereas a complex transaction is a single contract with a single aim.

7.7.The subject matter and content of the transaction

7.7.1. Concepts

Articles 1346–49 of the civil code provide rules to govern the subject matter of a transaction. Subject matter of a transaction should be distinguished from the subject matter (or prestation) of an obligation and in turn from the subject matter of the prestation itself, which is the action or abstinence required of the obligor (to do, to give or to refrain). The subject matter of a transaction is, however, often identified by a kind of transposition with that of an obligation. The subject matter is thus the thing or activity on which the transaction is based. In a sale contract, for example, the subject matter is the thing sold and the purchase price; in a letting it is the flat rented and the rent paid for it; in a loan it is the money lent and then repaid; and in a delivery contract it is the thing sent and the price paid for delivering it.

Subject matter is distinct from the object, which is the aim of the transaction.

The idea of subject matter derives from a naturalistic view of legal relations. When transactions became subject to statute, the ubiquitous

sale contract was the model uppermost in the legislator’s mind. In the exchange contracts that it typifies the subject matter – the thing sold – can be readily isolated, indeed is physically present and visible. In other contexts the subject matter is less easily identifiable. For example, in an employment contract does it inheres in the force, the energy expended by the worker? Or is it the activity she or he pursues?

On these grounds the abandonment of the term ‘subject matter’ may be proposed in favour of the content of a transaction: the content of a transaction is the totality of obligations, rights and duties that delineate that transaction.

For simplicity of explanation and to remain faithful to the wording of the law, we shall continue to speak of subject matter, but it must be borne in mind that this is a debatable concept of uncertain meaning.

7.7.2. Characteristics

The subject matter must be legal, possible, and certain or ascertainable

(Art 1346 civil code).

It must be legal in the sense that the transaction must not contemplate prestations or activities prohibited by law. The subject matter of the activity of prostitution (providing sexual services for payment) is illegal. The subject matter of the sale of State property (in the ‘domain’ category) would be legal, since it is in itself an economic good, but impossible, since it is placed outside the scope of commerce. Similarly, the sale of property that has been destroyed will be impossible. If, however, the subject matter exists and can be disposed of by an economic operation launched by the parties, then it is possible.

The subject matter can be something that does not yet exist, but will do (Art 1348 civil code). In this case the transaction involves a future asset.

The subject matter must be certain, that is, specified. ‘The flat situated on the 4th floor of no. 5, Main street, market’, for example, or ‘1 ton of laminates’, ‘300 kg of wool’, etc. It is ascertainable if the parties have laid down the criteria by which it may be specified. For example, the price for 300 kg of wool may be that obtaining on the commodity exchange 2006 in Genoa on 30 April. Or the subject matter may be ascertained by a third party, who cannot make his determination arbitrarily (unless the parties have agreed that he may), but must use his discretion so as to reach a fair assessment (Art 1349(1) civil code). If the third party does not reach a determination, or it is unfair or mistaken, the court may do it in his place . If the determination was to be merely arbitrative and has not been carried out, and the parties cannot agree on the relevant terms, the transaction fails for want of subject matter.

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7.8. Form

7.8.1. Concepts

Form is the outward appearance of the transaction as drafted, or as representing the intention behind the transaction. Form is usually left in Italian law to the choice of the parties under the principle of freedom of forms (other legal systems, such as the ancient Roman Law, are or were different). In specific instances, however, a form may be prescribed by law, and the transaction must conform to it, either to be admissible in evidence in legal proceedings, or, depending on the case, to be valid at all. The first situation is said to require a prescribed form ad probationem and the second, ad substantiam.

When a prescribed legal form is required, or the parties agree to use one (contractual form), it becomes fundamental to the transaction. If the prescribed form is not used the transaction is void, as it lacks one of its essential elements.

Solemn form, meaning executed in the presence of witnesses or with particular formalities which give the deed something of a ritual flavour, was necessary at one time when forms emphasised the significance of the deed for private parties and its legal importance. Form was often the only fundamental element of the deed, since an object was not indispensable. For reasons of economy, the speeding-up of circulation and commerce, changing habits, the loss of the ‘sacral-magic’ aspect of the law, and so on, have progressively changed the rules on form to the point where today rules requiring transactions to be in a specified form are the exception rather than normal practice.

Form is connected to giving notice of a deed or document by entry on a register and with judicial evidence in civil trials. The form of inter vivos dispositions and last wills is regulated by the law prevailing in the place of their execution, or where the substance of the deed is regulated, or of the national law of the disponer or of both parties if they have the same nationality.

Oral form is the most common: the will to transact is evident either from words spoken or from unambiguous conduct (such as when one places an item in a supermarket trolley).

Written form is where the will of the parties is substantially reproduced in documentary form, either on plain paper or, for tax purposes, on stamped paper, of which there is a variety prescribed for judicial acts such as a summons or pleadings.

Public document form is where the deed is executed with the assistance of an authorised public official or a notary (Art 2699 civil code). This form exists in an even more solemn variety: sometimes the presence of two witnesses is required as well (the public testament, Art 603 civil code).

7.8.2. Characteristics

Form may be legal or contractual. It is legal when required in one of the situations exhaustively prescribed by law, and contractual when the parties have agreed on its use.

Contracts for the following must be either in the form of a public document or a private deed: to create, modify or extinguish rights in immovable property; deeds of renunciation of a minor interest in immovables; antichresis (Art 1960 civil code), by which the debtor undertakes to deliver, but not transfer, immoveable property to the creditor guaranteeing the debt through use of the revenues; leases for a term longer than nine years; company or association contracts that confer the enjoyment of immoveable property or other rights in immoveable property for a period longer than nine years or for an indeterminate period; perpetual and life annuities; acts of apportionment; and settlements and other deeds that the law requires to be in writing.

If the required form is not complied with in any of the above cases, the transaction is void ad substantiam because an essential element is absent.

As to contractual form, unless the parties stipulate otherwise, once they have agreed on its use non-compliance is presumed to be fatal to the transaction.

Form may, however, have only evidential significance (for example, to establish whether a debt has been paid). The court may, taking the circumstances into account, admit testamentary evidence in its place (Art 2726 civil code), but the rule usually requires written evidence (generally in the form of a written receipt or other suitable form of release). Written form in these evidential situations is required ad probationem and does not affect the validity of the transaction per se or modify its effects, though it makes enforcement more difficult.

7.9. Incidental elements

7.9.1. Conditions

A condition is the means whereby the parties insert into the transaction the specific intentions which induced them to negotiate it. This too is an expression of the freedom to transact, but not all transactions are subject to conditions; marriage and the acceptance of an inheritance and bills of exchange do not permit of them.

A condition is, depending on its effects, either precedent or subsequent, and depending on its nature, of fact or of law.

A condition precedent makes the effect of the transaction dependent on the occurrence of an uncertain future event.

period of three months. The employment contract begins on 22 June and ends on 22 September of the same year. It is certain that the contract will end on the latter date. If, however, the initial date is not expressly stated but it is agreed that A will employ B when the latter ends his studies, then the fact that the contract will begin is still certain but the initial date is not. Transaction period is to be distinguished from a condition because the future event is certain, while a condition is an uncertain future event.

The transaction period is a special case of the legal period or legal time limit. There are time limits for performance, time limits for testamentary dispositions (Art 637 civil code), and so on.

7.9.3. Modus

The modus or modus burden applies only to gratuitous transactions (such as a gift, legacy or interest-free loan). It creates an obligation on the part of the beneficiary that can be owed either to the transactor or to a third party. There are many examples in connection with wills. So if A receives a bequest of €50,000 on the condition that he causes a chapel of remembrance, or a hospice, or similar, to be erected, he may carry out the condition if he has an interest in doing so, but it is nonetheless a burden. Supposing he does not carry it out? If the task was the only reason that the testator made the bequest, then the bequest will fail if the legatee does not carry out its terms (Arts 648, 793 civil code). A case can be brought upon non-performance only by those who would benefit from the failure of the bequest, in effect the residuary beneficiary of the will. If there is delay in performing the task a request to complete it may be made to whomever would have an interest in doing so, for example, the local authority in the case of a hospice.

7.10. Interpreting a transaction

7.10.1. Concepts

It sometimes happens that the expressions used, whether orally or in writing, to define the terms of an economic operation are understood in different senses by the parties.

For example, when the contract is executed, A thinks he has to keep his part of it in a certain way, but B points out that something different is expected of him. Or C delivers an item to D, but D refuses to accept it, because he thinks it is different from the item contracted for. Often the expressions employed are obscure. For example, in the contract of sale of a flat, which stipulates that the eastern boundary of the dwelling gives onto a courtyard to be turned into a garden, is it intended to create an easement for the purchaser’s benefit preventing the space being used for