Billionaire contract on a restaurant serviette (Part I)

After an aggressive negotiation, two CEOs of multinational companies finally reach an agreement at the table of an exclusive restaurant. They draw a simple sketch on a simple paper serviette, and shake hands:

“… Let’s have our attorneys meet on Monday to sort out all the paperwork…” sentences one of them with a relieved sigh.

Typical-topic of the legal world represented cinematographically by Hollywood that could well be one of the last scenes of the movie “Arbitrage” (The Fraud) or one of the many chapters of “Boston Legal” or “Suits”.

But is this first agreement binding? Could any of them regret it and not comply?

In this series, we will analyze what minimum requirements this small piece of paper must meet in order to have sufficient legal consistency before the courts and tribunals in case of non-compliance according to the jurisdiction and legislation of the Kingdom of Spain.

Similarly, is it possible to buy or sell with full effectiveness and legal certainty through Whatsapp, Facebook, Line, or through a simple oral agreement in a relaxed get-together within a group of friends or acquaintances?

Perfection, consummation, nullity and voidability are some of the concepts to be addressed in this series of articles whose main mission will be to provide the ordinary citizen with all the necessary basic knowledge about the most common civil and commercial contracts, to be able to carry out any agreement or business with the maximum success rate.

Autor

Fernando Aguilar Vijande
Abogado - Attorney

Contact Information
 + 34 630849627
 fernando.aguilar@lariostreslegal.com

Services

Court Law, litigation and arbitration. 
Transactions and private law
Investments and financial markets
Banking and mortgage law

ESSENTIAL ELEMENTS.

First of all, it is important to know that the original legal basis of the civil contract is to be found in art. 1.261 CC, which lists the essential elements that every contract must meet in order to be effective and binding:

1.- Consent of contracting parties [see arts. 1.262-1.270 CC].

Certain object on which the contract revolves [see arts. 1.271-1.273 CC], and

3.- Cause of the obligation established [see arts. 1.274-1.277 CC].

CONTRACT FORMATION STAGES.

Having said this, it is necessary to know that in the formalization of any binding agreement or contract we must distinguish between two fundamental and correlative concepts (or phases), the “Perfection” phase and the “Consummation” phase.
Although their use may often give the impression that they are categorical synonyms, they are completely different legal concepts and most people (including attorneys at law) tend to confuse them.

PERFECTION PHASE. CONTRATO

The perfection of the contract occurs when all the essential elements referred to above are present, i.e. consent by the concurrence of the offer and the acceptance of the thing and the cause [art. 1.262 CC]; and it is the birth of the contract to legal life and commercial traffic, fully constituting the obligations of the parties, with no possibility of repentance except to assume the eventual consequences of an unjustified breach.

It is clear, therefore, that when full agreement is reached on the respective positions of the parties (offer and acceptance) consent will take place and, from then on, the contract is born or perfected [see art. 1.450 CC – perfection].

From the moment of perfection, the parties are bound to performance irrespective of payment or delivery.

CONSUMMATION PHASE.

On the other hand, consummation is the second phase. It is the execution of the total or partial performance of that contract, in those obligations linked to a certain milestone or a certain term that, as we have already indicated, were pre-established through the perfection phase (negotiation and consent recorded in physical, digital-visual or verbal support -witnesses-).Contrato.

Therefore, the perfection phase would be the moment in which the CEOs reach this agreement and document it using the serviette as the physical support for formalization. However, consummation would be the moment in which the obligations of both parties are satisfied. CONTRATO. 

For example, the payment of “X” million euros by one party, and the delivery or transfer of the title-ownership, of the use-enjoyment of the object or satisfaction of the contracted service by the other party as consideration for such payment in the manner and within the terms established by both parties in the aforementioned napkin).

EVIDENTIARY SUPPORT. CONTRATO

Therefore, what is fundamental in any agreement or contract is the formation phase (perfection) and the corresponding proof of its existence through any type of support (for example: restaurant napkin, Whatsapp conversation, Telegram, Line, Facebook, text message, email with affirmative/confirmatory answer or oral agreement with several witnesses without interests or direct links, etc.), since, once the “formationphase” is completed, it is perfectly possible to determine the moment from which the contract begins to produce all its legal effects.

And it is from that moment when all the immediate consequences for the contracting parties are automatically generated.

Therefore, the exact moment that gave rise to rights and obligations can be perfectly measured in order, for example, to calculate interest or quantify damages in the event that one of the parties fails to comply with the agreement.

For this purpose, litigation lawyers will use the instrument of Art. 1.124 Cc for serious non-performance, or Art. 1.103 and 1.104 Cc in case of deficient performance.

CONCLUSIONS.CONTRATO

As we can see, our legislation openly admits any type of evidence support, which allows to be creative in the method used to hire. But always having clear the minimum requirements to be fulfilled by such support according to all the above mentioned.

In the next installment, we will analyze the figure of nullity and voidability in terms of the most common casuistry to check or avoid that such contract or agreement is vitiated and therefore, maintain full practical effectiveness in the (non-legal) life of the real world.

Vía | Código Civil, Noticias Jurídicas.

Image | IA Larios Tres Legal