Business Law_course 0_Introduction

OCT - 12 - 2013 C.Stoica, Dreptul afacerilor Contracte, Editura ASE, Bucureti, 2012; S.Crpenaru, Tratat de drept comercial romn, Ed. Universul Juridic, Bucureti, 2013; R. Dimitriu, Romanian Industrial Relations Law, Ed. Intesentia, 2007; S.Angheni, M.Volonciu, C.Stoica, Drept comercial (curs universitar), Ed. CH Beck, Bucureti, 2008; C. Lefter, R. Dimitriu, O. Maican, Civil Law, Ed. Economica, Bucureti, 2000; F.Baias, E.Chelaru, R.Constantinovici, I.Macovei (coord.), Noul cod civil. Comentarii pe articole, Ed. CH Beck, Bucureti, 2012

Business law_course 1_Legal Rule

OCT - 13 - 2013 LEGAL RULE THE STRUCTURE OF A LEGAL RULE Each legal rule has an internal structure named the formal-logical structure and an external structure called the technical-juridical structure. The formal-logical structure of a legal rule This structure shows the internal parts of a legal rule and their aims. Thus, any legal rule, usually, has three parts or elements of structure, as follows: a) the hypothesis. It is the part of a legal rule that describes the circumstances when a certain behavior is requested. The hypothesis can be determined when the circumstances are very detailed or indefinite when the circumstances are generally provided. b) the provision or command. The command is the substance, the core of the legal rule. It prescribes what the person, the subject of law shall do under the circumstances provided for by the hypothesis. Taking into account how precise the behavior provided for by legal rule is, the command might be absolutely determined or relatively determined. The command is absolutely determined, for example, when legal rule refers to an action or to a non-action, such as: the merchants should be incorporated, the seller is obliged to warrant the buyer, the judge is forbidden to The command is relatively determined when legal rule allows the subject of the law to choose his own

behavior, such as: the owner may take any appropriate decisions. c) the sanction It is a part of a legal rule that specifies whose are the consequences in case of the non-observance of the rules command. It means that this part of the internal structure of a legal rule specifies the penalties the judge can take against those who do not comply with the rules command. According to the determination rank the penalty can be: - absolutely determined in this case the judge cannot modify it. For example the nullity of a contract; - relatively determined in this case, law provides for a minimum and a maximum limit of the penalty and the judge might choose the concrete penalty in accordance with the gravity degree of the fact, the perpetrator and his relapse into crime status. E.g. the fine is from 100.000 up to 5.000.000 lei, the penalty is prison from 2 up to 5 years; - alternative penalties in this case the judge might choose between 2 penalties, such as prison or criminal fine; - cumulated penalties in this case law provides for two or many penalties for a specific crime, such as prison and withdrawal of rights (e.g. loss of parental authority or loss of associate right). It should be mentioned that it is not necessary for a legal rule to have in the same article of law all these three parts together. Frequently, the hypothesis or the sanction of a legal rule can be included in another normative act, or in another article, but the legal rule cannot ever be deprived of its command. The technical-legal structure of a legal rule Legal rules are usually included into normative acts, the so-called laws, governmental decisions, ministry orders, and so on. Any normative act is divided into paragraphs, articles, sections, chapters, titles, parts or books. The main element of this structure is the article. As it was mentioned above, it is not necessary that all the three elements of structure of a legal rule belong to the same article. More frequently an article can include many legal rules or a legal rule may be included in many articles.

THE CLASSIFICATION OF THE LEGAL RULES

Due to the fact that a lot of legal rules apply within a specific moment in time and in a particular state, it is important to find out which are the main features of each category of legal provisions. Thus, different criteria are used to classify the legal rules, as follows: A) According to the object under settlement, there are as many legal rules as branches of law are. Thus, there are constitutional legal rules, administrative legal rules, civil legal rules, labor legal rules, etc. B) According to their juridical force, the legal rules form a hierarchic system similar to the hierarchy of

the state bodies which adopt them. Thus, in the top of this hierarchy there lie the state Constitution and other fundamental laws, further, there are ordinary laws and decrees and then decisions and government orders, and finally ministrys orders and instructions. This hierarchy has a great importance when there are, and usually this is the case, many legal rules adopted by different state bodies for the same field of social behavior. In this case, a well-known principle is used to solve any possible confusion: the legal rules endorsed by the superior state body have priority to apply. C) According to the behaviors character requested, the legal rules can be classified as imperative rules and disposal rules. 1) The imperative rules are those which require a specific action (imposed rules) and those which forbid a specific action (prohibitive rules). We emphasize that it is not possible to depart from imperative legal provisions and law forbids any contrary agreements as well as any restrictive interpretation. a) The imposed rules are those which expressly provide for the obligation to do something, e.g. the seller has two main obligations, to deliver the goods and to be responsible for it b) The prohibitive rules are those which forbid a specific action, e.g. the judge is forbidden to pass general provisions through his rulings. 2) The disposal rules are those which allow the subjects of law to choose their behavior. These rules can be : a) permissive rules which allow the subjects of law to choose from the options provided for that one which fits better to their interest, e.g. the landowner may build or till on his land anything he wants to. b) suppletive rules which allow the subjects of law to choose their behavior and if they do not, the provision of law applies, e.g. the agreements legally concluded have the force of law between the contracting parties D) According to the extend of their application, legal rules are general rules, special rules or exception rules. 1) The general rules apply either within the entire system of law or within one of its branch, as being the greatest comprehensive rules; 2) The special rules have a limited sphere of application, according to the specific criterion or the qualities of people. It should be noted that there is a close connection between general and special rules. Thus, sometimes a rule can be called general rule as compared to a second rule, or special rule as compared to a third one. This classification appears to be very important when two legal rules have equal vocation to apply. In this case, always the special rule has priority to apply. 3) The exception rules allow the subject of law or the judge to depart from a general or a special rule and thus their interpretation and application is very strict.

E) According to the technique used for their drawing up, the legal rules can be classified as follows: 1) Complete rules which have all the three elements of their formal-logical structure; 2) Reference rules which do not have all the elements of their formal-logical structure and for the missing parts they send to another normative act; 3) Blank rules which also do not have all the elements of their structure, but the missing elements will be completed in the future through another normative act.

THE INTERPRETATION OF LEGAL RULES

The interpretation of a legal rule is a logical and reasoning procedure to understand and to explain the content and the real sense of a legal rule. The interpretation is important in order to have an accurate application of the rule to a real situation. The interpretation is a minds work that allows us to understand through the words used by law the legislators spirit, his ideas and his aims. This is why the interpretation is a preliminary step for the application of law. The interpretations content deals with the human judgment to understand the legislators will. This will forms the core of the legal rule. The interpretations goal is to collect by frame a real situation to the legal provisions in force and thus to make a rightful application of law.

The interpretations necessity

Firstly, we should emphasize that because of the wide variety of real situations a legal rule, even if it is perfect, it cannot regard all of them. Secondly, when we compare a real situation with the provisions of a legal rule, the latter appears to be a static element versus a dynamic one. The real situation is the dynamic element of our analysis because specific cases come out in real life. That is why the legal rule cannot take into account all the actual and possible situations. Thirdly, because the legislator cannot describe in detail all the social situations, he frequently uses general terms to protect the persons rights and that is why the interpretation is more than necessary. Fourthly, the interpretation is necessary each time when between different normative acts or different prescriptions of the same law contradictions arise. Finally, the interpretation is always necessary because the words may have, from the legal point of view, other meanings than those of current speech.

The forms of interpretation

According to its juridical force the interpretation can be:

1. official interpretation; 2. non-official interpretation.

1. The official interpretation is given by the state organ, which has this ability under law. Actually, the Parliament, the government and the courts of law have this competence. The official interpretation, on the other hand, can be: A) legal or authentic interpretation. The legislative state body, which enacts the legal rule (parliament, government or ministries), gives this form of interpretation. It should be mentioned that the interpretation rule has the same juridical force as an imperative rule has; B) judicial interpretation. This is given by the judicial organs (courts of law, tribunals, courts of appeal or the Supreme Court of Justice) when they judge concrete cases. From the juridical point of view a judicial judgment (decision or verdict) is compulsory only between the litigations parties. Therefore, this kind of interpretation, the so-called casuistic interpretation, has compulsory power only in the concrete case stand for judgment. 2. Non-official interpretation. Persons who do not act as representatives of a state body give the official interpretation. As far as its legal force is concerned, this interpretation does not bind the judges, but may help them towards a unitary application of law. At the same time, the so-called lex ferenda proposals given through the nonofficial interpretation may support the improvement of law. According to the result obtained through interpretation, the interpretation can be: A) literal interpretation; B) extensive interpretation; C) restrictive interpretation.

A) The literal interpretation, the so-called interpretation to the letter of law, means that the content of law text and the practical issued solution are identical. B) The extensive interpretation, the so-called interpretation to the spirit of law, means that by comparing the content of a legal text and the practical issued solution, it appears that the legal rule covers much more cases than the legal text shows. We emphasize that this kind of interpretation cannot be used: - when laws text gives limitative enumeration;

- when laws text provides for exceptions; - when laws text establishes presumptions; C) The restrictive interpretation, the so-called interpretation to support law, means that comparing the content of the legal text to the practical issued solution, it appears that the legal text is more broadly formulated than the real intention of the legislator was. According to the methods used: With the view to its interpretation, law uses different means than other sciences. These means are the so-called methods of interpretation. The methods of interpretation are the following: 1) grammatical interpretation; 2) systematical interpretation; 3) historical interpretation; 4) logical interpretation. It should be noted that, as far as the result of interpretation is concerned, there are frequently used different methods of interpretation in connection to one another. There is not any hierarchy concerning these methods either.

1) The grammatical interpretation As we mentioned above, the legislator includes in a legal rule the state will, and thus the rules command has to be understood by the addressees, subjects of law. The rules command is expressed by words linked together in clauses and sentences. The words used to form the content of a legal rule should belong to common speech, should be well known by the addressees and should help them to understand the legislators will. That is why the legal rule has to be clear, accurate and precise. It also has to allow a simple and common understanding and to be written in a concise style, without ambiguities. But, very often, the text of a legal rule does not fit these requirements. Therefore, using the morphological and syntactical analysis, we can interpret the legal text according to grammar rules. The grammar interpretation takes into account the meaning of the words (the sentences morphology) as well as the content of the sentences and the syntactical position of the word (the sentences syntax). Thus: - the words are used with the common meaning they have in the usual speech because laws language should be the addressees language. It should be emphasized that the meaning of a specific word is the

dictionary meaning and not the ordinary, local meaning; - sometimes, the meaning of the word may be specific for the juridical field, even if the word is common, e.g.: to give, to pay, payment, movable, Thus, to give commonly means to hand over something, while from legal point of view it means to transmit a real right as the ownership right. In a similar way, to pay usually means to give an amount of money, while from legal point of view it means to execute an obligation (having as object either an amount of money or the handing over of goods); . - when it is necessary, law itself explains the meaning of specific words, such as : living place, floor space, legal person, etc. 2) The systematic interpretation According to this method, the interpretation of law has to take into consideration the existing connection between different legal rules or different normative acts referring to the same object under settlement. 3) The historical interpretation According to this method of interpretation, in order to understand the content of legal rules, the interpreter should analyze the concrete conditions which have been determined for the endorsement of law, such as: explanatory notes, the parliamentary debates within the Senate or the Deputies Chamber, etc. 4) The logical interpretation In order to explain the meaning of a legal rule, this method of interpretation uses the rules of formal logic and its system of reasons. The best known logical rules of interpretation are the following: a) the exception has a very strict interpretation. Theoretically, an exception rule applies only under a specific hypothesis it cannot be extended to other cases with different conditions. Using this rule, we can settle the relation between general and special laws. Thus, special law (lex specialis) is the exception, and general law (lex generalis) is the rule. Special law always derogates from general law, but general law cannot ever derogate from special law. For example: the creditors may exercise all the debtors rights or actions, except those which are exclusively personal, such as divorce, fatherhood, etc. b) nobody can limit the application of a legal rule because its general wording, ubi lex distinquit, nec distingeure debemus: It means that, a general wording implies a general application. c) a legal rule has to be interpreted in order to apply not to remove its application. It means that, the purpose of interpretation is to support the application of law. In other words, from the logical point of view, law was adopted in order to produce a juridical effect. If that effect cannot clearly occur, the

adoption of law is senseless. For example: when a contract clause has two meanings, it will be interpreted in order to have an effect, not in the sense it cannot have any effect. Another example: the future litigation between parties will be solved according to law it means that, no matter who is called to judge the trial (litigation), court of law or arbitration tribunal, it should solve the case according to the existing legal provisions. d) Besides these logical rules, in order to interpret legal rules, the logic interpretation uses logical arguments. The most frequently logical arguments are: 1) The argument per a contrario. This argument applies the rule of a third partys exclusion, meaning that A cannot be A and non-A at the same time. In this respect, the Latin said tertium non datur or qui dicit de uno, negat de altero, qui de uno negat de altero dicit. In other words, anytime when a specific command is provided for by the legal rule, the opposite command is denied. For example: it cannot depart from law of public regime towards contracts or specific agreements. Using the above-mentioned argument, it means, per a contrario, that we can depart from laws that are not related to public regime. Nevertheless, it should be mentioned that this argument has a relative value because the silence of the law is not always equal to the opposite command. 2) The argument a fortiori rationae. This argument is used in order to extend the application of a legal rule to an unknown case, which has similar conditions with the case provided for by the legal rule or belongs to the same category of cases. In this situation, in spite of the fact that there is no direct solution for the case under the application of a legal rule, the judge should take into consideration the spirit of law and not the laws words. 3) The argument a majori ad minus, or in other words, qui potest plus, potest minus. This argument means that those who can do more can do less. For example, the Constitution guarantees the fundamental citizens rights and thus, the labor rights are also guaranteed by Constitution. d) The argument of reductio ad absurdum. This argument is based on the fact that among the different meanings of a legal rule there should be used that one which suits better to the rules aim. For example, commercial law does not have compulsory provisions regarding the minimum amount of the register capital for some private companies as sleeping partnerships or general partnerships. That does not mean that this kind of companies do not have any capital requirements. Indeed, according to the provisions of commercial law, any company, no matter its form, must have a capital in order to fulfill its commercial activities. In this case, using the argument ad absurdum, we should understand that sleeping partnerships and general partnerships companies should have a certain capital, but its amount is not imposed by law and thus may vary according to the partners will and their financial possibilities.

The establishment of a legal rule

To settle a legal rule means to identify that legal provision which suits the above-established reality and to select that rule which should apply to the present case. The difficult process of framing a legal rule to a real situation is named juridical qualification. An application act based on an accurate judicial qualification is named legal act. This is why the legality is the second condition of the validity of an application act. As soon as the solidity and the legality of the act are pointed out, the application act will be issued according to the condition of shape and the content provided for by law. The conditions of shape and content of a legal act are studied by civil procedural law. The application act cannot be mixed up either with normative acts (which express the state will) or with acts (which express a private will). The application act must be the result of a logic and scientific process made by the judge. On the ground of the proofs presented to him, the judge has to make a correct application of those legal rules appropriate to the case and to issue a legal and justified solution (judgment).

The application of law

When we speak about the application of law we usually take into account three main factors which limit our judgment. These factors are: - a certain period of time when a particular law applies; - a certain territory where a particular law applies (because law is always national and there are as many different laws as states are); - certain persons to whom law addresses its commands. Grounded on all these three approaches, it is frequently included within the application of law the following topics: 1. the application of law in time; 2. the application of law in space; 3. the application of law to people

1.The application of law in time

As it was mentioned above, the living conditions within the society change every day, they are, not the same throughout the years. It appears that in order to have a correspondence between the state will and the societys reality, it is necessary to modify the legal rules according to these changes. Indeed, it is senseless to apply to day, in Romania, legal rules adopted hundreds years ago for regulating the relationships between the king and his subjects. And thus, the human behavior requested by state is different in time and the societys development implies new legal rules.

Nevertheless, nobody can say when, as a certain moment in time, a particular law has to be changed. Thus, law will be changed whenever it is necessary, because its legal provisions do not correspond any more to the societys development. We should also emphasize that at a particular moment, a plurality of laws may coexist in a certain space. For states bodies or private persons it is very important to know which laws apply at a particular moment, because the applicable law will be the measure of their behavior. From this point of view, the principle is very simple at each moment in time, law which is in force should be applied, but law is not in force forever. Thus, the issue here is to ascertain the period of time when law is in force. It means, to establish the moment when a law begins and ends its application. In the respect of its application, law applies from the moment it enters into force until it no longer applies (it ends its application, no matter in what way). It should be also emphasized that there can be a difference, in time, between the moment when law is adopted and the moment it enters into force. These moments are frequently not the same, as it will be explained further. a) The laws entering into force According to the provisions of Romanian Constitution, law can enter into force only after the President of Romania enforced it. The enforcement of law is the last stage of the so-called decision-making process. This process begins when the legislative draft of law, prepared by the ministers or other states bodies or political parties is forwarded to the Parliament in order to be adopted. At the Parliament level, the draft is discussed and approved, first of all, by the specialized commissions of the Parliament, according to the laws field. Secondly, the draft is subject to the Chambers (Deputies Chamber and Senate) discussions. At this moment, the draft may be amended and goes back to the specialized commissions for a new approval or may be approved by each Chamber. If the form of the draft approved by each Chamber has the same content, law is sent to the President for enforcement. The President may enforce it or may reject it. In this latter case, law is sent back to the Chambers for further discussions. In fact, the enforcement of law means that the President signs the draft of law as it was approved by Chambers and orders its publication. Thus, theoretically, law enters into force on the date of its publication in the Official Monitor of Romania (the Official Monitor of Romania is the only means of legal publicity in Romania) or on a further date expressly mentioned within the content of law.

b) The end of the application of law The application of law usually ends towards its abrogation (or repeal). We may have different kinds of abrogation, but the result is always the same: law ends its application. Firstly, according to the way the abrogation occurs, it can be express or implicit (tacit) abrogation. The abrogation is express when new law expressly specifies that the application of a specific law comes to an end. The express abrogation, on the other hand, can be either direct or indirect. The direct express abrogation occurs when new law mentions which laws or the articles of a particular law are repealed (abrogated). The indirect express abrogation occurs when new law specifies that all legal rules contrary to that new law are repealed. The implicit abrogation occurs whenever a new law, without mentioning what old law is abrogated, has incompatible provisions with the latter. Secondly, taking into account its extend, the abrogation is total or partial.

2.The application of law in space

Speaking about where law has to apply, we should remember that a special state body empowered with this task always adopts law. Thus, the legislative power of the state delegated to different state bodies express the state sovereign right to impose certain rules of behavior. But, because each state has its own national sovereignty, and has to observe the sovereignty of other states, its laws cannot apply beyond its national territory. Usually, the application of law in space is governed by the principle of territoriality. By the idiom territory of the state we understand the area of lands and waters contained between the borders of the state including the afferent air space, as well as the continental plateau of the sea and the territorial sea (12 miles). .

3.The application of law to people

As it was mentioned above, the beneficiaries of legal rules are natural or legal persons. It means that law applies equally to all persons regardless their sex, nationality or race. In other words, it means that people are equal in front of law. However, that does not mean that law applies in the same way and with same limits to all persons. From this pointy of view, there are laws with general application (such as Constitution or civil code) and laws which apply only to specific persons (Law no.31l1990 republished, regarding commercial companies). In addition, we emphasize that the application of law is always national because, as it was mentioned above, law applies only on the national territory.

Business Law_course 2_Legal Relation

OCT - 13 - 2013

LEGAL RELATION
2.1.Definition The legal relation is a social relation, patrimonial or not, regulated by law.

2.2. Elements of legal relation 1) the object of the legal relation the behavior of the parties 2) the content of legal relation the ensemble of rights and obligations 3) the subjects of legal relation the legal and natural persons

2.3. Object of Legal Relation 1) Classification of goods The classification of goods has more a practical importance than a theoretical one because it determines the legal regime that applies to different categories of goods. 1. Following the regime of legal circulation, there are goods in civil circuit and off civil circuit. a). There are goods in civil circuit all the goods that can be object of civil juridical acts. It means that there can be alienated or obtained through civil acts. In this respect we can say that all the goods are in civil circuit if law does not expressly forbid their free circulation. Thus, as a rule, all the goods are in civil circuit and law must expressly provide the exceptions. The goods in the civil circuit are divided in two categories: a.1) goods in free circulation. Such goods can be object of any contract with no restrain; a.2) goods with a restrictive circulation which are subject to a special legal security reasons, such as: guns, ammunition, flammable materials. regime due to public

b). The goods off the civil circuit are those which cannot be object of civil juridical acts. Indeed, the goods belonging to public domain are usually out of the civil circuit. Thus, according to Art. 5 from Romanian Constitution the goods from the public property are inalienable. In addition, Art.5 para.2

from Law no.18/1991 stipulates that the lands belonging to public domain are off the circuit if law does not provide otherwise. The property right on them is indefeasible. 2. Based on the nature and qualification made by law, the goods are movable and immovable. Civil code expressly stipulates that The goods are movable or immovable. This characterization is based on a social and economic value criterion. Movable goods are classified as follows: a.l) The goods movable by their nature are those which can be transported from one place to another, either those that are moving themselves, such as animals or those that can be moved with the help of a foreign force, such as inanimate things. a.2) The goods movable established by law are those considered movable based on the object they apply to. In other words, they are incorporated in the object. . There are movable goods established by law the bonds and the shares that have as object due amount of money or movable goods. Similar, the shares and interests in financial, trade or industrial companies are movable goods even if their registered capital is made up of immovable goods. The shares and the interests are considered movable goods only in the respect of each shareholder or the partner and during the time of association. There are also considered movable goods the perpetual and lifetime revenues on the state or on the private persons. Moreover, law considers movable goods: real rights except the ownership right that have as object movable goods (such as the usufruct right, the use right or the pledge right); debt rights that have as object movable goods and the obligation to do or not to do; shares and other social contributions to the registered capital of a company; the right of industrial property (such as the inventors right, the innovation right, the right to have a firm or a trademark, etc.). a.3) Goods movable by anticipation to Art.540 This category includes certain immovable goods by their nature, but which are considered by the parties of a legal act as movable by anticipation because they will become movable in the near future. For example, there are considered movable goods by anticipation: harvests and fruits which are not picked up yet, bushes attached on roots; materials coming from demolition of a construction; non-extracted products of a quarry (stone, marble). It should be emphasized that, the above mentioned goods, have this movable character only through the will of the contracting parties who consider them as such. Indeed, for third parties these goods are immovable but will become movable by separating them from the background (cutting, picking, demolition). b) Immovable goods Immovable goods are those which cannot be transported either by their own energy or by a foreign

energy. If we take into account the fact that the earth is moving all the time, nothing is immovable. Immovable goods are classified into: b.1) Immovable goods by their nature. According to 537 civil code lands and constructions are immovable by their nature. It is usually admitted that the expression construction refers to all constructions or works built on the ground or underground such as warehouses, bridges, tunnels, channels, brake water, etc.. At the same time, we emphasize that all the parts of a construction are considered immovable by their nature through their incorporation in the building or by their destination, such as the windows, the doors, the installations, etc.. The legal provisions mentioned above also stipulate that the windmills or the watermills situated on pillars, uncut trees, harvest attached on roots, non-picked up fruits, vegetation stuck to the ground are immovable goods by their nature. b.2) Immovable goods through the object they apply to. There are immovable goods through the object they apply to the usufruct right of the immovable goods, the servitude right, lawsuits for recovery of property. By interpreting these legal provisions we emphasize that there are included into this category all the rights having as object immovable goods. Thus: - real rights excepting the ownership right (the ownership right is immovable by its nature because the right is confused with the thing); - debt rights regarding immovable goods which correspond to the obligation to give; - actions regarding the evaluation of the real estate rights, such as action of recovery of property, or petitory action of usufruct, or mortgage action and the action for claiming a servitude; - actions regarding the nullity of alienation of a building; the resolution of selling a building; cancellation of a donation of building; the reduction of a donation of building. b.3) Goods immovable by destination. This category is provided by Art.538 It includes some movable goods by their nature but which can be considered immovable because they are designated as annexes for the service or exploitation of that building. In order to qualify goods as immovable by destination two conditions should be cumulated observed: 1) both goods (the building by its nature and the movable goods) should belong to the same owner at the moment the destination is established; 2) those two goods should have the same destination, it means that the movable goods follow the same juridical position as the immovable goods have. It is the so-called accessory relationship, accesorium seguitur principalem. This relationship can be established either when the movable goods are affected

for the exploitation or service of the principal (immovable) goods or when it is materially or artificially attached to the immovable goods. There are immovable by destination: - goods used in agricultural operations, such as: animals used for harvesting, different instruments, seeds, animals dependent to the buildings as rabbits, fishes, water channels; - goods used in industrial operations, such as: tables, furniture, machines; - movable goods attached forever to the owner, such as: movable in cement or movable that cannot be removed without damaging them (mirrors, pictures, statutes) etc. This classification is important from the legal point of view because each of these categories of goods (movable and immovable) has a different legal regime. Thus: - the ownership right on real estate is submitted to special publicity which has as purpose to achieve the opposability of this juridical operation towards the third parties; - the alienation of real estate is strongly regulated (taxes, authentically act, registration in a special register, etc.); - the immovable goods can be mortgaged and the movables goods can only be pledged (with some exceptions: ships, aircrafts); - a real estate can be acquired through acquisitive prescription (possession), while the possession in good faith of movable goods is equal to their property right (Art. 928 Civil. code); - the place where the real estate is located determines the judicial court which has the competence to judge the lawsuits having as object that real estate (actor seguitur forum rei sitae). In case of movable goods, the judicial instance legal competent is that of the place of defendant (actor segiutur forum rei); - according to private international law, law of place where the real estate is located applies to immovable goods (lex rei sitae) while law of the owner of the goods applies to movable goods (lex personalis that can be lex patriae or lex domicilii). 3. According to the way used to determine them there are goods individually established (res ceria) and generally established (res genera). a) there are goods individually established, those which by their nature or by the will of the parties are individualized by specific features and characteristics (a certain car, a certain house, a certain watch, as well as all unique things). b) there are goods generally determined, those individualized by features corresponding to a class or category they belong to. These goods can be counted, weighed or sized, such as a certain quantity of

wheat, cement, apples. This classification is important for the following reasons: - the moment when the real right is transferred is different. Thus, in case of individually established goods, the real right is transferred at the very moment when the agreement of the parties was achieved, even if the goods were not transferred yet or the parties did not agree otherwise. In case of generally established goods, the real right is transferred at the moment when the goods was individualized or handed over. - the risk of the contract is differently supported. Thus, if individual established goods accidentally vanished before there were handed over, the debtor is exempted to hand them over. But, if the vanished goods are generally established, the debtor is bound to hand over other goods from the same category. - the place of delivery is different. Thus, the individual established goods must be delivered at the place where they were at the moment the contract was concluded, if the parties did not agree otherwise. In case of generally established goods, the delivery takes place at the debtors domicile because the debt is not payable at the address of payee. 4. According to the fact that the goods can be substituted or not where the payment of the civil obligation is concerned, goods are fungible and non-fungible. . a) Fungible goods are those which can be substituted for each other within the payment of a debt. b) Non-fungible goods are those which cannot be substituted for each other and therefore the debtor is not exempted from his obligation if he delivers another good. It should be mentioned that, the fungible character is determined either by the fact that the goods are generally established or by the will of the parties. Usually, the generally established goods can be always substituted for each other, while individual established goods cannot. This classification is important within the payment of the civil obligations. Thus, the debtor is exempted only if he delivers. to the creditor goods of the same good, but the debtor makes a valid payment only if he gives the exact individual established goods agreed upon. 5. After their quality to produce or not fruits the goods are classified into producing and non-producing goods. a) the producing goods are those which periodically produce other goods, the so-called fruits without consuming their substance; b) the non-producing goods are those which do not have the quality to produce other goods.

According to Art.548 Civil code there are three types of fruits: natural, industrial and civil fruits. - natural fruits are those produced by the ground itself (berry fruits, grass-land) as well animal breed (according to Art.548 par. 1 Civil code); - industrial fruits are those obtained by culture or by mans activity(Art.548 par. 2 Civil code);

- civil fruits are: the rent, the interest of due amounts, the profits from rent or lease (Art.548 par. 3 Civil code). It should be mentioned that the fruits are not to be confused with products. The products are the benefits extracted from goods that consume their substance (marble, stone or sand from the quarries) Art.549 Civil code. This classification is important because it explains in what way these fruits are obtained. Thus, natural and industrial fruits are obtained by picking them up, while civil fruits are obtained daily. The difference between fruits and products is important from the usufruct and possession points of view, as follows: - the one using the good is entitled only to the fruits and not to the products that belong to the owner of the goods; - the possession in good faith leads only to ownership right of the fruits but not of the products. 6. As far as the use of the goods implies or not their consumption, there are consumable goods or non-consumable goods. a) Consumable goods are those which consume their substance by use or are alienated at their first use. b) Non-consumable goods can be repeatedly used, without consuming their substance by use or alienation. From the legal point of view, the term consumption means not only material consumption but legal consumption as well (such as alienation or erasing from the patrimony). It should be mentioned that some goods are consumable by their nature such as the fuel or money. The other goods are not consumable by their nature, such as lands, buildings, and equipment. This classification is important for loan and usufruct. Thus, consumable goods can be only the object of the consumption loan contract (mutuum), while non-consumable goods are object of loan contract If the object of the usufruct is non-consumable goods, the one using the good must return to the owner the same goods and, at the same time, he is obliged to preserve their substance. 7. As far as the goods can be divided without changing their economic substance there are divisible and non-divisible goods:

a) Divisible goods are those that can be divided without changing their economic destination; b) Non-divisible goods are those that cannot be divided without changing their economic destination. The legal importance of this classification is reflected within civil obligations and conventional or judicial partition, thus: - conventional or judicial partition applies to in case of common property (in fact, to co-ownership and joint property). If the goods is not divisible, it is given either to one of the owners and the others are entitle to an additional payment in order to equalize their shares or it is sell in auction and the price is divided afterwards; - in case non-divisible goods are object of an obligation relationship with more subjects of law (passive pluralism), it determines a natural co-ownership. 8. After their perception, the goods are tangible and intangible. a) Tangible goods have a material existence and can be touched using human senses. It should be mentioned that most of the things are generally tangible goods. b) Intangible goods have an abstract, ideal existence and cannot be touched with our senses. This is the case of all the rights provided for by law, such as real rights, debt rights or authors rights. In fact, this classification makes the distinction between rights and goods, not between goods. At the same time, we emphasize that tangible goods participate within real life only through the rights which are exercised on them. This is why, it is usually considered that the goods absorb rights (we do not say I am selling the ownership right over a car but I am selling the car, even if in reality all the legal prerogatives are alienated together with the car). This classification is important because it reefers to the acquirement of the ownership title. Thus: - only the tangible movable goods can be acquired through possession in good faith or by simple delivery or hand over; - securities can be transferred in different ways depending on their form. Indeed, the bearer bonds are transferred by handing or delivery, while registered shares are transferred by cession. Also, the bills payable to order are transferred by endorsement. 9. Following the correlation between goods, there are principal goods and auxiliary goods. a) principal goods are those that can be use independently; b) auxiliary goods are those goods which help the use of principal goods. Thus, by their destination these goods are attached to principal goods and support their use, such as the immovable by destination are or the TV antenna.

The classification is important in case of the achievement of civil obligations. Thus, according to the rule accesorium sequitur principalem, the debtor must pay for the principal goods together with the auxiliary ones, unless law stipulates otherwise. 2.4. Content of Legal Relation 1) Classification of Rights Absolute and relative rights a) The absolute right is that subjective civil right according to which the established owner has the possibility to exercise it alone and all the other persons have the general and negative obligation not to do something that could jeopardize the owners right. The absolute right has the following specific features: - the juridical relationship that contains an absolute right is established between its owner, as definite active subject and all the other persons as passive subjects; - the content of the indefinite passive subjects obligation is always the same: not to do something that could jeopardize the owner of exercising his prerogatives; - the absolute rights are opposable to all persons, erga omnes. It means that everybody is bound to observe the prerogatives held by the owners of these rights. In this category there are enclosed the personal and non-patrimonial real rights (the right to have a name, etc.) and patrimonial real rights such as the ownership right and its dismemberments (use, usufruct, servitude, and so on). b) The relative right is that subjective right according to which the definite active subject (creditor) has the possibility to pretend from the definite passive subject (debtor) to give, to do or not to do something for him. The relative rights have the following specific features: - both the active and the passive subjects are determined from the beginning of the juridical relationship; - the obligation of the passive subject consists of his duty to give, to do or not to do something. Thus, the content of the obligation is not always the same, it consists either an action or an abstention; - this right is opposable only versus a definite person (erga certam personam). We emphasize that in case of debt rights, the content of the passive definite subjects obligation is to give, to do or not to do something. When the passive subjects obligation is negative (not to do) its content is different from one juridical relationship to another. Thus, by not to do, the person abstains from doing an action that is not forbidden by law, but the debtor himself, through his own will has limited his own right. For example, the offer to sell a good to a person at an established date obliges the offer or not to sell to another person until the deadline, otherwise law does not forbid him to sell the

good to whom he wants to.

Patrimonial rights and personal, non-patrimonial rights

a) The patrimonial right is the subjective right that has an economic content or in other words which can be estimated in money. b) The personal, non-patrimonial right is the subjective right that has no economic content. In other words, it cannot be estimated in money and it is connected to the person. Therefore it is used to individualize the person. These rights individualize the person within the society or his family or refer to the non-patrimonial aspects of the intellectual creation rights. Patrimonial rights (that together with their corresponding obligations form the patrimony of the persons) are classified into real and debt rights as follows: a.1) real rights (jus in re). There are those subjective rights according to which their owners can directly exercise their attributes towards a thing/goods without the intervention of another person; a.2) debt rights (jus in personam). There are those subjective rights according to which the active subject (creditor) can pretend to the definite passive subject (debtor) to give, to do or not to do something. There are some differences between real and debt rights, as following: - in case of real rights, only the active subject is definite, while in case of debt rights both subjects are determined; - in case of real rights, the content of the obligation is always not to do, while in case of debt right is to give, to do or not to do something; - real rights are limited in number and are expressly stipulated by law, while debt rights are unlimited; - the real right owner exercises his prerogatives alone, while the debt right owner needs the action or non-action of the others (to give, to do, not to do); - real rights are absolute rights, opposable erga omnes, while debt rights are relative rights, opposable erga ceria personam; - real rights can only have as object sure things (res ceria), while debt rights can have as object either sure things or general established goods (res genera). For example, the obligation to sell 10 tones of cement; - the owner of a real right has in addition of his prerogatives the right of pursuit and the right of preference. The right of pursuit consists in the possibility recognized by law to the owner of the real right to pretend the goods, wherever there are. So, if the owner of a mortgaged apartment sold it before the payment of the debt warranted with the mortgage, the creditor can follow the apartment wherever it is, because that apartment could not be

sold unless the debt is paid. The right of preference consists in the possibility recognized by law to the owner of a real right to be satisfied with priority in front of other owners who have obtained their rights later. The same right of preference applies versus the owners of debt rights without warranties (the so-called simple creditors). Thus, the owners of a real right will be paid according to the order of the date of their rights. In the same way, the owner of a debt right warranted with pledge can ask for his debt to be, paid before the creditors that have not the right of pledge; - from the procedure point of view, in case of real rights, the lawsuit is instituted before the court where the goods are located, according to the rule actor seguitur forum rei site. The action is the so-called real action because through it only the goods are followed, while the person is taken into account only in relation with the non-observance of his real right. In case of debt rights the lawsuit is instituted before the court competent according to the headquarters of the debtor, following the rule actor seguitor rei. At their turn, the real rights can be classified into principal and accessory real rights. Thus: a.1.1) Principal real rights have a self-existence and are established by civil code and other normative acts. The following are considered principal real rights: - the right of public property that belongs either to the state (public domain of national interest), or to the administrative territorial unit of the county, the city (public domain of local interest) as legal persons of public law; the regime applicable to this ownership right is legal regime of public law and the goods belonging to the public domain are out of civil circuit; - the right of private property, having as owners natural and legal persons (with state or mixed capital, or cooperatives) including the state private domain having as owners the State and the administrative territorial units in which they are acting as legal persons under private law; - the dismemberments of private ownership right, such as : usufruct right, right of occupancy, right of servitude. a.1.2) Accessory real rights are those which cannot exist alone. Their lends on other rights that they guaranty. There are accessory real rights: pledge or pawn right; mortgage right and privileges. The latter can be general privilege on all the debtors goods or general privilege on entire movable goods or special privilege on real estate.

Pure and simple rights and rights affected by modalities

Pure and simple right is that created within a juridical relationship in its most simple form. It supposes a creditor, a debtor and a single object. This right produces its effects immediately, giving to the owner full power. Therefore the debt is due from the moment the contract is concluded.

Rights affected by modalities the time and condition produce specific effects. 2.5. Subjects of Legal Relation A. The Legal Capacity of Natural Person The legal capacity can be defined as being the natural persons abstract and general ability to have rights and obligations and to exercise their rights or to assume their obligations by concluding juridical acts on their own name. We emphasize that each person has his own legal capacity and has only one. Moreover, law can only state who has legal capacity and when, as well as in what conditions a person loses his legal capacity. In other words, the legal rules regarding the legal capacity of persons are imperative provisions and thus, they should have a very restrictive interpretation and application. The legal capacity deals with two issues: 1) the abstract capacity or the persons ability to have rights and obligations; 2) the concrete capacity or the persons capacity to exercise the above rights or to assume their obligations by concluding on their own name juridical acts. We emphasize that, all natural persons have the legal capacity under law, but the moment when it is granted to them is different for each part of this capacity. Thus, the abstract capacity is granted under law to each human being from the moment of his birth, or, by exemption, from the moment of conception. But, in this latter case, the person can get only rights. Furthermore, the way of the correlative obligations is suspended till the moment of the birth when the legal representative of the child (parent or tutor) can assume the obligations. The abstract capacity ends when the natural person dies, no matter the ways this event occurs. The abstract capacity also ends by a final judicial conclusion of death or disappearance announcement. . The concrete capacity is granted, according to Romanian law, at the age of 18. At this age it is presupposed that the human being has the capacity to understand his actions and to decide what to do. In other words, at the age of 18 the person is considered under law to be mature and therefore gains his full concrete capacity. The underage persons (persons under age of 14), the non compos mentis (weakly/mental handicap) persons and the people under judicial guardianship have not at all concrete capacity. Law divides the so-called restrained capacity, the period between 14 and 18 years old, in two intervals: the first between 14 to 16, and the second between 16 and 18. During the first interval of their restrained capacity the persons can conclude some juridical acts (e.g. will, employment contract) on their own name. Sometimes, as it is the case of the employment contract, they need a preliminary consent of their legal

representatives (parents or tutor). According to the provisions of civil code, an underage person can dispose through will for half of his fortune. Also, a girl can marry at the age of 15 with the preliminary consent of her legal representative, but a boy cannot. Through marriage, the girl obtains the full concrete capacity because it is possible that she becomes a legal representative for her future child. B. The Legal Capacity of a Legal Person The abstract capacity of legal persons The abstract capacity of a legal person means its general and abstract ability to have rights and obligations. Nevertheless, no matter which branch of law is involved (commercial, civil, administrative, financial, etc.) a legal person is a subject of law. Thus, all the rights and obligations which may occur from these different branches of law will form the content of the legal persons abstract capacity. Indeed, as a subject of law, the legal person has only one legal capacity and each legal person has its own legal capacity. In other words, the legal capacity of a legal person is unique, as it is for the natural person too. But, in fact, unlike the abstract capacity of a natural person, the general and abstract ability of a legal person to have rights and obligations is limited. The abstract capacity of a legal person has the following juridical features: 1) it is legal meaning that it is stipulated by law and nobody can extend or limit its content; 2) it is general meaning that the rights and the obligations which form the content of the abstract capacity are not exactly provided for by law for each legal person. Thus, the limits of the abstract capacity result from the legal persons object of activity; 3) it is inalienable meaning that the abstract capacity cannot be alienated or yielded either in total or in part by juridical acts. Moreover, any act of renunciation or alienation regarding the abstract capacity of a legal person is absolutely void (null). This sanction occurs because a renunciation act has as juridical effects the cessation of the legal person and that may happen only through the ways provided for by law (e.g. the merger, the division or the dissolution); 4) it is intangible meaning that it can be limited only by law and these limits depend on the object of activity of the legal person. These limits also express the principle of specialization; 5) it is special the specialization of the abstract capacity is that character which departs the abstract capacity of a legal person from the abstract capacity of a natural person. Thus, the content of the abstract capacity of a natural person is the same for all natural persons and for each of them, but for a legal person, the content of its abstract capacity is different according to the goal for which each legal person has been set up. The beginning of the abstract capacity of legal person

Taking into account the fact that the legal person is submitted or not to registration, its abstract capacity begins at different moments. Legal persons are submitted to incorporation or registration, if the applicable laws provide for the incorporation or registration. Thus: 1) No matter the way of setting up used, the legal persons submitted to registration obtain their abstract capacity on the date of their registration; 2) The legal persons which are not submitted to registration obtain their legal capacity according to the way used to set them up. In fact this moment can be the date of the order of the state organ I competent to set them up; the date of the recognition act; the date of the authorization act or the date when any other legal requirements have been fulfilled. 3) Other legal persons obtain their capacity to have rights and obligations on the date of the order of the state organ competent to set them up, on the date of the recognition or authorization act. Finally, there are legal persons that obtain their abstract legal capacity and are valid set up on the date when other legal requirements have been fulfilled. We should emphasize that the date of registration or the dates of the other acts which have to be observed for a valid setting up (act of recognition, act of authorization, or other legal requirements) have a constitutive effect. It means that these dates mark the moment when the full abstract capacity begins. This moment is considered as follows: 4) the date of their incorporation in the Register of trade for: - the commercial companies (according to Art.20 from Law no.26/1990) - the States Companies (according to Art.20 from Law no.26/1990); - the crafts-mens co-operative organizations (according to Art.20 from Law no.26/1990 and Art. 10 from the Decree-Law no.66/1990) ; - the consumers and credits co-operative organizations (according to Art.20 from Law no.26/1990 and Art.8 from Decree-Law no.67/1990). 5) the date of the authorization act for the political parties and public organizations. It should be mentioned that according to Art.4 from Decree-Law no.8/1989 and Art.19 from Law no.54/1991, the date of the authorization act is the date when the judicial conclusion of the admission to the registration of a political party or a public organization became final (irrevocable); 6) the date when the Government recognized the setting up of the Chambers of Commerce and Industry. The end of the abstract capacity of legal person The end of the abstract capacity of a legal person concerns the anticipated abstract capacity as well as

the full abstract capacity. Thus, the anticipated abstract capacity ends when the full capacity is obtained and this moment usually coincides with the moment when legal personality is granted to a legal person. Further, the full abstract capacity ends when the subject of law (the legal person) ceases. It means that without its full abstract capacity a legal person cannot exist. Therefore, when a legal person begins the clearing off process, its full abstract capacity still has to exist but it is restricted. In other words, the legal person can no longer carry on its business but it still has rights and obligations with the view to accomplishing the clearing off process. Also, from the date when the dissolution has decided and until the legal person is erasure from the register (either register of trade or other kind of special register), it can unfold its activities but only in order to achieve its patrimonial. rights and to pay its debts. This restricted abstract capacity ends on the date when the legal person is erased from the register where it was incorporated. We emphasize that, when a juridical act was concluded without the legal rules regarding the abstract capacity of a legal person having been observed, the act is void, it is annulled. This sanction, the absolute nullity of the act, occurs either if the legal person did not have its full abstract capacity to conclude the act, or the principle .of specialization was infringed. The concrete capacity of legal persons The concrete capacity of a legal person is defined as being the abstract and general ability of a legal person to obtain and to exercise subjective civil rights and to assume and to fulfill civil obligations, by concluding on its own name civil juridical acts through its organs. The common legal rules regarding the concrete legal capacity of a legal person are the following: - the legal person exercises its rights and fulfills its obligations through its management organs; - the juridical acts concluded by the organs of the legal person within the limits of the powers conferred to them, are the acts of the legal person itself; - the lawful or unlawful facts committed by the organs of a legal person within the exercise of their functions obliged the legal person itself; the natural person acting on behalf of a legal person is personally ~ responsible before it and before the third party as well if they commit an unlawful fact; - the relationships between the legal person and those who form its organs are submitted to the mandates rules if law, the setting up deed or the statute does not provide for otherwise. From these legal provisions we should understand that, as an abstract legal construction, a legal person expresses its will through its management organs. Between the legal person and its management organs there is the so-called legal representation. It means that the director, the general manager, or the president represents the legal person within the relationships with third parties. This kind of representation is not the same with that settled by civil code. In fact, this representation is only similar due to the fact that it does not represent a real mandate.

Sometimes, the management organs of a legal person can mandate a natural person, such as its legal advisor, to represent it in front of the court of law, or within other relationships with third parties. In this case, without any doubts there is a contractual representation. As far as the management organs are concerned, they can have either unipersonal form, such as the minister, the president, the director or the rector, or a collective form, such as council, committee, board of directors, etc. No matter the form of the management organs is, according to their competencies, they exercise the rights and assume the obligations of the legal person by participating within juridical relationships. . The beginning of the concrete capacity of legal person Due to the absence of legal provisions, the juridical doctrine has expressed several opinions regarding this issue. Thus: it is considered that the legal person obtains its concrete capacity at the same time with its abstract capacity, or on the date when its management organs are appointed. The common opinion is that the legal person obtains its concrete capacity on the date of its setting up. This moment, as it was mentioned above, can be even before its incorporation or registration, or before the recognition/authorization act has been issued or other legal requirements have been fulfilled. Therefore, besides the anticipated abstract capacity, the legal person has an anticipated concrete capacity from the moment of its setting up and with the view to its valid setting up. The end of the concrete capacity The concrete capacity of a legal person ends when the existence of the legal person ends. It can also end in case the legal person is reorganized. It means that the legal person is subject of a fusion or of a merger by absorption or of a total division.

Business Law_Course 3_The Subjects of Business Law

OCT - 20 - 2013

The Professionals
Legal basis: art. 3 Civil code : 1) The provisions of the Code apply to both relations between professional and those between professionals and other subjects of civil law 2) Are considered professionals all those managing an enterprise. The new civil code has erased the term merchant and it has introduced a new one: professional which includes all persons licensed to perform economic activities. Art. 8 from law no. 71/2011 (the law issued for the entering into force of the Civil code) stipulates the

professional includes all types of merchants, enterprises, commercial agents and any other persons authorized to exercise economic or professional activities. The new Civil code presents the professional as the one managing an enterprise, the activity of this enterprise being an systematic exercise for producing, administrating or selling goods, services.

Classification of professionals
For the moment, the doctrine hasnt presented a clear classification of professionals, but, the provisions of the Civil code and the law no 71/2011 help us issue one: a) Merchants: commercial companies, individual merchants, co-operative organizations, economic interests groups, state institutions, etc b) c) d) Liberal professions: attorneys, doctors, Foundations, Associations, Unions Public institutions

Conditions:
a)The legal capacity Can be defined as being the natural persons abstract and general ability to have rights and obligations and to exercise their rights and to assume their obligations by concluding juridical acts on their own name. The legal capacity deals with two issues: a) The abstract capacity the persons ability to have rights and obligations (granted to each human being from the moment of birth or, by exception, from the moment of his conception) b) The concrete capacity the persons capacity to exercise their rights or to assume their obligations by concluding on their own name juridical acts (granted at the age of 18 years old and a restrained capacity from 14 or 16 years old)

Incapacities
Do not have legal capacity: - underage persons Full capacity from 18 years old and special cases: a) married person after 16 years old (art. 39 Civil code)

b) c)

by court decision (art. 40 Civil code) member of family enterprise (art. 8 oug 44/2008)

Incompatibilities
The business law activity is incompatible, because its speculative character, with certain positions and professions like: deputies, senators, public persecutors, judges, officers, public servants / attorneys, doctors;

Declines
The business legal system has to respect the legal provisions regarding the public order. According to Law nr.12/1990, Criminal Code, Law nr.26/1990 and Law nr. 31/1990, a person who was convicted of a criminal act incompatible with the commercial activity (like: theft; taking/offering bribe), cannot be a merchant.

Interdictions
In order to protect general interests, economical, social or moral ones, some activities cannot be done by private persons, but only by the state (for example: fabrication and commercialization of guns, drugs, narcotics with other purpose than medicine)

Interdictions (legal or conventional)

Are due to legal interdictions or the parties will - Legal incapacities related to public monopoly domains (e.g. mine exploitation) or to public order requests (existence of a labor permit e.g. foreigners) Conventional incapacities (general/special):

- continuation of trade in case of selling the stock trade (good will) - exclusive distributor - franchisee position b) Name and risk Name = firm (according to Law no.26/1990) Exception = permanent commercial agent is merchant according to art.1 par.5 Law no.509/2002. Permanent commercial agent is a natural or legal person who acts as independent intermediary and is entitled constantly

- to negotiate business for other natural or legal person to conclude business operations on the name and on behalf of the principal

Note: It carries on its intermediation acts as principal or accessory acts in exchange of a remuneration => he carries on trade activity as a profession Auxiliary of trade are not merchants (perform commercial acts/facts on the name of their employer): pre-posed agent (prepus) shop vendor (vnztor) delegate commercial traveler (comis-voiajor) Risk = unlimited liability => debtor of all its commercial obligations > commercial creditors (as simple creditors) have as warranty the merchants entire present or future fortune (patrimony) The merchant has to reduce the risk which is objective => clauses for modification /adaptation of parties obligations c) Profitability of the activity Finis mercatorum est lucrum = the activity has to be completed with a certain gain necessary to cover the needs of his own existence and of his family, the activity has a speculative character => non-profit activities are excluded Important is the intention to obtain profit and not the obtainment itself It has no relevance if the activity is his only source of revenue or not d) merchants authorization and registration The authorization and registration in Register of Trade is imposed by art.1 of law 26/1990 for: individual merchants, individual enterprises, family enterprises, commercial companies; cooperative organizations; cooperative companies state companies and national companies economic interest groups

european companies european cooperative companies european interest groups Authorization is an administrative act issued by the Register of Trade Professional knowledge or practice can be proved with the following documents: college or university diploma or certificate of graduation, certificate of professional competences, labor book that proves at least 2 years of work within the activity for which the authorization is requested. Art.1 para.1 of Law no.26/1990 modified and republished and art.16 of Law no 300/2004: the merchants have the obligation to request the registration within the Register of Trade, before the beginning of their activity or during it, or at the end of it, and to request the registration within the same register of all mentions regarding acts or facts that are submitted to registration by law

The professional obligations of merchants

These professional obligations of merchants are provided by the law in order to protect the public interests, as well as the interests of third parties and merchants themselves. Thus, the merchants are obliged to accomplish certain formalities of publicity within the Register of Trade, to keep specific books and to organize and manage their own accounting activity. 1. The obligation to keep specific books It is provided by the Commercial Code, articles 22-24 and the Law no. 82/1991 on the accounting system, republished, amended and completed. Thus, the merchant is bound to keep the following books: - Journal ledger, where all economical and juridical operations of the merchant are recorded daily; - Inventory ledger, where all movable and immovable goods of the merchant are recorded, on the basis of a yearly inventory. - General ledger, which serves as a summary of the journal ledger. 2. The obligation to organize and manage his own accounting activity which refers mainly to the yearly financial statements, accounting books, inventories and so on. 3. The obligation of registration within the Register of Trade The publicity within the Register of Trade is regulated by Law no. 26/1990 republished. Thus, before starting their business, the merchants are bound to ask for the incorporation in the Register of Trade. During the performance of their commercial activities, the merchants are also obliged

to ask for the registration in the same register of certain mentions concerning acts and facts that are subject to publicity, as follows: - juridical acts such as sale, donation concerning the goodwill; - any act certifying changes to the records in the Register of Trade; - information concerning the legal representative of the merchant; - patents, trade marks, firm, emblem and other distinctive signs upon which the merchant has any right; - the insolvency procedure and so on. The Register of Trade is kept by the Office of the Register of Trade organized in each county and in Bucharest. The Central Register of Trade is kept by the National Office of the Register of Trade, which is a public institution subordinated to the Ministry of Justice. The Register of Trade is public and thus, any interested person may have access to all its records. The Register of Trade consists of a register for recording individuals and family partnerships and another one for recording legal persons. The merchants must apply for incorporation to the Office of the Register of Trade organized in the county where they have their headquarters. The registration in the Register of Trade is done on the basis of a decision provided by the judge delegate. The incorporation and the mentions registered within the Register of Trade have a publicity function, in order to be opposable to third parties. It means the law considers that all records in the Register of Trade are known by third parties form the date of their registration. The merchants must apply for the incorporation in the Register of Trade within 15 days: - form the date of the authorization, in the case of individual merchants; - form the date of conclusion of the constitutive act, in the case of commercial companies. According to article 22 form the Law no. 26/1990 republished, the obligation of merchants to ask for the registration of mentions in the Register of Trade is due within 15 days from the date of the acts or facts that are subject to publicity. As far as the merchant natural person is concerned, the incorporation in the Register of Trade does not produce constitutive effects in order to obtain the quality of merchant. As we mentioned before, the natural person becomes a merchant by performing commercial facts, under the conditions provided in the Commercial Code. However, concerning the commercial companies, by the incorporation in the Register of Trade they get

the legal personality, meaning they become legal persons.

Business Law_Course 4_The Stock-trade

OCT - 25 - 2013 In common law legal systems, the good will is an intangible asset that normally represents the excess of the value of the business over the value of its tangible assets established reputation of a business regarded as a quantifiable asset In legal systems of French inspiration (Romanian), the good will is more than the merchants reputation, it is a totality of different elements which together are used by the merchant with the view to carry on his business The performance of commercial activity requests the existence and the use of goods such as buildings, merchandise, industrial equipment, raw materials, patents and so on. All these goods used for the accomplishment of commercial activity represent the goodwill of a merchant. The Civil code does not provide either a definition of the goodwill or legal provisions for its regulation. The legislator had used the term goodwill, without explaining it, within several normative acts, such as the Law no. 26/1990 on the Register of Trade, republished. However, there is a definition of the term goodwill provided by the Law no. 298/2001 concerning the amendment of the Law no. 11/1991 on the unfair competition. Thus, according to article 11 point c form the law, the goodwill represents the ensemble of movable and immovable, tangible and intangible (trade marks, firms, emblems, patents, the place of business and so on) used by a merchant in order to perform its activity.

The Definition
Thus, the goodwill is an ensemble of movable and immovable, tangible and intangible goods used by a merchant in his commercial activity, in order to get clients and to obtain profits. The Distinction between Goodwill and other close notions a) Goodwill and Patrimony. Unlike the goodwill, which is an ensemble of goods, the patrimony contains all patrimonial rights and obligations of the merchant. b) Goodwill and Enterprise. As we mentioned before, the enterprise is an independent organized activity which combines elements like capital, labor or nature for the purpose of producing goods and services and of obtaining profit. The goodwill is an ensemble of goods used for the accomplishment of commercial activities. Thus, we may see from these definitions that, beside goods, the enterprise also combines other elements like capital or labor. As a consequence, the goodwill is only a part of the enterprise.

The legal nature of the goodwill

Legal doctrine considers it as de facto universality and not a legal universality as the patrimony is. In the juridical doctrine, most authors consider that the goodwill constitute an ownership right over an intangible thing, as the copyright. As a consequence, the features of the goodwill are the following: 1. it is an unitary thing, different from the goods that compose it. Thus, the goodwill can be the object of juridical acts such as the sale-purchase or the donation. 2. it is a movable thing because in its composition the movable goods prevail. 3. it is an intangible movable thing because in its composition the intangible goods have the highest value. 4. It can be object of pledged 5. It is a part of the patrimony of the merchant, not the patrimony itself. 6. It lasts as long as it is exploited (used), so its existence is less stable than of other intangible goods The assignment contract (contract de cesiune), is the agreement concluded between the assignor (cedent) and the assignee (cesionar) with the view to transfer to the assignee the rights that belong to the assignor

The elements of the goodwill

Because the goodwill contains those goods that are necessary for the performance of a specific commercial activity by a specific merchant, its composition is different from one merchant to another, it depends upon the specificity of the merchants activity. In the same time, the elements that compose the goodwill may change, in accordance with the needs of the trade, but the goodwill as a whole continues to exist. Generally, regardless of the specificity of commercial activity, we consider that the goodwill contains two categories of goods: 1. tangible goods 2. intangible goods

1.The tangible elements of the goodwill

They are included within this category:

a. immovable goods, such as buildings, real estate and so on. b. movable goods, such as raw materials used for the production of other goods and products or merchandise which are the result of commercial activity.

2.The intangible elements of the goodwill

They are included within this category: the firm, the emblem, the clients, the place of business, the patents, the trade marks and so on. 1) The Firm It is an element of identification, a name, registered in the Register of Trade, used by the merchant to identify his business. (article 30 Law 26/1990). Natural persons the firm is composed by the name (full name or only the family name with the first letter of the second name) and, sometimes, with a phrase representing the object of activity. Commercial Companies the firm has different forms, depends on the type of company we discus about. Characteristics: - each new firm has to be different than the others already in use - the name must be avaible, so we have to check at the Register office (Registrul Unic), but an erased name can be taken after 2 years it has been erased. - the firm must not include a denomination, name, used by public institutions; - it can be transmitted through acts intervivos/ mortis causa only together with the goodwill. - protection by: - incorporation and no matter if it is used or not - action in counterfeit (contrafacere) and action for usurpation - action based on unfair competition facts - action for damages (moral or pecuniary) + criminal proceedings 2) The Emblem (Corporate Image) It is a sign or denomination used to make the difference between merchants. Characteristics: it is not compulsory to have an emblem

its disponibility can be checked at the Registration Office we can use emblems on invoices, letters, catalogues, advertising etc can be transmitted separately of the good will protection by:

- incorporation if it is used - action for recovery of property (in revendicare) - action based on unfair competition facts - action for damages (moral and pecuniary) 3) The clients (The Practice) It represents the ensemble of natural and legal persons that have juridical relations with a merchant. In accounting is a figure, meaning it can be evaluated. Influenced by: - internal factors: objective (the place where the shop/headquarters is located, the quality of merchandises) or subjective (advertising, clients fidelity, shop assistants behavior. - external factors (competition, market share owned, possibility to obtain credits)

The trademark
It is a distinctive sign, drawing or denomination that individualizes the products of a merchant from the ones of other merchants. The exclusive usage right of a merchant over a trademark is protected only if the trademark is registered within the State Office for Inventions and Marks, the competent Romanian authority for ensuring industrial property. The juridical protection is granted for 10 years.

The patent
It grants and protects the rights over an invention. The patent is issued by the State Office for Inventions and Marks. The patent grants its owner an exclusive usage right over the invention within the entire protection period of 20 years. However, according to the Law no. 26/1990, in order to ensure the juridical protection, the merchants must ask for the registration, in the Register of Trade, of mentions concerning the trademarks, patents and other distinctive signs.

Juridical acts concerning the goodwill

The goodwill, as an unitary movable thing, as well as its elements, may be the object of juridical acts such as sale-purchase, donation, rental or pledge. The goodwill may be also the object of contribution in kind to the capital of a commercial company. Thus, the owner of the goodwill who wants to become an associate of a commercial company contributes to the capital of that company with the goodwill. We should mention that, because of their object, the juridical acts concerning the goodwill are objective accessory commercial facts. According to the Law no. 26/1990 the merchant is bound to ask for the registration, in the Register of Trade, of mentions related to juridical acts concerning the goodwill.

Business Law_Course 5_Natural persons merchants

NOV - 19 - 2013 In order to be qualified as a merchant, the natural person must fulfill several conditions, as follows:

1. to have full concrete capacity. Thus, a natural person may be a merchant only after he is 18 years old

As a consequence, the minors and the persons under judicial interdiction are not allowed to be merchants. Therefore, when the minor inherits the stock-trade of a merchant, the business can be continued in the name of the minor by his legal representative.

2. to perform trade as a profession, on a regular basis.

3. to perform trade in his own name. Thus, the merchant undertakes the risks related to the performance of commercial activities and he is liable toward third parties with his patrimony.

However, in order to protect the public interest, the law provides that certain categories of natural persons are not allowed to be merchants. Thus, the commercial activity is incompatible with certain positions or professions such as judges, public prosecutors, officers, public servants, priests, lawyers, doctors. In addition, a person who was convicted for committing a crime that is incompatible with

commercial activity cannot be a merchant.

Thus, according to the law, Romanian citizens or nationals of one of the EU Member States may perform commercial activities on the Romanian territory, in an independent manner, or may set up a family enterprise or individual enterprise.

Definitions

An individual enterprise is an economic enterprise, without legal personality, organized by an individual entrepreneur; A family enterprise is an economic enterprise, without legal personality, organized by an individual entrepreneur with his family; An individual merchant is a natural person authorized to perform any kind of economic activity permitted by law, mainly using its workforce; On the strength of the right of free initiative, free association and settlement, any natural person, Romanian citizen or citizen of another EU or European Economic Space member state, can perform economic activities on Romania territory, in conditions provided by the law. Economic activities can be performed in all branches, handicrafts, activities or professions which the law doesnt forbid in an express manner for free initiative.

According to art. 4 of the Emergency Ordinance no. 44/2008, the natural persons mentioned above can carry out economic activities as follows:

a)

individually and independently, as individual merchants;

b)

as promoters, holders of an individual enterprise;

c)

as members of a family enterprise.

First of all, in order to carry out an economic activity, these persons must have a professional headquarters on the territory of Romania, in conditions provided by the law. Secondly, they have to apply for registration in the Register of Trade and ask for authorization.

Also, in order to be able to operate in legal terms, they are obliged to obtain, before starting the activity, authorizations, approvals, licenses and other similar, provided in special laws, to perform certain economic activities.

REGISTRATION AND AUTHORIZATION

The individual merchants and the promoter and holder of an individual enterprise are obliged to ask for their registration in Register of Trade and authorization of operation, before starting the economic activity as individual merchants, respectively natural persons promoters which hold an individual enterprise. The representative of family enterprise is obliged to ask for registration in Register of Trade and authorization of operation, before starting the economic activity. If it doesnt forward a petition in term of 7 days since conclusion of memorandum of association, any member of family enterprise can ask for registration in the Register of Trade and authorization of operation. The petition for registration in the Register of Trade and authorization of operation must be forwarded in a term of 15 days since the memorandum of association was concluded.

Conditions to perform economic activities in one of the forms provided above:

a) the persons must have minimum 18 years of age, in case of natural persons which ask authorization to perform economic activities according to Art. 4 letters a) and b) of the Emergency Ordinance no. 44/2008 and for family enterprise representative, respectively 16 years of age, in case of family enterprise members;

b) they cannot have committed facts punished by financial, custom laws and laws on financial-fiscal discipline, like those stipulated in the tax offence record;

c) they must have a professional headquarters

d) they must declare on own responsibility that meet the operation conditions provided by the legislation specific to the sanitary, sanitary-veterinary, environment and labor protection branches.

The individual merchants, the promoter and holder of an individual enterprise and family enterprise have the professional headquarters declared by registration petition in the Register of Trade and authorization of operation.

To set up the professional headquarters is necessary that the individual merchants, the individual enterprise holder or any member of the family enterprise, depending on the case, to hold a commonage over the property which they want to be the professional headquarter.

Performance of economic activities through a permanent headquarters by citizens of other EU member states or European Economic Space is accomplished according to the provisions in force on permanent headquarters.

Petition for registration in the Register of Trade and authorization of operation will be laid down to the Register of Trade attached to the Law court from the county where the inquirer sets up its professional headquarters. Registration in the Register of Trade of the individual merchant, individual enterprise and family enterprise is performed based on motivated resolution of the manager of the Office of Register of Trade attached to the Law court. If documents laid down in the petitions support are incomplete, then the manager of the Office of Register of Trade attached to the Law court will order by motivated resolution to be awarded a term of maximum 15 days for their completion. The term will be communicated to the inquirer either immediately, if he is present, or by a recommended letter with receiving confirmation.

In all cases it will be indicated the documents which follows to be laid down until the given term. By motivated inquirers request, the term of 15 days can be prolonged. If legal conditions are not met, then the manager of the Office of Register of Trade attached to the Law court will order by motivated resolution to be rejected the petition of registration in the Register of Trade and authorization of operation for the individual merchant, individual entreprise or inquiring family enterprise. Against the resolution given by the manager of the Office of Register of Trade attached to the Lawcourt can be forwarded a complaint in term of 15 days from the date when it was given or its communication,

depending on the situation.

If registration in the Register of Trade and authorization of operation for the individual merchant, individual entreprise and family enterprise was admitted, the Office of Register of Trade attached to the Lawcourt will release the certificate for registration, containing a sole registration code, certificate of findings issued based on the declaration on own responsibility, as well as other documents provided by the law, depending on the situation. Certificate of registration, containig the sole registration code, is the document attesting the registration in the Register of Trade, authorization of operation, as well as recording by the competent fiscal body. A person can have a single certificate of registration for legal status, i.e. the one for individual merchant, holder of an individual enterprise or member of a family enterprise it was authorized for. Changing the professional headquarters and main activity objective is registered in the Register of Trade, by application accordingly to the Emergency Ordinance no. 44/2008. Bias points are registered in the Register of Trade, complying with the provisions on professional headquarters and application accordingly to the Emergency Ordinance no. 44/2008.

The individual merchant, the holder of individual enterprise and the representative of family enterprise will perform the single entry book-keeping, according to the regulations on organization and management of single entry book-keeping by the individual merchants which are contributor, according to the provisions of the Law No. 571/2003 on Fiscal Code, with further changes and completions.

LEGAL REGIME OF INDIVIDUAL MERCHANT

In order to perform the activity for which an individual merchant has been authorized, the individual merchant may collaborate with other natural persons authorized as individual merchant, promoter and holder of an individual enterprise and representative of a family enterprise or with natural persons or legal entities in order to perform an economic activity, without changing its legal status.

A person may cumulate the quality of individual merchant with the one of employee of a third party operating either in the same field or in another economic activity field than the one for which the individual merchant is authorized.

The individual merchant shall not be considered employee of third parties with whom it collaborates,

even if the collaboration is exclusive. An individual merchant performs its activity by using, mainly, its own workforce and professional abilities. It cannot also cumulate the quality of natural person entrepreneur holder of an individual enterprise. The individual merchant may require the change of the legal status acquired and the authorization as natural person entrepreneur holder of an individual enterprise. The individual merchant shall account for its obligations by the dedicated assets if set up and, in addition, by its entire patrimony and in case of insolvency, it shall be subject to the procedure provided by the Romanian Law.

Creditors shall execute their debts according to the common law if the individual merchant is not a trader. Any interested person may prove its trader quality during the insolvency procedure or separately, by means of a declaratory action if it has a justified legal interest.

The individual merchant shall cease its activity and shall be cancelled from the trade registry in the following cases:

a) by death;

b) by free will;

c) according to art. 25 of the Law nr. 26/1990, republished, with the further amendments and supplementing.

The cancellation application accompanied by a true certified copy of justifying documents, as the case may be, shall be submitted by any interested person to the trade registry office near the court of law where it has its professional headquarter.

LEGAL REGIME OF A NATURAL PERSON ENTREPRENEUR HOLDER OF AN INDIVIDUAL ENTERPRISE

The individual enterprise does not acquire legal personality by registration in the Register of Trade. The natural person entrepreneur holder of an individual enterprise is, at the date of its registration in the

Register of Trade, a natural person trader.

In order to organize and operate its undertaking, the natural person entrepreneur, as natural person employer, may employ third parties by means of an individual labor agreement recorded at labor territorial inspectorate according to the law, and may collaborate with other individual merchants, with other natural persons entrepreneurs holders of individual enterprises or with representatives of family enterprises or with other legal entities, in order to perform economic activity, without changing its legal status.

The natural person entrepreneur holder of an individual enterprise shall not be considered employee of third parties with whom it collaborates, even if the collaboration is exclusive.

The natural person entrepreneur holder of an individual enterprise may also cumulate the quality of employee of a third party operating both in that field as well as in another field of economic activity than the one in which the individual enterprise is operating.

The natural person holder of an individual enteprrise shall account for its obligations by the dedicated assets if set up and, in addition, by its entire patrimony, and in case of insolvency, it shall be subject to the procedure provided by the Romanian Law.

The natural person entrepreneur holder of an individual enterprise shall cease its activity and shall be cancelled from the Register of Trade in the following cases:

a) by death;

b) by free will;

c) according to art. 25 of the Law no. 26/1990, republished, with the further amendments and supplementing.

The cancellation application accompanied by a true certified copy of justifying documents, as the case may be, shall be submitted by any interested person to the trade registry office near the court of law where it has its professional headquarter.

If the natural person entrepreneur holder of an individual enterprise ceases its activity and is cancelled from the Register of Trade due to his death, inheritors may continue the undertaking if they so desire, by means of an authenticated statement, within 6 months as of the inheritance division date. In case of several inheritors, they shall appoint a representative in order to continue the economic activity as family enterprise.

The activity may be continued under the same company, on condition of mentioning the successor quality.

LEGAL REGIME OF FAMILY ENTERPRISE

A family enterprise consists in 2 or several family members. The members of a family enterprise may be, at the same time, individual merchants or holders of individual enterprises. Moreover, they may also cumulate the quality of employee of a third party operating both in that field as well as in another field of economic activity than the one in which the family enterprise is operating.

The members of a family enterprise are insured in the public pensions system and other social insurances rights and have the right to be insured in the health and unemployment social insurance system according to the legal provisions.

A family enterprise may not employ third parties by means of labor agreement.

As validity condition, a family enterprise is established by means of an incorporation agreement concluded by the members of the family in writing. The incorporation agreement shall provide the members names and forenames, the representative, date of drafting it, participation of each member to the undertaking, participation conditions, shares in which net incomes of the undertaking shall be divided, relationship between the members of the family enterprise and withdrawal conditions, under

the absolute nullity sanction.

The representative appointed by means of the incorporation agreement shall manage the family enterprise interests based on a special power of attorney, in the form of a private signature writ. The special power of attorney shall be signed by all legally competent members of the undertaking and their legal representatives with a restricted legal competence.

In order to perform the activity for which it has been authorized, the family enterprise, by means of its representative, may collaborate with other natural persons authorized as individual merchants, natural persons entrepreneurs holders of individual enterprises or representatives of certain family enterprises or with other natural persons or legal entities in order to perform an economic activity, without changing its legal status.

A family enterprise does not have its own patrimony and shall not acquire legal personality by registration in the Register of Trade. The members of a family enterprise may provide in the incorporation agreement of the family enterprise the set up of dedicated assets. In this case, the participation shares of the members to the set up of the dedicated assets shall be established in the incorporation agreement or an addendum thereof. If the members of the undertaking unanimously agree, the shares may be different than the ones provided for the participation to net incomes or losses of the undertaking.

The members of the family enterprise are natural persons traders as of the date of its registration in the Register of Trade and shall account, jointly and indivisibly, for the debts incurred by the representative by operating the undertaking by means of the dedicated assets, if set up, and, in addition, by the entire patrimony, according to the participation shares.

The decisions on the current management of the family enterprise shall be made by the representative of the family enterprise. The acts of disposal over the assets included in the activity of the family enterprise shall be made by simple majority consent of undertakings members, on condition that this majority also includes the consent of the owner of the asset object of the act.

The documents by which assets are acquired for the performance of family enterprise activity shall be concluded by the representative, without members prior authorization, if the value of the asset for which the document is concluded does not exceed 50% of the value of the assets included in the

undertaking and the amounts of money made available to the undertaking at the date of the document. Acquired assets are co-property of the members depending on the shares.

A family enterprise shall cease its activity and shall be cancelled from the Register of Trade in the following cases:

a) more than half of its members have deceased;

b) more than half of its members require its cessation or withdraw form it;

c) according to art. 25 of the Law no. 26/1990, republished, with the further amendments and supplementing.

The cancellation application accompanied by a true certified copy of justifying documents, as the case may be, shall be submitted by any interested person to the trade registry office near the court of law where it has its professional headquarter. Business Law_6_Commercial Companies

NOV - 20 - 2013 1. Introduction

The commercial companies are regulated by Law no. 31/1990 on commercial companies, republished, amended and completed, which is the general law that regulates the matter. Beside this general law, there are special laws which regulate specific companies, such as banking companies, insurance companies and so on. These provisions are to be completed by the Civil code.

The Law no. 31/1990 regulates the following types of companies:

- general partnership;

- limited (sleeping) partnership;

- limited (sleeping) partnership by shares;

- limited liability company;

- company by shares or joint stock company.

It contains general rules that are applicable to any commercial company and special rules related to each category of commercial companies.

The definition

The commercial companies are not defined by the Law no. 31/1990 . In this case, we have to look for a definition in the Civil Code. The Civil Code regulates the company contract.

Thus, according to article 1881 Civil Code, the company is a contract by which two or more persons (the associates) agree to put together some goods in order to perform together a certain activity for the purpose of obtaining and sharing the profits.

This definition refers to the contract, but certain elements may also be used for defining the commercial company.

Features of a commercial company:

- it is set up by a company contract;

- the existence of a common fund, constituted by the contributions of the members;

- the goal of the associates is to obtain and share the benefits;

- affectio societatis, meaning the will of the associates to participate in the performance of the common activity and the common use of contributions and capital in order to obtain profits.

- the economic activity of the commercial company

- the commercial company has legal personality, it is a legal person.

As a consequence, taking into account all these elements, the definition of the commercial company is the following:

The commercial company is a group of persons, set up by a company contract and having legal personality, in which the associates agree to put together some goods in order to perform economic activity for the purpose of obtaining and sharing the profits.

The juridical forms of commercial companies

According to article 2 form the Law no. 31/1990 republished, the commercial companies can only be set up in one of the following juridical forms: general partnership; limited (sleeping) partnership; limited (sleeping) partnership by shares; limited liability company; company by shares (joint stock company). Thus, it is not possible to constitute a commercial company in other form than those provided by article 2 from the Law no. 31/1990 republished.

The differences between the forms of commercial companies are determined by the extent of liability of associates for the debts of the company.

Therefore:

a. the obligations of the general partnership are secured by its patrimony and the unlimited and joint liability of all associates.

b. the limited partnership has two categories of partners: active partners and sleeping partners. The obligations of the limited partnership are secured by its patrimony and the unlimited and joint liability of active partners; the sleeping partners are liable only within the limits of their contribution to the capital of the partnership;

c. the limited partnership by shares has also two categories of partners: active partners and sleeping partners. Its registered capital is divided into shares and its obligations are secured by the patrimony of the partnership and the unlimited and joint liability of active partners; the sleeping partners are liable only within the limits of their contribution to the capital of the partnership;

d. concerning the company by shares, its registered capital is divided into shares and the obligations of the company are secured by its patrimony; the shareholders are liable only within the limits of their contribution to the registered capital of the company;

e. the obligations of the limited liability company are secured by its patrimony and the associates are liable only within the limits of their contribution to the registered capital of the company.

However, the persons who want to set up a commercial company are free to choose between the five juridical forms provided by the law. The juridical form chosen by the associates must be mentioned in the constitutive contract of the company. After choosing the juridical form of the company, the associates are bound to observe the legal provisions which regulate the setting up and the functioning of that type of company.

The classification of commercial companies

The commercial companies are classified according to several criteria.

1. the most important is the criterion of their nature and the prevalence of personal element or the material element.

According to this criterion, the commercial companies are divided in two categories:

- companies of persons

- companies of capitals.

The companies of persons are those commercial companies set up by a small number of persons taking into account the mutual trust between partners and their personal qualities (intuituu personae). The general partnership and the limited partnership are companies of persons.

The features of the companies of persons are the following:

- a small number of partners;

- the liability of the partners for the debts of the company is unlimited and joint. Unlimited liability means that regardless of his contribution to the registered capital of the company, each partner is liable for the debts of the company with his own patrimony. Joint liability means that in the case the commercial company does not pay a debt, any partner can be obliged to pay the whole amount. However, there is an exception, concerning the sleeping partners of a limited partnership. Thus, the liability of the sleeping partners for the debts of the partnership is limited to their contribution to the registered capital.

- the registered capital is divided into parts of interest which are not negotiable. They can be transmitted only under restrictive conditions.

- the partners are allowed to contribute with their work to the registered capital of the company. It means that the undertaking of a partner to perform a certain work on behalf of the company is considered as a contribution to its registered capital.

- the companies of persons are dissolved when they are reduced to a sole partner because of the bankruptcy, incapacity, exclusion, withdrawal or death of the other partners.

The companies of capital are those commercial companies that are set up by a great number of associates taking into account only the actual contribution of the associates to the capital of the company. Thus, the personal qualities of the associates are not important. The limited partnership by shares and the company by shares are included in this category.

The features of the companies of capital are the following:

- a great number of shareholders;

- the liability of the shareholders for the debts of the company is limited to their contribution to the registered capital. There is an exception concerning the active partners of a limited partnership by shares. Thus, the liability of the active partners for the debts of the partnership is joint and unlimited.

- the registered capital is divided into shares which are negotiable and can be transmitted freely;

- the shareholders are not allowed to contribute with their work to the registered capital of the company. Thus, the contribution to the registered capital of a company of capitals may be in kind or in money.

- the bankruptcy, incapacity, exclusion, withdrawal or death of a shareholder does not produce any consequence concerning the dissolution of the company.

We should mention that the limited liability company cannot be included in one of these two categories. Thus, like the companies of persons, the setting up of a limited liability company is based on the trust and the personal qualities of the associates.

This feature requires the limitation of the number of associates and restrictive conditions for transmitting the social parts. However, the liability of the associates is limited to their contributions to the registered capital, as for the companies of capital.

2. the criterion of the structure of registered capital.

According to this criterion, the commercial companies may be divided in two categories:

- commercial companies in which the registered capital is divided into parts of interest such as the general partnership, the limited partnership and the limited liability company. According to the Law no. 31/1990 republished, the parts of interest of a limited liability company are called social parts.

- commercial companies in which the registered capital is divided into shares such as the company by shares and the limited partnership by shares.

3. the criterion of the possibility to issue negotiable instruments (shares or bonds).

According to this criterion, the commercial companies may be:

- companies that are allowed to issue negotiable instruments, such as the company by shares and the limited partnership by shares.

- companies that are not allowed to issue negotiable instruments, such as the general partnership, the limited partnership and the limited liability company.

4. the criterion of the number of associates. According to this criterion, there are:

- companies with sole associate such as the limited liability company with sole associate;

- companies with two or more associates, such as all the other types of companies.

2. The setting up of commercial companies

In order to set up a commercial company, there are several steps, which must be followed:

1. The conclusion of the constitutive act;

2. The incorporation of the company in the Register of Trade;

3. The publicity of the companys setting up.

The constitutive act of the company and its form

According to the provisions of the Law no. 31/1990 republished, in order to set up a general partnership or a limited partnership, the partners must conclude a company contract which is the constitutive act of the partnership.

In order to set up a company by shares, a limited partnership by shares or a limited liability company, the law requires the conclusion of the company contract and the articles of association which both represent the constitutive act of the company. The company contract and the company statute may be concluded either as two distinct documents or, if the associates agree, as a single document.

In order to set up a limited liability company with sole associate, the Law no. 31/1990 republished requires only the conclusion of the articles of association As a rule, the constitutive act of any company has to be concluded in writing and signed by all associates or by the founders, when a company by shares is set up by public subscription.

As an exception, the constitutive act of the company must be concluded in authentic form (it must be authenticated by a notary public) in the following cases:

- land is contributed in kind to the registered capital of the company;

- the company by shares is set up by public subscription;

- it refers to the setting up of a general partnership or a limited partnership.

The founders of a commercial company

The term founders is a common element for all the juridical forms of commercial companies.

According to article 6 form the Law no. 31/1990 republished, the founders of a commercial company are the persons who sign the constitutive act, as well as the persons who play an important role in the setting up of the company.

In order to become a founder, the person must fulfill two conditions, as follows:

- he must have full concrete capacity;

- he must not have been convicted of any criminal offence related to commercial activity such as forgery, use of forgery, breach of trust an so on.

The content of the constitutive act

Regardless of the juridical form of a commercial company, its constitutive act must contain the following common elements:

- the identification elements of the associates;

- the firm of the company, its juridical form, the headquarters and the emblem of the company, if any;

- the companys object of activity, specifying the main field of activity;

- subscribed and paid-up registered capital;

- the bodies of decision, management and control of the company;

- the manner in which the associates share the profit and the loss of the company;

- the time limit of the company;

- the branches, agencies or other divisions without legal personality;

- the ways for the dissolution and the liquidation of the company.

Beside these general elements, the constitutive act of a limited liability company must provide the number and the nominal value of the social parts as well as the number of social parts acquired by each associate on the basis of his contribution.

The constitutive act of a limited partnership or a limited partnership by shares must provide in a distinctive manner the two categories of partners: active partners and sleeping partners.

The constitutive act of a company by shares or a limited partnership by shares must also mention:

- the number and the nominal value of shares;

- the type of shares, meaning bearer shares or registered shares;

- the specific advantages of the founders.

The incorporation of the commercial companies in the Register of Trade

Within 15 days from the conclusion of the constitutive act, the founders, the administrators or their representatives are bound to apply for the incorporation of the commercial company in the Register of Trade.

The incorporation is made on the basis of an application filled by the applicant and registered within the Office of the Register of Trade from the county where the company has the headquarters.

The publicity of the setting up of commercial companies

After the incorporation, the applicant is obliged to publish the judgment of authorization provided by the delegated judge in the Official Monitor of Romania. Also, the applicant must publish in the Official Monitor of Romania the constitutive act of the company approved by the delegated judge, in full or only an extract of it.

This publicity has an opposability function, meaning that the law considers that the existence of the company is known by third parties form the date of the publication. Thus, any interested party has the possibility to bring an action against the constitutive act of the company or even against the existence of the company, if they prejudice his interests in any way.

3. The contributions to the registered capital of the commercial companies The contribution means the obligation assumed by each associate to put together some goods, to transfer a right from his patrimony to the patrimony of the commercial company or even to perform a certain work in behalf of the company. Concerning the transfer of a right, this right may be either an ownership right over a thing or only a usage right. In exchange for his contribution, each associate gets parts of interest, social parts or shares.

The term contribution has two meanings, as follows:

a. contribution as the obligation to contribute to the registered capital of the company;

b. contribution as the goods that are the object of this obligation.

The contributions of the associates to the registered capital of the company may be unequal and may have a different nature. Nevertheless, in all situations they have to be real. The absence or the fictiveness of contributions is a ground for the absolute nullity of the company contract.

For example, the contribution of a thing without an economic value is a fictive contribution, such as the contribution of a trademark that is no longer protected.

According to the object of the associates contribution to the registered capital of a commercial company, this contribution may be as follows:

1. contribution in money;

2. contribution in kind;

3. contribution in work (in industry).

1. The contribution in money is compulsory at the setting up of any juridical form of commercial company. According to article 68 from the Law no. 31/1990 republished, the contribution in money of the associates does not give them the right to interests.

2. The contribution in kind may consist in the following goods:

- immovable goods, such as buildings, real estate and so on;

- tangible movable goods, such as raw materials, merchandise;

- intangible movable goods, such as receivables, patents, the goodwill and so on.

The contribution in kind is allowed for any juridical form of commercial company. This contribution is performed by the transfer to the company either of the ownership right or the usage right over specific goods. If there is no provision in the constitutive act of the company concerning the right that is transmitted, the law considers that the goods which are contributed in kind are the property of the company from the date of its incorporation in the Register of Trade.

The thing that is the object of the contribution in kind must be evaluated in money, in order to determine the value of the parts of interest, social parts or shares the associate must get in exchange for his contribution. This evaluation may be made by the associates or by an expert.

The evaluation must be made by an expert in the following cases:

a. in the case of limited liability company with sole associate;

b. in the case of the company by shares set up by public subscription;

c. in the case of companies by shares, when the delegated judge decides the performance of an expertise in order to evaluate the contributions in kind.

As we mentioned before, the contribution may have as object intangible movable goods, such as the receivables.

The contribution in receivables is not allowed for the company by shares set up by public subscription, the limited partnership by shares or the limited liability company, because the payment of the receivable may be difficult to obtain.

If the contribution in receivables is allowed, the associates contributing receivables to the capital of the company are not exonerated of liability towards the company until the latter obtains the actual payment of the receivable. If the payment can not be obtained from the debtor, the associate is liable towards the company for the amount representing the value of the receivable and interests, calculated from the date when the receivable becomes due.

3. The contribution in work (in industry) represents the associates undertaking that he will perform a certain work or activity in behalf of the company.

The contribution in work is allowed only in the case of the general partnership and the limited partnership.

The contribution in work is not included in the registered capital of the company. Thus, the associate who contributes his work is not entitled to get parts of interest in exchange for his contribution. Nevertheless, this associate has the right to participate in sharing the profits and the assets of the company. Also he has the obligation to participate in sharing the loss of the company. For this purpose, the contribution in work must be evaluated in money and provided in the constitutive act of the company.

4. The functioning of commercial companies

General rules concerning the administration of commercial companies

Generally the administrator represents the company within the relations established with third parties. The administrator is the legal representative of the company. The administrators may perform all operations required for the fulfillment of the object of activity of the company, except for the restrictions set forth by the constitutive act or by law.

Any commercial company is administrated by one or several administrators. The administrator of a commercial company may be a natural person having full concrete capacity. A legal person may also be appointed as administrator of a commercial company. In this case, the legal person must appoint a permanent representative, natural person, in order to carry out its duties.

The administrators of commercial companies are appointed and revoked exclusively by the General Meeting. The first administrators can be appointed by the constitutive act.

The administrators of any commercial company may be associates of the company or persons unrelated to the company.

Normally, the powers of the administrators end upon the expiry of their mandate or before that date, in any of the following situations:

- the revocation of the administrator;

- the death, incapacity or incompatibility of the administrator;

- the resignation of the administrator.

The control of commercial companies operations

The control of commercial companies operations may be performed as follows:

- by the associates who are not the administrators of the company;

- by internal auditors.

The appointment of internal auditors by the constitutive act is compulsory in the following cases:

- for the companies of capitals;

- for the limited liability company with more than 15 associates.

General Partnership

Associates rights and obligations

1.Rights:

a) to vote(name) the administrators

b) to receive all documents concluded by administrators

c) to request any information related to the companys activity

d) may elect one or more administrators among themselves; establish their powers, duration of their mandate and their possible remuneration, unless otherwise stipulated by the constitutive act.

e) in case the constitutive act prescribes that the administrators should operate together, the decision must be made unanimously; in case of disagreement among the administrators, the decision will be made by the associates.

f) to participate to profit

The associate who, in a certain operation, has, on his own or on another ones behalf, interests contrary to those of the company, cannot take part in any proceedings or decision-making regarding this operation.

The associate breaking the legal provisions is liable for the damages caused to the company if, without his vote, the required majority would not have been met.

2.Obligations:

a) The associates may not take part, as partners with unlimited liability, neither in other competing companies or having the same goal, nor may they operate on their own or on others behalf, in the same trading branch, or in a similar one, without the consent of the other associates.

b) to participate to losses

c) The associates are unlimitedly and jointly liable for the operations carried out in the companys name, by the persons representing it.

The judgement in court obtained against the company is opposable to each associate.

d) The associate who, without the written consent of the other associates, uses the capital, the assets or the credit of the company for his own or another persons benefit is bound to reimburse the resulting profits to the company and to pay the damages caused.

e) No associate may take out of the companys funds more than what was allotted to him, for the expenses which were incurred or for those he will make in the companys interest.

f) In case of breaking the provisions regarding the interdiction of competition, the company, beside the right to exclude the associate, can decide whether he worked on its behalf or can claim for damages.

This right is cancelled after a three months period passing from the day the company took knowledge of the situation without making any decision.

Management

The administrators can carry out all the operations required for the fulfillment of the companys goal, except for the restrictions mentioned by the constitutive act.

They are bound to take part in all the companys meetings, in the meetings of the managing board and of managing bodies similar to this.

The right to represent the company belongs to each administrator, unless otherwise stipulated by the constitutive act.

The associates representing the absolute majority of the registered capital may elect one or more administrators among themselves, establish their powers, duration of their mandate and their possible remuneration, unless otherwise stipulated by the constitutive act.

The same majority may decide the administrators discharge or the limitation of their powers, except for the case when the administrators were appointed through the constitutive act.

Managers can be also persons unrelated with the company.

In case a administrator takes the initiative of an operation exceeding the limits of an ordinary operation in the line of trade carried out by the company, he must advise the other administrators prior to concluding respective operation under the sanction of bearing the consequences resulting therefrom.

Limited Partnership

Associates rights and obligations

In order to determine Associates rights and obligations we need to make the distinction between active and passive partners.

The active partners have the right to represent the company, can be elected as administrators, having all the rights and obligations like the partners from Partnership.

The passive partners can conclude operations on behalf of the company, only on the basis of a special power of attorney for certain operations, granted by the companys representatives and registered in the trade register.

The passive partner can perform actions of supervision, may take part in the procedures for appointing and dismissing the administrators in cases provided by law, or can grant the administrators authorization in performing operations exceeding their powers, within the limits of the constitutive act.

The passive partner also has the right to ask for a copy of the balance sheet and of the profit and loss

account and to verify their exactness by means of checking the commercial registers and the other supporting documents.

Joint-stock companies

The General Meeting

The General Meeting is the main decisional body, because has the obligation to decide all the other bodies and their powers.

The general meetings are ordinary and extraordinary.

The ordinary meeting is convened at least once a year, within 5 months as from the end of the financial year.

Besides the debate of other issues on the agenda the general meeting is obliged:

a) to discuss upon, approve or amend the balance sheet, after listening to the administrators and auditors report and to determine the dividend;

b) to appoint the administrators and the auditors;

c) to establish the proper remuneration for the administrators and auditors for the current financial year, unless it was settled by the constitutive act;

d) to give their opinion on the administrators administration of budget;

e) to determine the income and expenditure budget and the activity program for the next financial year as the case may be;

f) to decide upon the mortgaging, renting or dissolving of one or several of the companies units.

Quorum. With a view to ensuring the validity of the proceedings of the ordinary meeting it is necessary to have the shareholders attending it representing at least 1/4 of the registered capital and that the decisions be made by the shareholders representing the absolute majority of the registered capital represented in the meeting in case the constitutive act or the law does not stipulate a larger majority.

If the meeting cannot operate due to unfulfillment of the conditions of paragraph (1) the meeting gathered after a second convening may proceed upon the issues on the first meetings agenda, whatever the registered capital part represented by the attending shareholders is, with a majority.

The extraordinary general meeting gathers whenever a decision is necessary to be made for:

a) changing the legal form of the company;

b) changing the location of the registered office of the company;

c) changing the object of activity of the company;

d) extending the companys life;

e) increase of the registered capital;

f) writing down of the registered capital or its completion by means of the issue of new shares;

g) merging with other companies or its division;

h) early dissolution of the company;

i) conversion of shares from one category into another;

j) conversion of one category of bonds into another or into shares;

k) issue of bonds;

l) any other modification of the constitutive act or any other decision for which the approval of an extraordinary general meeting is requested.

Quorum. With a view to ensuring the validity of the proceedings of the general extraordinary meeting, in case the constitutive act does not stipulate otherwise, the following are necessary:

- upon the first convening, the attendance of shareholders representing at least 1/4 of the registered capital and the decisions to be made with the vote of the majority of those present or represented;

- upon the subsequent convening, the attendance of shareholders representing at least1/5 of the registered capital, and the decisions to be made with the vote of the majority of those present or represented;

The right to vote.

The shareholders exercise their right to vote in the general meeting proportional to the number of shares they hold, with the exception stipulated under The constitutive act can limit the number of votes belonging to the shareholders who possess more than one share.

The exercising of the right to vote is suspended for the shareholders not updated on the payments which are falling due.

The shareholder who, with regard to a certain operation, has a personal, an opposite interest to that of the company, will have to refrain from taking part in the proceedings concerning that operation.

On companys administration

The administration of the company by shares may be performed according to two systems, as follows:

a. the unitary system, with an administrator or a board of administration;

b. the dual system, with two bodies, namely the Supervision Board and the Directorate.

a. The unitary system

The company by shares is administered by one or several temporary and revocable administrators. In case there are several administrators, they are organized as a board. If a company is run by a board, one of the administrators will be appointed as chairman of the board.

The company by shares is represented by the administrators empowered to represent it or by the chairman of the board.

The administrators who have the right to represent the company are not allowed to delegate this right, unless provided otherwise by the constitutive act.

b. The dual system

In this system, the General Meeting of shareholders appoints the Supervision Board and this Board elects the Directorate. The executive of the company is the Directorate composed by one director or a board of directors. The Supervision Board controls the activity of the Directorate. In the relations with the third parties, the company by shares is represented by the Directorate.

For the validity of the decisions of the Managing Board, Directorate, Supervision Board the attendance in person of at least half of the number of administrators is necessary, unless the constitutive act stipulates a larger number.

The decisions in Managing Board, Directorate, Supervisory board are made with the majority of the attending members.

The Managing Board may delegate part of its powers to a Managing Committee, made of members elected from among the administrators, at the same time determining their remuneration.

Liability. The administrators are jointly liable towards the company for :

a) reality of payments effected by associates;

b) actual existence of the paid dividends;

c) existence of the registers required by law and their correct updating;

d) exact fulfillment of the decisions of the general assembly;

e) strict fulfillment of the duties imposed by the law and by the constitutive act.

Auditors

The joint-stock company will have three auditors and one deputy member unless the constitutive act stipulates a larger number. In all cases, the number of the auditors must be an odd one.

The auditors have to carry out their mandate personally. The auditors may be shareholders of the company except of the authorized or certified accountant.

The auditors are bound to supervise the companys administration, to check if the balance sheet and the profit and loss account are legally drawn up and according to the registers, if these are regularly kept, and whether the assets assessment was made according to the regulations settled for the drawing up of the balance sheet.

Limited Partnership by Shares

The limited partnership by shares is regulated by the provision regarding joint-stock companies except for the provisions regarding the partners.

The administration of the partnership is entrusted to one or several active partners.

In the limited partnership by shares, the administrators can be dismissed by the shareholders general assembly according to a decision made with the majority required for the extraordinary meetings.

The general assembly elects with the same majority another person instead of the manger who was dismissed, died or who ceased to exercise his mandate.

The appointment must also be approved by the other administrators if there are several ones. The new administrator becomes an active partner.

The dismissed administrator remains unlimitedly liable towards third parties for the obligations he was committed to during his administration, keeping his right to subsequently sue the partnership.

The active partners who are administrators cannot participate in the proceedings of the general assembly for the election of auditors even if they possess shares in the partnership.

Limited Liability Company

General Assembly

The associates decisions are to be made in the meeting of the general assembly.

Quorum. The general assembly makes decisions by the vote of the absolute majority of the associates and of the participating shares.

The vote of all associates is needed for decisions having as their subject amendments to the constitutive act.

Each social participating share gives the right to one vote.

The assembly of the associates has the following main duties:

a) to approve the balance sheet and to establish the allotment of the net profit;

b) to appoint the administrators and the auditors, to dismiss them and to release them of their activity;

c) to decide upon the suing of the administrators and auditors for damages caused to the company, also

designating the person in charge of taking action against them;

d) to modify the constitutive act.

Management

The company is administered by one or several administrators, associates or non-associates, appointed through the constitutive act or by the general assembly.

5. Dissolution and Liquidation

The dissolution

The dissolution of commercial companies may be decided in three ways, as follows:

- by the associates;

- by the court of law;

- by law. It means that in this case the dissolution of the company is imposed by a provision of the law.

The Law no. 31/1990 republished provides general cases of dissolution of commercial companies and special cases which are applicable to certain juridical form of commercial companies.

1. General cases

a) expiration of the period established for the life of the company; In this case, the associates must be asked by the administrators, at least 3 months before the final moment, whether they intend to extend the companys existence.

b) impossibility to carry out the object of activity of the company or its fulfillment;

c) the declared nullity of the company;

d) the decision of the general assembly;

e) the court decision, initiated by any one of the associates, for justified reasons, such as serious dispute between the associates that hinder the companys operation;

f) bankruptcy;

g) other reasons as prescribed by the law or by the constitutive act of the company;

In the cases prescribed at a, consultation of the associates must be held, at least 3 months prior to the companys expiration date, regarding the possible extension of its life. When such a consultation lacks, at the initiative of any one of the associates the court may order, by a decision, the carrying out of the consultation.

2. Special cases

1) The joint-stock company (company by shares) enters dissolution:

a) in the case the administration board or the directorate notices, following the anual losses, that the

active of the company (established as the difference between the total active and the totality of debts) has diminished to less than half of the social capital.

b) The latter case is applicable also to limited liability company.

2) The general partnership and limited liability companies are dissolved through bankruptcy, legal inability, exclusion, withdrawal or death of one of the associates when, owing to these causes, the number of the associates was reduced to only one.

An exception makes the case where the constitutive act contains a clause according to which the company may continue its existence with the heirs or when the only remaining associate decides the company to continue in the form of a limited liability company with one sole associate.

The provisions of the preceding paragraphs are to be applicable also to the limited partnership or limited partnerships by shares providing those clauses are applicable to the only active or the only sleeping partner.

3. Other cases of dissolution

At the request of the local chamber of trade and industry or of any interested person, the Tribunal can decide the dissolution of the company, in the cases when:

a) the company lacks the bodies required by the constitutive act or these bodies cannot meet any more;

b) the company did not submit within 6 months from the legal required terms the financial statements and other documents

c) the company ceased its activity or it has no known registered office or the associates have disappeared or they have no domicile or known residence. This is not to be applied in case the company was temporarily inactive, a fact notified to the public fiscal agencies and registered with the trade

register. The duration of inactivity cannot exceed 3 years.

Dissolutions effects

Dissolution of the company has, as an effect, the beginning of the liquidation procedure. Dissolution may take place without liquidation in case of merging or of total division of the company and in other cases stipulated by law.

As from the moment of dissolution, the managers cannot start new operations; otherwise they are personally and jointly liable for the operations they started. The ban imposed is to be applied as from the day the time established for the companys life expires or as from the date of its dissolution as decided by the general assembly or as declared by a court decision.

Even under these conditions, the company maintains its legal personality during the liquidation operations until the liquidation is finished.

The dissolution of the company, before expiration of the period established for its duration, becomes effective against third parties only after a thirty days interval has passed from the publication in the Official Gazette of Romania.

Dissolution of a limited liability company with an only associate brings about the universal transfer of the companys assets towards the only associate, without liquidation.

Liquidation

The liquidation of commercial companies involves all the operations concerning the conversion of the companys assets into cash, the payment of the creditors from these amounts and the distribution of the rest to the associates. During the liquidation, the company maintains its legal personality, but only for the purpose of performing the operations required for its liquidation. However, all the documents issued by the company must mention that it is subject to the liquidation process.

In order to declare the companys liquidation, we need official receivers, natural or legal persons, authorized by law, the official receivers are obliged, along with the companys managers, to make an inventory and to draw up a balance sheet to ascertain the exact situation of the companys assets and liabilities and to sign them.

Even if the constitutive act of the company stipulates provisions concerning the companys liquidation, the following rules shall be observed in liquidating and distributing the social assets:

- until the liquidators take over their duties, the administrators must continue their mandate;

- the act of appointing the liquidators or the judgment that replaces it and any subsequent act concerning their replacement must be deposited with the Office of the Register of Trade in order to be registered and published in the Official Monitor of Romania.

All the documents issued by the company must show that it is undergoing liquidation.

The liquidators are entitled to exercise the powers conferred upon them by the associates or shareholders, under the same conditions as those requested by the law for their appointing.

Official receivers obligations

a) to make an inventory and to draw up a balance sheet to ascertain the exact situation of the companys assets and liabilities

b) to receive and keep the companys assets, the registers committed to them by the managers and the documents of the company.

c) to

keep a register with all the liquidation operations, by their date order.

d) to request the erasing of the company from the trade register.

Official receivers rights

a) to go to law and be sued to the benefit of the liquidation;

b) to carry out and to conclude the trading operations related to liquidation;

c) to sell, by public auction, the real estate and any movable estate of the company; the goods cannot be sold in the lump;

d) to make transactions;

e) to liquidate and to cash in the companys debts even in case of the debtors bankruptcy, issuing a receipt;

f) to contract bills of exchange, to make unmortgaged loans and generally to carry out all other necessary acts.

The companys liquidation must be completed within 3 years at the most as from the date of its dissolution. For justified reasons the court may extend the said time limit with not more than 2 years.

After the liquidation is completed the official receivers must request the erasing of the company from the trade register.

Beside the provisions of the present title, the rules established under the constitutive act or law are also applied to the companies undergoing liquidation to the extent to which they are not incompatible with the liquidation.

All the documents issued by the company must show that it is undergoing liquidation. Business Law_7_Legal Act

NOV - 26 - 2013 The most accurate definition of a legal act is an expression of somebodys will made with the intention to bear, modify or cease a juridical relationship.

Our law commonly uses this notion (act) with two different meanings:

1) Firstly, as we already defined it, as an expression of a persons will.

This is the negotium sense;

2) Secondly, this notion is used with the meaning of a written statement, which is known as the instrumentum sense.

Civil code uses both of these meanings. For instance, the civil code provides that the acceptance of a succession can be expressed or implied. It is expressed whenever the successor makes an act in an authentic form (instrumentum sense) in order to acquire the inheritance, and it is implied whenever he simply makes an act (negotium sense) which can be concluded only by a person who has a successor quality.

CLASSIFICA TION OF LEGAL ACTS

There are different criteria to classify the civil acts as follows:

Unilateral and bilateral acts

A unilateral act is an act that involves the expression of a single persons will. It means that, there is only one person expressing his intention to produce juridical effects. It can be included in this category the will, the offer to contract, the acceptance of a succession.

On the contrary, a bilateral or multilateral act is an agreement between two or more parties with distinguished interests. A bilateral/multilateral act is a contract, a legally recognized promise or bargains made by two or more persons and including all rights and duties resulting from their promises or bargains.

Examples of contracts include: contract of sale, contract of exchange, loan, mandate, consignment, employment contract, etc.

The process by which the parties arrive at a bargain will vary widely according to the circumstances. It is common to assume that it involves two distinct steps: the first is an offer by one party and the second is an acceptance by the other.

Moreover, contracts may be classified, in their turn, as unilateral. and bilateral contracts.

Indeed, a contract may involve an exchange of promises in which two parties agree that each of them will perform a certain obligation. The exchange of a promise for a promise is known as a bilateral contract.

If there is no such exchange and only one part assumes obligations, the contract is unilateral. For instance, in a loan contract, the loaner is the promisor, being entitled to demand the loan, and the borrower is the promisee, being obliged to give it back. We emphasize that, in this case, the contract involves two will but only one part assumes obligations.

Acts made by onerous title and acts made by gratuitous title

The criterion of this distinction is the aim pursued by parties concluding the act.

An act made by onerous title is that act in which each party promises an economic benefit to the other in exchange of another economic benefit.

On the contrary, an act made by gratuitous title is one in which one party promises to the other an economic benefit without expecting, in exchange, any promise.

Although many of the unilateral contracts are made by gratuitous title (e.g., the donation or the gratuitous mandate), there are some which may have both gratuitous or onerous titles (e.g., the loan contract without or with interests).

The acts made by onerous title subdivide into:

a) commutative act one in which the parties know, from the very moment of concluding the act, which will be their mutual obligations (e.g., sale contract).

b) aleatory act an agreement wherein the performance of one party depends on the occurrence of an uncertain event (alea).

In fact, when the contract is concluded the parties do not know the extent of their obligations because their performance depends of the occurrence of an uncertain and fortuitous event. Examples of such acts include life and fire insurance contracts or life annuity contracts. Such agreements are enforceable notwithstanding an uncertainty of terms at the time of their conclusion or an undertaken risk clearly appears.

The acts made by gratuitous title are subdivided in:

a) grants a voluntary transfer of goods from a patrimony to another.This transfer can be achieved either by a person to another.

b) acts of benevolence a favor made by a person to another without decreasing the patrimony of the former (e.g., the gratuitous mandate).

Translative, constitutive and declarative act

The criterion of this classification is the effect of the act.

A constitutive act is one that constitutes a right which does not previously exist. For instance, the juridical institutions of mortgage or of usufruct are such constitutive acs. Accordind to the New Civil Code, the partition is a constitutive act. A partition is a dissolution of the unity of a possession that exists between mutual owners.

A translative act is an act which transfers a pre-existing right. The most juridical acts have this character (e.g., sale contract or exchange contract).

A declarative act is one that consolidates a pre-existing subjective right. For instance, the partition or the settlement is a declarative act.

Consensual, formal and real acts

A consensual act is an enforceable one with no formal conditions requested. code the most juridical acts are enforceable by simple consent.

According to the civil

A formal act is enforceable only if there are observed some additional formal conditions, other than the simple consent. The form required for concluding such acts is, most frequently, a written settlement. For instance, law requires a written form, and sometimes even an authentic form, for concluding acts as

donation, will, mortgage or farm contract.

A real act is one that can be concluded only by delivering the thing by the transferor to the transferee. Therefore, the deliverance of the goods is requested not only to perform the real act, but to conclude it as well. There are real acts loan or deposit contracts, whereby the simple consent is not enough for the validity of the transaction. Thus, the deliverance of the goods is required by law for a valid conclusion of the act itself.

Acts with instantaneous execution and acts with successive execution

An act with an instantaneous execution (uno ictu) is one that involves a single performance, meaning made at once (e.g., sale contract).

An act with successive execution involves multiple performance. It means that we have successive operations (e.g., life annuity contract, rent contract, etc.).

According to the New Civil Code, there is no difference in what concerns the nullity of those acts. One of the most important differences is that the sanction for culpable failure or improper performance will be rescission in case of the contracts with an instantaneous execution, while for the contracts with successive execution the sanction will be dissolution.

Principal and accessory acts

A principal act is one independent of any other act.

An accessory act is one that depends on a principal act. For instance, a mortgage depends on the loan

contracted by the mortgagor. It cannot continue after the time when the mortgagor performed his obligation to the benefit of the encumbrance. In this case, the rule is that the accessory act has the same destiny as the principal one (accesorium sequitur principale).

Pure and simple acts and acts affected by modalities

A pure and simple act is one that does not contain a modality. There are several acts that are incompatible with modalities, like marriage or adoption, but most of them may be affected by the modalities.

A modality is a future event that determines the existence or performance of a juridical act. There are modalities the term, the condition and the task, which will be later treated in this chapter. Certain acts are essentially dependent upon a modality, e.g., the loan, that always involves a term, the donation with a task or the insurance contract.

Inter vivos acts and mortis causa acts

An inter vivos act (lifetime act) is that which produces its effects unconditioned until the death of the promisor. That category includes all contracts and the most of unilateral acts.

A mortis causa act is one which produces its effects after the death of the promisor. In other words, until then it has no effects. (the will)

Named acts and unnamed acts

The named acts are the acts described and regulated by law. Their conclusion and performance will be governed by the specific provision of law (e.g., civil code regulates the sale contract in Art. 1650 1762, the donation in Art. 1011-1033, the exchange contract in Art. 1763 -1765, etc.).

The unnamed acts are those created by the parties for their specific interests. They are as legal as the

named ones. In as much as there is not a specific provision in law, they are governed by the rules determined according to the general principles of contract law. Sometimes an unnamed contract may become a named one, when a special law, which describes and regulates it, comes into force. It has happened recently with the sponsorship contract, becoming a named act by coming into force of Law no. 32/1994.

CONDITIONS OF VALIDITY

By conditions of validity of juridical acts we understand their elements of enforceability. Thus, the civil code provides the main conditions for the validity of juridical acts. These conditions are the following:

- the capacity of the parties to contract;

- a genuine assent of the promisor;

- a certain subject matter;

- a lawful consideration.

The capacity

To test the capacity of concluding a juridical act does not mean to see whether a persons mind is impaired or unsound, and whether that person understands all the terms of the act, but, it means, to see whether that person has the ability to comprehend the nature of the transaction he or she is engaged in and understand its consequences.

Essentially, any person unable to take care of his or her property for any reason, including mental illness, advanced age, or disease is considered incompetent. The capacity, which is a state of law (de jure) is distinguishable from judgment, which is a state of fact (de facto).

Civil code provides that any person is assumed to be able to contract unless he is declared incapable by law. It means that without a court determination of legal incompetence, the presumption of law is that a person has the legal capacity to contract or to make a unilateral act. In this matter, the rule is the capacity, and the lack of capacity is the exception. Therefore, any legal provisions related to the absence of capacity cannot be extensively construed.

In company law, the issue is analyzed according to the rule provided by Decree no. 31/1954, which prohibits in Art. 34 the ultra vires acts (meaning, the activities of a corporation beyond the powers conferred upon it by its charter, or by the statute under which it was created).

The assent

The assent and the consideration constitute the juridical will of the parties.

The parties voluntarily and knowingly conclude the act as a result of their intention.

In our legal system, the juridical will of parties is governed by two principles:

1) the principle of freedom of juridical will of the parties. It means that the parties of a civil act are free to conclude or not a certain act, to stipulate any particular clauses, to determine the specific content of the act, and, in most cases, to determine the form of the act.

The parties freedom to conclude any juridical acts is limited by the compulsory rules of law and by the public policy.

2) the principle of real will of the parties. According to this principle, if there is any incongruity between the real intent of the parties and the expressed clauses of the act, the former is the one which will be taken into account.

It should be mentioned that, in order to apply this principle, the proof of the real intention of the parties is taken into account. Thus, if it is possible to determine the real will of the parties, the act has to be construed upon the expressed words used by parties.

It results there from that the validity of the act depends on the validity of the juridical will of the parties. Indeed, in some cases, the elements required for a valid and enforceable contract appear to be present but in reality they are not.

For example, if a store owner accepts a gang leaders offer to protect his property from gang violence by agreeing to pay the gang $100 per month, the store owner is not genuinely assenting to the terms of the act. Similarly, if a used-car salesperson deceitfully states that a car has a rebuilt engine and has never been in an accident, the buyer who relies on that information and signs a purchase contract does not have a valid juridical will to conclude the act.

The assent externalizes the partys intent to conclude a juridical act. For being the basis of a valid act, the assent has to fulfill several conditions, as follows:

1) It has to exist. Any act concluded in the absence of the assent will be declared null and void;

2) It has to be unambiguously externalized. It means to result from the words of the parties, either orally or written expressed, or even derived from their actions.

While, usually, any reasonable means of communication are effective to externalize a valid assent, several problems arise in case of silence. Does silence have any juridical value?

Generally speaking, the assent cannot be implied, and in case of silence it is considered that it is no assent. Mere inaction and silence are usually not regarded as manifestations of intention to agree over a contract. However, some exceptions to this rule occur, depending on the subject matter of the act.

Firstly, law expressly provides, in some cases, that the silence of one of the parties has to be considered an assent. For instance, the civil code stipulates that the rent contract is considered restored in force if,

after the term of the contract has been fulfilled, the parties silently continue to perform it.

Secondly, the initial agreement between the parties may constitute the basis for regarding silence as an assent.

Thirdly, certain conducts of the party may be assumed as expressing an assent. For instance, if an heir conducts himself like an acceptant of an inheritance, law considers that he has performed a tacit acceptance.

3) It has to be expressed by a person who is mentally competent to conclude the act. In other words, the person is able to comprehend the nature of the transaction he or she is engaged in and to understand its consequences.

4) It has to be expressed by a person who intents to engage himself in a legal relationship.

5) It has to be definite and certain as the essential terms of the act are concerned;

6) It has to be genuine. To be genuine, the assent must be conceded voluntarily and knowingly by each of the parties, elsewhere there is no valid contract between them.

The lack of genuine assent may arise by the so-called vices of consent or defects. Law considers as vices of consent the following:

a) the mistake/error;

b) the misrepresentation;

c) the duress;

d) the injury.

a) The mistake (error)

The error is generally defined as a state of mind which has not accordance with the facts. It is an erroneous belief about the facts as they exist at the time when the agreement is concluded. It should be mentioned that the error is produced by the person himself. In order to vitiate the partys assent, the error should be serious. In that case, the party is entitled to claim the cancellation of the act.

Types of errors:

a) essential error, which refers to the nature of the act (error in negotium) or to the identity of the subject matter (error in corpore). For instance, when one of the parties believes that the act is a donation, and the other one believes that it is a sale.

A similar case is when one party believes that he or she buys a car while the other party believes that he or she sells a toy car.

Another example of essential error is the one which refers to the qualities of the subject matter of the act (error in substantiam) or to the contracting person (error in personam). A case of error in substantiam arises, for example, when the seller believes that the subject matter of the contract is an upright piano, and the buyer believes that it is a grand piano.

Another type of error is one concerning a persons identity. Thus, generally, an act is avoidable for error in personam only if it is concluded intuitu personae. These acts are concluded on the ground of one of the parties qualities

If the offer or receives an acceptance from one whom he mistakenly believes to be the addressee of the offer, the offer may avoid the contract for error in personam.

The sanction for these types of error is relative nullity.

b) nonessential error is the false representation of less important circumstances at the moment when the contract was signed, in the sense that the mistaken party would have signed the act whether he had had a fair representation of those circumstances.

A nonessential error can attract a decrease or increase in value of the benefit, but may remain even without any legal consequences

c) immaterial error, which refers to a contract. It doesnt confer to any of the parties unenforceable.

From another point of view, an error could be bilateral or unilateral. A mutual (bilateral) error means that both parties are misunderstood the same matter. For example, a mutual error is where both parties understood that the real agreement was what one party alleges it to be, but had unintentionally prepared and executed one which did not express the true agreement.

A future distinction should be drawn up between an error about law and an error about the facts. It should be mentioned that within our system of law, the error about law is not accepted for pleading somebodys ignorance. This rule is based on the fact that law is presumed to be known from the moment it is published in the Official Monitor of Romania.

Thus, whenever somebody is fully cognizant of the facts and the substance of his behavior, he cannot plead his ignorance regarding the legal consequences of his conduct for justifying the rescission of the contract. By contrary, in case of errors about the facts the party can claim the rescission of the contract.

b) The misrepresentation

The misrepresentation is the misrepresentation of a fact that is made with knowledge and with intention to deceive the other party. The misrepresentation has the same essence as the error/mistake, meaning the misrepresentation. But unlike the error/mistake, the misrepresentation results from one

contracting party action. Thus, the party who misrepresents the facts clearly intends to do it and to deceive the second party, who, relying on the misrepresentations, changes his or her legal position in concluding the contract.

Sometimes, a misrepresentation of facts may be unintentional. It means that there is no misrepresentation, but the act is still avoidable, because it was concluded by mistake.

In order to have a misrepresentation, law commonly requires either an affirmative act or an express statement. Occasionally, silence may constitute a misrepresentation of facts leading to fraud. The intention to deceive is expressed by the partys intention to create a false impression. Since misrepresentation requires this intent, mere negligence or carelessness cannot constitute fraud.

From a structural point of view, the misrepresentation has two main elements:

1) intentional element (which consists of the will to fraud the other party),

2) material element (which consists of the activities performed in order to lead the other party into mistake).

Generally, mere failure to disclose information to the other party does not constitute a misrepresentation, because law does not impose a duty of disclosure. There are, however, a number of exceptions to this rule. Suppose one party knows certain material facts and knows the other party is not aware of them.

Moreover, he also knows that if those facts were known by the other party there would be no contract. For example, when a prospective seller of land has knowledge of a hidden defects in the property that cannot be observed through inspection. If the seller fails to inform the purchaser about these defects, the seller could be held liable for misrepresentation because his or her silence was intended to mislead the purchaser into assuming there were no defects.

However, an active ceasing of the fact is the most obvious type of misrepresentation. For instance, when

the seller of a used car turns back the odometer to conceal the number of kilometers the car has been driven, misrepresentation has occurred.

c) The duress

The relief from an agreement on the grounds of duress is clearly avoidable if a person is deprived of his freedom or his property through physical or moral force. Even the threat of physical force, although not carried out, constitutes duress.

It should be mentioned that duress is not limited to the above situations.

Indeed, undue influence, which exists when a person exercises mental coercion over another, can also lead to lack of genuine assent.

Furthermore, the coercion exercised not only against the contractual party, but against a relative or closed friend of the party as well constitutes duress, in a juridical meaning.

The essence of duress is the lack of free will or voluntary assent. Any wrongful act or threat that overcomes the free will of the consenting party constitutes duress. In other words, any economic coercion, threats on a persons family and the beloved ones, and other uses of moral or social force to put a person in such fear that his or her act is not voluntary, constitutes duress.

In order to determine whether a contract can be avoided on account of duress, it is necessary to ascertain whether the acts or the threats were wrongful and whether these events and not the free will of the party have induced the required contractual assent.

At the same time, it should be mentioned that duress cannot be limited to the fear that might overcome an ordinary person. If a contracting party, whether brave or timid, is actually coerced to conclude a contract, duress has occurred. Thus the state of mind of the person who is being threatened must be examined.

Unlike misrepresentation, duress can arise not only from the activity of the contracting party, but also from the wrongful activity of a third party.

As a conclusion, it should be mentioned that, as a vice, duress presupposes an intentional element and a material one as well. Thus, the intentional element is the fear induced to a contracting party for determining he or she to conclude a juridical act.

d) Injury

Injury represents an obvious disproportion between mutual promises of the parties within a bilateral contract.

In fact, injury is not provided by civil code as a real vice of consent, but it is commonly recognized that it has this effect.

Injury includes the absence of the meaningful choice of one party together with the terms of the contract, which are unreasonably favorable to the other party.

It should be mentioned that not every juridical act could be avoided on the ground of injury. Law requires several conditions that have to be fulfilled to obtain the rescission of the act based on injury.

Thus, for the injury in case of the underage child, the following conditions must be fulfilled

*) it has to be a bilateral act (e.g. a contract). That condition is imposed by the fact that only these kind of juridical acts are defined as promises made in exchange of promises. As consequences, bilateral contracts are susceptible of disproportion of parties mutual promises;

*) It has to be a commutative contract, otherwise the disproportion assumed by the parties appears as a normal risk of an aleatory contract (the terms commutative and aleatory contracts are explained in another chapter of this book); .

*) the party who alleges to avoid the contract has to be an underage person between 14 and 18 years old.

*) it has to be a contract whereby such minor can conclude on his own name and without any additional consent.

For the injury on case of an adult, the following conditions must be fulfilled:

It has to be a bilateral contract It has to be a commutative act, made by onerous title It is necessary that one of the party, taking advantage of the state of need, inexperience or lack of knowledge of the other party stipulates in its own favour or another person a benefit of a considerably greater value at the time of concluding the contract than the value of their own benefits. As an exception, in case of the sale contract, the ridiculous low price is sanctioned with the relative nullity of the contract without the need for the party to demonstrate that the other had taken advantage of the state of need, lack of experience or lack of knowledge of the seller. In case of the adult, the action for annulment is admissible only if the damage exceeds half the value of the performance guarantee or executed by the injured party at the time of concluding the contract and the disproportion must subsist until the request for cancellation.

The subject matter

Art. 1225 (1) NCC stipulates that the subject matter of the contract is the legal operation, such as the sale, the lease, the loan and so on, agreed by the parties.

Art. 1226 (1) NCC stipulates that the subject mater of the obligation is the benefit to which the debtor engages.

The distinction between the suject matter of the contract and the subject matter of the obligation is

very useful. Therefore, the subject matter of the contract is the same with the subject matter of the civil legal relation and the subject matter of the obligation consists of the positive or negative performance that contracting party undertakes to each other.

Within a juridical act, the parties conduct can refer to goods and thus, the toads become subsequent objects of the act.

In order to be valid, the subject matter of a juridical act has to fulfill seven different conditions requested by law, as follows:

1. The subject matter has to exist. Law considers the subject matter as existing even if it exists in the near future, unless it does not have an actual existence (e.g., the sale of future harvest is a valid contract). A transaction in futures occurs when a person contracts to deliver goods that either does not exist, or the seller does not own them at the time of contracting. There is only one exception from this rule. It is the case of the sale of future inheritance, which is completely prohibited by law, not on the ground of non-existence of the subject matter, but on the ground of immoral consideration.

If the object does no longer exist (at present), even if it has existed in the past, the subject matter does not fulfill this requirement.

2. The subject matter has to belong to the civil circuit. Thus, according to the civil code only the goods on the market can be the object of a contract.

3. The subject matter has to be identified or identifiable. The process of selecting or setting aside the specific goods is referred to as identification of the goods within the contract. According to the civil code, the goods individual established (res ceria) are identified by their features, while general established goods (res genera) are identified by their quantity, quality, number, size, etc.

The identification of goods has important legal consequences for the contracting parties. Thus, if the goods are individual established and are lost, damaged, or destroyed, the seller supports these risks. By contrary, when the goods are general established, the seller is bound to deliver goods from the same category, unless the risk has passed to the buyer. In this last case, the buyer bears the loss.

It should be mentioned that the act is null, unless its object/subsequent subject matter is identified or, at least, identifiable.

4. The subject matter has to be legal or material possible (impossibilium nulla obligatio est). The impossibility of the subject matter means the impossibility of anyone to perform a particular promise. For example, is not material possible to alienate the moon. It is neither legal possible to sell goods that belong to public property of the state.

This requirement is not considered fulfilled if the performance of the contract is impossible only for a particular promisor, but it is generally possible.

For instance, a contract whereby a part promises to the other to pay an amount of

5. The subject matter has to be free from legal or moral prohibition. It means that the subject matter of the act should be lawful. Law usually cannot enforce an act whereby the parties promise to do something illegal or against public policy or morals.

6. Each party has to assume his or her owns behavior. It means that nobody can promise somebody elses conduct. For example, it is forbidden to sell the goods which belong to somebody else, or to engage performance the performance of somebody else.

The consideration

In order to be enforceable, a legal consideration or cause must support a juridical act. The consideration represents the goal pursued by the parties who conclude a particular juridical act.

The consideration is analyzed by our juridical literature from two points of view:

- the instant consideration, which is essentially the same in all acts of a certain type;

- the intermediate or specific consideration, which is different from a certain agreement to another. For instance, the parties who conclude a sale contract resume the same instant consideration in all cases; the seller is interested to obtain the price while the purchaser is interested to acquire the goods.

Nevertheless, every seller has his or her own intermediate- consideration for selling (e.g., he or she wants to buy another object with that money, or he wants to pay a former debt, etc.). At the same time, every purchaser has his own intermediate consideration for buying (e.g., he or she wants to use the object or he wants to sell it for a better price, etc.).

In order to support a valid contract, the consideration has to fulfill several conditions as follows:

- to exist;

- to be real;

- to be non-prohibited by law or public morals (contra bonos mores). For instance, a promise to undertake a social obligation cannot be considered a valid one.

The problem of the validity of the consideration does not arise unless the intermediate cause is analyzed. The instant cause is always valid, being an abstract one.

In fact, the civil code provides two presumptions: firstly, that the consideration exists, and, secondly that it is valid.

The form

The observance of the proper legal form is one of the validity conditions required for concluding a juridical act.

Within the common understanding, many people assume that juridical acts should be drawn up in a written form in order to be enforceable. In fact, law does not usually impose that. There are only a few types of juridical acts that should be concluded in a certain form imposed by law for their enforceability.

It means that within Romanian law system, the formalism does not apply as a principle, despite the normal exceptions provided by law.

The legal rules, which stipulate formal requirements, are divided into three main categories as follows:

1) form requested by law ad validitatem. This form has to be observed for the very validity of the act, which is compulsory. The non-observance of this form flaws the act and a later complaining with the legal rules cannot cover the nullity of the act.

Therefore, several acts are valid only when they are drawn up in a deed stricto sensu, meaning an authentic form (e.g. donation, sale of land, articles of partnership or mortgage). Law also requires some formal conditions for certain other acts, as it is the case of the will (the will is valid only if it is executed in the accordance with the formalities prescribed by statute for each type of will).

2) Form requested ad probationem. This form has to be observed in order to proof (to attest) the content of the act, although the act is valid even in the absence of the due form.

Sometimes, the simple consent of the contracting parties is enough for concluding a valid agreement and law requires a written form only for constituting evidences that can be used within a lawsuit. Examples of such acts include insurance contract, voluntary deposit, lease or settlement.

However, the civil code specifically requests the written form for an act with an object having a value over 250 lei. Due to the power of the national currency, it means that today, the written form is

requested for proving any agreement.

3) Form requested for the opposability to third party. In other words, the act is valid between contracting parties, but in order to make it opposable to third parties, it should be concluded in a specific form. The form imposed by law has to be also observed; otherwise the act could not produce its effects over any third party. For example, there can be mentioned the legal requirement to notify the debtor within the assignment of debts and the registration of selling and purchasing contracts of land or of real estate.

In fact, the assignment of debts is a debt transfer to another persons benefit. Within a contract, one of the contacting parties can transfer his contractual rights to a third party. The person entitle to do that is the so-called assignor while the recipient of these rights is the so-called assignee. The contract between the assignor and the assignee has no effect against the debtor, unless he or she is informed about that assignment, otherwise the debtor may validly pay his debts to the assignor.

Being governed by the same rule, a land or real estate contract has effects only between the seller and the purchaser, unless it is registered in the real estate register. This is why, the purchaser of the land or other real estate would not be able to prove his rights in case of eviction from a third party, unless he or she has observed the due form of act.

THE MODALITIES OF THE JURIDICAL ACT

As it was mentioned above, juridical acts may be pure and simple or affected by modalities. The acts modalities are future events that determine the existence or performance of the act.

The modalities of the juridical act are: the term, the condition and the task.

The term

A term is a sure and future event until the beginning or the extinguishing of a right and of correlative

duty adjourns. There are two categories of terms: suspensive and extinctive terms.

A suspensive term is one that adjourns the beginning of enjoyment of a right and of correlative duty (e.g. the term when the debtor becomes liable for devolve duty, the so-called term of payment).

An extinctive term is one that adjourns the end of a right and of correlative duty (e.g. the date of a creditors death within a life annuity contract).

The term, either suspensive or extinctive, affects only the performance of the act, not its very existence. Therefore, each of the above categories of tenns produces different effects as follows:

- If the promisor (the debtor) performs his obligation before the suspensive term provided by the contract, the payment is valid. In other words, the debtor has voluntarily renounced to the benefit of the term;

- Until the payment is not due, the creditor cannot claim the payment of his debt right and the debtor is not liable to pay;

- After the payment is due, the creditor is entitled to pursue the debtor (to sue) for imposing him to execute his obligation;

- Unlike the suspensive term, the extinctive term brings the debtors obligation to its end. It means that the creditor may claim his debt right and the debtor is liable for his duty;

The condition

A condition is a future and uncertain event, which suspends the creation or the execution of legal obligation. Apart from term, within condition the achievement of the future event is not sure. The

conditions, as modalities of juridical acts, can be classified upon many criteria.

Along with specific effects arising from them, there are suspensive conditions and resolutive conditions.

A suspensive condition is one upon which the enforceability of a contractual right and its correlative obligation depend. It should occur before the party executes his obligation within the contract.

For instance, ,the further promise Ill sell you my apartment, if I have to move in another locality is a suspensive condition.

A resolutive condition is one upon which the cancellation of a contractual right and its correlative obligation depend. If that condition occurs any performance under the contract takes end.

The following example expresses a promise affected by a resolutive condition Ill sell you my car, but if I have to move in another locality, the sale is canceled.

A condition, either suspensive or resolutive, affects not only the Iperformance of the act but its very existence. Therefore, the condition has the following effects:

- Until the achievement of the suspensive condition (pendente conditione), the creditor is not entitled to request the performance of the contract and the debtor is not liable to execute it. Nevertheless, if the debtor fulfils his obligation, he can claim the refund of his payment because it was not due. In this case, he is entitle to obtain the restitution;

- after the achievement of the suspensive condition (eveniente conditione), the act becomes a, pure and simple one and as consequences the creditors right is retroactively strengthened;

- if the suspensive condition cannot be achieved, any juridical relationship between the parties is retroactively canceled;

- until the fulfillment of the resolutive condition (pendente conditione) the act has the appearance of a pure an/d simple one and therefore the creditors right is enforceable and the debtor is liable to execute his obligation;

- after the resolutive condition is achieved (eveniente conditione), the act is retroactively canceled. Consequently, the parties should return their achieved services, just as no contract had been concluded between them;

- if the resolutive condition cannot be achieved, the act is retroactively considered as a pure and simple one.

Another distinction is made between the fortuitous (causative) condition, the joint (mixed) condition and the willed (potestative) condition.

Firstly, a condition is fortuitous (causative) whenever it consists of a casual event.

For instance Ill lend you my umbrella, if it rains.

Secondly, a condition is joint (mixed) whenever it depends on one of the parties will.

For example Ill buy your apartment if I get married until the end of the year.

Finally, a condition is willed (potestative) whenever it depends only on one of the parties will.

Law allows the conditions that depends on the promisees will (e.g., Ill buy your apartment, whenever you want to sell it), but prohibits it if depends on the promisors will (e.g. Ill buy your apartment, if I feel like it).

Since it affects the existence of the creditors right and the debtors duty, the condition has a retroactive effect. It means that, its achievement makes the act a pure and simple one (in case of a suspensive condition), and cancels it (in case of a resolutive condition).

The task

A task is an obligation to give, to do or not to do, required by the grantor to the grantee, within a gratuitous act (donation or a legacy, either bequest or devise). It may be required to the benefit of the grantor, to the grantees benefit or to the benefit of a third party.

An example of tasks provided to the grantors benefit includes the contract whereby the grantor required to the grantee to pay an amount of money to a third person. However, the task may never overtake the value of the gift, otherwise the contract becomes a bilateral one.

A task may be also included in a will. For instance, the devise whereby the devisor specifically requests that the devisee cultivate the land that constitutes the object of the devise is a legacy affected by a task provided to the benefit of the grantee.

A task provided to the benefit of the third party is almost similar with the contract to the benefit of a third party. Essentially, a contract to the benefit of a third party is a contract whereby the promises primary interest is to bestow a ~ft upon a third party (e.g. a life insurance whereby the insurance company promises to pay a certain amount of money to the benefit of a non-contracting third party if the insured person die).

Unlike the contract to the benefit of the third party, a donation or a legacy affected by a task stipulated to the benefit of the third party grants the grantee (e.g., the task imposed to the legatee to pay a certain alimony to the surviving spouse of the legator).

Whether the grantee does not execute the task, the gratuitous act is not retroactively canceled, but the grantor may revoke it.

THE EFFECTS OF JURIDICAL ACTS

The effects of the juridical act mean the rights and the correlative duties that arise, modify or extinguish it. The effects of juridical acts are identically with their content. Thus, in order to determine the acts effects, the content of the act (the parties rights and obligations) should be analyzed together with the parties will.

It means that the following steps should be achieved:

1) to determine the existence of the act and to prove it through the means of evidence;

2) to determine the acts effects through the interpretation of the acts provisions.

It should be mentioned that the content of each provision expresses the parties will and their intention to conclude that particular act.

In order to analyze the content of the acts provisions the following interpretation rules stipulated by civil code should be observed:

- juridical act has to be interpreted according to the real will of the parties, despite the literal meaning of the words

- juridical act yields not only the effects the parties had in mind at the time it was concluded, but also the effects requested by law or by public morals

- the usual clauses of the act are considered written, unless the parties expressly forbid them

- the clauses of a juridical act are systematically interpreted, according to the meaning of the whole act

- whenever a clause has two different meanings, it should be interpreted that it produces effects, not in the way that excludes any effect

- doubtful clauses are interpreted according to the nature of the act ;

- if a doubtful clause cannot be understand otherwise, it is interpreted according to the customs of the place where the act is concluded

- doubtful clauses are always interpreted to the debtors benefit

- the act will be essentially considered to cause the effects intended by the parties, no matter how general are the words used in the act

- whenever the parties use an example within the act that does not mean they intended to restrict their obligations at this example

The effects of a juridical act are governed by the following three principles:

a) the principle of compulsory force of the act;

b) .the principle of irrevocability of the act; c) the principle of relativeness (privacy) of the acts effects.

The principle pacta sunt servanda

The principle of compulsory force of the act is expressed by the Latin I idiom pacta sunt servanda.

Indeed, the civil code synthetically expresses this idea by stipulating that the conventions legally concluded have the force of law between contracting parties.

Furthermore, the principle of compulsory force is effective even upon the court of law. For instance, the court solves the litigation between parties according to the legal provisions and also based on the convention existing between the litigants.

Nevertheless, law expressly provides the exceptions from the compulsory I force of the act. Thus, despite the parties will the contract takes end is the following cases:

- the death, incompetence, insolvency or bankruptcy of any of the contracting parties terminates the mandate contract

- the contracts concluded intuitu personae are generally terminated by the promises death.

The principle of irrevocability of the act

The principle of irrevocability of the act restrains the promisor to revoke his promise. This rule is a corollary of the. previous one (the principle of compulsory force of the contract).

By way of exception, there are several cases where the unilateral revocation of the act is allowed by law. For instance, law allows: the cancellation of a gift made by one of the spouse to another

- the termination of a lease (rent) contract by the lessee, if there is no certain term for the contract. A lease is an agreement whereby one party (the so-called landlord) transfers his or her right into immediate possession to the other party (the so-called lessee) for a commonly consideration, the so-called rent

- the dissolution of a partnership;

- the termination of the gratuitous mandate by any of the parties

- the termination of a gratuitous deposit by the deponent

There are also several unilateral juridical acts that may be merely revoked by their author, such as:

- the will. The testator may revoke a will at any time until his or her death. Notwithstanding, conceptually, a will is not a true juridical act until the testators death, because it has no juridical force. Obviously, after the testators death it cannot be revoked anymore;

- the relinquish of an inheritance. To revoke a relinquish of the inheritance means to accept the inheritance. Therefore, the conditions requested for revocation of the relinquish are the same as they are for the

- acceptance of an inheritance (the acceptance should be expressed within 6 months from the death of the person inherited and the inheritance should not to be previously accepted by another heir);

The principle of privacy of the act

According to the principle of relativeness (privacy) of the acts effects, the effects of a juridical act are produced strictly between the parties of the act (promisor and the promisee). Hence, a plaintiff can maintain a lawsuit only against the party with whom the contract has been concluded.

In order to understand that principle, the following basic notions have to be explained:

- party (the so-called contracting party in case of a bilateral act);

- third party;

- interested party.

A party is a person who concludes a juridical act, either referred to as an author (in case of a unilateral act), or as a contracting party (in case of a bilateral act). Depending on the nature of the act, the parties can have specific names: grantor-grantee, legator-legatee, assignor-assignee, bargainer-bargainee, leasor-Ieasee, landlord-tenant, vendor-purchaser, consignor-consignee, devisordevisee, mortgagor-mortgagee, etc.

From a juridical point of view, a .party can be a single person or group of Itwo or more persons, whether they have the same interest within the act.

A third party is a person who was not involved in the conclusion and the performance of the act.

An interested party (known, also, as ayant cause or habentes causam) lis a non-contracting party who uses the existence of the act as a basis for a lawsuit.

Essentially, the interested parties are persons who are recognized either as aving enforceable rights or as being liable for duties created by an act where they e not parties. These persons are grouped into three classes:

1. Universal successors and successors with universal title, either intestate or testamentary.

A universal heir succeeds an universitas bonorum, with assets and liabilities, and every juridical act made by the deceased takes effects upon him or her.

In company law, a case of universal succession is the merging through absorption. The absorption supposes that a company becomes a part of another company (the so-called absorbent company). The former company ceases its existence but the absorbent company continues to exist and succeeds into

the rights and duties owed by the former corporation. One of the absorption effects is that the absorbent company retains its name and identity and, at the same time, acquires the assets, liabilities, franchises and power of the company that ceases to exist. Another case provided by company law is the merge. Within merge, two or more companies are united and form a new company. At the same time, the original companies cease to exist. In both the case, the absorbent company or the company resulted from merge acquires the assets and liabilities of the former company/companies, being its universal successor.

Successors with universal title are persons who bequeath a fraction of the deceaseds patrimony. They have the same position like universal heirs, being bounded by any contract or unilateral act made by the deceased. The only distinction between them and the universal heirs is that the former inherits a fraction of the patrimony, whereas the latter inherit a whole patrimony.

For example, within company law, the division of a company leads to such succession with universal title. Thus, the divided company ceases to exist and the resultant companies bequeath fraction of its patrimony.

Universal successors and successors with universal title are interested parties in any act concluded by the deceased because they inherit the patrimony as it is (e.g. decreased by expensive gifts). Thus, even if they were not parties of the act, due to their inheritance right, they become interested parties. It should be mentioned that, there are cases where law allows to a special category of heirs to avoid the gratuitous acts made by the deceased.

2. Successors with a particular title

A successor with a particular title is a person who acquires a certain enforceable right, by any lawful transfer. For instance, such persons are the purchasers, the assignees, the heirs who inherit a specific right. The transferees are interested persons only related to the acts which fulfill certain conditions as follows:

- the act is previously concluded;

- the transfer

- the act refers to the right acquired by the transferee.

We emphasize that the transferee can be either a party (in the act whereby he or she acquires the right), or a third party (in the act which has another object than the acquired right).

Simple creditors

A creditor is a person to whom an obligation is due. According to law, the creditor has the right to demand and to be recovered by a certain performance of his debtor. The creditors who are entitled to a lien (e.g. a charge, holds or claims upon the property of another as security for some debt or charge) are generally referred to as secured creditors. Apart from them, there are some creditors who have no such guarantees, known as simple creditors.

Inasmuch as their claims are unsecured, the simple creditors are interested parties in any juridical act made by their debtor, because such acts may influence the promisees solvency. Therefore, law allows them to avoid the gratuitous acts concluded by their debtor with the view to jeopardize the creditors rights.

Lets take the following example: we suppose that X owns $500,000 to Y.

There is considered real exception to the principle of relativeness effects of the act the so-called contracts to the benefit of a third party (e.g. life insurance contract).

But, the universal successors and successors with universal title, as well as the simple creditors are. considered apparent exceptions from above mentioned principle.

THE NULLITY OF JURIDICAL ACTS

Definition

An act concluded with the observance of legal rules is a valid act. It can be enforced under the contracting parties and can produces its legal effects stipulated by law. But, whenever, the legal provisions are not observed and the act disregards certain legal expressed rules, then the act is void or avoidable. It means that, an act concluded against law is sanctioned through a specific civil sanction, the so-called nullity.

The nullity is that juridical means which deprives the act of its effects. It should be mentioned that, within Romanian legal system, the concept of nullity does not destroy the act itself, but only its effects. Thus, nullity is not seeing as an organic state of the act. It is only a sanction due to the non-observance of legal rules at the time when the act was concluded.

The nullity fulfills a preventive function, because the parties refrain from concluding an unlawful act. But, when the acts are concluded without the observance of legal rules, then the nullity has a punitive function.

It should be noted that the nullity applies from the moment when the act was concluded (ex tunc) and consequently the parties are restored to the positions prior to their agreement. It is just as no act has been ever concluded between them.

Nevertheless, the nullity is different from dissolution or rescission of the contract, which presupposes a valid act that cannot produce its effects any more due to specific events.

Thus, the nullity supposes that the act was defectively created, against law and as result has never existed.

Classification of nullities.

a) The absolute and the relative nullity.

An act concluded disregarding the legal provisions could be void or avoidable, according to the nature of the interests protected by nullity.

When the interests protected by nullity are public interests, the act is null and void. It means that the nullity is absolute.

If the protected interests are private, the act is only avoidable and the nullity is relative.

A void act is not enforceable by anyone. It is a null act or an act having no legal force or validity because it was concluded disregarding the statutory provision of law. The following reasons call the absolute nullity of an act:

- when one of the validity condition of the act is missing;

- when the object or consideration is prohibited by law or public morals;

- when the act has been concluded by fraud and evasion of law;

- in case of activities performed by a company beyond the powers conferred upon it by its articles of association or other constitutive deeds (known as ultra vires acts);

- when a special permission requested by law for the transaction is missing;

- in case the form requested ad validitatem by law has not been observed.

An avoidable act has an in-between status. It means that it can become a valid act because one or more of the parties have the power to render it enforceable.

For example if the lack of genuine assent (error, mistake, duress or injury) occurs within the conclusion of the act, it can be avoided.

This classification presents a particular importance because of the differences between the rule governing the void and the avoidable acts. Thus:

1. Anybody may claim to make null and void a juridical act. In a such as it is a high degree of irregularity, law draws no limits in enforceability of the right to sue.

By contrary, only the interested persons may avoid an act (e.g. the party whom consent was affected by one of the vices of consent).

2. The absolute nullity can be claimed anytime; there are no limits in time for claiming an act to be null and void.

As far as the relative nullity is concerned, a party who benefits from nullity can claim the avoidance of the act only within a specific limit of time, the so-called extinctive prescription (the general time of extinctive prescription is 3 years).

3. Generally speaking, an avoidable act can produces its effects until its avoidance is claimed. Thus, it is up to the party who benefits from the nullity to claim the cancellation of the act. But, if the party ratifies the act by covering its defects, then the act is valid and produces its effects.

This situation cannot occur for a null and void act that cannot be subject of ratification because its defects are so essential, that nothing can cover them.

b) According to the extent of the nullity, there are partial and total nullities.

Total nullity affects the whole act, while partial nullity affects only a part of it. In this latter case, the parts of the act, which are not avoided by nullity, produce their legal effects.

It should be mentioned that, within Romanian legal system, the partial nullity is the rule, and the total nullity is the exception, Therefore, whenever it is possible, the tendency is to save the act, and to cancel only those clauses which have been drawn up through the non-observance of legal rules.

The effects of nullity and avoidance

As it was mentioned above, the nullity of the act deprives it of its effects.

It is obvious that an act null and void or avoidable cannot produce any effects in the future (ex nunc). As for the past (ex tunc), the effects should be retroactively eliminated.

The nullity or avoidance of an act is governed by three principles:

- principle of retroactivity. The rule is that an act null or avoided cannot produce effects in the future, and the effects already produced will be eliminated.

If the parties of the act have not fulfilled their obligation until the nullity is established, the judge declares within the nullity the ineffectiveness of the act. But, when the parties have total or partial fulfilled their obligations, the judge declares within the nullity or the avoidance of the act the retroactive elimination f acts effects. Consequently, the parties are liable to return each other the services already carried.

Nevertheless, this principle has its exceptions. An example would be the case of a putative marriage

- principle of restoring the parties into their positions before the contract (restitution in integrum).

Exceptions to this rule include the right of the bona fide acquirer (i.e., the acquirer in good faith, having no knowledge that the act is defective) to maintain the benefits yielded by the goods acquired on the basis of a null act.

- principle of cancellation of accessory acts. It means that the nullity or avoidance of the act also affects the subsequent acts concluded on the basis of a null act.

This principle represents an exception of the rule .that an accessory act has the same destiny as the principal act has (accesorium sequitur principale). It should be mentioned that the case of a good faith tenant is an exception to this principle.

This classification presents a particular importance because of the differences between the rule governing the void and the avoidable acts. Thus:

1. Anybody may claim to make null and void a juridical act. Inasmuch as it is a high degree of irregularity, law draws no limits in enforceability of the right to sue.

By contrary, only the interested persons may avoid an act (e.g. the party whom consent was affected by one of the vices of consent).

2. The absolute nullity can be claimed anytime; there are no limits in time for claiming an act to be null and void.

As far as the relative nullity is concerned, a party who benefits from nullity can claim the avoidance of the act only within a specific limit of time, the so-called extinctive prescription (the general time of extinctive prescription is 3 years).

3. Generally speaking, an avoidable act can produces its effects until its avoidance is claimed. Thus, it is up to the party who benefits from the nullity to claim the cancellation of the act. But, if the party ratifies the act by covering its defects, then the act is valid and produces its effects.

This situation cannot occur for a null and void act that cannot be subject of ratification because its defects are so essential, that nothing can cover them.

b) According to the extent of the nullity, there are partial and total nullities.

Total nullity affects the whole act, while partial nullity affects only a part of it. In this latter case, the parts of the act, which are not avoided by nullity, produce their legal effects.

It should be mentioned that, within Romanian legal system, the partial nullity is the rule, and the total nullity is the exception, Therefore, whenever it is possible, the tendency is to save the act, and to cancel only those clauses which have been drawn up through the non-observance of legal rules.

c) Taking into account if the nullity is or is not provided by law, there are implied or express nullities.

Whenever law expressly establishes that the infringement of the rule leads to the state of nullity of the act ,the nullity is expressed.

By contrary, the nullity is implied when law does not expressly provide it, but the cancellation (avoidance) of the act results indubitably from that legal provision. For instance, according to civil code all donations should be concluded in authentic form. In this case, even if law does not expressly provide the nullity, the act is null because the conditions imposed for its validity have not been observed. Business Law_Course 8_ Contracts

DEC - 03 - 2013 According to art. 1166 NCC the contract is the will agreement between two or more persons with the intent to establish, modify, transfer or extinguish a legal relation. The main regulations governing the contracts, whether named or unnamed, are in the civil code. De lege lata, we should mention that the provisions of the Civil Code are the common law of contracts. As a consequence, they apply to all contracts whether civil, commercial or administrative.

The features of the contract

Patrimonial effect the contract is a legal instrument through which the movement of goods or rights is performed. The contract produces juridical effects. The contract is always a will agreement between two or more persons. Moreover, the existence of the will is a necessary condition (sine qua non) for the existence of a contract. The right to undertake legal acts is recognized by the NCC, in art. 11 which provides the following: it can not be derogated by conventions or unilateral legal acts from the laws which are of public interest or from the good morals. Moreover, the New Civil Code regulates expressis verbis in art. 1169 the freedom of contracting principle as follows: The parties are free to conclude any contract, as well as to determine its content, whithin the limits imposed by law, public interest or good morals. This principle must be coroborated with the principle of compulsory force of the act which provides that the conventions legally concluded have the force of law between contracting parties., according to art. 1270 (1) NCC.

Classification

By the way they were created Consensual contracts they are enforceable with no formal conditions requested. According to the new civil code, the most contracts are enforceable by simple consent. Formal contracts they are enforceable only if there are observed some additional formal conditions, other than the simple consent. The form required for concluding such acts is, most frequently, a written settlement. For instance, law requires a written form, and sometimes even an authentic form, for concluding acts as donation, will, mortgage or farm contract. Real contracts they can be concluded only by delivering the thing by the transferor to the transferee. Therefore, the deliverance of the goods is requested not only to perform the real contract, but to conclude it as well. There are real contracts loan or deposit contracts, whereby the simple consent is not enough for the validity of the transaction. Thus, the deliverance of the goods is required by law for a valid conclusion of the contract itself. By their content:

Bilateral contracts according to art. 1171 NCC, a contract is bilateral when the obligations arising from it are reciprocal and interdependent. Otherwise, the contract is unilateral even if its execution involves obligations for both parties. Unilateral contracts The New Civil Code does not regulates expressis verbis the features of this kind of contract, this contract is only presented as the opposite of the bilateral contract. (see art. 1171 NCC, mentioned above) By the the aim pursued by parties concluding the act: Contracts made by onerous title those contracts in which each party promises an economic benefit to the other in exchange of another economic benefit. Contracts made by gratuitous title those contracts in which one party promises to the other an economic benefit without expecting, in exchange, any promise. The contracts made by onerous title subdivide into:

a) commutative contracts those in which the parties know, from the very moment of concluding the contract, which will be their mutual obligations (e.g., sale contract).

b) aleatory contracts an agreement wherein the performance of one party depends on the occurrence of an uncertain event (alea). In fact, when the contract is concluded the parties do not know the extent of their obligations because their performance depends of the occurrence of an uncertain and fortuitous event. Examples of such contracts include life and fire insurance contracts or life annuity contracts. Such agreements are enforceable notwithstanding an uncertainty of terms at the time of their conclusion or an undertaken risk clearly appears.

The acts made by gratuitous title are subdivided in:

a) grants a voluntary transfer of goods from a patrimony to another.This transfer can be achieved either by a person to another.

b) acts of benevolence a favor made by a person to another without decreasing the patrimony of the former (e.g., the gratuitous mandate).

By the effects they produce Constitutive or translative contracts these contracts are concluded in order to transfer real rights. Contracts giving rise to debt rights (jus in personam). The number of these contracts are unlimited. Declarative contracts the ones that consolidates a pre-existing juridical situation. For instance, the settlement is a declarative contract. By the way they are carried out Contract with an instantaneous execution (uno ictu) those in which the parties are required to execute the benefits they owe to each other in one and the same time, usually the moment when the contract is concluded. Examples: sale contract, donation, the exchange contract etc Contracts with successive execution those in which the obligation of both parties or at least one of them must be carried out gradually over a period of time. Example: rent contract, maintenance contract etc. We should mention that a sale contract where the price is paid in monthly rates is a contract with an instantaneous execution, even if the parties agreed that the transfer of property right will take place upon payment of the final installment of the payment price. By the way they are regulated or not in the legislation Named contracts those contracts whose essential content is expressly governed by the express provisions of the Civil Code and other civil laws with a name prescribed by law in accordance with legal operations they generate. In the absence of specific legal regulations, the named contracts can not be created by agreement between the parties because they do not enjoy the attributes of the legislature, namely normative force. As a consequence, the regulation and provision of special names to such contracts are in the exclusive competence of the legislature. Unnamed contracts those created by the parties for their specific interests. They are as legal as the named ones. In as much as there is not a specific provision in law, they are governed by the rules determined according to the general principles of contract law, and if these are not sufficient, by the rules of the contract that resemble the most. Sometimes an unnamed contract may become a named one, when a special law, which describes and regulates it, comes into force. By some correlation between them: Principal contracts those independent of any other contract. Accesory contracts those that depend on a principal contract. In this case, the rule is that the accessory contract has the same destiny as the principal one (accesorium sequitur principale). By the way the parties expresses their will: negotiated contracts those that are entirely negociated by the parties. An important feature of this contract is that there is a period in which pre-contractual negotiations between parties, personally or by

their representatives, period that is placed under the sign of freedom. Adhesion contracts those contracts whose content is predetermined entirely by one party. The other party is free to agree to them or not. If he agrees, he simply joines to the specific contract, without any possibility to negociate. Examples: insurance contract, phone subscription, tv subscription etc. The general features of these contracts are:

a) the two contracting parties are unequal from the economic point of view. Therefore, one party has a superior economic position in relation to the other party.

b) The offer to contract is general because it adresses to the public and permanent because it reffers to the conclusion of all contracts within a certain period of time.

c)

The adhesion contracts are the exclusive work of one of the party.

Forced contracts those we have to conclude because there is an obligation for all the people regulated by law. Their content is extablished also by law. An example would be the liability insurance (RCA) New Civil Code regulates a new category of contracts, the consumer contracts. According to art. 1177 NCC, the consumer contract is regulated by special laws that regulate commercial activity and in completion by common provisions applicable to the contract in general. The framework contracts representing the will of the parties by which they agree to negotiate, conclude or maintain contractual relationships whose essential elements are determined by these type of contracts. The conditions of validity

These conditions are the following:

the capacity of the parties to contract; a genuine assent of the promisor;

a certain subject matter; a lawful consideration.

The capacity

Civil code provides that any person is assumed to be able to contract unless he is declared incapable by law. It means that without a court determination of legal incompetence, the presumption of law is that a person has the legal capacity to contract or to make a unilateral act. In this matter, the rule is the capacity, and the lack of capacity is the exception. Therefore, any legal provisions related to the absence of capacity cannot be extensively construed.

A. The Legal Capacity of Natural Person

The legal capacity can be defined as being the natural persons abstract and general ability to have rights and obligations and to exercise their rights or to assume their obligations by concluding juridical acts on their own name.

We emphasize that each person has his own legal capacity and has only one. Moreover, law can only state who has legal capacity and when, as well as in what conditions a person loses his legal capacity. In other words, the legal rules regarding the legal capacity of persons are imperative provisions and thus, they should have a very restrictive interpretation and application.

The legal capacity deals with two issues:

*) the abstract capacity or the persons ability to have rights and obligations;

*) the concrete capacity or the persons capacity to exercise the above rights or to assume their obligations by concluding on their own name juridical acts.

We emphasize that, all natural persons have the legal capacity under law, but the moment when it is granted to them is different for each part of this capacity.

Thus, the abstract capacity is granted under law to each human being from the moment of his birth, or, by exemption, from the moment of his conception. But, in this latter case, the person can get only rights. Furthermore, the way of the correlative obligations is suspended till the moment of the birth when the legal representative of the child (parent or tutor) can assume the obligations. The abstract capacity ends when the natural person dies, no matter the ways this event occurs. The abstract capacity also ends by a final judicial conclusion of death or disappearance announcement.

The concrete capacity is granted, according to Romanian law, at the age of 18. At this age it is presupposed that the human being has the capacity to understand his actions and to decide what to do. In other words, at the age of 18 the person is considered under law to be mature and therefore gains his full concrete capacity.

The underage persons (persons under age of 14), the non compos mentis (weakly/mental handicap) persons and the people under judicial guardianship have not at all concrete capacity.

Law divides the so-called restrained capacity, the period between 14 and 18 years old, in two intervals: the first between 14 to 16, and the second between 16 and 18.

During the first interval of their restrained capacity the persons can conclude some juridical acts (e.g. will, employment contract) on their own name.

Sometimes, as it is the case of the employment contract, they need a preliminary consent of their legal representatives (parents or tutor). According to the provisions of civil code, an underage person can dispose through will for half of his fortune. Also, through marriage, the underage person obtains the full concrete capacity because it is possible that he becomes a legal representative for his future child.

A new rule is provided by art. 40 NCC which states that the underage persons of 16 years old can have an anticipated concrete capacity. This means that for grounded reasons, the guardianship court can

recognize to this person a full capacity, after the hearing of their parents or their tutors and, if it is necessary, the approval of the familly council is also requested.

B. The Legal Capacity of a Legal Person

The abstract capacity of legal persons

The abstract capacity of a legal person means its general and abstract ability to have rights and obligations. Nevertheless, no matter which branch of law is involved (commercial, civil, administrative, financial, etc.) a legal person is a subject of law. Thus, all the rights and obligations which may occur from these different branches of law will form the content of the legal persons abstract capacity.

Indeed, as a subject of law, the legal person has only one legal capacity and each legal person has its own legal capacity. In other words, the legal capacity of a legal person is unique, as it is for the natural. person too.

But, in fact, unlike the abstract capacity of a natural person, the general and abstract ability of a legal person to have rights and obligations is limited.

The abstract capacity of a legal person has the following juridical features:

1) it is legal meaning that it is stipulated by law and nobody can extend or limit its content;

2) it is general meaning that the rights and the obligations which form the content of the abstract capacity are not exactly provided for by law for each legal person. Thus, the limits of the abstract capacity result from the legal persons object of activity;

3) it is inalienable meaning that the abstract capacity cannot be alienated or yielded either in total or

in part by juridical acts. Moreover, any act of renunciation or alienation regarding the abstract capacity of a legal person is absolutely void (null). This sanction occurs because a renunciation act has as juridical effects the cessation of the legal person and that may happen only through the ways provided for by law (e.g. the merger, the division or the dissolution);

4) it is intangible meaning that it can be limited only by law and these limits depend on the object of activity of the legal person. These limits also express the principle of specialization;

5) it is special the specialization of the abstract capacity is that character which departs the abstract capacity of a legal person from the abstract capacity of a natural person. Thus, the content of the abstract capacity of a natural person is the same for all natural persons and for each of them; but for a legal person, the content of its abstract capacity is different according to the goal for which each legal person has been set up.

The beginning of the abstract capacity of legal person

Taking into account the fact that the legal person is submitted or not to registration, its abstract capacity begins at different moments.

1) No matter the way of setting up used, the legal persons submitted to registration obtain their abstract capacity on the date of their registration;

2) The legal persons which are not submitted to registration obtain their legal capacity according to the way used to set them up. In fact this moment can be the date of the order of the state organ I competent to set them up; the date of the recognition act; the date of the authorization act or the date when any other legal requirements have been fulfilled.

3) Other legal persons obtain their capacity to have rights and obligations on the date of the order of the state organ competent to set them up, on the date of the recognition or authorization act. Finally, there are legal persons that obtain their abstract legal capacity and are valid set up on the date when other legal requirements have been fulfilled.

We should emphasize that the date of registration or the dates of the other acts which have to be observed for a valid setting up (act of recognition, act of authorization, or other legal requirements) have a constitutive effect. It means that these dates mark the moment when the full abstract capacity begins. This moment is considered as follows:

4) the date of their incorporation in the Register of trade for:

- the commercial companies (according to Art.20 from Law no.26/1990)

- the State s Companies (Autonomous Regie) (according to Art.20 from Law no.26/1990);

- the crafts-mens co-operative (according to Art.20 from Law no.26/1990 and Art. 10 from the Decree-Law no.66/1990) ;

- the consumers and credits co-operative (according to Art.20 from Law no.26/1990 and Art.8 from Decree-Law no.67/1990).

5) the date of the authorization act for the political parties and public organizations. It should be mentioned that according to Art.4 from Decree-Law no.8/1989 and Art.19 from Law no.54/1991, the date of the authorization act is the date when the judicial conclusion of the admission to the registration of a political party or a public organization became final (irrevocable);

6) the date when the Government recognized the setting up of the Chambers of Commerce and Industry.

The end of the abstract capacity of legal person

The end of the abstract capacity of a legal person concerns the anticipated abstract capacity as well as the full abstract capacity. Thus, the anticipated abstract capacity ends when the full capacity is obtained and this moment usually coincides with the moment when legal personality is granted to a legal person.

Further, the full abstract capacity ends when the subject of law (the legal person) ceases. It means that without its full abstract capacity a legal person cannot exist.

Therefore, when a legal person begins the clearing off process, its full abstract capacity still has to exist but it is restricted. In other words, the legal person can no longer carry on its business but it still has rights and obligations with the view to accomplishing the clearing off process. Also, from the date when the dissolution has decided and until the legal person is erasure from the register (either register of trade or other kind of special register), it can unfold its activities but only in order to achieve its patrimonial. rights and to pay its debts. This restricted abstract capacity ends on the date when the legal person is erased from the register where it was incorporated.

We emphasize that, when a juridical act was concluded without the legal rules regarding the abstract capacity of a legal person having been observed, the act is void, it is annulled. This sanction, the absolute nullity of the act, occurs either if the legal person did not have its full abstract capacity to conclude the act, or the principle .of specialization was infringed.

The concrete capacity of legal persons

The concrete capacity of a legal person is defined as being the abstract and general ability of a legal person to obtain and to exercise subjective civil rights and to assume and to fulfill civil obligations, by concluding on its own name civil juridical acts through its organs.

I should be stated that between the legal person and its management organs there is the so-called legal representation. It means that the director, the general manager, or the president represents the legal person within the relationships with third parties. This kind of representation is not the same with that settled by civil code. In fact, this representation is only similar due to the fact that it does not represent a real mandate.

Sometimes, the management organs of a legal person can mandate a natural person, such as its legal advisor, to represent it in front of the court of law, or within other relationships with third parties. In this case, without any doubts there is a contractual representation.

As far as the management organs are concerned, they can have either unipersonal form, such as the minister, the president, the director or the rector, or a collective form, such as council, committee, board of directors, etc. No matter the form of the management organs is, according to their competencies, they exercise the rights and assume the obligations of the legal person by participating within juridical relationships.

The beginning of the concrete capacity of legal person

Due to the absence of legal provisions, the juridical doctrine has expressed several opinions regarding this issue. Thus: it is considered that the legal person obtains its concrete capacity at the same time with its abstract capacity, or on the date when its management organs are appointed.

The common opinion is .that the legal person obtains its concrete capacity on the date of its setting up. This moment, as it was mentioned above, can be even before its incorporation or registration, or before the recognition/authorization act has been issued or other legal requirements have been fulfilled.

The end of the concrete capacity.

The concrete capacity of a legal person ends when the existence of the legal person ends.

It can also end in case the legal person is reorganized. It means that the legal person is subject of a fusion or of a merger by absorption or of a total division.

The assent

The assent and the consideration constitute the juridical will of the parties.

The parties voluntarily and knowingly conclude the act as a result of their intention.

In our legal system, the juridical will of parties is governed by two principles:

1) the principle of freedom of juridical will of the parties. It means that the parties of a civil act are free to conclude or not a certain act, to stipulate any particular clauses, to determine the specific content of the act, and, in most cases, to determine the form of the act.

The parties freedom to conclude any juridical acts is limited by the compulsory rules of law and by the public policy.

2) the principle of real will of the parties. According to this principle, if there is any incongruity between the real intent of the parties and the expressed clauses of the act, the former is the one which will be taken into account.

It should be mentioned that, in order to apply this principle, the proof of the real intention of the parties is taken into account. Thus, if it is possible to determine the real will of the parties, the act has to be construed upon the expressed words used by parties.

It results there from that the validity of the act depends on the validity of the juridical will of the parties. Indeed, in some cases, the elements required for a valid and enforceable contract appear to be present but in reality they are not.

For example, if a store owner accepts a gang leaders offer to protect his property from gang violence by agreeing to pay the gang $100 per month, the store owner is not genuinely assenting to the terms of the act. Similarly, if a used-car salesperson deceitfully states that a car has a rebuilt engine and has never been in an accident, the buyer who relies on that information and signs a purchase contract does not have a valid juridical will to conclude the act.

The assent externalizes the partys intent to conclude a juridical act. For being the basis of a valid act, the assent has to fulfill several conditions, as follows:

1) It has to exist. Any act concluded in the absence of the assent will be declared null and void;

2) It has to be unambiguously externalized. It means to result from the words of the parties, either orally or written expressed, or even derived from their actions.

While, usually, any reasonable means of communication are effective to externalize a valid assent, several problems arise in case of silence. Does silence have any juridical value?

Generally speaking, the assent cannot be implied, and in case of silence it is considered that it is no assent. Mere inaction and silence are usually not regarded as manifestations of intention to agree over a contract. However, some exceptions to this rule occur, depending on the subject matter of the act.

Firstly, law expressly provides, in some cases, that the silence of one of the parties has to be considered an assent. For instance, the civil code stipulates that the rent contract is considered restored in force if, after the term of the contract has been fulfilled, the parties silently continue to perform it.

Secondly, the initial agreement between the parties may constitute the basis for regarding silence as an assent.

Thirdly, certain conducts of the party may be assumed as expressing an assent. For instance, if an heir conducts himself like an acceptant of an inheritance, law considers that he has performed a tacit acceptance.

3) It has to be expressed by a person who is mentally competent to conclude the act. In other words, the person is able to comprehend the nature of the transaction he or she is engaged in and to understand its consequences.

4) It has to be expressed by a person who intents to engage himself in a legal relationship.

5) It has to be definite and certain as the essential terms of the act are concerned;

6) It has to be genuine. To be genuine, the assent must be conceded voluntarily and knowingly by each of the parties, elsewhere there is no valid contract between them.

The lack of genuine assent may arise by the so-called vices of consent or defects. Law considers as vices of consent the following:

a) the mistake/error;

b) the misrepresentation;

c) the duress;

d) the injury.

a) The mistake (error)

The error is generally defined as a state of mind which has not accordance with the facts. It is an erroneous belief about the facts as they exist at the time when the agreement is concluded. It should be mentioned that the error is produced by the person himself. In order to vitiate the partys assent, the error should be serious. In that case, the party is entitled to claim the cancellation of the act.

Types of errors:

a) essential error, which refers to the nature of the act (error in negotium) or to the identity of the subject matter (error in corpore). For instance, when one of the parties believes that the act is a donation, and the other one believes that it is a sale.

A similar case is when one party believes that he or she buys a car while the other party believes that he or she sells a toy car.

Another example of essential error is the one which refers to the qualities of the subject matter of the act (error in substantiam) or to the contracting person (error in personam). A case of error in substantiam arises, for example, when the seller believes that the subject matter of the contract is an upright piano, and the buyer believes that it is a grand piano.

Another type of error is one concerning a persons identity. Thus, generally, an act is avoidable for error in personam only if it is concluded intuitu personae. These acts are concluded on the ground of one of the parties qualities

If the offer or receives an acceptance from one whom he mistakenly believes to be the addressee of the offer, the offeror may avoid the contract for error in personam.

The sanction for these types of error is relative nullity.

b) nonessential error is the false representation of less important circumstances at the moment when the contract was signed, in the sense that the mistaken party would have signed the act whether he had had a fair representation of those circumstances.

A nonessential error can attract a decrease or increase in value of the benefit, but may remain even without any legal consequences.

c) immaterial error, which refers to a contract. It doesnt confer to any of the parties unenforceable.

From another point of view, an error could be bilateral or unilateral. A mutual (bilateral) error means that both parties are misunderstood the same matter. For example, a mutual error is where both parties understood that the real agreement was what one party alleges it to be, but had unintentionally

prepared and executed one which did not express the true agreement.

A future distinction should be drawn up between an error about law and an error about the facts. It should be mentioned that within our system of law, the error about law is not accepted for pleading somebodys ignorance. This rule is based on the fact that law is presumed to be known from the moment it is published in the Official Monitor of Romania.

Thus, whenever somebody is fully cognizant of the facts and the substance of his behavior, he cannot plead his ignorance regarding the legal consequences of his conduct for justifying the rescission of the contract. By contrary, in case of errors about the facts the party can claim the rescission of the contract.

b) The misrepresentation

The misrepresentation is the misrepresentation of a fact that is made with knowledge and with intention to deceive the other party. The misrepresentation has the same essence as the error/mistake, meaning the misrepresentation. But unlike the error/mistake, the misrepresentation results from one contracting party action. Thus, the party who misrepresents the facts clearly intends to do it and to deceive the second party, who, relying on the misrepresentations, changes his or her legal position in concluding the contract.

Sometimes, a misrepresentation of facts may be unintentional. It means that there is no misrepresentation, but the act is still avoidable, because it was concluded by mistake.

In order to have a misrepresentation, law commonly requires either an affirmative act or an express statement. Occasionally, silence may constitute a misrepresentation of facts leading to fraud. The intention to deceive is expressed by the partys intention to create a false impression. Since misrepresentation requires this intent, mere negligence or carelessness cannot constitute fraud.

From a structural point of view, the misrepresentation has two main elements:

1) intentional element (which consists of the will to fraud the other party),

2) material element (which consists of the activities performed in order to lead the other party into mistake).

Generally, mere failure to disclose information to the other party does not constitute a misrepresentation, because law does not impose a duty of disclosure. There are, however, a number of exceptions to this rule. Suppose one party knows certain material facts and knows the other party is not aware of them.

Moreover, he also knows that if those facts were known by the other party there would be no contract. For example, when a prospective seller of land has knowledge of a hidden defects in the property that cannot be observed through inspection. If the seller fails to inform the purchaser about these defects, the seller could be held liable for misrepresentation because his or her silence was intended to mislead the purchaser into assuming there were no defects.

However, an active ceasing of the fact is the most obvious type of misrepresentation. For instance, when the seller of a used car turns back the odometer to conceal the number of kilometers the car has been driven, misrepresentation has occurred.

c)The duress

The relief from an agreement on the grounds of duress is clearly avoidable if a person is deprived of his freedom or his property through physical or moral force. Even the threat of physical force, although not carried out, constitutes duress.

It should be mentioned that duress is not limited to the above situations.

Indeed, undue influence, which exists when a person exercises mental coercion over another, can also lead to lack of genuine assent.

Furthermore, the coercion exercised not only against the contractual party, but against a relative or closed friend of the party as well constitutes duress, in a juridical meaning.

The essence of duress is the lack of free will or voluntary assent. Any wrongful act or threat that overcomes the free will of the consenting party constitutes duress. In other words, any economic coercion, threats on a persons family and the beloved ones, and other uses of moral or social force to put a person in such fear that his or her act is not voluntary, constitutes duress.

In order to determine whether a contract can be avoided on account of duress, it is necessary to ascertain whether the acts or the threats were wrongful and whether these events and not the free will of the party have induced the required contractual assent.

At the same time, it should be mentioned that duress cannot be limited to the fear that might overcome an ordinary person. If a contracting party, whether brave or timid, is actually coerced to conclude a contract, duress has occurred. Thus the state of mind of the person who is being threatened must be examined.

Unlike misrepresentation, duress can arise not only from the activity of the contracting party, but also from the wrongful activity of a third party.

As a conclusion, it should be mentioned that, as a vice, duress presupposes an intentional element and a material one as well. Thus, the intentional element is the fear induced to a contracting party for determining he or she to conclude a juridical act.

d)The injury

Injury represents an obvious disproportion between mutual promises of the parties within a bilateral contract.

Injury includes the absence of the meaningful choice of one party together with the terms of the contract, which are unreasonably favorable to the other party.

It should be mentioned that not every juridical act could be avoided on the ground of injury. Law requires several conditions that have to be fulfilled to obtain the rescission of the act based on injury.

Thus, for the injury in case of the underage child, the following conditions must be fulfilled

*) it has to be a bilateral act (e.g. a contract). That condition is imposed by the fact that only these kind of juridical acts are defined as promises made in exchange of promises. As consequences, bilateral contracts are susceptible of disproportion of parties mutual promises;

*) It has to be a commutative contract, otherwise the disproportion assumed by the parties appears as a normal risk of an aleatory contract (the terms commutative and aleatory contracts are explained in another chapter of this book); .

*) the party who alleges to avoid the contract has to be an underage person between 14 and 18 years old.

*) it has to be a contract whereby such minor can conclude on his own name and without any additional consent.

For the injury on case of an adult, the following conditions must be fulfilled:

It has to be a bilateral contract

It has to be a commutative act, made by onerous title

 It is necessary that one of the party, taking advantage of the state of need, inexperience or lack of knowledge of the other party stipulates in its own favour or another person a benefit of a considerably greater value at the time of concluding the contract than the value of their own benefits. As an exception, in case of the sale contract, the ridiculous low price is sanctioned with the relative nullity of the contract without the need for the party to demonstrate that the other had taken advantage of the state of need, lack of experience or lack of knowledge of the seller.

In case of the adult, the action for annulment is admissible only if the damage exceeds half the value of the performance guarantee or executed by the injured party at the time of concluding the contract and the disproportion must subsist until the request for cancellation.

The subject matter

Art. 1225 (1) NCC stipulates that the subject matter of the contract is the legal operation, such as the sale, the lease, the loan and so on, agreed by the parties.

Art. 1226 (1) NCC stipulates that the subject mater of the obligation is the benefit to which the debtor engages.

The distinction between the suject matter of the contract and the subject matter of the obligation is very useful. Therefore, the subject matter of the contract is the same with the subject matter of the civil legal relation and the subject matter of the obligation consists of the positive or negative performance that contracting party undertakes to each other.

Within a juridical act, the parties conduct can refer to goods and thus, the toads become subsequent objects of the act.

In order to be valid, the subject matter of a juridical act has to fulfill seven different conditions requested by law, as follows:

1. The subject matter has to exist. Law considers the subject matter as existing even if it exists in the near future, unless it does not have an actual existence (e.g., the sale of future harvest is a valid contract). A transaction in futures occurs when a person contracts to deliver goods that either does not exist, or the seller does not own them at the time of contracting. There is only one exception from this rule. It is the case of the sale of future inheritance, which is completely prohibited by law, not on the ground of non-existence of the subject matter, but on the ground of immoral consideration.

If the object does no longer exist (at present), even if it has existed in the past, the subject matter does not fulfill this requirement.

2. The subject matter has to belong to the civil circuit. Thus, according to the civil code only the goods on the market can be the object of a contract.

3. The subject matter has to be identified or identifiable. The process of selecting or setting aside the specific goods is referred to as identification of the goods within the contract. According to the civil code, the goods individual established (res ceria) are identified by their features, while general established goods (res genera) are identified by their quantity, quality, number, size, etc.

The identification of goods has important legal consequences for the contracting parties. Thus, if the goods are individual established and are lost, damaged, or destroyed, the seller supports these risks. By contrary, when the goods are general established, the seller is bound to deliver goods from the same category, unless the risk has passed to the buyer. In this last case, the buyer bears the loss.

It should be mentioned that the act is null, unless its object/subsequent subject matter is identified or, at least, identifiable.

4. The subject matter has to be legal or material possible (impossibilium nulla obligatio est). The impossibility of the subject matter means the impossibility of anyone to perform a particular promise. For example, is not material possible to alienate the moon. It is neither legal possible to sell goods that belong to public property of the state.

This requirement is not considered fulfilled if the performance of the contract is impossible only for a particular promisor, but it is generally possible.

5. The subject matter has to be free from legal or moral prohibition. It means that the subject matter of the act should be lawful. Law usually cannot enforce an act whereby the parties promise to do something illegal or against public policy or morals.

6. Each party has to assume his or her owns behavior. It means that nobody can promise somebody elses conduct. For example, it is forbidden to sell the goods which belong to somebody else, or to engage performance the performance of somebody else.

The consideration

In order to be enforceable, a legal consideration or cause must support a juridical act. The consideration represents the goal pursued by the parties who conclude a particular juridical act.

The consideration is analyzed by our juridical literature from two points of view:

1. the instant consideration, which is essentially the same in all acts of a certain type;

2. the intermediate or specific consideration, which is different from a certain agreement to another. For instance, the parties who conclude a sale contract resume the same instant consideration in all cases; the seller is interested to obtain the price while the purchaser is interested to acquire the goods.

Nevertheless, every seller has his or her own intermediate- consideration for selling (e.g., he or she wants to buy another object with that money, or he wants to pay a former debt, etc.). At the same time, every purchaser has his own intermediate consideration for buying (e.g., he or she wants to use the object or he wants to sell it for a better price, etc.).

In order to support a valid contract, the consideration has to fulfill several conditions as follows:

- to exist;

- to be real;

- to be non-prohibited by law or public morals (contra bonos mores). For instance, a promise to undertake a social obligation cannot be considered a valid one.

The problem of the validity of the consideration does not arise unless the intermediate cause is analyzed. The instant cause is always valid, being an abstract one.

In fact, the civil code provides two presumptions: firstly, that the consideration exists, and, secondly that it is valid.

The legal form of the contract

The observance of the proper legal form is one of the validity conditions required for concluding a juridical act.

Within the common understanding, many people assume that juridical acts should be drawn up in a written form in order to be enforceable. In fact, law does not usually impose that. There are only a few types of juridical acts that should be concluded in a certain form imposed by law for their enforceability.

It means that within Romanian law system, the formalism does not apply as a principle, despite the normal exceptions provided by law.

The legal rules, which stipulate formal requirements, are divided into three main categories as follows:

1) form requested by law ad validitatem. This form has to be observed for the very validity of the act, which is compulsory. The non-observance of this form flaws the act and a later complaining with the legal rules cannot cover the nullity of the act.

Therefore, several acts are valid only when they are drawn up in a deed stricto sensu, meaning an authentic form (e.g. donation, sale of land, articles of partnership or mortgage). Law also requires some formal conditions for certain other acts, as it is the case of the will (the will is valid only if it is executed in the accordance with the formalities prescribed by statute for each type of will).

2) Form requested ad probationem. This form has to be observed in order to proof (to attest) the content of the act, although the act is valid even in the absence of the due form.

Sometimes, the simple consent of the contracting parties is enough for concluding a valid agreement and law requires a written form only for constituting evidences that can be used within a lawsuit. Examples of such acts include insurance contract, voluntary deposit, lease or settlement.

However, the civil code specifically requests the written form for an act with an object having a value over 250 lei. Due to the power of the national currency, it means that today, the written form is requested for proving any agreement.

3) Form requested for the opposability to third party. In other words, the act is valid between contracting parties, but in order to make it opposable to third parties, it should be concluded in a specific form. The form imposed by law has to be also observed; otherwise the act could not produce its effects over any third party. For example, there can be mentioned the legal requirement to notify the debtor within the assignment of debts and the registration of selling and purchasing contracts of land or of real estate.

In fact, the assignment of debts is a debt transfer to another persons benefit. Within a contract, one of the contacting parties can transfer his contractual rights to a third party. The person entitle to do that is

the so-called assignor while the recipient of these rights is the so-called assignee. The contract between the assignor and the assignee has no effect against the debtor, unless he or she is informed about that assignment, otherwise the debtor may validly pay his debts to the assignor.

Being governed by the same rule, a land or real estate contract has effects only between the seller and the purchaser, unless it is registered in the real estate register. This is why, the purchaser of the land or other real estate would not be able to prove his rights in case of eviction from a third party, unless he or she has observed the due form of act.

Special forms new disposition

According to art. 1244 NCC, except the cases where the law provides, the contracts which havr to be registered in the Land Registry and whom subject matter is the transfer or the constitution of real rights must be concluded in authentic form, under the sanction of absolute nullity.

Art. 1240-1245 NCC stipulates the electronic form between the forms in which a contract can be concluded. Therefore, the will may be expressed:

verbally

in a written statement

in such a matter that leave no doubt over the intention to produce juridical effects

by electronic means.

An electronic form consists of a message data which can express any information with a juridical value, including a will agreement over a legal relation, such as a contract.

In order to conclude a contract in an electronic manner, we have to go through 2 stages:

the publicity the negociation We should mention that the party who wants to sell, to buy, to exchange or to rent a product must handle virtual advertising. For this purpose, he sends a message to let the others know that he wants to conclude a contract. If someone wants to conclude the contract, he will have to click the button click deal. The contract will be considered signed at the moment when the acceptance of the offer will have been received by the informatic system of the offerer.

General rules for the interpretation of a contract

The priority of the real will of the parties According to art. 1266 alin (1) NCC contracts shall be interpreted according to the will of the parties and not by the literal meaning of the terms.

The real will of the parties must be proved. The proof can be made by any means and until proved otherwise, the form that corresponds to the manifestation of the parties will will be considered to meet their real intention.

The contract produces, apart from the specific effects expressly stated, other effects According to art. 1272 (1) NCC A valid contract obliges the parties not only to what is expressly stipulated but also to all the consequences that practices established between the parties, usages, contract law or equity give to the contract, according to its nature.

The meaning of the usual clauses is implied

According to art.1272 (2) The meaning of the usual clauses is implied, athough they are not expressly stipulated.

An example would be the case of the sale contract where the obligation of the seller to guarantee the buyer for the crowd is implied, although this obligation was not expressly stated in the contract

Special rules for the interpretation of a contract

The systematic interpretation of the clauses According to art. 1267 NCC clauses are interpreted one through the others giving each of them the meaning resulting from the entire contract.

We should not understand from this principle that if one clause is declared null, the contract itself will be declared null, because our legislation stipulates that the partial nullity is the rule and the total nullity is the exception and, in adittion, the clauses should be interpreted in the way in which they can produce some effect.

The interpretation of the doubtful clauses The doubtful clauses cand be defined as the ones that can be undertsood in more than one way or the ones that can not be understood in any way.

In order to interpret these types of clauses, the following rules should be respected:

a) When a certain clause can be interpreted in two different ways, it will be interpreted in a way that can produce a effect. This principle has its origin in the Roman Law which stipulated the principle actus interpretandus est potius ut valeat quam ut pereat. It can not be accepted that the parties have stipulated a clause without the intention that this certain clause would produce juridical effects.

Practical application: - the case when a sale contract is declared null, but it is valid as a sale promissory agreement (?), according to the principle of the conversion of the legal act. This principle is stated in art. 1260 (1) NCC a contract which is declared null and void will produce the effects of the legal act for which all the condition specified by law are accomplished

b) When the terms of the clause have more than one meaning, they will be interpreted in the way that fits the most with the nature and the subject matter of the contract

c) The doubtful clauses will be interpreted taking into consideration the nature of the contract, the circumstances in which it was concluded, the previous interpretation of the clauses and expressions of the contract given by the parties, the sense that generally is assigned to the clauses and expression in this domain and the usages.

d) When in doubt, the clauses will be interpreted in favor of the debtor, according to the principle in dubio pro reo. In case of the sale contract, we have a special rule which derogates from the rule mentioned above. Therefore, according to art. 1671 NCC In a sale contract, the doubtful clauses will be interpreted in favour of the buyer, with the exception of the rules applicable to the consumer contracts and adhesion contracts.

e) No matter how general are the terms of the contract, its only subject matter are the benefits to which the parties have committed.

f) In the case when in the content of the contract, we are given an example for a specific obligation, their number and scope are not restricted to the example given.

g) The clauses in the adhesion contracts will be interpreted against the one who have proposed them, according to the principle in dubio contra stipulantem.

The principle pacta sunt servanda

The principle of compulsory force of the act is expressed by the Latin I idiom pacta sunt servanda. Indeed, the civil code synthetically expresses this idea by stipulating that the conventions legally concluded have the force of law between contracting parties.

Furthermore, the principle of compulsory force is effective even upon the court of law. For instance, the court solves the litigation between parties according to the legal provisions and also based on the convention existing between the litigants.

Nevertheless, law expressly provides the exceptions from the compulsory force of the act. Thus, despite the parties will the contract takes end in the following cases:

- the death, incompetence, insolvency or bankruptcy of any of the contracting parties terminates the mandate contract

- the contracts concluded intuitu personae are generally terminated by the promisees death.

The principle of irrevocability of the act

The principle of irrevocability of the act restrains the promisor to revoke his promise. This rule is a corollary of the. previous one (the principle of compulsory force of the contract).

By way of exception, there are several cases where the unilateral revocation of the act is allowed by law. For instance, law allows: the cancellation of a gift made by one of the spouse to another

- the termination of a lease (rent) contract by the lesee, if there is no certain term for the contract. A lease is an agreement whereby one party (the so-called landlord) transfers his or her right into immediate possession to the other party (the so-called lesee) for a commonly consideration, the so-called rent

- the dissolution of a partnership;

- the termination of the gratuitous mandate by any of the parties

- the termination of a gratuitous deposit by the deponent

There are also several unilateral juridical acts that may be merely revoked by their author, such as:

- the will. The testator may revoke a will at any time until his or her death. Notwithstanding, conceptually, a will is not a true juridical act until the testators death, because it has no juridical force. Obviously, after the testators death it cannot be revoked anymore;

- the relinquish of an inheritance. To revoke a relinquish of the inheritance means to accept the inheritance. Therefore, the conditions requested for revocation of the relinquish are the same as they are for the

- acceptance of an inheritance (the acceptance should be expressed within 6 months from the death of the person inherited and the inheritance should not to be previously accepted by another heir);

The principle of privacy of the act

According to the principle of relativeness (privacy) of the acts effects, the effects of a juridical act are produced strictly between the parties of the act (promisor and the promisee). Hence, a plaintiff can maintain a lawsuit only against the party with whom the contract has been concluded.

In order to understand that principle, the following basic notions have to be explained:

- party (the so-called contracting party in case of a bilateral act);

- third party;

- interested party.

A party is a person who concludes a juridical act, either referred to as an author (in case of a unilateral act), or as a contracting party (in case of a bilateral act). Depending on the nature of the act, the parties can have specific names: grantor-grantee, legator-legatee, assignor-assignee, bargainer-bargainee, leasor-Ieasee, landlord-tenant, vendor-purchaser, consignor-consignee, devisordevisee, mortgagor-mortgagee, etc.

From a juridical point of view, a .party can be a single person or group of Itwo or more persons, whether they have the same interest within the act.

A third party is a person who was not involved in the conclusion and the performance of the act.

An interested party (known, also, as ayant cause or habentes causam) lis a non-contracting party who uses the existence of the act as a basis for a lawsuit.

Essentially, the interested parties are persons who are recognized either as aving enforceable rights or as being liable for duties created by an act where they e not parties. These persons are grouped into three classes:

1. Universal successors and successors with universal title, either intestate or testamentary.

A universal heir succeeds an universitas bonorum, with assets and liabilities, and every juridical act made by the deceased takes effects upon him or her.

In company law, a case of universal succession is the merging through absorption. The absorption supposes that a company becomes a part of another company (the so-called absorbent company). The former company ceases its existence but the absorbent company continues to exist and succeeds into

the rights and duties owed by the former corporation. One of the absorption effects is that the absorbent company retains its name and identity and, at the same time, acquires the assets, liabilities, franchises and power of the company that ceases to exist. Another case provided by company law is the merge. Within merge, two or more companies are united and form a new company. At the same time, the original companies cease to exist. In both the case, the absorbent company or the company resulted from merge acquires the assets and liabilities of the former company/companies, being its universal successor.

Successors with universal title are persons who bequeath a fraction of the deceaseds patrimony. They have the same position like universal heirs, being bounded by any contract or unilateral act made by the deceased. The only distinction between them and the universal heirs is that the former inherits a fraction of the patrimony, whereas the latter inherit a whole patrimony.

For example, within company law, the division of a company leads to such succession with universal title. Thus, the divided company ceases to exist and the resultant companies bequeath fraction of its patrimony.

Universal successors and successors with universal title are interested parties in any act concluded by the deceased because they inherit the patrimony as it is (e.g. decreased by expensive gifts). Thus, even if they were not parties of the act, due to their inheritance right, they become interested parties. It should be mentioned that, there are cases where law allows to a special category of heirs to avoid the gratuitous acts made by the deceased.

2. Successors with a particular title

A successor with a particular title is a person who acquires a certain enforceable right, by any lawful transfer. For instance, such persons are the purchasers, the assignees, the heirs who inherit a specific right. The transferees are interested persons only related to the acts which fulfill certain conditions as follows:

- the act is previously concluded;

- the transfer

- the act refers to the right acquired by the transferee.

We emphasize that the transferee can be either a party (in the act whereby he or she acquires the right), or a third party (in the act which has another object than the acquired right).

Simple creditors

A creditor is a person to whom an obligation is due. According to law, the creditor has the right to demand and to be recovered by a certain performance of his debtor. The creditors who are entitled to a lien (e.g. a charge, holds or claims upon the property of another as security for some debt or charge) are generally referred to as secured creditors. Apart from them, there are some creditors who have no such guarantees, known as simple creditors.

Inasmuch as their claims are unsecured, the simple creditors are interested parties in any juridical act made by their debtor, because such acts may influence the promisees solvency. Therefore, law allows them to avoid the gratuitous acts concluded by their debtor with the view to jeopardize the creditors rights.

Lets take the following example: we suppose that X owns $500,000 to Y.

There is considered real exception to the principle of relativeness effects of the act the so-called contracts to the benefit of a third party (e.g. life insurance contract).

But, the universal successors and successors with universal title, as well as the simple creditors are. considered apparent exceptions from above mentioned principle.

The specific effects of the mutually binding contracts

The principle of reciprocity and interdependency of the obligations of the parties in the mutually binding contracts The specific feature of this type of contract is the reciprocity and interdepency of the obligations of the parties which basically means that each party is at the same time both debtor and creditor.

Given this principle, we have some specific effects:

a) If one of the party does not fulfill his obligation but he request the other party to perform his, the party who was asked to carry out the obligation can invoke the exception for non-performance of the contract.

b) If one of the party, guilty of culpable misconduct, does not carry out his obligation, the other can ask the court to pronounce the rescission of the contract.

c) If one of the party can not by any means carry out his obligations and because this situation, the contract is terminated, the question which arise is who bears the risk of contract.

The exception for non-performance of the contract (exceptio non adimpleti contractus) Exceptio non adimpleti contractuls can be defined as a muniment made available for the party that is asked to carry out his obligations although the party who is asking did not carry out his own obligations.

Lets take as an example the case when A seller sells to B buyer a mobile phone. If in the contract is stated that the phone will be given only after the price will be paid, A wont be forced to give the good before he receives the price. If the buyer asks such a thing, the seller can successfully invoke the exception for non-performance of the contract. Nevertheless, if in the contracts content exists a clause that states that the buyer will pay the price at a certain date agreed by the parties, after the good will have been given, the seller will not be able to invoke this exception because he had given up his right.

The conditions that must be fulfilled in order to invoke the exception for non-performance of the contract:

a) The mutual and interdependent obligations of the parties must have their basis in the same contract

b)

To exist a non-performance, even a partial one, but important enough from the other party.

New Civil Code introduce a presumption of guilt in art. 1548 which states that The fault of the debtor of a contractual obligation is presumed by the simple fact of the non-performance.. Moreover, the NCC states that the enforcement may not be refused if according to the circumstances and taking into account the small matter of the performance which was not executed this refusal would be contrary to good faith.

c) The non-performance should not be due to a certain fact of the party that invokes the exception and because of this, the other party could not perform his own obligation

d)

Parties should not have agreed a term for the performance of their mutual obligations.

This exception can be invoked between the parties that have concluded a contract, by the party who is entitled to this, without the intervention of a judge and without giving notice to the debtor. In this situation. In this case, the party does not want the rescission of the contract, but only a suspension of its effect.

The most important consequence which arises from this exception is the temporary suspension of the obligation of the party who invokes it. For example, if an architect does not receive the money agreed for his work, he can suspend the work until the payment is made.

Rescission of the contract The rescission of the contract is the abolition of a contract, usually mutually binding, uno-ictu, at the request of a party when the other party did not perform the obligations that he had taken when the contract was concluded

Features

a) Institution sanctioning the non performance of the obligations in a contract, usually mutually binding, uno-ictu. As an exception, this sanction can arise also in the case of a unilateral contract, such as the contract of pledge.

b) Arises when the non-performance of the obligations is due to the debtors guilt and not to the force majeure or due to some unforeseeable circumstances.

c) Operates by virtue of a court judgment, of an unilateral declaration of rescission or if the law expressly provides it.

d)

If this exception is invoked and obtained, the contract is disbanded.

e)

The rescission frees the one who obtain or invoke it from its own commitment.

f) The most important effect of the rescission of the contract is its retroactive nature which produces the following consequences:

The benefits which were performed will be restored

If a third party had obtained some rights from the purchaser of the good, once the rescission was obtained, these rights will be disbanded as well.

If a third party had concluded conservation acts or acts of administration and rescission was obtained, these acts will remain valid.

g) Is optional the creditor may choose between the forced execution of the obligation or the cancellation of the contract

Rescission may be:

Judicial Conventional Legal The judicial rescission

The judicial rescission will be decided by the court at the request of the interested party. Though, if the non-performance of the debtors obligation is of little significance, the creditor will not be able to obtain the rescission of the contract. However, there is an exception to this rule the case of the contracts with successive execution where the creditor may ask for the rescission of the contract even though the non-performance of the obligation is of little significance. Still, the non-performance must have a repetitive character.

The creditor is not obliged to ask for the rescission of the contract, he can ask the court to compel the debtor to perform his obligations instead.

The judicial rescission can be admitted if the following conditions are fulfilled:

a) One of the party did not perform his obligation the non-performance may be either total or partial and in this last case, the non-performance must have been considered essential at the moment when the contract was concluded

b) The party who did not perform his obligation should be responsible for this situation according to art. 1548 NCC The fault of the debtor of a contractual obligation is presumed by the simple fact of the non-performance. The non-performance of the obligation must be due to the debtors guilt and not to the force majeure or due to some unforeseeable circumstances.

c)

The debtor who did not perform his obligations must have been given notice, in the conditions

provided by the law.

If the obligation had not been carried out in the term stipulated in the contract, it will not be considered that the debtor had been given notice. For this purpose, it is necessary a manifestation of the creditors will.

It will be considered that the debtor was given notice:

if he had received a written notice

if the creditor submitted the request for summons.

If the debtor had not been given notice and the creditor submitts a request for summons, the judge will give the debtor a reasonable period of time in which he can perform the obligation.

Action for rescission of the contract

In order for the rescission of the contract to operate, it must be requested by the interested party. The action for rescission of the contract must be submitted in the general term of prescription (3 years). If the debtor does not carry out his obligation, the creditor is entitled to damages.

The damages are:

1) compensatory damages - the damages that the creditor is entitled to if the debtor does not perform his obligation or if he performs it inadequately

2)

punitive damages (?) the damages that

the creditor is entitled to if the debtor does not

perform his obligation in time.

Therefore, the creditor has a right of choice, he is not forced to ask for the rescission of the contract, he can request the forced execution of the contract if this is still of interest to the creditor.

The conventional rescission

New Civil Code expressly stipulates that the conventional rescission is possible, moreover, the conventional rescission becomes the rule in this domain, while the judicial rescission becomes the exception.

The conventional rescission can take place through a written notice send to the debtor, when the parties agreed this way, when the debtor is in default without notice or when the debtor did not perform his obligation in time.

The resolutive clause in a contract

A clause by which the parties stipulate the rescission of the contract for non-performance of the obligations of one of them is called a resolutive clause in a contract. This type of clause produces effects only if expressly stipulates the obligations for which the non-perfomance leads to the rescission of the contract.

This clause only leads to the rescission of the contract if the debtor was given notice or if the parties have agreed that the simple fact of non-performance would lead to the rescission of the contract. The parties must stipulate clearly in the contract the content of the resolutive clause and also the condition in which it operates.

The effects of the rescission

The rescission produces the same effect, irrespective of its type (judicial or conventional) and this is the cancellation of the contract for the past and for the future as well.

The rescission produces effects between the parties of the contract, but also towards the third parties.

The effects between the parties If the rescission is admitted, the parties must give back the benefits which were obtained at the conclusion of the contract

The effects towards third parties If a third party had obtained some rights from the purchaser of the good, once the rescission was obtained, these rights will be disbanded as well, according to the principle resuluto iure dantis, resolvitur ius accipientis.

The dissolution of the mutually binding contracts

The action for dissolution of contracts is a procedural means which allows the party that had performed his obligation from a contract with a successive execution to ask the court the dissolution of the contract when the other party did not performed his own.

In order to be admitted, it must follow the same rules as the rescission of the contract, but unlike the rescission, the dissolution only produces effects in the future, which means that the contract will produce no effects from the moment when the dissolution was admitted to the future this is one of the differences between these two juridical institution

Differences between rescission and dissolution

The rescission is a sanction applicable to the contracts with an instantaneous execution, while the dissolution is applicable to the contracts with a successive execution The rescission of the contract can be obtained if the non-performance of the obligation is essential, while for the dissolution the non-performance of the obligation, it is not necessary that the non-performance to be essential, it can be non-essential, but it must have a repetitive character The rescission produces the cancellation of the contract for the past and for the future as well, while the dissolution only produces effects for the future 4. Risks of the contract

The question that arises when we say risks of the contract is whether a party must or must not perform his obligations if the other party fails to execute his own. For example, if we agree that the seller bears the risks of the contract, it means that the seller looses the good and the price as well. If we agree that the buyer bears the risks of the contract, it means that he will have to pay the price even though he didnt receive the good. Which is the solution of the Romanian law?

The risks of the contract is a juridical institution consisting of a rule res perit debitori and an exception res perit domini.

The risk of the contract is beard by the creditor whose obligation had become impossible to perform, according to the principle res perit creditori. However, in the case of the mutually binding contracts, the risk is beard by the debtor whose obligation had become impossible to perform, according to the principle res perit debitori.

The principle res perit debitori

The rule is that the risk of the contract is beard by the debtor whose obligation had become impossible to perform, respectively by the party that, due the force majeure, can not carry out his obligation.

Because of the fact that he is in an impossibility to perform his obligation, he will not be able to compel the other party to perform his own obligations.

If the obligation is only partially impossible to be carried out, there are possible two situations:

a) A decrease of the other party benefits, the debtor whose obligation had become impossible to perform bearing the risks of the contract if he hadnt carried out his obligation.

b)Termination of the contract when the part that still can be carried out is not able to assure the scope of the contract. In this case, the debtor whose obligation had become impossible to perform is completely bearing the risks of the contract.

The risks in the mutually binding contract that transfers property rights

In this situation, we must take into consideration the risks of the contract, but also the situation in which the obligation can not be performed due to an impossibility of performance of the contract.

Although in the previous legislation the rule for these types of contracts was res perit domino, which means that the risk is beard by the party who was the owner of the good at the moment of the fortuitous/accidental loss an exception from the rule res perit debitori -, the New Civil Code states that for these types of contract is applicable the general rule: res perit debitori. If the creditor was given notice, then he would have to bear the risks, according to the rule res perit creditori, as a consequence of the principle res perit domino.

The effects of the contract towards third parties. The principle of privacy of the act

1. The principle of privacy of the act

According to the principle of relativeness (privacy) of the acts effects, the effects of a juridical act are produced strictly between the parties of the act (promisor and the promisee). Hence, a plaintiff can maintain a lawsuit only against the party with whom the contract has been concluded.

In order to understand that principle, the following basic notions have to be explained:

- party (the so-called contracting party in case of a bilateral act);

- third party;

- interested party.

A party is a person who concludes a juridical act, either referred to as an author (in case of a unilateral act), or as a contracting party (in case of a bilateral act). Depending on the nature of the act, the parties can have specific names: grantor-grantee, legator-legatee, assignor-assignee, bargainer-bargainee, leasor-Ieasee, landlord-tenant, vendor-purchaser, consignor-consignee, devisordevisee, mortgagor-mortgagee, etc.

From a juridical point of view, a .party can be a single person or group of Itwo or more persons, whether they have the same interest within the act.

A third party is a person who was not involved in the conclusion and the performance of the act.

An interested party (known, also, as ayant cause or habentes causam) lis a non-contracting party who uses the existence of the act as a basis for a lawsuit.

Essentially, the interested parties are persons who are recognized either as aving enforceable rights or as being liable for duties created by an act where they e not parties. These persons are grouped into

three classes:

a. Universal successors and successors with universal title, either intestate or testamentary.

A universal heir succeeds an universitas bonorum, with assets and liabilities, and every juridical act made by the deceased takes effects upon him or her.

In company law, a case of universal succession is the merging through absorption. The absorption supposes that a company becomes a part of another company (the so-called absorbent company). The former company ceases its existence but the absorbent company continues to exist and succeeds into the rights and duties owed by the former corporation. One of the absorption effects is that the absorbent company retains its name and identity and, at the same time, acquires the assets, liabilities, franchises and power of the company that ceases to exist. Another case provided by company law is the merge. Within merge, two or more companies are united and form a new company. At the same time, the original companies cease to exist. In both the case, the absorbent company or the company resulted from merge acquires the assets and liabilities of the former company/companies, being its universal successor.

Successors with universal title are persons who bequeath a fraction of the deceaseds patrimony. They have the same position like universal heirs, being bounded by any contract or unilateral act made by the deceased. The only distinction between them and the universal heirs is that the former inherits a fraction of the patrimony, whereas the latter inherit a whole patrimony.

For example, within company law, the division of a company leads to such succession with universal title. Thus, the divided company ceases to exist and the resultant companies bequeath fraction of its patrimony.

Universal successors and successors with universal title are interested parties in any act concluded by the deceased because they inherit the patrimony as it is (e.g. decreased by expensive gifts). Thus, even if they were not parties of the act, due to their inheritance right, they become interested parties. It should be mentioned that, there are cases where law allows to a special category of heirs to avoid the gratuitous acts made by the deceased.

2. Successors with a particular title

A successor with a particular title is a person who acquires a certain enforceable right, by any lawful transfer. For instance, such persons are the purchasers, the assignees, the heirs who inherit a specific right. The transferees are interested persons only related to the acts which fulfill certain conditions as follows:

- the act is previously concluded;

- the transfer

- the act refers to the right acquired by the transferee.

We emphasize that the transferee can be either a party (in the act whereby he or she acquires the right), or a third party (in the act which has another object than the acquired right).

Simple creditors

A creditor is a person to whom an obligation is due. According to law, the creditor has the right to demand and to be recovered by a certain performance of his debtor. The creditors who are entitled to a lien (e.g. a charge, holds or claims upon the property of another as security for some debt or charge) are generally referred to as secured creditors. Apart from them, there are some creditors who have no such guarantees, known as simple creditors.

Inasmuch as their claims are unsecured, the simple creditors are interested parties in any juridical act made by their debtor, because such acts may influence the promisees solvency.

Therefore, law allows them to avoid the gratuitous acts concluded by their debtor with the view to jeopardize the creditors rights.

Lets take the following example: we suppose that X owns $500,000 to Y.

There is considered real exception to the principle of relativeness effects of the act the so-called contracts to the benefit of a third party (e.g. life insurance contract).

But, the universal successors and successors with universal title, as well as the simple creditors are. considered apparent exceptions from above mentioned principle.

2. Opposability

According to art. 1281 NCC The contract is enforceable against third parties who are required to respect the rights and obligations of the contracting parties.

Even though a contract produces effects only towards its contracting parties, in general, that does not mean that other persons can completely ignore its effects. The other persons who were not parties in the contract are held to respect all the rights and obligations which arose from this particular contract.

Exceptions from the principle of privacy of the act

The genuine exception from this principle is the stipulation for somebody else, because a third party, a stranger to the contract, becomes creditor as a consequence of the agreement will of the contracting parties.

The apparent exceptions from this principle are:

Reprezentation a party, the representative, concludes a legal act, usually a contract, in the name and on behalf of another person, called proxy, in such a way that the effects of the contract which is concluded are produced towards the proxy the person who was not present at the moment when the contract was concluded.

Direct actions A third party has the right to ask directly his debtor contracting party in order to recover his own debt. An example would be the situation when some persons who concluded a contract with an entrepreneur does not receive money for their work, so they can ask for the money directly to the beneficiary of the work.

The promise for other (porte-fort convention)

The porte-fort convention is a contract or a clause in a contract through which a person debtor commits towards the creditor to determine another person to make a legal commitement in favor of the creditor from the contract.

Differences between the porte-fort convention and stipulation for somebody else:

a. The porte-fort convention is an apparent exception from the principle of privacy of the act, while stipulation for somebody else is a genuine exception from this principle

b. In the case of the porte-fort convention, the third party makes an act of ratification through which becomes a party in the contract concluded initially between promisor and creditor, while in the case of stipulation for somebody else, the third party makes an act of acceptance through which he consolidates the right acquired from the contract concluded between the one who stipulates and the promisor, but through this act of acceptance, he does not become a party in the contract.

c. In the case of the porte-fort convention, the promisor undertakes the obligation to determine the third party to conclude or to ratify an act, while in the case of the stipulation for somebody else, the promisor undertakes the obligation to give or to make something in favor of the third party beneficiary.

d. In the case of the porte-fort convention, the promisor is only debtor towards the creditor, while in the case of stipulation, depending on the decision of the third party, the promisor becomes creditor for this third party.

Simulation exception from the principle of opposability of the contract

The simulation is a legal operation stipulated expressis verbis in the New Civil Code and it is based on the mutual intention of the parties to simulate, creating through a public act (but untrue) a legal appearance which does not corresponds to the reality, but it produces effect toward third parties, and through another act (a secret act) modifies entirely or partially the legal appearance created through the public act.

The features of the simulation:

a) Conventional characteristic the intention of the parties is to hide under an untrue appearance the true reality

b) Legal characteristic simulation is permitted by law only if the parties do not pursue the breaking of the law.

c) Unitary characteristic simulation is a single legal operation: first, the real act, but secret, is concluded and after this operation, the parties conclude the public act, but untrue.

Conditions of the simulation:

a) the mutual intention of the parties to simulate (anumus simulandi)

b) the simultaneous existence of 2 acts: the public one and the real one (secret)

The mutual intention of the parties to simulate

The intention of the parties to simulate is a sine qua non condition for the existence of the simulation. The parties conclude an act, that is secret, but is real and afterwards they conclude another act, public, but untrue.

The simultaneous existence of 2 acts: the public one and the real one (secret)

In order to be valid, the public act must meet all the conditions imposed to the acts, in genere. This act does not produce any effect towards the parties because they were never intent to give this act a legal significance.

The secret act (contra-lettre) is the legal act in which we can find the real manifestation of the parties will. This act and only this will produce effects between the parties, but it will not produce any effects towards third parties. This act must meet all the substantive condition provided by law for legal acts. This contra-lettre should follow this two conditions:

It must have a secret characteristic

It must be contemporary to the public act the act are contemporary when they are concluded simultaneously, but also when first is concluded the secret act and afterwards the public act. It is essential that at the moment the public act is concluded, the secret one to be already concluded.

The secret act must meet only the substantive conditions provided by law for legal acts. They are not required to follow any formal conditions.

According to the New Civil Code, the simulation is not sanctioned with the nullity, but the specific sanction for this institution is the unenforceability of the secret act towards third parties. The secret act

only produces effects between the contracting parties, unlike the public act which does not produce any effect between the parties, it only produces effects to the third parties, but they have to be of good faith.

The third parties can ask the court to ascertain the existence and content of the secret act in order to remove the effects of the public act. If the action is admitted, then the secret act will produce effect towards the third parties, not only between the contracting parties.

Contractual liability

The contractual liability means the debtors obligation to repair the damage that he had caused to the creditor due to the non-performance, improper execution of his own obligation or due to the fact that he had performed his obligation, but not in time.

The essential condition to exist a contractual liability is to have a valid contract between the debtor and the creditor. If a contract does not exist, then we will apply the tort liability

The contractual liability has two forms:

The contractual liability for his own deeds

The contractual liability for the others deeds

Conditions for contractual liability

1. The existence of a valid contract

2. An illegal act

3. The existence of an injury

4. The existence of a connection between the illegal act and the injury

5. The debtors guilt

The illegal act

An illegal act means the non-performance of the obligations lato sensu. This means that the debtor is held responsible if he does not perform his obligations or if he performs in an inadequate way or if he performs them too late. The non-performance may be either totally or partially. New Civil Code introduce a presumption of guilt in art. 1548 which states that The fault of the debtor of a contractual obligation is presumed by the simple fact of the non-performance.

The injury

The injury may be defined as the damages caused to the creditor by the non-performance of the obligations of the debtor, or by the inadequate performance of these or by the performance of the same obligations too late.

The injury may be:

-patrimonial consists of the actual damage suffered by the creditor (damnum emergens) and the loss of profit (lucrum cessans)

- moral the physical pain and sufferings caused to the creditor by the non-performance of the obligation

- corporal the damages caused to the health and physical integrity of a person.

The creditor must prove the existence of the injury, unless the law stipulates otherwise ot the parties have agreed otherwise

The injury must fulfill the following conditions:

a. to be sure

b. to be foreseeable

c. to be attributable to the debtor

An injury is sure when its existence is certain. In genere, the actual injuries are sure. Also, the future injuries are sure if their existence is sure.

According to art. 1533 NCC, the debtor can only be held responsible for the injuries that he foresaw or could have foreseen at the moment when the contract was concluded

The injury must be attributable to the debtor which mean that the debtor should be guilty of non-performance his obligations.

The connection between the illegal act and the injury

According to the New Civil Code, the damages cover only what is a direct and a necessary consequence of the non-performance of the obligation.

The debtors guilt

Only if the debtor is guilty of non-performance his obligations, the creditor is entitled to damages.

According to art. 16 New Civil Code, there are two forms of guilt:

1) intent

2) negligence

The offense is committed with intent when the author foresees the result of his action and he either follows its outcome or although he doesnt follow the outcome, he accepts the possibility that this outcome will produce.

The offense is committed with negligence when the author either foresees the outcome of his action, but he does not accept it considering that it will not produce or he does not foresees the outcome of his action although he was supposed to foresee it.

In contract law, the debtor is held responsible no matter the form of his guilt. This is the general rule, but we have exceptions as well.

Damages

Damages can be defined as compensation money that the debtor is held to pay for repairing the injury suffered by the creditor as a consequence for non-performance of the obligation of the debtor, for an inadequate performance of the obligation or for not performing the obligation in time.

Damages are always established in money.

The court can force the debtor to pay damages to the creditor if the creditor has given notice to the debtor. In contract law, if the time in which the obligation must have been performed had expired, it is necessary a manifestation of the creditors will in order to give notice to the debtor to perform his obligation.

The debtor is considered to have been given notice when the creditor send him a written statement asking to perform the obligation or when the creditor introduce a writ of summons to the court.

The debtor is in default without notice in the following cases:

a) when the law expressly provides

b) when the contracting parties agreed this way

c) when the obligation, through his nature, had to be performed in a certain time and the debtor had not performed it

d) in the case of continuous obligations (the obligation to supply water)

e) if the obligation of not to do was breached

f) in other cases provided by law

If the debtor was given notice, the following effects arise:

a) from the moment when the debtor was given notice, the debtor is held to punitive damages

b) from the moment when the debtor was given notice, the debtor is held to compensatory damages

c) if the obligation is to transfer an individually determined good, from the moment when the debtor was given notice, the risk of the contract is not any more beard by the debtor of the obligation of releasing the good, but by the creditor who did not took the good.

If an amount of money is not paid in time, the creditor has the right to receive punitive damages, in the amount agreed by the parties or in the amount stipulated by the law. If the parties have not agreed to a specific interest, then it will be applicable the legal interest.

Penalty cause

According to art. 1538 NCC, a penalty clause is a clause through which the parties agrees that if the debtor does not perform his obligation, he will have to pay a certain amount of money. The parties sets in advance the value of the injury caused to the creditor and they will not be able to ask for more damages in court and the judge will not be able to reduce or to increase the amount of the damages.

Clauses concerning the contractual liability

Irresponsibility conventions the debtor is not held responsible for any obligation; they are permitted only if the creditors guilt is negligence

Limitation of liability clause the parties agrees to a maximum amount of money which the debtor has to pay if he causes a damage to the creditor. The clause is only valid if the creditors guilt is negligence.

Aggravation of the liability clause the debtor agrees to be held responsible for any obligation. They are permitted no matter the debtors guilt

The contractual liability for the others deeds

The debtor is liable for damage caused by negligence of the person who is used by him in the performance of the contractual obligations.

The conditions under which the contractual liability for the others deeds can be applied:

a) contractual obligation of the debtor to be executed through another person

b) the third party who has to perform the obligation has to be assigned

c) absence of the exemption from liability of the debtor by the creditor

Business law_9_The extinctive prescription (termination of act)

DEC - 04 - 2013 Definition:

The extinctive prescription is a sanction which consists of the extinction of right of action not exercised in the period of limitation.

which was

The substantive law of action, referred to as the right of action is extinguished by prescription if it is not exercised within the time limit which has been set by law. The right of action means the right to compel a person using public force, to execute a particular performance, to meet a specific legal situation or to support any other civil penalty, as the case may be.

The rights of action having a patrimonial object undergo extinctive prescription unless by law is specified otherwise. Also, when the law expressly provides, other rights of action, no matter their subject matter, undergo extinctive prescription. The New Civil Code stipulates that the termination of act is an institution of private order, which means that the court cannot apply this sanction unless it is requested by the party. Also, the legislation gives the possibility for the parties who have full capacity to modify the length of the prescription terms or their course.

The effect of this institution

According to art. 2500 (1) NCC, the extinctive prescription has as an effect the termination of the right of action., which means that after the fulfillment of the prescription term, the right itself continue to exist.

The effect of the extinctive prescription is governed by 2 principles:

The prescription of the action concerning an accessory right together with the prescription of the action concerning a principal right. This principle is an application of the accesorium sequitur principale rule. According to this principle,

once the right of action concerning a principal right cannot be exercised, the right of action concerning an accessory right is terminated as well, but the other way around is not possible.

The second principle is applied if the debtor is obliged to successive benefits, such as rents, leases, except the case when all these benefits make up by their purpose, or stipulated by law or a convention, a whole unit. In order to understand this principle, lets take as an example the case when A borrowed 10.000 RON to B on 1 February 2008 agreeing that this amount of money will be given back on 1 August 2008, with an interest of 0,5% per month. If A sues B on 1 October 2011, requesting the money with interest, the court will not be able to grant the action because the extinctive prescription of the principal right drew to the extinctive prescription of all the benefits which make the subject matter of the accessory right.

The domain

The extinctive prescription and the rights of claim. As a rule, the rights of claim are subject to extinctive prescription, but there are exceptions (art. 2237 NCC the rights of policyholders on the amounts resulting from technical reserves provided to life insurance payment obligations falling due in the future are not subject to prescription).

The extinctive prescription and the ancillary rights in rem. As a rule, the ancillary rights in rem are subject to extinctive prescription.

The extinctive prescription and the non-ancillary rights in rem. The law stipulates that the majority of the non-ancillary rights in rem are not subject to statute of limitations. Examples:

action for the recovery of possession

Partition

actions over land boundaries.

The extinctive prescription and the non patrimonial rights. As a rule, the non patrimonial rights are subject to extinctive prescription. Examples: action concerning the defense of a right to a name, action in establishing parentage toward the mother etc.

Exceptions: action for declaring a non patrimonial legal act relatively null, action in the relative nullity of marriage etc

Period of limitation/lapse of time/statute of limitation

Definition: a period of time, fixed by law or agreed by the parties, during which legal action can be brought, as for settling a claim. The statute of limitation period is not a fundamentally legal term anymore, because the parties are allowed to modify it.

The general statute of limitation period is 3 years, if the law does not provide any other term. However, the Romanian law stipulates some special statute of limitation periods:

a) 10 years the right of action regarding moral or material damages caused to a person through torture and other rights of action expressly stipulated by law

b) 2 years the right of actions based on an insurance relationship and other rights of action expressly stipulated by law

c) 1 year the right of action of attorneys against their customers for the payment of fees and expenses and other rights of action expressly stipulated by law

d) other terms expressly stipulated by the Romanian legislation.

The course of the extinctive prescription

According to art. 2523 NCC states that extinctive prescription begins to run from the date the holder of the right of action knew or ought to have known the birth of this right of action.

Examples:

-in the case of the obligation of to give or to do, the extinctive prescription begins to run from the date when the obligation had become enforceable and the debtor should have performed it. If the right is affected by a suspensive term or condition, the extinctive prescription will begin to run from the moment the term or the condition have fulfilled.

- in the case of successive benefits, the prescription of the right of action begins to run from the date when each obligation had become enforceable

- in the case of liability for hidden defects of the work or construction, the extinctive prescription begins to run from the discovery of the defects, but no later than the expiration of the period of warranty for these defects.

- in the case of the right of action for annulment of a legal act, the extinctive prescription begins to run:

a) in the case of duress, from the day when it stopped.

b) in the case of misrepresentation, from the day when it was discovered

c) in the case of error or other cases of annulment, from the day when the person entitled or his legal guardian knew the cause for annulment, but no later than the expiration of 18 months from the day of signing the legal document.

The suspension of the extinctive prescription

The suspension of the extinctive prescription means that change of the course of extinctive prescription consisting in stopping the course of prescription within the time it takes for the situations which enable the holder of the right of action to react to disappear

General causes for suspension:

According to art. 2532 NCC, the extinctive prescription will not start running and if it starts, it will be suspended:

1. between spouses, as long as the marriage lasts and if they are not separated;

2. between parents, legal guardians and those with restrained capacity or with no capacity or between curators and those who are represented as long as this situation lasts and the reckonings have not been released and approved;

3. between any person who, under the law, under a court ruling or under a legal act, administrates other persons goods and those whose goods are administrated as long as the management has not been terminated and the reckonings have not been released and approved.

4. in the case of the person with restrained capacity or with no capacity as long as he doesnt have a legal guardian, except the cases the law provides otherwise.

5. as long as the debtor, deliberately, hides the existence of the debt or its enforceability to the creditor.

6. throughout the duration of negotiations carried for the settlement of disputes in an amiable way between the parties, but only if these were held in the last six months prior to the expiration of the limitation.

7. in the case when the person entitled to the right of action must or wants to use a preliminary procedure as long as he doesnt know the outcome of this procedure, but no later than the expiration of 3 months from the day this procedure had started, if the law or the contract does not stipulate otherwise.

8. in the case when the holder of the right of action or when the person who violated the right of action is part of the Romanian armed forces, while they are in a state of mobilization or war.

9. as long as the creditor founds himself in a situation of force majeure

The law also provides some special causes for suspension:

The prescription does not run against the heirs of the deceased as long as they have not accepted the inheritance

The prescription does not run against the deceaseds creditors about the debts that they have on heritage as long as it has not been accepted by the heirs.

Etc

The effects of suspension

The general effect

For the period prior to the cause of the suspension, the suspension does not produce any legal effect.

As long as the cause of suspension lasts, the effect of suspension consists in stopping the course of the extinctive prescription.

After the cause of prescription had disappeared, the course of prescription starts running again, taking into consideration the elapsed time before the cause of suspension as well.

The special effect

According to art. 2534 (2) NCC the prescription will not be fulfilled before the expiry of six months from the date when the suspension has ceased with the exception of the prescriptions of six months or shorter which will not be fulfilled until after the expiration of one month after cessation of the suspension.

The suspension of the extinctive prescription can be invoked only by the party who was prevented from doing acts of interruption, except the cases where the law provides otherwise. If the party invokes the suspension, its effects will occur by default.

The interruption of the extinctive prescription

The interruption of the extinctive prescription means that change of the course of extinctive prescription consisting in removing the prescription elapsed before occurrence of the interrupted cause and the start of another statute of limitations.

Causes for interruption:

The extinctive prescription is interrupted:

1. through a voluntary act of enforcement or by admitting, in any way, the right whose action is prescribed made by the debtor

2. by introducing an application for summons or an application for arbitration, only if they are admitted

3. by bringing a civil action in the criminal proceedings

4. initiation of criminal proceedings

5. notice of default given to the debtor, only if the debtor is sued within six months from the date the debtor had received the notice of default.

6. other cases provided by law

The effects of the interruption

The interruption of the extinctive prescription produces the following effects:

Erasing the extinctive prescription which started to run before the cause of interruption had appeared

After the interruption, a new course of extinctive prescription is starting to run.

The reinstatement in the period of limitation

If a party has good reason for not performing his right of action, he can ask the court to be reinstated in the period of limitation and to hear the cause.

The causes for reinstatement in the period of limitation are not stipulated by law, the law offers the judge the possibility to appreciate if the reasons invoked by the party are reasonable or not.

The reinstatement in the period of limitation can not be admitted unless the party had performed his right of action prior to the expiration of a period of 30 days, counted from the day that he knew or should have known that the reasons which enabled him to introduce an application for summons had disappeared. The period of 30 days is a period of limitation.

The reinstatement in the period of limitation has as an effect considering the extinctive prescription as unfulfilled although the period of limitation had expired. The reinstatement in the period of limitation has a judicial character, which means that the court has to deliver a judgment. According to New Civil Code, the reinstatement in the period of limitation can not be decided ex officio, it has to be requested.

The fulfillment of the extinctive prescription

If the period of limitation is established in weeks, months or days, the period of limitation will be considered fulfilled in the corresponding day in the last week or month or the last year. If the last month has not a day corresponding to the one in which the period of limitation began to run, the period of limitation will be considered fulfilled in last day of this month.

If the period of limitation is established in days, the first and last day will not be taken into consideration. The period of limitation will be considered fulfilled at midnight of the last day.

If the period of limitation is established in hours, the first and last hour will not be taken into consideration. Acts of any kind are considered to be made in time if the documents were delivered to the post office no later than the last day of the period of limitation, until the closing date at this specific post office.