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DRAFT OF THE CIVIL CODE OF CAMBODIA

 

NOTE

This is a tentative  English translation prepared by the JICA Project Office in the  Ministry   of  Justice  of  Cambodia  for  reference   purpose  only.     This translation was made from Japanese version, and is subject to further review to  reflect   the   Khmer   original   draft   more  precisely.     The   official  draft submitted by the Ministry of Justice to the Council of Ministers  is in Khmer.

 

 

BOOK  ONE "GENERAL  RULES"

 

  1. (General principles of private law)

 

This Code sets forth the general principles governing legal relations in civil matters. Except where otherwise provided by special law, the provisions of this Code shall apply to property related matters and family relations.

 

  1.  (Fundamental concepts)

 

This Code gives concrete embodiment to the concepts of the dignity of the individual, the equality of the sexes and the guarantee of property rights provided in the Constitution.

 

  1. (The principle of private autonomy)

 

Under this Code, legal relations among private persons, including

corporations, shall be equal and equivalent, with respect for the free

intention   of   the   individual.   Public   corporations   shall   be   deemed  private persons in connection with their legal relations that arise from transactions.

 

  1.  (Prohibition of abuse of rights)

 

The abuse of rights shall not be permitted. If a right is used beyond

the scope of the protection originally anticipated, the exercise of such

right shall not be valid.

 

  1.  (The principle of good faith)

 

Rights shall be exercised and duties performed in good faith.

 

 

 

 

BOOK   TWO "PERSONS"

 

Chapter One NATURAL PERSONS

 

 

Section  I Legal Capacity

 

  1. (Principle of equality of legal capacity)

 

All natural persons are entitled to have rights and assume obligations

in their name.

 

  1.  (Limitation on capacity of foreign nationals to acquire rights)

 

Foreign nationals are not entitled to acquire or maintain certain rights

if so provided by law or treaty.

 

  1. (Commencement/end of legal capacity)

 

Natural  persons  shall  acquire  legal  capacity  by  birth,  and  shall  lose it  by  death.

 

  1. (Fetus)

 

(1)      A fetus in existence at the time that a tortious act is conducted shall  be  entitled  to  seek  damages  for  the  harm  arising  from  such  act after  it  is  born.

 

(2)     A fetus in existence at the time of death of a decedent who dies intestate  shall  be  entitled  to  inherit  from  the  decedent  after  it  is born.

 

(3)      A fetus in existence at the time of death of a testator is entitled to  receive  the  effect  of  the  testament.

 

Section   II  Personal Rights

 

  1. (Concept of personal  rights)

 

Personal rights include the rights to life, personal safety, health, freedom, identity, dignity, privacy, and other personal benefits or interests.

 

  1. (Right to injunction)

 

Where  there  is  a  danger  of  unlawful  infringement  of  a  personal  right, or where there is a danger that such an infringement that has already occurred will unlawfully continue or be repeated, the personal right holder  may  demand  to  enjoin  such  infringement.

 

  1. (Right to demand  elimination  of  effect  of  infringing  act)

 

A person who has suffered an unlawful infringement of a personal right may, where the infringing state is continuing due to the continued presence  of  the  effect  of  the  infringing  act,  demand  the  elimination of the effect of the infringing act unless such elimination is not practically  feasible.

 

  1. (Right to damages)

 

The  provisions  of  Articles  11(Right  to  injunction)  and  12(Right  to demand  elimination  of  effect  of  infringing  act)  shall  not  prevent  a person who has suffered an infringement of a personal right from seeking damages for any harm suffered from such infringement in accordance with the  provisions  regarding  tortious  acts.

 

Section   III  Capacity

 

  1. (Lack of capacity)

 

An act performed by a person who was unable to recognize and understand the  legal  consequences  of  his  actions  is  voidable.

 

  1. (Definition of act)

 

An 'act' as used in the provisions of Sections III, IV and VI of this Chapter  shall  include  a  declaration  of  intention,  [the  execution  of] a  contract,  and  a  unilateral  legal  act.

 

Section   IV  Capacity  to  Act

 

  1. (Definition of incompetent  persons)

 

Incompetent  persons  are  minors,  adults  in  guardianship  and  a  person under  curatorship.

 

Sub-section  I  Minors

 

  1. (Definition of minor)

 

Minors  are  persons  under  the  age  of  eighteen.

 

  1. (Right to rescind  act)

 

An act conducted by a minor without the consent of his parental power holder  or  guardian  may  be  rescinded.  However,  this  shall  not  apply  to an act performed in order to obtain a right or to discharge a duty or obligation,  or  to  an  act  conducted  in  the  course  of  daily  life.

 

  1. (Disposal of property  with  permission  of  parental  power  holder  or guardian)

 

Where a minor has been permitted by his parental power holder or guardian to  dispose  of  property  for  a  specific  purpose,  the  minor  may  dispose of  the  property  within  the  scope  of  such  purpose.  A  minor  may  also dispose of property where he has been permitted by his parental power holder   or   guardian   to   dispose   of   the   property   without   a   specified purpose.

 

  1. (Minor permitted to  conduct  business)

 

(1)      A minor who is permitted by his parental power holder or guardian to  conduct  one  or  more  kinds  of  business  shall  have  the  same  capacity to  act  as  an  adult  to  the  extent  of  the  permitted  business.

 

(2)      In  the  case  of  paragraph  (1),  if  it  is  found  that  the  minor  is unable  to  manage  the  business,  his  parental  power  holder  or  guardian may revoke the permission to conduct business or impose restrictions thereon.

 

  1. (Requirements for emancipation)

 

(1)      Where   a   minor   who   has   reached   the   age   of   sixteen   completely supports himself, the court may, upon a petition from the minor, declare the  emancipation  of  the  minor  if  such  emancipation  is  deemed  in  the minor's best interest. In such a case, the court shall hear the opinions of  the  parental  power  holder(s).

 

(2)      A married minor shall be deemed emancipated without a declaration of  the  court.

 

(3)      In  case  of  paragraph  (2),  the  effect  of  the  emancipation  shall not  cease  to  exist  in  the  event  of  a  subsequent  divorce.

 

  1. (Effect of emancipation)

 

An  emancipated  minor  shall  have  the  same  capacity  to  act  as  an  adult.

 

  1. (Minor's labor contract)

 

(1)   Notwithstanding  the  provisions  of  Articles  1050(Property management and representation) and 1077(Property management and representation), a parental power holder or guardian may not enter into a  labor  contract  on  behalf  of  a  minor.

 

(2)      A contract that contravenes the provisions of paragraph (1) shall not  be  binding  on  the  minor.  However,  this  shall  not  apply  where  the minor  ratifies  the  contract.

 

(3)    A  parental  power  holder,  a  guardian  or  the  administrative authorities may, if the labor contract is deemed to be disadvantageous to  the  minor,  terminate  the  contract.

 

Sub-section  II  Person  under General Guardianship

 

  1. (Declaration of commencement  of  general  guardianship)

 

(1)     With respect to a person who remains in a habitual condition of lacking the ability to recognize and understand the legal consequences of his actions due to mental illness or disability, the court may declare the commencement of a general guardianship at the request of the person himself, the person's spouse, any relative within the fourth degree of consanguinity,  the  guardian  of  minor,  the  supervisor  of  guardian  of minor, the chief of the Khum or Sangkat where the person's domicile is located,  or  a  prosecutor.  However,  this  provision  shall  not  apply  in case where the person is under 15 years old at the time of application.

(2)      In  case  where  the  court  makes  the  declaration  of  Paragraph  (1), and  where  the  person  is  under  the  curatorship,  the  court  must  revoke the  declaration  of  commencement  of  curatorship.

 

  1. (Meaning of   general   guardianship;   and   appointment   of   general guardian)

 

A person who receives a declaration of commencement of general guardianship shall be called a 'person under general guardianship,' and shall  be  placed  under  the  care  of  a  general  guardian.

 

  1. (Right to rescind  act)

 

An act conducted by a person under general guardianship may be rescinded. However, this shall not apply to an act necessary in the course of daily life.

  1. (Revocation of declaration of commencement of general guardianship) When the grounds  for  the  general  guardianship  described  in  Article

24(Declaration of commencement of general guardianship) cease to exist,

the   court   shall   revoke   the   declaration   of   commencement   of   general

guardianship at the request of the person himself, the person's spouse, any relative within the fourth degree  of consanguinity, the guardian, the guardian's supervisor, the chief of the Khum or Sangkat where the person's  domicile  is  located,  or  a  prosecutor.

 

Sub-section  III  Person under  curatorship

 

  1. (Declaration of commencement  of  curatorship)

 

(1)       With respect to a person whose ability to recognize and understand the legal consequences of his actions is substantially impaired due to mental  illness  or  disability,  the  court  may  declare  the  commencement of curatorship at the request of the person himself, the person's spouse, any relative within the fourth degree  of consanguinity, the guardian,

a guardian's supervisor, the chief of the Khum or Sangkat where the person's  domicile  is  located,  or  a  prosecutor.

 

(2)      In  case  where  the  court  makes  the  declaration  of  Paragraph  (1), and where the person is under the general guardianship, the court must revoke  the  declaration  of  commencement  of  the  general  guardianship.

 

  1. (Meaning of a  person  under  curatorship;  appointment  of  curator)

 

A person who receives a declaration of commencement of curatorship shall be  called  a  'person  under  curatorship',  and  shall  be  placed  under  the care  of  a  court-appointed  curator.

 

  1. (Right to rescind  act)

 

Any   of   the   following   acts   conducted   by   a   person   under   curatorship without  the  consent  of  the  curator  may  be  rescinded,  except  where  the act  is  conducted  in  the  course  of  daily  life:

(a)                  receiving  or  using  principal;

(b)                  incurring  or  guaranteeing  a  debt;

(c)                  acting   with   the   intent   of   obtaining   or   losing   rights pertaining  to  an  immovable  or  other  valuable  asset;

(d)                  conducting  an  act  of  litigation;

(e)                  donating [money or property], or entering into a settlement or  arbitration  agreement;

(f)                  accepting  or  waiving  succession,  or  dividing  a  legacy;

(g)                  refusing  a  donation  or  bequest,  or  accepting  a  donation  or bequest  subject  to  a  burden;

(h)                  building, remodeling,  expanding or conducting major repairs

to  a  building  or  structure;

(i)                  executing a lease agreement that exceeds three years for land, two  years  for  a  building,  or  six  months  for  a  movable;  or

 

 

 

 

(j)                  any  other  act  that  a  court  specifically  declares,  based  on the application of a person listed in Article 28(Declaration of commencement of curatorship) , a curator, or a curator's supervisor,  requires  the  consent  of  the  curator.

 

  1. (Revocation of declaration  of  commencement  of  curatorship)

When  the  grounds  for  curatorship  described  in  Article  28(Declaration of commencement of curatorship) cease to exist, the court shall revoke the declaration of commencement of curatorship at the request of the person  himself,  the  person's  spouse,  any  relative  within  the  fourth degree  of  consanguinity,  the  guardian,  a  guardian's  supervisor,  the chief of the [commune] where the person's domicile is located, or a prosecutor.

 

Sub-section  IV   Protection  of  Party  to  Transaction with  Incompetent  Person

 

  1. (Right to demand)

(1)     The other party to an act conducted by an incompetent person may, after  the  incompetent  person  has  become  a  person  of  full  capacity, notify such person and demand a definite answer within a period [fixed by  such  other  party],  which  shall  not  be  less  than  one  month,  as  to whether or not the person ratifies the voidable act.  If the previously incompetent  person  fails  to  dispatch  a  definite  answer  within  such period,  the  act  shall  be  deemed  to  have  been  ratified.

(2)      The   same   shall   apply   to   cases   where   the   notice   set   forth   in paragraph   (1)   was   given   to   a   parental   power   holder,   guardian   or court-appointed curator with respect to an act within the scope of the guardian's authority before  the incompetent person became a person of full capacity, but no definite answer was dispatched by the guardian within  such  period.

(3)      The other party to an act conducted by a person under curatorship may  notify  the  person  under  curatorship  and  demand  that  such  person obtain the ratification of the curator within the period set forth in paragraph  (1).     If  the  person  under  curatorship  fails  to  dispatch  a notice  to  the  effect  that  ratification  has  been  duly  obtained  within such  period,  the  contract  shall  be  deemed  rescinded.

 

  1. (Fraud by incompetent)

 

If an incompetent person has used fraudulent means to induce the belief that he is a person of full capacity, the act of the person cannot be rescinded.

 

Section   V    Permanent  Residence

 

  1. (Definition of permanent  residence)

 

A person's base and center of living shall be the person's permanent residence.

 

 

  1. (Place of abode)

 

If the permanent residence is unknown, the place of abode shall be deemed to  be  the  permanent  residence.

 

  1. (Cases where no  residence  exists  within  Cambodia)

 

If a person has no permanent residence in Cambodia, the place of abode in Cambodia shall be deemed to be the person's permanent residence, regardless of whether the person is a Cambodian citizen or a foreign national. However, this shall not apply where the law of the person's domicile  applies.

 

Section   VI  Management  of  Property  of  Absentee:  Dec  aration  of  Disappearance

 

 

Sub-section  I  Management  of  Property  of  Absentee

 

  1. (Appointment of administrator  by  the  court)

 

Where  a  person  has  left  his  permanent  residence  or  place  of  abode  and there is no expectation of his return, if he did not appoint an administrator for his property, the court may, upon the petition of any interested   person,   the   chief   of   the   [commune]   where   the   person's residence  is  located  or  a  public  prosecutor,  order  the  appointment  of an administrator or take any other measure necessary for the management of   such   property.   The   same   shall   apply   where   the   authority   of   an appointed  administrator  has  expired  during  the  absence  of  the principal.

 

  1. (Revocation of order  to  manage  property)

 

In the case described in Article 37(Appointment of administrator by the court),  if  the  absentee  subsequently  appoints  an  administrator,  the court may revoke the order described therein upon the request of the administrator, any interested person, the chief of the [commune] where the  person's  residence  is  located  or  a  public  prosecutor.

 

  1. (Replacement of administrator)

 

Where  an  absentee  has  appointed  an  administrator,  if  it  is  unknown whether the absentee is alive or dead, the court may, upon the petition of any interested person, the chief of the [commune] where the person's residence  is  located  or  a  public  prosecutor,  order  the  replacement  of the  administrator.

 

  1. (Authority of administrator)

 

(1)      A court-appointed administrator has the authority to conduct acts set forth in paragraph (2), Article 363(Scope of agency authorization). Where the administrator is required to conduct an act beyond the scope of   that   authority,  the   administrator  may   conduct   the   act   with   the approval  of  the  court.

 

(2)      Where it is unknown whether the absentee is alive or dead, if the

 

 

 

 

administrator needs to conduct an act beyond the scope of the authority specified by the absentee, the administrator may conduct such act with the  approval  of  the  court.

 

 

Sub-section  II  Dec  aration  of  Disappearance

 

  1. (Requirements for declaration  of  disappearance)

 

(1)      If  it  is  unknown  for  five  years  whether  an  absentee  is  alive  or dead,  the  court  may,  upon  the  petition  of  his  spouse,  heir,  legatee, a designated insurance beneficiary, a parental power holder, guardian, father, mother or any other person who has an important legal interest in the declaration of disappearance, make a judicial declaration of disappearance.

 

(2)      The  rule  described  in  paragraph  (1)  shall  apply  where  the  fate of a person located in a war zone or aboard a foundered vessel, or who encountered  any  other  peril  that  might  have  been  the  cause  of  death, has been unknown for one year after the cessation of the war, the foundering  of  the  vessel  or  the  termination  of  the  peril.

 

  1. (Notification by publication)

 

The  proceedings  for  notification  by  publication  shall  be  carried  out in  order  to  declare  the  disappearance.

 

  1. (Effect of declaration  of  disappearance)

 

The absentee shall be deemed dead from the time, in the event that a judicial declaration of disappearance has been made in accordance with the provisions of paragraph (1) of Article 41(Requirements for declaration   of   disappearance),   when   the   period   set   forth   therein expires, and in the event that a judicial declaration of disappearance has been made in accordance with the provisions of paragraph (2) of the same Article, when the peril ceases to exist with respect to any legal relationship  that  exists  at  or  around  the  permanent  residence  or  the place  of  abode  at  such  time.

 

  1. (Handling of absentee's  return)

 

(1)      If  it  is  proven  that  the  absentee  is  alive,  or  died  at  a  time different from that set forth in paragraph (1) of Article 43(Effect of declaration  of  disappearance),  the  court  shall,  upon  the  petition  of the absentee or any interested person, revoke the judicial declaration of  disappearance.

 

(2)      A  person  who  has  acquired  property  directly  from  the  absentee based  on  the  effect  of  a  judicial  declaration  of  disappearance  shall lose  his  right  to  the  property  upon  the  revocation  of  the  declaration of  disappearance.    However,  a  person  who  was  unaware  when  he  acquired the property that the declaration of disappearance was in fact not in accordance with the truth is obligated to return such property only to the  extent  that  the  person  continues  to  receive  the  benefits  thereof.

 

 

 

 

(3)      An  act  conducted  after  a  declaration  of  disappearance  has  been made but before it has been revoked, in the belief that the declaration is in effect, shall not lose its effect or validity on account of the revocation.

 

(4)      In the event that a declaration of disappearance is revoked after the remarriage of the spouse of a person as to whom the declaration was made, the previous marriage shall be annulled due to the establishment of  the  remarriage.

 

Section   VII   Presumption  of  Simu  taneous  Death

 

  1. (Presumption of simultaneous  death)

 

If, among two or more persons who have died, it is unknown whether one has  survived  after  the  death  of  the  other(s),  the  persons  shall  be presumed  to  have  died  simultaneously.

 

 

 

Chapter Two JURISTIC PERSONS

 

Section   I  Genera                                                  Provisions

 

Sub-section  I  Definitions,  Types  and  Princip  es  of  Incorporation

 

  1. (Definition and types     of     juristic     persons,     principles     of incorporation)

 

(1)      In  this  law,  an  organization  granted  the  status  of  being  the subject  of  rights  and  obligations  independent  of  those  of  the  members that compose the organization shall be referred to as an "incorporated associations", and contributed assets granted the status of being the subject of rights and obligations independent [of the contributors of such  assets]  shall  be  referred  to  as  an  "incorporated  foundation".

 

(2)     In this law juristic persons that do not have profit among their objects are referred to as "non-profit juristic persons" and juristic persons that do have profit among their objects as "for-profit juristic persons".

 

(3)      In  this  law  incorporated  associations  of  which  the  members  are liable for the debts of the juristic person up to the amount of property contributed are referred to as "limited liability incorporated associations"  and  those  of  which  the  members  are  liable  for  the  debts of the juristic person with all their property are referred to as "unlimited  liability  incorporated  associations".

 

(4)      No  juristic  person  may  become  a  member  with  unlimited  liability of  another  incorporated  association.

 

(5)      A  non-profit  juristic  person  may  be  incorporated  under  this  law or  another  law  or  regulation.

 

(6)      A for-profit juristic person may be incorporated under [another]

 

 

 

 

law  to  be  stipulated  separately.

 

 

Sub-section  II  Name  of  Non-profit  Juristic Person

 

  1. (Name of non-profit  juristic  person)

 

(1)     No entity other than an incorporated association or incorporated foundation  may  use  the  words  "incorporated  association"  or "incorporated  foundation"  in  their  name.

 

(2)   Limited  liability  incorporated  associations  and  unlimited liability incorporated associations shall include in their name a statement that they are limited liability incorporated associations or unlimited  liability  incorporated  associations  as  the  case  may  be.

 

  1. (Foreign juristic persons)

 

(1)     In this law, juristic persons incorporated under foreign law are referred  to  as  "foreign  juristic  persons".

 

(2)     Foreign juristic persons are not recognized as juristic persons except in the cases of states, administrative divisions of states and foreign trading companies; provided that juristic persons may be recognized  as  such  by  Cambodian  laws  or  treaties.

 

(3)      Foreign  juristic  persons  recognized  under  paragraph  (2)  shall enjoy the same private law rights as juristic persons incorporated under the same type of Cambodian law; provided that this shall not apply to rights  that  may  not  be  enjoyed  by  foreigners  or  in  cases  where  there is  specific  [contrary]  provision  in  a  law  or  treaty.

 

Sub-section  III  Registration  of  Incorporation

 

  1. (Registration of incorporation  and  time  of  formation)

 

(1)      A juristic person shall come into existence upon registration at the  registry  having  jurisdiction  over  its  principal  office.

 

(2)    If a juristic person has a secondary office at the time of its incorporation, registration must [also] be effected at the registry having jurisdiction over the secondary office not later than one week after  registration  under  Paragraph  (1).

 

  1. (Particulars to be  registered)

 

(1)   The  following  particulars  of  a  juristic  person  shall  be registered:

(a)                  the  objects;

(b)                  the  name;

(c)                  the  principal  office  and  secondary  office(s);

(d)                  if grounds for dissolution have been provided in the articles of  incorporation,  such  grounds;

(e)                  the names and addresses of the directors and supervisor(s);

provided                             that    in    the    case    of    an    unlimited    liability

 

 

 

 

incorporated  association,  the  names  and  addresses  of  the members  shall  be  stated;

(f)                  if there are any directors who do not represent the juristic person, the name(s) of the director(s) who do represent the juristic  person;  and

(g)          if  there  is  a  provision  for  more  than  one  director  jointly  to represent  the  juristic  person,  such  provision.

 

(2)      If  there  is  a  change  in  any  particular  listed  in  Paragraph  (1), such change shall be registered within two weeks [following its occurrence]  at  the  registry  having  jurisdiction  over  the  principal office and within three weeks at the registry having jurisdiction over any other office. Pending registration, no change can be set up against other  persons.

 

(3)      If  there  is  provisional  disposition  to  suspend  the  performance of duties by, or to appoint a substitute for, a registered director, supervisor, liquidator or member, or a change or cancellation of such provisional disposition, registration thereof shall be effected at the registry   having   jurisdiction   over   the   principal   office   and   at   the registry having jurisdiction over any other office. In such cases the second  sentence  of  Paragraph  (2)  shall  apply  mutatis  mutandis.

 

Sub-section  IV   Domici  e  of  Juristic  Person

 

  1. (Domicile of juristic  person)

 

The  domicile  of  a  juristic  person  shall  be  the  place  in  which  its principal  office  is  located.

 

  1. (Registration of relocation  of  office)

 

(1)      If  a  juristic  person  relocates  its  principal  office,  then  not later than two weeks following the relocation, such fact shall be registered  at  the  registry  having  jurisdiction  over  its  old  location and  the  particulars  provided  in  Article  50(Particulars  to  be registered)  shall  be  registered  at  the  registry  having  jurisdiction over  the  new  location.  If  a  juristic  person  relocates  an  office  other than the principal office, then such fact shall be registered at the registry having jurisdiction over its  old location within three weeks and  the  particulars  provided  in  Article  50(Particulars  to  be registered)  shall  be  registered  at  the  registry  having  jurisdiction over  the  new  location  within  four  weeks.

 

(2)      Notwithstanding Paragraph (1), where an office has been relocated within   the   area   of   jurisdiction   of   a   single   registry,   only   such relocation  need  be  registered.

 

  1. (Registration of establishment  of  new  office)

 

(1)     Upon establishment of a new office, the particulars provided in Article 50(Particulars to be registered) shall be registered not later than two weeks following said establishment at the registry having jurisdiction  over  the  new  office.

 

 

 

 

(2)     In cases under Paragraph (1), the fact of registration of the new office shall be registered at the registries having jurisdiction over the principle office and any other office not later than three weeks following  the  establishment  of  the  new  office.

 

Sub-section  V    Registration  of  Foreign  Juristic  Persons

 

  1. (Registration of foreign  juristic  persons)

 

(1)      The   provisions   of   Articles   50(Particulars   to   be   registered),

52(Registration of relocation of office) and 53(Registration of establishment  of  new  office)  shall  apply  to  the  case  where  a  foreign

juristic  person  establishes  an  office  in  Cambodia.

 

(2)     Where a foreign company establishes an office in Cambodia for the first time, other persons may deny the corporate status of such juristic person until such time as registration thereof has been effected at the registry  having  jurisdiction  over  such  office.

 

Sub-section  VI   Management  and  Administration  of  Juristic  Persons

 

  1. (Inventory and list  of  members)

 

(1)    Upon incorporation and not later than the third month of each financial year, a juristic person shall prepare an inventory of assets and  keep  same  in  its  office  at  all  times.

 

(2)     An incorporated association shall prepare a list of members, keep same at it office and revise it whenever there is a change of membership.

 

  1. (Number of directors  and  their  selection,  dismissal  and  duties)

 

(1)    A  juristic  person  shall  have  director(s)  who  shall  be  the executive organ of the juristic person; provided that an unlimited liability  incorporated  association  shall  not  have  directors.

 

(2)     There may be one or more directors; provided that an incorporated foundation  shall  have  not  less  than  three  directors.

 

(3)     Unless otherwise provided in the articles of incorporation, the juristic  person's  business  shall  be  determined  by  a  majority  of directors  if  there  is  more  than  one  director.

 

(4)      Directors shall be appointed by the articles of incorporation or the  general  meeting  of  members.

 

(5)    Directors of an incorporated association may be dismissed by resolution  of  the  general  meeting  of  members.

 

  1. (Duties of directors)

 

(1)     Directors shall be subject to the duty to execute the company's business faithfully, in compliance with relevant laws, rules, and tenor of  the  articles  of  incorporation.

 

 

 

 

 

(2)      In  addition  to  Paragraph  (1),  the  relationship  of  directors  and the   juristic   person   shall   be   subject   to   the   provisions   governing mandate.

 

  1. (Directors' right to  represent  the  juristic  person)

 

(1)    A  director  represents  the  juristic  person;  provided  that  a director cannot contravene the tenor of the articles of incorporation.

 

(2)     If there is more than one director, they shall each represent the company, provided that it is permitted to stipulate otherwise in the articles  of  incorporation  or  the  act  of  endowment.

 

(3)      In  case  of  incorporated  association,  director(s)  shall  comply with  resolution  of  the  general  meeting  of  members.

 

  1. (Restrictions on the  right  to  represent  the  juristic  person)

 

No  restriction  imposed  on  the  right  of  representation  of  any  director or  other  representative  of  the  juristic  person  may  be  set  up  against a  bona  fide  third  party.

 

  1. (Provisional director)

 

If  there  is  a  vacancy  among  the  directors  and  there  is  a  concern  that damage   will   ensue   from   delay,   the   court  may   appoint   a   provisional director upon application by any interested person or of a public prosecutor.

 

  1. (Special representative)

 

A director shall have no right of representation in cases where the interests of the juristic person and the director's own interests conflict. In such a case, a special representative shall be appointed using the same procedures as those described in Article 60(Provisional director).

 

  1. (Supervisors)

 

(1)      A  juristic  person  shall  have  one  or  more  supervisors;  provided that an unlimited liability incorporated association shall not be required  to  have  a  supervisor.

 

(2)    The  supervisors  shall  be  appointed  in  accordance  with  the provisions of the articles of incorporation or by resolution of the general  meeting  of  members  or  of  the  meeting  of  directors.

 

(3)    No  director  or  employee  of  a  juristic  person  may  become  a supervisor.

 

(4)      An  audit  juristic  person  may  become  a  supervisor.

 

  1. (The duties of  supervisors,  etc.)

 

 

 

 

(1)      The  supervisors  shall  examine  the  work  of  the  juristic  person.

 

(2)      The  supervisors  may  demand  progress  reports  from  the  directors and employees of the juristic person concerning the juristic person's business, and may examine the status of the juristic person's business and  assets.

 

(3)    The supervisors shall examine proposals and documents that the directors intend to submit to the general meeting of members and meeting of  directors.  In  such  cases,  if  the  supervisors  find  any  matter  to  be in  breach  of  any  law  or  regulation,  the  articles  of  incorporation  or the  act  of  endowment,  or  to  be  seriously  improper,  they  shall  report to  the  general  meeting  of  members  or  the  meeting  of  directors.

 

(4)   The  supervisors  may  state  their  opinions  concerning  the appointment, dismissal and remuneration of supervisors at general meetings  of  members  or  meetings  of  directors.

 

(5)      If  they  find  that  directors  have  engaged  in  conduct  outside  the scope  of  the  objects  of  the  juristic  person  or  otherwise  in  breach  of law  or  regulation  or  the  articles  of  incorporation,  or  that  there  is a  concern  of  any  of  the  foregoing,  the  supervisors  shall  report  this to the general meeting of members or the meeting of directors. In such a   case,   if   this   is   necessary   in   order   to   make   such   a   report,   the supervisors may convene a meeting of the general meeting of members or meeting of directors. Furthermore, the supervisors of an incorporated foundation shall make the aforementioned report to the supervising authority   not   later   than   the   time   of   making   it   to   the   meeting   of directors.

 

(6)      If  directors  engage  in  any  conduct  prescribed  in  Paragraph  (5) or there is a concern that this will happen, and there is a concern that serious damage will ensue to the juristic person as a result of such conduct, the members may demand that such directors cease such conduct.

 

(7)      If  suit  is  filed  by  the  juristic  person  against  the  director(s) or by the director(s) against the juristic person, the supervisors shall represent  the  juristic  person  in  relation  to  such  suit.

 

Sub-section  VII   Disso  ution  and  Liquidation

 

  1. (Grounds for dissolution)

 

(1)      A  juristic  person  shall  be  dissolved  for  the  following  grounds:

(a)     the occurrence of a ground of dissolution prescribed in the

articles  of  incorporation;

(b)                  the conclusion of the undertaking that is the object of the juristic  person,  or  the  impossibility  thereof;

(c)                  bankruptcy;  or

(d)                  a  judgment  ordering  dissolution.

 

(2)       Apart     from    the     grounds     prescribed     in    Paragraph     (1),    an incorporated association shall be dissolved for the following grounds: (a)       a resolution of the general meeting of members of a limited liability incorporated association or agreement by all the

 

 

 

 

members of an unlimited liability incorporated association;

or

(b)                  the  number  of  members  being  reduced  to  one.

 

(3)   The  resolution  for  dissolution  by  a  limited  liability incorporated association under Paragraph (2) Item (a) shall require affirmation by a majority of all the members holding not less than three fourths  of  the  voting  rights  held  by  all  the  members.

 

  1. (Suit seeking dissolution)

 

(1)      In  the  case  of  a  limited  liability  incorporated  association, members  holding  not  less  than  10%  of  the  total  voting  rights,  in  the case of an unlimited liability incorporated association, the members, and in the case of an incorporated foundation, the directors or the supervising authority, respectively, may file suit seeking dissolution of  the  juristic  person.

 

(2)      In  cases  under  Paragraph  (1),  the  court  may  order  the  juristic person to be dissolved if and only if one of the following circumstances applies  and  the  reasons  are  compelling:

(a)                        The  juristic  person  is  faced  with  extreme  hardship  in

accomplishing   the   object   of   its   undertaking   and   has suffered or is likely to suffer irrecoverable damage; or

(b)                        The  management  or  disposition  of  the  juristic  person's property          is    extremely    improper,    to    the    extent    of imperiling   the   continued   existence   of   the   juristic person.

 

(3)       Notwithstanding Paragraphs (2) and (3), in cases where the court determines, upon application by the Minister of Justice or by any member, creditor  or  other  interested  person,  that  in  order  to  preserve  the public interest, the continued existence of the juristic person can not be  permitted  for  any  of  the  grounds  listed  below,  the  court  may  make an  order  that  the  juristic  person  be  dissolved:

(a)                  The juristic person was incorporated for an illegal object;

(b)                  Without   legitimate   reason,   the   juristic   person   has   not commenced business within one year after incorporation, or

has  ceased  to  do  business  for  one  year  or  more;  or

(c)                  Despite  a  person  executing  the  juristic  person's  business having received a written warning from the Minister of Justice,   there   has   been   continuation   or   repetition   of

conduct   that   deviates   from   or   abuses   the   powers   of   the juristic person as prescribed by law or regulation or the articles  of  incorporation  or  that  infringes  any  penal  law or  regulation.

 

(4)       Where an application has been made under Paragraph (3), even prior to making an order of dissolution, upon application by the Minister of Justice or by any member, creditor or other interested person, or ex officio, the court may appoint managers or take such other measures as it  deems  necessary  to  conserve  the  property  of  the  juristic  person.

 

  1. (Cases where a juristic person should be liquidated and liquidators)

 

 

 

 

Where  a  juristic  person  is  liquidated,  except  in  cases  under  Article

64(Grounds   for   dissolution)   Paragraph   (1)   Item   (c),   it   shall   be

liquidated in accordance with this Subsection 7. In such cases, for the purposes of liquidation, the juristic person shall be deemed to continue to  exist  until  the  liquidation  is  concluded.

 

  1. (Reversion of surplus  assets)

 

(1)       The reversion of any surplus assets after full payment of the debts of           the    juristic    person    shall    be    governed    by    the    articles    of incorporation.

 

(2)     In the case of an incorporated association, if reversion is not determined in accordance with Paragraph (1), it shall be determined by resolution of the general meeting of members in the case of a limited liability incorporated association and by decision of all the members in  the  case  of  an  unlimited  liability  incorporated  association.

 

(3)      Surplus   assets   of   which   the   reversion   is   not   determined   by

Paragraphs  (1)  or  (2)  shall  revert  to  the  National  Treasury.

 

  1. (Assumption of office  by  liquidators)

 

(1)    If a juristic person is dissolved under Article 64(Grounds for dissolution), Paragraph (1) Items (a) or (b) or Paragraph (2) Item (a), the  persons  listed  below  shall  be  the  liquidators  in  the  order indicated:

(a)                        the persons prescribed in the articles of incorporation; (b)             the  persons  appointed  by  the  general  meeting  of  members in                the       case                of        a          limited                                      liability   incorporated association   and   by   the   opinion   of   a   majority   of   the members      in      the    case   of  an   unlimited                 liability

incorporated  association;

(c)     in    the    case     of    a    limited     liability     incorporated

association or an incorporated foundation, the directors, and  in  the  case  of  an  unlimited  liability  incorporated association,  the  members.

 

(2)    If in cases described in Paragraph (1) there is no-one to be a liquidator, the court may appoint liquidators upon application by an interested  person.

 

(3)    If a juristic person is dissolved under Article 64(Grounds for dissolution) Paragraph (1) Item (d) or Paragraph (2) Item (b), upon application by any interested person or by the Minister of Justice, or ex  officio,  the  court  may  appoint  liquidators.

 

  1. (Dismissal of liquidators)

 

(1)    The  court  may  dismiss  a  liquidator  for  grave  reason  upon application  of  an  interested  person.

 

(2)     In the case of incorporated associations, except for liquidators appointed by the court, liquidators of a limited liability incorporated association may be dismissed by a resolution of the general meeting of

 

 

 

 

members  and  those  of  an  unlimited  liability  incorporated  association by  the  opinion  of  a  majority  of  the  members.

 

  1. (Registration of liquidators  and  dissolution)

 

Except  in  cases  of  dissolution  under  Article  64(Grounds  for dissolution)  Paragraph  (1)  Item  (c),  the  liquidators  shall  register their names and addresses and the cause and date of dissolution at the registry having jurisdiction over the  principal office not later than two  weeks  following  dissolution  and  at  other  offices  not  later  than three  weeks  following  dissolution.

 

  1. (Duties and powers  of  liquidators)

 

(1)      the  duties  of  the  liquidators  shall  be  as  follows:

(a)                        to conclude the current business of the juristic person;

(b)                        to collect the claims of the juristic person and pay its debts;  and

(c)                        to  deliver  surplus  assets.

 

(2)      If there is more than one liquidator, the business of the juristic person shall be determined by the opinions of a majority of liquidators.

 

(3)      Article  58(Directors'  right  to  represent  the  juristic  person) shall  apply  mutatis  mutandis  to  liquidators;  provided  that  where  the court appoints multiple liquidators, it may appoint a sole or joint representative  liquidators  from  among  them.

 

  1. (Duty to examine  and  report  the  juristic  person's  assets/assets)

 

(1)    Without  delay  after  assuming  office,  the  liquidators  shall examine the status of the juristic person's assets, prepare an inventory and  balance  sheet  and  submit  the  same  to  the  court.

 

(2)     In the case of a limited liability incorporated association, the documents described in Paragraph (1) shall be approved by the general meeting  of  members  prior  to  being  submitted  to  the  court.

 

(3)      In  the  case  of  an  unlimited  liability  incorporated  association, the documents described in Paragraph (1) shall be approved by all the members  prior  to  being  submitted  to  the  court.

 

(4)       In the case of an incorporated foundation, the documents described in  Paragraph  (1)  shall  be  approved  by  the  supervising  authority  prior to  being  submitted  to  the  court.

 

  1. (Notices to creditors)

 

(1)     Not later than two months following the day on which they assume office,  the  liquidators  shall  give  notice  in  the  official  gazette  on not less than three occasions, calling upon creditors to present their claims within a specified period which shall not be less than two months.

 

(2)     The notices described in Paragraph (1) shall included a statement that  if  creditors  do  not  present  their  claims  within  the  stipulated

 

 

 

 

period,  they  shall  be  excluded  from  the  liquidation.

 

(3)      Liquidators shall give separate notice to creditors known to them to  present  their  claims.

 

(4)    Liquidators may not exclude creditors known to them from the liquidation.

 

  1. (Settlement of claims  within  presentation  period)

 

(1)      The  liquidators  must  not  make  payment  to  creditors  within  the period for presentation of claims prescribed in Article 73(Notices to creditors); provided that the liquidators shall not hereby incur any liability  for  lateness  in  performance.

 

(2)      Notwithstanding Paragraph (1), with the permission of the court, the liquidators may settle petty claims, secured claims and other claims that are unlikely to harm the other creditors even if they are settled.

 

  1. (Payment to excluded  creditors)

 

Creditors who have been excluded from a liquidation may demand payment only  of  surplus  assets  that  has  not  yet  been  distributed.

 

  1. (Payment of claims)

 

(1)      Juristic  persons  may  pay  even  claims  that  have  not  yet  become payable.

 

(2)      In   cases   under   Paragraph   (1),   claims   that   are   subject   to   a condition, that have an uncertain remaining period or otherwise are of uncertain value shall be paid by the liquidators in accordance with the value  determined  by  a  valuer  appointed  by  the  court.

 

  1. (Disposition of surplus  assets)

 

The liquidators may not dispose of surplus assets in accordance with Article  67(Reversion  of  surplus  assets)  until  the  juristic  person's debts have been discharged; provided that the liquidators may dispose of surplus assets after retaining an amount deemed to be sufficient to discharge  any  claim  in  dispute.

 

  1. (Bankruptcy during liquidation)

 

(1)      If  during  a  liquidation  it  becomes  apparent  that  the  assets  of the  juristic  person  are  insufficient  to  pay  all  its  debts,  the liquidators shall immediately apply for a declaration of bankruptcy and give  notice  thereof  in  the  official  gazette.

 

(2)      The duties of the liquidators shall terminate when they hand over the  work  to  the  administrator  in  bankruptcy.

 

(3)      If  in  a  case  falling  under  this  Article  the  liquidators  have already made payment to a debtor or delivered assets to a person entitle to  reversion,  the  administrator  in  bankruptcy  may  recover  same.

 

 

 

 

 

  1. (Termination of liquidation)

 

(1)    Without delay after concluding the work of liquidation, the liquidators  shall  prepare  an  accounting  report.

 

(2)     In the case of a limited liability incorporated association, the liquidators shall submit the accounting report described in Paragraph (1)  without  delay  to  the  general  meeting  of  members  and  shall  obtain its  approval.

 

(3)      In  the  case  of  an  unlimited  liability  incorporated  association, the  liquidator  shall  submit  the  accounting  report  described  in Paragraph (1) without delay to the members and shall obtain their approval; provided that except where the liquidators have acted illegally, the members shall be deemed to have approved such report if they  state  no  objection  thereto  within  one  month  after  receiving  it.

 

(4)     In the case of an incorporated foundation, the liquidator shall submit the accounting report described in Paragraph (1)  without delay to  the  supervising  authority  and  shall  obtain  its  approval.

 

(5)      Liquidators  appointed  by  the  court  shall  submit  the  accounting report  described  in  Paragraph  (1)  without  delay  to  the  court.

 

  1. (Registration of conclusion  of  liquidation)

 

When  the  procedures  prescribed  by  Article  79(Termination  of liquidation) have been concluded, the liquidators shall register the conclusion  of  the  liquidation  not  later  than  two  weeks  thereafter  at the  registry  having  jurisdiction  over  the  principal  office,  and  not later than three weeks thereafter at the registry of each other office.

 

  1. (Preservation of documents)

 

The juristic person's books of account and other important documents relating  to  its  business  and  liquidation  shall  be  preserved  for  ten years following the registration of the conclusion of the liquidation at the registry having jurisdiction over the principal office. The custodian shall be appointed by the court, upon application by the liquidators  or  other  interested  person.

 

Section   II  Incorporated  Associations

 

Sub-section  I  Limited  Liabi  ity  Incorporated  Associations

 

  1. (Incorporation and articles  of  incorporation)

 

(1)  In order to incorporate a limited liability incorporated association,   the   persons   wishing   to   become   members   shall   jointly prepare  and  sign  articles  of  incorporation.

 

(2)     The articles of incorporation stipulated in Paragraph (1) shall include  the  following  particulars:

 

 

 

 

(a)                        the  objects;

(b)                        the  name;

(c)                        the  location  of  the  principal  office;

(d)                        stipulation of the total amount of the base assets to be secured by the entity in its capacity as a juristic person

and its funding. If there is contribution of assets other than  money,  the  assets  so  contributed  and  their  value shall  be  included.  If  a  promise  has  been  made  for assignment of assets after incorporation, the value thereof and the name or designation of the assignor shall be included. The amount of incorporation expenses to be borne  by  the  juristic  person  shall  also  be  included;

(e)                        the  accounting  year;

(f)                        particulars relating to directors, supervisors and other officers;

(g)                        stipulation      relating     to     acquisition     and     loss     of

qualification  as  a  member;

(h)                        particulars  relating  to  accounting;

(i)                        particulars  relating  to  dissolution;

(j)                        particulars     relating     to    amendment     of    articles     of

incorporation;  and

(k)                        method  of  giving  public  notices.

 

(3)    The  articles  of  incorporation  shall  not  take  effect  unless certified  by  a  notary.

 

(4)      The  articles  of  incorporation  shall  be  kept  at  the  principal office  and  each  subordinate  office.

 

  1. (Minimum amount of  asset  base)

 

A limited liability juristic person shall have an asset base of not less than  20  000  000  (Twenty  Millions)  riels.

 

  1. (Appointment of directors  and  supervisors)

 

(1)      If  a  limited  liability  incorporated  association  in  the  process of incorporation does not stipulate directors or supervisors in its articles of incorporation, a general meeting of members prior to incorporation  may  appoint  directors  or  supervisors.

 

(2)      Members  may  convene  a  general  meeting  of  members  described  in

Paragraph  (1).

 

  1. (Inspection of asset  base,  etc.)

 

(1)      In  order  to  have  an  adequate  asset  base,  the  directors  shall solicit  contributors  to  the  asset  base,  allocate  and  seek contributions.

 

(2)       If the articles of incorporation include an entry under the second sentence of Article 82(Incorporation and articles of incorporation), Paragraph (2) Item (d), the directors shall request the court to appoint an inspector in order to inspect the particular items of entry without delay.

 

 

 

 

 

(3)      The  inspector  appointed  under  Paragraph  (2)  shall  report  the results  of  the  inspection  to  the  court.

 

(4)      If  on  the  basis  of  the  inspection  the  court  finds  the  entry  in the articles of association improper, it shall make a ruling ordering amendment thereof. In such a case, the ruling shall be notified to the members, the directors and, in case of amendment relating to contributed assets  other  than  money,  to  the  contributor  thereof.

 

(5)      A contributor of assets other than money who has received a notice under  Paragraph  (4)  may  cancel  his  declaration  of  intention  to contribute such assets not later than one week following the ruling's becoming final and conclusive. In such a case the procedures for incorporation of the limited liability incorporated association may be continued  after  amendment  of  the  articles  of  incorporation.

 

  1. (Inspection of incorporation  procedures)

 

(1)      The  directors  and  supervisors  shall  inspect  the  confirmation  of the   contributors   of   the   total   amount   of   the   asset   base,   and   the completion  of  the  contribution  of  the  contribution  in  kind.

 

(2)      The directors or supervisors shall report to the members if they find any breach of law or regulation or of the articles of incorporation, or any impropriety, as a result of their inspection under Paragraph (1).

 

  1. (Particulars to be  registered  and  period  of  registration)

 

(1)     In the case of a limited liability incorporated association, in addition to the particulars stipulated in Article 50(Particulars to be registered),  the  particulars  set  forth  below  shall  be  registered:

(a)                        the  total  amount  of  the  asset  base;

(b)                        a  provision  dealing  with  the  rights  of  the  contributors

of  the  asset  base;

(c)                        the  procedures  for  return  of  the  asset  base;  and

(d)                        the  method  of  giving  public  notices.

 

(2)      Registration of incorporation of a limited liability incorporated association shall be effected not later than two weeks following the completion of the procedures prescribed in Articles 85(Inspection of asset base, etc.) and 86(Inspection of incorporation procedures) at the registry  having  jurisdiction  over  the  principal  office.

 

(3)   Registration at the registry having jurisdiction over each subordinate office shall be effected not later than two weeks following the  completion  of  registration  under  Paragraph  (2).

 

  1. (Liability for warranty  of  contributions  of  asset  base)

 

(1)      If no contributor has been confirmed for any portion of the asset base at the time of formation of a limited liability incorporated association, the directors and members at that time shall be deemed jointly to have become the contributors of such portion. The same shall apply  if  after  the  formation  of  such  juristic  person,  the  declaration

 

 

 

 

of  intention  of  any  contributor  of  asset  base  is  cancelled.

 

(2)       If asset base is not paid, or contribution in kind is not delivered, at the time of formation of a limited liability incorporated association, the  directors  and  members  of  such  juristic  person  at  that  time  shall be liable, jointly and severally, to pay such amount that was not paid, or  the  value  of  such  contribution  in  kind  that  was  not  delivered,  as the  case  may  be.

 

(3)      If the value of assets prescribed in the second sentence of Article

82(Incorporation  and  articles  of  incorporation),  Paragraph  (2),  Item (d)  is  extremely  short  of  the  value  noted  in  the  articles  of incorporation    at    the    time    of    formation    of    a    limited    liability

incorporated association, the directors and members of such juristic person  at  that  time  shall  be  liable  vis-a-vis  the  juristic  person, jointly  and  severally,  to  pay  the  amount  of  said  shortfall;  provided that  where  there  has  been  inspection  by  an  inspector  under  Article

85(Inspection of asset base, etc.), they shall be exempted from such liability unless they are a contributor in kind or an assignor of the assets  in  question.

 

  1. (Rights and obligations  of  members)

 

(1)     The members shall be obliged to pay the expenses of the juristic person.

 

(2)      The  members  may  exercise  the  right  to  vote  at  general  meetings of  members;  provided  that  they  may  not  exercise  this  right  in  respect of votes concerning the relations between themselves and the juristic person.

 

(3)    Each member shall have one vote; provided that the articles of incorporation may stipulate otherwise, taking account of the amount contributed.

 

(4)      Members who do not attend a general meeting of members shall vote in writing or by proxy; provided that if the articles of incorporation stipulate  otherwise,  such  other  stipulation  shall  be  followed.

 

  1. (Disqualification of members)

 

(1)    Members  may  resign  at  any  time;  provided  that  except  in unavoidable circumstances, members wishing to resign shall give prior notice in accordance with the provision requiring prior notice in the articles  of  incorporation,  if  any.

 

(2)      The  notice  period  described  in  Paragraph  (1)  may  not  exceed  one year.

 

(3)     Apart from Paragraph (1), members shall be disqualified for the following  grounds:

(a)                        the occurrence of any ground provided in the articles of incorporation;

(b)                        the  agreement  of  all  the  members;

(c)                        death  of  the  member  or  dissolution;  or

 

 

 

 

(d)                        expulsion.

 

  1. (Expulsion)

 

(1)     A member may be expelled by resolution of the general meeting of members, but only for legitimate reason. In such a case, the juristic person shall give the member in question not less than one week's prior notice  of  the  general  meeting,  and  shall  afford  the  member  the opportunity  to  defend  himself  at  the  meeting.

 

(2)      A  resolution  under  Paragraph  (1)  shall  require  the  affirmative vote of not less than one half of all the members moreover holding not less  than  three  quarters  of  all  the  voting  rights.

 

(3)       Expulsion shall only come into effect when notice thereof is given to  the  expelled  member.

 

  1. (Ordinary general meeting)

The directors shall hold an ordinary general meeting of members not less than  once  a  year.

 

  1. (Extraordinary general meeting)

 

(1)      The  directors  may  convene  an  extraordinary  general  meeting  of members  whenever  they  deem  it  necessary  to  do  so.

 

(2)     The directors shall convene an extraordinary general meeting of members if members holding not less than ten percent of the total voting rights demand the holding of a general meeting, stating the agenda thereof;  provided  that  if  the  articles  of  incorporation  provide otherwise   concerning  the   aforementioned  percentage,  such   provision shall  be  followed.

 

(3)      If,  notwithstanding  the  making  of  a  demand  under  Paragraph  (2), the  directors  fail  to  convene  a  general  meeting  without  delay,  the members who have made such demand may, with the permission of the court, convene  such  meeting.

 

  1. (Convening of general  meetings)

 

(1)      In  order  to  convene  a  general  meeting  of  members,  notice  shall be  issued  to  each  member  not  later  than  one  week  prior  to  the  date  of such  meeting;  provided  that  this  period  may  be  shortened  by  provision of  the  articles  of  incorporation.

 

(2)      If  there  is  agreement  of  all  the  members,  a  general  meeting  of members  may  be  opened  without  going  through  the  convening  procedure.

 

  1. (Powers of general  meeting)

 

(1)    The general meeting of members may pass resolutions only in accordance with provisions of this law or the articles of incorporation.

 

(2)      At  general  meetings  of  members,  the  directors  and  supervisors shall  provide  an  explanation  of  matters  in  respect  of  which  this  is

 

 

 

 

requested  by  members;  provided  that  if  such  matter  is  not  related  to a  matter on the agenda, the directors and/or supervisors need not give such explanation if giving it would cause serious damage to the common interests of members, such explanation would necessitate investigation, or  for  other  legitimate  reasons.

 

(3)      In  cases  under  Paragraph  (2),  if  members  give  notice  in  writing of   the   matters   to   be   explained   at   the   general   meeting   at   a   time reasonably in advance of the meeting, the directors and supervisors may not  refuse  to  give  the  explanation  by  citing  the  ground  that investigation  would  be  required  for  such  explanation.

 

  1. (Matters that can  be  resolved  by  the  general  meeting)

 

Except where otherwise provided in the articles of incorporation, the general meeting may only pass resolutions in respect of matter of which prior notice has been given in accordance with Article 94(Convening of general  meetings).

 

  1. (Amendment of articles  of  incorporation)

 

(1)      The articles of incorporation of a limited liability incorporated association  may  only  be  amended  by  the  affirmative  vote  of  members holding not less than three fourths of the total voting rights; provided that if the articles of incorporation provide otherwise, such other provision  shall  be  followed.

 

(2)      Amendments  of  the  articles  of  incorporation  shall  only  be  valid if  certified  by  a  notary.

 

  1. (Preparation and approval  of  accounting  documents)

 

(1)    Each financial year, the directors shall prepare the documents described below, together with schedules noting important facts supplementing  the  contents  thereof:

(a)                        balance  sheet;

(b)                        profit  and  loss  statement;

(c)                        business  report;  and

(d)                        proposal relating to disposition of surplus or treatment of  loss.

 

(2)    The directors shall submit each of the documents described in Paragraph  (1)  to  the  ordinary  general  meeting  of  members,  shall  give a report concerning the document described in item (c), and shall obtain approval  of  the  documents  described  in  items  (a),  (b)  and  (d).

 

  1. (Auditing of accounting  documents)

 

(1)      The  directors  shall  submit  the  documents  described  in  Paragraph

1 of Article 98(Preparation and approval of accounting documents) for audit  by  the  supervisors.

 

(2)      The  audit  described  in  Paragraph  (1)  shall  be  carried  out  prior to  the  ordinary  general  meeting  of  members.

 

 

 

 

(3)      The  directors  shall  submit  the  documents  described  in  Paragraph (1) of Article 98(Preparation and approval of accounting documents) to the supervisors at latest five weeks prior to the commencement of audit by the supervisors, and the schedules to said documents at latest three weeks  prior  to  said  commencement.

 

(4)      The supervisors shall submit their audit report to the directors not later than four weeks following the date of their receipt of the documents described in Paragraph (3) (excluding the schedules thereto).

 

  1. (Disclosure  of  accounting  documents,  etc.)

 

(1)     A limited liability incorporated association shall maintain the documents   described   in   Paragraph   1   of   Article   98(Preparation   and approval  of  accounting  documents)  together  with  the  audit  report  for a period of five years calculated from the submission of the audit report to the directors at the principal office and a copy thereof for a period of  three  years  at  other  office(s).

 

(2)      The  members  and  the  creditors  of  the  juristic  person  shall  be entitled   to   peruse   the   documents   described   in   Paragraph   (1)   or   to receive an certified copy or extract thereof during the business hours of the juristic person, subject to paying the charges stipulated by the juristic  person  in  the  case  of  certified  copies  or  extracts.

 

 

Sub-section  II  Un  imited                     iabi  ity  Incorporated  Associations

 

  1. (Incorporation  and  articles  of  incorporation)

 

(1)   In order to incorporate an unlimited liability incorporated association,   the   persons   wishing   to   become   members   shall   jointly prepare  and  sign  articles  of  incorporation.

 

(2)   The articles of incorporation shall include the following particulars:

(a)                        the  objects;

(b)                        the  name;

(c)                        the  names  and  addresses  of  the  members;  and

(d)                        the     location     of     the     principal     office     and     other

subordinate  offices.

 

(3)    The  articles  of  incorporation  shall  not  take  effect  unless certified  by  a  notary.

 

(4)       The articles of incorporation shall be maintained at the principal office  and  each  other  subordinate  office.

 

  1. (Particulars  to  be  registered  and  period  of  registration)

 

(1)      In     addition     to     the     particulars     prescribed     in     Article

50(Particulars to be registered), in the case of an unlimited liability incorporated association the particulars described below shall be registered   at   the   registry   having   jurisdiction   over   the   principal office:

 

 

 

 

(a)                        if  there  are  members  who  do  not  represent  the  juristic person, the names of the members who do represent the juristic  person;  and

(b)                        if there is a provision for more than one director jointly

to  represent  the  juristic  person,  such  provision.

 

(2)      The  particulars  prescribed  in  Paragraph  (1)  shall  be  registered at the registry having jurisdiction over each other subordinate office not later than two weeks following the registration under Paragraph (1).

 

  1. (Liability  of  members,  etc.)

 

(1)      If  an  unlimited  liability  incorporated  association  is  unable  to pay its debts in full with its assets, the members shall be jointly and severally  liable  to  pay  such  debts.

 

(2)      Paragraph (1) shall apply equally if compulsory execution against the assets of an unlimited liability incorporated association is not effective.

 

(3)      Paragraphs  (1)  and  (2)  shall  not  be  applied  if  a  member  proves that  the  unlimited  liability  incorporated  association  does  have capacity  to  pay  and  that  furthermore  compulsory  execution  is  easy.

 

(4)    Members of an unlimited liability incorporated association may invoke defenses available to the juristic person against its creditors.

 

(5)      If an unlimited liability incorporated association has rights of set-off, cancellation or rescission against its creditors, the members shall  be  entitled  to  decline  performance  vis-a-vis  such  creditors.

 

(6)     Members who join an unlimited liability incorporated association after  its  formation  shall  be  liable  for  debts  of  the  juristic  person that  arose  prior  to  their  joining.

 

(7)      Members  who  resign  shall  be  liable  for  debts  of  such  juristic person arising prior to the registration of their resignation at the registry having jurisdiction over the principal office of the juristic person.

 

(8)      Liability  under  Paragraph  (7)  shall  be  extinguished  after  two years have passed from the said registration vis-a-vis creditors of the juristic  person  who  have  not  made  a  demand  or  given  notice  of  demand.

 

(9)    The members shall bear the expenses of the juristic person in accordance  with  the  provisions  of  the  articles  of  incorporation.

 

  1. (Disqualification  of  members)

 

(1)      Except where otherwise provided in the articles of incorporation, members  may  resign  at  any  time.

 

(2)     Notwithstanding Paragraph (1), members may resign at any time on account  of  unavoidable  circumstances.

 

 

 

 

(3)      Apart from Paragraphs (1) and (2), members shall be disqualified for  the  following  grounds:

(a)                        the occurrence of any ground provided in the articles of incorporation;

(b)                        the  agreement  of  all  the  members;

(c)                        expulsion;

(d)                        death;

(e)                        bankruptcy;  or

(f)                        being   subject   to   a   judgment   ordering   commencement   of

guardianship.

 

  1. (Expulsion)

 

A member may be expelled by the other members unanimously, but only for legitimate reason. Expulsion shall only come into effect when notice thereof  is  given  to  the  expelled  member.

 

  1. (Execution  of  business)

 

(1)     The members shall execute the business of an unlimited liability incorporated  association.

 

(2)     Unless otherwise provided in the articles of incorporation, the business of an unlimited liability incorporated association shall be carried  out  in  accordance  with  the  decisions  of  a  majority  of  the members.

 

(3)      If  the  articles  of  incorporation  stipulate  members  who  are  to carry out the business of an unlimited liability incorporated association,  such  members  shall  execute  the  said  business.

 

(4)      If  more  than  one  member  is  stipulated  under  Paragraph  (3),  then unless  otherwise  provided  in  the  articles  of  incorporation,  the business of the unlimited liability incorporated association shall be carried  out  in  accordance  with  the  decisions  of  a  majority  of  such members.

 

(5)     Notwithstanding Paragraphs (2) and (4), any member can carry out routine  business  of  an  unlimited  liability  incorporated  association. If there is a stipulation as described in Paragraph (3), only the members so  stipulated  may  carry  out  routine  business,  except  where  another member states an objection prior to the completion of such routine business.

 

  1. (Representation  of  the  juristic  person)

 

(1)     The members shall represent an unlimited liability incorporated association; provided that if a stipulation is made under Paragraph (3) of Article 106(Execution of business), only the members so stipulated shall  represent  the  juristic  person.

 

(2)    If more than one member represents the juristic person under Paragraph (1), each of such members shall represent the juristic person; provided  that  provision  may  be  made  in  the  articles  of  incorporation or  by  agreement  of  all  the  members  for  certain  members  in  particular

 

 

 

 

to  represent  the  juristic  person.

 

(3)     Members who represent the juristic person shall be subject to the provisions  governing  directors.

 

  1. (Reports  and  examinations)

 

(1)     Members may demand that other members report on the progress of execution  of  the  business,  or  may  themselves  examine  the  condition  of the business and assets of an unlimited liability incorporated association;  provided  that  if  a  stipulation  has  been  made  under Paragraph (3) of Article 106(Execution of business), such a demand for report or examination may only be made vis-a-vis the members so stipulated.

 

(2)      If any members engage in conduct outside the scope of the objects of  the  juristic  person  or  otherwise  in  breach  of  law  or  regulation  or the articles of incorporation, or there is a concern of any of the foregoing  occurring,  and  there  is  also  a  concern  that  serious  damage will ensue to the juristic person as a result of such conduct, the other members  may  demand  that  such  members  cease  such  conduct.

 

(3)      If  supervisors  have  been  appointed,  the  functions  prescribed  in

Paragraphs  (1)  and  (2)  shall  be  carried  out  by  such  supervisors.

 

  1. (Amendment  of  articles  of  incorporation)

 

(1)    Amendment of the articles of incorporation shall require the agreement  of  all  the  members.

 

(2)    Notwithstanding Paragraph (1), if there is a provision in the articles of incorporation that the articles of incorporation may be changed by agreement of not less than a certain percentage of the persons comprising  the  members,  such  provision  shall  be  followed.

 

(3)      Amendments  of  the  articles  of  incorporation  shall  only  be  valid if  certified  by  a  notary.

 

Section   III  Incorporated  Foundations

 

  1. (Incorporation  and  articles  of  incorporation)

 

(1)      An incorporated foundation may be established, limited to objects for the public benefit, by preparing articles of incorporation and obtaining  the  permission  of  the  supervising  authority.

 

(2)     The articles of incorporation stipulated in Paragraph (1) shall include  the  following  particulars:

(a)                        the  objects;

(b)                        the  name;

(c)                        the  location  of  the  principal  office;

(d)                        stipulation  of  the  total  amount  of  the  asset  base  and

funding. If there is contribution of assets other than money,  the  assets  so  contributed  and  their  value  shall be        included. If a promise has been made for assignment

 

 

 

 

of assets after incorporation, the value thereof and the name  or  designation  of  the  assignor  shall  be  included. The amount of incorporation expenses to be borne by the juristic  person  shall  be  also  included;

(e)                        the  financial  year;

(f)                        directors,  supervisors  and  other  officers;

(g)                        particulars  relating  to  accounting;

(h)                        particulars  relating  to  dissolution;

(i)                        particulars     relating     to    amendment     of    articles     of

incorporation;  and

(j)                        method  of  giving  public  notices.

 

(3)    The  articles  of  incorporation  shall  not  take  effect  unless certified  by  a  notary.

 

(4)      The  articles  of  incorporation  shall  be  kept  at  the  principal office  and  each  subordinate  office.

 

  1. (Minimum  amount  of  asset  base)

 

An incorporated foundation shall maintain an asset base of not less than

200  000  000  (Two  Hundred  Millions)  riels.

 

  1. (Supplementation  of  articles  of  incorporation)

 

If the [would-be] founder of an incorporated foundation dies without stipulating the name, office or method of appointing and revoking directors, the court may determine such matters upon application by an interested  person  or  a  public  prosecutor.

 

  1. (Mutatis mutandis application of provisions governing gifts and testamentary gifts)

 

(1)      If  a  contribution  of  assets  for  the  purpose  of  establishment  of an incorporated foundation is made through a disposition inter vivos, the provisions of Book Five, Chapter Three (Gift) shall apply mutatis mutandis.

 

(2)    If a contribution of assets is made by will for the purpose of establishment of an incorporated foundation, the provisions of Book Eight,   Chapter   Three,   Section   VI   (Testamentary   Gifts)   shall   apply mutatis  mutandis.

 

  1. (Time  of  vesting  of  contributed  assets)

 

(1)      If  a  contribution  of  assets  for  the  purpose  of  establishment  of an incorporated foundation is made through a disposition inter vivos, the  contributed  assets  shall  vest  in  the  juristic  person  at  the  time of registration prescribed in Article 49(Registration of incorporation and  time  of  formation).

 

(2)    If a contribution of assets is made by will for the purpose of establishment of an incorporated foundation, the assets contributed shall be deemed to have vested in the juristic person at the time that the  will  came  into  effect.

 

 

 

 

 

  1. (Particulars  to  be  registered  and  time  of  registration)

 

(1)      In     addition     to     the     particulars     prescribed     by     Article

50(Particulars  to  be  registered),  the  following  particulars  shall  be

registered  in  respect  of  an  incorporated  foundation:

(a)                        the  total  amount  of  the  asset  base;

(b)                        the  method  of  giving  public  notices;  and

(c)                        the   date   on   which   permission   was   obtained   from   the

supervising  authority.

 

(2)      Registration  of  incorporation  of  a  foundation  shall  be  effected at the registry having jurisdiction over the principal office not later than two weeks following the granting of permission by the supervising authority.

 

(3)      Registration  shall  be  effected  at  each  subordinate  office  not later  than  two  weeks  following  registration  under  Paragraph  (2).

 

  1. (Preparation  and  approval  of  accounting  documents,  etc.)

 

(1)    Each financial year, the directors shall prepare the documents described below, together with schedules noting important supplemental facts  to  the  contents  thereof:

(a)                        balance  sheet;

(b)                        profit  and  loss  statement;

(c)                        business  report;  and

(d)                        proposal relating to disposition of surplus or treatment of  loss.

 

(2)      The  directors  shall  submit  the  documents  described  in  Paragraph

(1)  to  the  supervising  authority  and  obtain  its  approval  thereof.

 

  1. (Auditing  of  accounting  documents)

 

(1)      The  directors  shall  submit  the  documents  described  in  Paragraph (1) of Article 116(Preparation and approval of accounting documents, etc.)  for  audit  by  the  supervisors.

 

(2)      The  audit  described  in  Paragraph  (1)  shall  be  carried  out  prior to the submission of the said documents to the supervising authority .

 

(3)      The  directors  shall  submit  the  documents  described  in  Paragraph (1) of Article 116(Preparation and approval of accounting documents, etc.) to the supervisors at latest five weeks prior to the commencement of  audit  by  the  supervisors,  and  the  schedules  to  said  documents  at latest  three  weeks  prior  to  said  commencement.

 

(4)      The supervisors shall submit their audit report to the directors not later than four weeks following the date of their receipt of the documents described in Paragraph (3) excluding the schedules thereto.

 

  1. (Disclosure  of  accounting  documents,  etc.)

 

(1)      An incorporated foundation shall maintain the documents described

 

 

 

 

in Paragraph 1 of Article 116(Preparation and approval of accounting documents,  etc.)  together  with  the  audit  report  for  a  period  of  five years   calculated   from   the   submission   of   the   audit   report   to   the directors at their principal office and a copy thereof for a period of three  years  at  other  office(s).

 

(2)      The  creditors  of  the  incorporated  foundation  shall  be  entitled to peruse the documents described in Paragraph (1) or to receive a certified copy or extract thereof during the business hours of the juristic   person,   subject   to   paying   the   charges   stipulated   by   the juristic  person  in  the  case  of  certified  copies  or  extracts.

 

 

 

BOOK  THREE  "REAL  RIGHTS"

 

 

Chapter One GENERAL PROVISIONS

 

 

Section   I  Things

 

  1. (Definition  of  thing)

 

Under this Code, a thing is a corporeal object or substance comprising a  gas,  liquid  or  solid.1

 

  1. (Movables  and  immovables)

 

(1)      Things  are  divided  into  movables  and  immovables.

 

(2)      An immovable comprises land or anything immovably fixed to land, such  as  a  building  or  structure,  crops,  timber,  etc.

 

(3)      A  movable  is  any  thing  that  is  not  an  immovable.

 

(4)    Except as otherwise provided by special laws, the provisions pertaining   to   movables   shall   apply   mutatis mutandis   to   intangible property  that  can  be  controlled.

 

  1. (Component  of  a  thing)

 

A component of a thing that cannot be severed from the associated thing without  destroying  the  thing  or  changing  its  essential  nature  may  not be  the  subject  of  rights  separate  from  those  applicable  to  the  thing.

 

  1. (Component  of  a  land;  principle  rule)

 

Things attached to land or comprising a part thereof, particularly buildings or structures immovably constructed on land, or seeds planted in the ground, crops in the fields or timber growing on the land, are components  of  the  land  unless  they  are  severed  from  the  land,  and  may

 

 

1   In this translation, while the different terms such as 'good' and 'property' are used in different contexts to maintain consistency with standard English-language legal  usage,  they  have  the  same  meaning,  and  are  substantively  identical.

 

 

 

 

not,  except  as  otherwise  provided  by  law,  be  the  subject  of  rights separate  from  those  applicable  to  the  land.

 

  1. (Component  of  a  land;  exceptional  rule)

 

Where the holder of a right [to occupy or use] a land of another has constructed buildings or structures, or grown timbers, plants, etc. on the  land  in  the  course  of  exercising  such  right,  those  constructed  or grown  shall  not  become  components  of  the  land.    The  same  shall  apply to those things that are attached on the land for a purpose of temporary nature.

 

  1. (Ownership  of  building,  etc.  built  based  on  exercise  of  right
[to  occupy  or  use]  land  owned  by  another)

 

For the purposes of Article 123(Component of a land; exceptional rule), buildings and other structures built on land by a right-holder, as well as  grown  timber,  plants,  etc.  shall  be  deemed  components  of  the  right [to  occupy  or  use]  the  land  of  another.

 

  1. (Components  of  building)

 

Materials used to construct a building, as well as fixtures, furniture, signs and ornaments that cannot be separated from the building without destroying it or changing its essential nature, are components of the building, and may not be the subject of rights separate from those applicable  to  the  building.

 

  1. (Principal  thing  and  accessory  thing)

 

(1)      A  thing  that  is  associated  with  a  principal  thing  by  the  owner of the principal thing so that it can continuously serve the economic purpose of the principal thing but does not comprise a component of the principal  thing  is  termed  an  accessory  thing.

 

(2)      The  creation  and  assignment  of  rights  pertaining  to  a  principal thing  extend  to  the  accessory  thing  unless  otherwise  agreed.

 

  1. (Definitions  of  source  thing  and  fruits)

 

(1)      Income   derived   from   a   thing   is   termed   fruits.   A   thing   that generates  fruits  is  termed  a  source  thing.

 

(2)      Products of or harvests obtained from a thing in accordance with the  normal  use  of  the  thing  are  termed  natural  fruits.

 

(3)      Money  and  other  things  received  as  the  price  of  using  a  thing, such  as  rent,  are  termed  legal  fruits.

 

  1. (Right  to  obtain  fruits)

 

(1)      Natural  fruits  belong  to  the  ownership  of  the  person  or  persons who are entitled to receive them when they are severed from the source thing.

 

 

 

 

(2)     Legal fruits may be acquired in proportion to the number of days during  which  the  right  to  acquire  them  continues  to  exist.

 

  1. (Right  to  demand  reimbursement  of  costs)

 

A person having an obligation to return fruits may demand reimbursement of the normal costs of acquiring the fruits. However, the amount of such reimbursement shall not exceed the price of the fruits to be returned.

 

Section   II  Rea                                                        Rights

 

  1. (Definition  of  real  right)

 

A real right is the right to directly control a thing, and may be asserted against  all  persons.

 

  1. (Statutory  nature  of  real  right)

 

No real right may be created except as permitted by this Code or under special law. A real right permitted under customary law shall be valid under   this   Code   to   the   extent   that   it   does   not   conflict   with   the provisions  of  this  Code  and  special  law.

 

  1. (Types  of  real  rights)

 

The  following  real  rights  are  established  by  this  Code:

  1. Ownership
  2. Possession
  3. Usufructuary  real  rights (a)         Perpetual  lease (b)           Usufruct

(c)     Right  of  use/right  of  residence

(d)     Servitude

  1. Security  rights

(a)    Right of retention (b)    Preferential right (c)     Pledge

(d)     Hypothec

(e)     Transfer  of  title  for  security  purpose.

 

Section   III  Creation, Transfer  and   A  ternation  of  Rea                        Rights

  1. (Creation, transfer and alternation of real rights by agreement) The creation, transfer and alternation of a real right shall take effect

in  accordance  with  those  agreed  upon  between  the  parties.

 

  1. (Perfection)

 

(1)    Except for a right of possession and a right of retention, the creation, assignment and alteration of a real right pertaining to an immovable cannot be asserted against a third party unless the right is registered in accordance with the provisions of the laws and ordinances regarding  registration.

 

 

 

 

 

(2)       The transfer of a real right regarding a movable cannot be asserted against  a  third  party  unless  the  movable  has  been  delivered.

 

  1. (Merger  of  rights)

 

(1)      Where  the  ownership  and  other  real  rights  created  over  one  and the same thing have become vested in a single person, such other real rights shall be extinguished.  However, this shall not apply if the thing or the other real right constitute the object of a right of a third party.

 

(2)      If a real right other than ownership and other rights created over that real right have become vested in a single person, such other rights shall be extinguished. The second sentence of paragraph (1) shall apply mutatis  mutandis  to  this  case.

 

(3)      The provisions of paragraphs(1) and (2) shall not apply to a right of  possession.

 

  1. (Presumptions  regarding  registration)

 

(1)      Where  a  right  is  registered  in  the  immovables  register,  it  is presumed that such right belongs to the person to whom it is registered.

 

(2)       Where a previously registered right is deleted from the immovables register,  it  is  presumed  that  such  right  has  been  extinguished.

 

Chapter Two OWNERSHIP

 

 

Section   I  Nature and Scope of  Ownership

 

  1. (Definition  of  ownership)

 

Ownership refers to the right of an owner to freely use, receive income and benefits from and dispose of the thing owned, subject to applicable laws  and  regulations.

 

  1. (Scope  of  ownership  of  land)

 

(1)      Ownership of land extends to the areas above and below the surface of  the  land  to  the  extent  that  the  owner  derives  benefit  therefrom, subject  to  applicable  laws  and  regulations.

 

(2)      A landowner may not use the land for the sole purpose of hindering the  activities  of  another  or  in  order  to  create  a  nuisance.

 

  1. (Injunction  against  nuisance)

 

(1)       Where a nuisance occurring on the land of another due to activities involving gas, steam, odor, smoke, soot, heat, sound, vibration, etc., is  within  the  normal  scope  of  use  of  the  other  person's  land,  and  is not   otherwise   prohibited  by   law   and   regulations,  the   owner   of   the affected  land  cannot  demand  that  such  activities  be  ceased.

 

 

 

 

(2)      In case of paragraph (1), an owner of land that is in fact severely harmed  by  the  nuisance  may  demand  appropriate  compensation  from  the person causing such nuisance.   This does not preclude the owner of land from  demanding  for  damages  based  on  tort.

 

  1. (Discovery  of  cultural  artifact  or  minerals  in  the  ground)

 

(1)      A landowner cannot assert the ownership over any type of statue, bas-relief, antiquity or other cultural artifact discovered in the ground.  Such  items  comprise  assets  of  the  state,  and  the  owner  of  the land  is  obligated  to  return  them  to  the  Ministry  of  Culture  and  Fine Arts.

 

(2)     A landowner cannot assert ownership over minerals in the ground, which are governed by a separate law. Such minerals comprise assets of the state, and the right to mine and acquire them shall be owned by the person  to  whom  mining  rights  have  been  granted  by  the  state.

 

  1. (Right  to  cut  trees  growing  across  boundary)

 

Where a branch of a tree grows across the boundary from adjacent land, or  when  the  roots  of  a  bamboo  or  tree  grow  across  the  boundary  from adjacent   land,   the   landowner   may   receive   the   fruits   therefrom   or eliminate  such  branch  or  roots.

 

Section   II  Re ationship  Between Neighboring  Properties

 

  1. (Right  to  use  adjoining  land)

 

A  landowner  may  demand  to  use  adjoining  land  to  the  extent  necessary to construct or repair fences or buildings on or near the boundary. If the neighbor suffers damage or loss as a result, the landowner must pay compensation.

 

  1. (Right  of  way  for  enclosed  land)

 

(1)     A parcel of land which is enclosed and lacks access to a public highway, or where the agricultural or industrial use thereof is significantly hampered due to an insufficient access to a public highway is  termed  'enclosed  land.'

 

(2)      The  owner  of  an  enclosed  land  shall  be  given  a  right  to  demand the  creation  of  a  right  of  way  over  neighboring  property  in  exchange for  the  payment  of  compensation  equivalent  to  the  resulting  burden  on the  neighboring  property.

 

(3)      The right of way shall be created in principle along the direction or path that minimizes the distance from the enclosed land to the public highway.  Notwithstanding  the  provisions  of  the  first  sentence,  the right of way shall be located so as to minimize the burden on the owner of  the  neighboring  property.

 

(4)      Where   the   enclosed   land   is   the   result   of   a  division   of   land effected pursuant to a sale, exchange, division of devised property or other  contract,  the  right  of  way  may  be  demanded  only  for  the  land

 

 

 

 

remaining after such division. However, where a sufficient right of way cannot be created in such a situation, the provisions of paragraphs (2) and  (3)  shall  apply.

 

  1. (Obligation  to  accept  naturally  flowing  water)

 

(1)    The owner of a lower parcel of land must accept water flowing naturally from higher land. The owner of the lower land may not construct any bank, dam [or sluice], wall or other type of structure that blocks the  flow  of  water  onto  the  land.  The  owner  of  the  higher  land  may  not take any action that increases the burden on the owner of the lower land.

 

(2)      Where the flow of water through the lower land is obstructed due to  force  majeure  without  the  fault  of  the  parties,  the  owner  of  the higher  land  may  carry  out  a  construction  at  his  own  expense  so  as  to make  the  flow  to  continue.

 

  1. (Right  to  use  rainwater,  etc.)

 

An owner of higher lying land is entitled to use and dispose of a water source existing on his property as well as rainwater falling on the property  in  accordance  with  the  third  sentence  of  paragraph  (1)  of Article  144(Obligation  to  accept  naturally  flowing  water).

 

  1. (Obligation  to  preserve  flow  of  water)

 

Where necessary for agricultural purposes, the owner of  land situated on  a  body  of  flowing  water  has  a  duty  to  permit  the  water  to  flow  to adjacent property. The owner of the adjacent property has the same duty with  respect  to  other  property  that  is  farther  away.

 

  1. (Right  to  establish  an  irrigation  channel)

 

A  landowner  who  wishes  to  receive  for  irrigation  purposes  water  from a water source which the landowner has the right to use is entitled to establish and maintain a channel running through land located in between his   own   land   and   the   water   source   in   return   for   the   payment   of compensation  for  damages  suffered  by  the  owner  of  such  land.

 

  1. (Right  to  drain  water  after  irrigation)

 

A landowner is entitled to drain off the water that remains after irrigation through lower-lying land in return for the payment of compensation  to  the  owner  of  the  lower-lying  land.

 

  1. (Right  to  drain  water  of  flooded  land)

 

The owner of a land, the whole or part of which is flooded, is entitled to drain detrimental water off his land so far as it is allowed under sanitary  laws  and  regulations.

 

  1. (Right  to  install  sluice,  etc.)

 

(1)      A riverside landowner who wishes to use the river to irrigate his land is entitled to install on the land of the opposite bank equipment

 

 

 

 

necessary  for  the  taking  of  water  in  return  for  the  payment  of compensation  to  the  landowner  of  the  opposite  bank.

 

(2)     A landowner who accepts the installation of the equipment on his property  is  entitled  to  demand  the  person  who  installed  the  equipment to allow equal use of the sluice [or dam] provided he pays for half of the  cost  of  construction  and  maintenance  thereof.  In  this  case,  the person  who  installed  the  equipment  does  not  owe  an  obligation  to  pay the compensation mentioned in paragraph (1), and may demand the return of  any  compensation  paid.

 

  1. (Nuisance)

 

A  landowner  who  wishes  to  carry  out  activities  on  his  land  that  may create a nuisance with regard to neighboring parcels, such as drilling, boring   or   digging,   or   who   wishes   to   install   or   store   on   his   land equipment or materials that are dangerous, inconvenient or unsanitary, shall  comply  with  specially  established  rules  that  regulate  the distance at which such activities, equipment or materials may be located or  the  measures  that  must  be  taken.

 

  1. (Duty  to  put  blind  on  window,  etc.)

 

A landowner who erects, within two meters of the boundary of an adjacent parcel  of  land,  a  window,  balcony  or  any  other  similar  fixture  or structure that offers a direct view of the residential land of another shall  put  a  blind  thereon.

 

  1. (Trees  planted  near  the  boundary)

 

A  landowner  may  not  have  trees,  bushes  or  shrubs  exceeding  two  meters in height within two meters from the boundary of an adjacent parcel of land.   A landowner violating this restriction shall be required to transplant the offending tree, bush or shrub upon the demand of a neighboring  landowner.

 

Section   III  Right  to  Demand  Based on Ownership

 

  1. (Right  to  demand  return  based  on  ownership)

 

An owner may demand that a possessor return a thing. However, this shall not apply where the possessor is entitled to possess the thing as against the  owner.

 

  1. (Possessor  and  fruits)

 

(1)      A  good  faith  possessor  is  entitled  to  acquire  fruits  generated from  the  possessed  thing.

 

(2)      Where  a  good  faith  possessor  loses  a  lawsuit  in  which  his  title to possess a thing is disputed, he shall be deemed a bad faith possessor retroactively  as  from  the  time  of  the  filing  of  the  lawsuit.

 

(3)      Where a possessor returns a thing to an owner, if any fruits have been produced after the possessor became bad faith, he must return the

 

 

 

 

fruits  obtained  and  provide  compensation  for  the  value  of  any  fruits lost  or  not  collected  due  to  the  fault  of  the  possessor.

  1. (Responsibility  for  loss  of  or  damage  to  a  possessed  thing) Where a possessor is at fault  for the loss of or  damage to  a thing, or

for any other cause preventing the return of the thing, if the possessor was  a  possessor  in  bad  faith  when  such  cause  occurred,  the  possessor must  provide  compensation  for  all  of  such  damage,  while  a  good  faith

possessor must provide compensation only to the extent that he continues to  receive  the  benefits  therefrom.  However,  a  possessor  without intention of ownership must make compensation for all damage regardless of  whether  the  possession  was  in  good  faith.

 

  1. (Possessor's  right  to  demand  reimbursement  of  expenditures)

 

(1)      A  possessor  who  returns  a  thing  to  an  owner  may  demand  that  the owner reimburse the amount of necessary costs that the possessor has expended on the thing for the maintenance or preservation thereof. Where the possessor has collected and consumed fruits, he is responsible for ordinary  costs  of  maintenance  or  preservation  of  the  thing.

 

(2)      Where  a  possessor  has  made  expenditures  for  the  improvement  of a thing or any other beneficial expenditures for a thing, the owner shall provide compensation, at the owner's election, for either the expenditures made by the possessor or the increase in value in the thing attributable to such expenditures, to the extent that the increase in value  continues  to  exist.  However,  as  against  a  bad  faith  possessor, the court may grant the owner a grace period of a reasonable length to make  such  compensation.

 

(3)     Where a possessor is to return land to the owner, if there exist buildings, unharvested crops or unharvested timbers that a good faith possessor constructed or planted thereon, the owner shall provide compensation, at the owner's election, for the expenditures made by the possessor  for  these  buildings,  crops  or  timbers,  or  the  increase  in value in these buildings, crops or timbers attributable to such expenditures,  to  the  extent  that  the  increase  in  value  continues  to exist. Notwithstanding the provisions set forth  in paragraphs (1) and (2)  above,  where  the  possessor  is  a  possessor  in  bad  faith,  the  owner may elect to either remove the constructed buildings, planted but unharvested   crops   or   unharvested   timber,   or   assume   the   ownership thereof. Where the landowner chooses removal, the possessor must remove the  buildings,  crops  or  timber  without  receiving  compensation.  Where the  owner  elects  to  assume  the  ownership  of  the  buildings,  crops  or timber, the owner must compensate the  possessor for expenditures made by the possessor or for the increase in the value of the buildings, crops or  timbers  that  include  the  original  value  of  these  things  and  shall be calculated without considering the added value to the land. In this case, the court may grant the owner a grace period of a reasonable length to  make  such  compensation.

 

  1. (Right to demand abatement or prevention of hindrance to exercise of ownership)

 

 

 

 

(1)     Where the exercise of ownership has been hindered, the owner may demand  that  the  person  causing  such  hindrance  abate  the  hindrance.

 

(2)    Where the exercise of ownership is actually in danger of being hindered,  the  owner  may  demand  that  the  person  creating  the  danger  of such  hindrance  prevent  such  hindrance.

 

Section   IV                                            Acquisition  of  Ownership

 

 

Sub-section  I  Acquisition  of  Ownership  over  Immovab  e

 

  1. (Acquisition  of  ownership  over  immovable)

 

Ownership over an immovable may be acquired not only via contract, inheritance or other causes set forth in this Section IV but also based on  the  provisions  set  forth  in  this  Code  and  other  laws.

 

  1. (Immovable  without  owner)

 

An  immovable  without  an  owner  shall  belong  to  the  state.

 

  1. (Prescriptive  acquisition  of  ownership  over  immovable)

 

(1)      A  person  who  peacefully  and  openly  possesses  an  immovable  for  a period   of   20   years   with   the   intention   of   ownership   shall   acquire ownership  thereof.

 

(2)      A  person  who  peacefully  and  openly  possesses  an  immovable  for  a period   of   10   years   with   the   intention   of   ownership   shall   acquire ownership thereof if the possession commenced in good faith and without negligence.

 

(3)       Neither Paragraph (1) or (2) shall apply to any immovable property belonging  to  the  state,  regardless  of  its  kind.

 

  1. (Retroactive  effect  of  prescriptive  acquisition)

 

The   effect   of   acquisition   of   ownership   as   set   forth   in   Article

161(Prescriptive  acquisition  of  ownership  over  immovable)  shall  be

retroactive to the date on which the period of prescription commenced. Fruits  that  come  into  existence  after  that  date  shall  belong  to  the person  acquiring  ownership  via  prescription.

 

  1. (Invocation  of  prescriptive  acquisition)

 

(1)       A court may not issue a decision based on prescriptive acquisition unless  a  party  invokes  prescriptive  acquisition.

 

(2)    Prescriptive acquisition may be invoked only by a prospective prescriptive acquirer, a person who has received a perpetual lease, usufruct, right of use/right of residence, servitude, leasehold, hypothec or pledge from a prospective prescriptive acquirer, or other person having a legal interest in the invocation of prescriptive acquisition.

 

 

 

 

 

(3)     Where a prospective prescriptive acquirer invokes prescriptive acquisition,  third  parties  shall  also  receive  the  benefit  thereof. Where a person other than a prospective prescriptive acquirer properly invokes prescriptive acquisition, such invocation is effective only as between  the  invoking  person  and  the  original  owner.

 

  1. (Renunciation  of  benefit  of  prescriptive  acquisition)

 

The benefit of prescriptive acquisition cannot be renounced in advance. A prescriptive acquisition that has already been completed can be renounced.

 

  1. (Persons affected  by  renunciation  of  benefit  of  prescriptive acquisition)

 

A renunciation of the benefit of prescriptive acquisition is effective only as between the original owner and the renouncing party having the right  to  invoke  prescriptive  acquisition.

 

  1. (Grounds for interruption of prescriptive acquisition) Prescriptive acquisition shall be interrupted by any of the following:

(a)                  loss  of  possession  with  the  intention  of  ownership;

(b)                  the  filing  of  a  lawsuit  or  equivalent  exercise  of  legal

rights;

(c)                  an  act  of  execution  or  preliminary  injunction;  or

(d)                  acknowledgment.

  1. (Persons affected by interruption of prescriptive acquisition) Where an interruption of prescriptive acquisition is in effect against

a  prospective  prescriptive  acquirer,  other  persons  may  not  deny  the effect of the interruption. Where an interruption of prescriptive acquisition is in effect against a person who is not a prospective prescriptive acquirer but has the right to invoke prescriptive acquisition, the interruption is effective only as between the original owner  and  the  person  having  the  right  to  invoke  prescriptive acquisition.

 

  1. (Loss  of  possession  with  intention  of  ownership)

 

Where a person having possession with the intention of ownership involuntarily loses such possession and possession is thereafter recovered within one year or is recovered through a lawsuit filed within one  year  of  the  loss,  the  prescriptive  acquisition  shall  be  deemed  to have  continued  uninterrupted.

 

  1. (Lawsuit)

 

A lawsuit that is dismissed without prejudice or discontinued shall not operate  to  interrupt  prescriptive  acquisition.

 

  1. (Rescission of act of execution or act of preliminary injunction) Where an  act  of  execution  or  preliminary  injunction  is  rescinded  upon

 

 

 

 

the motion of a right-holder or for failure to comply with conditions imposed  by  law,  an  interruption  of  prescriptive  acquisition  effected by  such  act  shall  be  deemed  to  have  not  occurred.

 

  1. (Running of     prescriptive       acquisition      period      following interruption)

 

(1)   Upon  the  termination  of  an  interruption  of  prescriptive acquisition, the prescription period shall be calculated anew as of the date  of  such  termination.

 

(2)    The prescription period for prescriptive acquisition that is interrupted  by  the  filing  of  a  lawsuit  shall  be  calculated  anew  as  of the  date  the  decision  of  the  court  becomes  final  and  binding.

 

  1. (Suspension  upon  demand)

 

(1)       Where the original owner makes a demand during the six months prior to           the    completion    of    the    prescription    period    for    prescriptive acquisition, the prescription period shall not be deemed to have been completed  with  respect  to  the  person  on  whom  the  demand  is  made  for  a period of six months from the date of the demand. However, a subsequent demand by the original owner shall not delay the completion of the prescription  period.

 

(2)      Where  a  lawsuit  is  ineffective  to  interrupt  the  prescription period due to the dismissal without prejudice or discontinuance of the lawsuit, a demand shall be deemed to have run continuously from the date of service of the complaint on the other party to the date of dismissal or  discontinuance  of  the  action.  In  this  case,  the  period  of prescription shall not be deemed to have been completed until six months after  the  dismissal  or  discontinuance  of  the  lawsuit.

 

(3)    Where the original owner asserts his right as a defendant in a lawsuit,   a   demand   shall   be   deemed   to   run   continuously   during   the pendency  of  the  lawsuit  from  the  time  the  assertion  is  made.  In  this case, the period for prescriptive extinction of the claim against the defendant shall not complete until six months passes after the judgment in  the  lawsuit  becomes  final  and  binding.

 

  1. (Suspension of period for prescriptive acquisition against minor or adult  in  guardianship)

 

Where  the  original  owner  is  a  minor  or  adult  in  guardianship,  and  has no  legal  representative  within  six  months  prior  to  the  completion  of the prescription period for prescriptive acquisition, such period shall not  be  deemed  to  have  been  completed  until  six  months  after  the  minor or adult in guardianship attains capacity or obtains a legal representative.

 

  1. (Suspension of period for prescriptive acquisition between minor or adult  in  guardianship  and  legal  representative)

 

Where a legal representative is to obtain via prescriptive acquisition ownership  of  an  immovable  owned  by  a  minor  or  adult  in  guardianship,

 

 

 

 

the prescription period for such prescriptive acquisition shall not be deemed to have been completed until six months after the minor or adult in guardianship attains capacity or obtains a new legal representative.

 

  1. (Suspension  of   period   for   prescriptive   acquisition   between spouses)

 

Where  one  spouse  is  to  obtain  via  prescriptive  acquisition  ownership of an immovable owned by the other spouse, the prescription period for such prescriptive acquisition shall not be deemed to have been completed until  six  months  after  the  dissolution  of  the  marriage.

 

  1. (Suspension of  period  for  prescriptive  acquisition  in  case  of natural  disaster)

 

Where an original owner cannot invoke interruption of the prescription period  for  prescriptive  acquisition  due  to  natural  disaster  or  other force  majeure,  such  period  shall  not  be  deemed  to  have  been  completed until six months after the disaster or force majeure has ceased to exist.

 

  1. (Prescriptive  acquisition  of  rights  regarding  immovable)

 

(1)      A  person  who  peacefully  and  openly  exercises  a  right  regarding an  immovable  such  as  a  perpetual  lease,  usufruct,  right  of  use/right of residence, servitude, leasehold or pledge for his own benefit shall obtain such right after either 10 years or 20 years, in accordance with the classifications set forth in Article 161(Prescriptive acquisition of  ownership  over  immovable).

 

(2)      The provisions of Articles 162(Retroactive effect of prescriptive acquisition) through 176(Suspension of period for prescriptive acquisition in case  of natural disaster) shall apply  mutatis mutandis to prescriptive acquisition of the rights specified in paragraph (1).

 

(3)      Paragraph (1) shall not apply to any immovable property belonging to  the  state,  regardless  of  its  kind.

 

  1. (Ownership  of  alluvial  deposit)

 

An alluvial deposit that forms gradually and naturally along a riverbank belongs to the owner of the riverbank along which it forms, regardless of whether the river is navigable by boats or rafts. The owner of the riverbank of a river navigable by boats or rafts is responsible for maintaining a way to pull such boats in compliance with the laws and regulations.

 

  1. (Ownership  of  alluvial  deposit)

 

With regard to an enlargement of land on a riverbank due to gradual and natural conveyance of an alluvial deposit from the opposite riverbank caused  by  natural  water  flow,  the  owner  of  a  parcel  of  land  on  the enlarged riverbank shall receive benefits from the conveyed alluvial deposit.  The  owner  of  a  land  on  the  opposite  riverbank  may  not  demand the  restoration  of  the  land  lost.

 

 

 

 

  1. Ownership  of  land  removed  by  water  flow)

 

Regardless  of  whether  a  river  is  navigable  by  boats  or  rafts,  where  a river removes by sudden force a significant and clearly recognizable portion  of  a  riverbank  and  transfers  it  to  the  opposite  bank  or  to  a lower lying part of the river, the owner of the lost land may claim ownership  thereof.  The  owner  must  exercise  his  right  to  demand  return of  the  land  within  one  year.  However,  this  shall  not  apply  where  the owner of the land that was joined with the removed portion has not yet taken  possession  of  such  land.

  1. (Ownership  of  island  or  alluvial  bed  in  the  middle  of  river) An islands or alluvial bed that forms in the middle of a river navigable

by  boats  or  rafts  shall  belong  to  the  state.

  1. (Ownership  of  island  or  alluvial  bed  in  the  middle  of  river) An  island  or  alluvial  bed  that  forms  in  the  middle  of  a  non-navigable

river  shall  belong  to  the  owner  of  the  riverbank  on  the  side  on  which

it  forms.  Where  an  island  is  formed  more  or  less  in  the  center  of  the river, it shall belong to the owners of both riverbanks using the center line  of  the  river  as  a  dividing  line.

 

  1. (Ownership  of  island)

 

Where  a  river  forms  a  new  branch  and  cuts  off  land  belonging  to  a riverbank owner, thereby creating an island, the owner of the riverbank does  not  lose  ownership  of  such  land,  even  where  the  island  is  formed in  the  middle  of  a  river  navigable  by  boats  or  rafts.

 

  1. (Ownership  of  old  riverbed  after  creation  of  new  channel)

 

If  a  river  navigable  by  boats  or  rafts  abandons  its  existing  riverbed and  follows  a  new  channel,  the  riverbank  owners  may  acquire  ownership of the old riverbed up to a line running along the center thereof. The riverbank owners shall pay the price determined by an expert appraiser. On the application of the provincial or municipal authority or of an interested party, the price of the old riverbed shall be determined by an expert appraiser appointed by the court located in that jurisdiction. However, if the riverbank owners do not indicate an intention to acquire the  old  riverbed,  the  old  riverbed  shall  be  sold  at  public  auction  by the provincial or municipal authority. The money paid by the riverbank owners or received from the sale of the old riverbed shall be distributed to the owners of the land lost due to the new channel in proportion to the  value  of  the  land  they  lost.

 

  1. (Affixture  of  movable  to  immovable)

 

Where  a  movable  is  affixed  to  an  immovable  and  becomes  a  component thereof, ownership of the immovable extends to the movable unless otherwise  provided  for  under  law  or  by  agreement.  In  this  case,  the person  losing  rights  to  the  movable  may  demand  compensation  from  the owner of the immovable in accordance with the rules pertaining to unjust enrichment.  However,  no  claim  for  restoration  of  the  status  quo  ante

 

 

 

 

shall  be  permitted.

 

 

Sub-section  II  Acquisition  of  Ownership  over  Movab  e

 

  1. (Acquisition of  ownership  over  movable)

 

Ownership over a movable may be acquired not only via contract, inheritance or other causes set forth in this Section IV but also based on  the  provisions  set  forth  in  this  Code  and  other  laws.

 

  1. (Ownership  of  movable  without  owner)

 

Ownership  of  a  movable  without  an  owner  shall  revert  to  a  person  who first commences the possession thereof with the intention of ownership. However, this shall not apply if otherwise provided for in law or regulations  regarding  the  protection  of  wild  life.

 

  1. (Ownership  of  escaped  animals,  etc.)

 

A person who possesses in good faith animals other than livestock raised by another or birds other than poultry raised by another shall acquire ownership thereof unless the person who raised such animals or birds demands  their  return  within  one  month  of  the  time  of  their  escape.

 

  1. (Ownership  of  fish  living  in  pond,  etc.)

 

Fish  living  in  a  pond,  swamp  or  other  body  of  water  owned  by  another shall  belong  to  such  owner.

 

  1. (Ownership  of  lost  article)

 

(1)      A person who finds an article lost by another shall return it to the owner if the identity of the owner is clear, while if the identity of  the  owner  is  not  clear,  the  finder  shall  turn  over  the  article  to the  chief  of  the  police  within  seven  days  of  finding  it.

 

(2)      The  chief  of  the  police  shall  keep  custody  of  the  lost  article and give public notice of its discovery, and if the identity of the owner is not determined within six months, the finder shall acquire ownership of the lost article. However, if the finder fails to turn over the lost article within seven days of finding it, the finder cannot acquire ownership,  and  instead  its  ownership  shall  revert  to  the  state.    The same  shall  apply  to  a  case  where  the  finder  does  not  claim  the  lost article from the chief of the police within two months after acquiring ownership.

 

(3)      If the lost article is of a type that cannot be kept in custody, the  chief  of  the  police  may  sell  it  and  keep  custody  of  the  proceeds of  the  sale.  The  sale  proceeds  shall  be  handled  in  the  same  manner  as the  lost  article  itself.

 

(4)      Where the lost article is returned to the owner, the owner shall pay  between  five  and  twenty  percent  of  the  value  of  the  article  as finder's  compensation.  If  the  finder  does  not  exercise  his  right  of

 

 

 

 

demand for compensation within one month of the article's return, the finder  shall  lose  his  right  of  demand  for  the  finder's  compensation.

 

  1. (Ownership  of  buried  treasure)

 

The  provisions  of  Article  190(Ownership  of  lost  article)  shall  apply

mutatis  mutandis  to  buried  treasure,  except  as  set  forth  in  Article

140(Discovery of cultural artifact or minerals in the ground). However, where buried treasure that is not identified by its owner is discovered

among things belonging to another, ownership of such treasure shall be split evenly between the discoverer and the owner of the other things.

 

  1. (Bona  fide  acquisition  of  ownership  of  movable)

 

A transferee who commences in good faith and without negligence the possession of a movable upon receiving the delivery of the movable under a valid contract transferring the ownership of the movable, the person shall acquire ownership of such movable even where the transferor does not have the ownership thereof. However, this shall not apply where the transferor  still  maintains  the  direct  possession  over  the  movable.

 

  1. (Transfer  of  stolen  or  lost  property)

 

(1)    In the case described in Article 192(Bona fide acquisition of ownership of movable), if the transferred thing comprises stolen or lost property,  the  injured  party  or  owner  of  the  lost  property  may  demand the return of the property from the transferee within two years of its theft  or  loss.

 

(2)      If  a  transferee  purchases  and  receives  in  good  faith  stolen  or lost property via public auction, sale on the open market, or from a merchant who sells items of the same type, the injured party or the owner of the lost property cannot demand return of the property without paying the  transferee  compensation  for  the  price  paid  by  him.

 

  1. (Prescriptive  acquisition  of  ownership  over  movable)

 

(1)       A person who possesses a movable peacefully and openly for 10 years with  the  intention  of  ownership  shall  acquire  ownership  thereof.

 

(2)      A person who possesses a movable peacefully and openly for 5 years with the intention of ownership shall acquire ownership thereof if the possession  commenced  in  good  faith  and  without  negligence.

 

  1. (Prescriptive acquisition of rights regarding movable and other property rights)

 

A person who peacefully and openly exercises for his own benefit a pledge, leasehold  or  other  right  regarding  movable  or  other  property  right2

 

 

2  As used in this translation, the term 'property right' shall include rights over property (rights in rem), rights arising from an obligational relationship (rights in personam), intellectual property rights, shares in a company, etc., and can be contrasted with 'non-property rights' such as personal rights or other rights purely inherent  to  one's  identity  or  status.

 

 

 

 

shall obtain such right after either 10 years or 20 years, in accordance with the classifications set forth in Article 194(Prescriptive acquisition  of  ownership  over  movable).

 

  1. (Mutatis mutandis  application  of  provisions  regarding prescriptive  acquisition  of  immovables)

 

The provisions of Articles 162(Retroactive effect of prescriptive acquisition) through 176(Suspension of period for prescriptive acquisition in case  of natural disaster) shall apply  mutatis mutandis to the cases described in Articles 194(Prescriptive acquisition of ownership over movable) and 195 (Prescriptive acquisition of rights regarding  movable  and  other  property  rights).

 

  1. (Attachment,  mixture,  consolidation  of  movables)

 

(1)     If two or more movables are attached to each other such that they cannot be separated without causing damage thereto, ownership of the composite thing shall belong to the owner of the principal movable. This shall also apply where such separation would be unreasonably expensive.

 

(2)   If a principal movable among attached movables cannot be distinguished   from   the   other   movables,   ownership   of   the   composite movable shall be shared among the owners of the component movables in proportion to the respective values thereof at the time they became attached.

 

(3)       The  provisions  of  paragraphs  (1)  and  (2)  shall  apply  mutatis mutandis  where  two  or  more  movables  become  mixed  or  consolidated  with each  other  such  that  they  cannot  be  separated.

 

  1. (Processing  of  movable)

 

(1)      A  person  who  creates  a  new  movable  through  the  processing  or reworking of materials belonging to another shall acquire ownership of the processed thing. However, if the added value attributable to the processing or reworking is substantially less than the value of the materials,  ownership  of  the  processed  thing  shall  belong  to  the  owner of  the  materials.

 

(2)       If the processing party provides part of the materials, such party shall acquire ownership of the processed thing so long as the increase in  the  value  of  the  thing  attributable  to  the  processing  or  reworking plus the price of the materials provided by the processing party exceeds the  price  of  the  materials  provided  by  the  other  person.

 

  1. (Effect  of  attachment  of  movable)

 

(1)      Where  ownership  of  a  thing  is  extinguished  due  to  attachment, mixing,  consolidation  or  processing,  all  rights  that  exist  over  such thing  are  also  extinguished.

 

(2)      The  rights  of  another  already  established  over  a  thing  held  by a person who acquired the ownership of a composite, mixed, consolidated

 

 

 

 

or processed thing shall continue to exist over the newly created thing. In  the  case  where  the  newly  created  thing  is  held  by  co-owners,  such rights  shall  continue  to  exist  over  the  person's  share  of  ownership.

 

  1. (Attachment  and  compensation  therefor)

 

A  person  who  loses  rights  as  a  result  of  attachment,  mixing, consolidation  or  processing  of  movables  may  demand  compensation  from the  person  acquiring  such  rights  and  benefiting  therefrom,  in accordance with the provisions relating to unjust enrichment. However, no  demand  for  restoration  of  the  status  quo  ante  shall  be  permitted.

 

Section   V    Co-ownership

 

  1. (Definition  of  co-ownership)

 

Ownership of a single thing by multiple persons wherein the size of each owner's ownership interest is limited to such owner's share of the thing is  termed  co-ownership.

 

  1. (Equality  of  shares  of  co-owners)

 

The  shares  of  co-owners  are  presumed  to  be  equal.

 

  1. (Disposal  of  co-ownership)

 

Each co-owner can transfer or provide his share as security. A creditor of  a  co-owner  can  attach  the  co-owner's  share.

 

  1. (Use  of  co-owned  thing)

 

A  co-owner  can  use  the  entire  co-owned  thing  in  accordance  with  his share.

 

  1. (Preservation  of  co-owned  thing)

 

Each  co-owner  can  individually  perform  acts  of  preservation  on  the co-owned  thing.

 

  1. (Change  in  use  of  co-owned  thing)

 

No  co-owner  can  dispose  of  or  significantly  alter  the  co-owned  thing without  the  consent  of  the  other  co-owners.

 

  1. (Administration  of  co-owned  thing)

 

Except as provided in Articles 205(Preservation of co-owned thing) and

206(Change  in   use   of   co-owned   thing),   all   matters   relating   to   the administration  of  a  co-owned  thing  shall  be  determined  by  a  majority

in  value  of  the  co-owners.

 

  1. (Burdens  of  co-owned  thing)

 

(1)       Each  co-owner  shall  bear  expenses  of  administration,  taxes  and other  charges  in  relation  to  the  co-owned  thing  in  proportion  to  his

 

 

 

 

share  thereto.

 

(2)      Where a co-owner makes an expenditure for an act of preservation or administration or for taxes or other charges in excess of his share to the co-owned thing, he may seek compensation from the other co-owners for such excess expenditure in accordance with their respective share.

 

(3)    The claim for compensation for expenditures described in the paragraph (2) can be made against a successor in interest to the share of  another  co-owner.

 

  1. (Renunciation,  etc.  of  co-ownership)

 

Where a co-owner renounces his share or dies without an heir, the share shall  devolve  to  the  other  co-owners.

 

  1. (Demand  for  partition  of  co-owned  thing)

 

(1)     Each co-owner may demand at any time a partition of the co-owned thing,  but  the  co-owners  may  agree  to  prohibit  partition  for  a  period of  time  not  to  exceed  five  years.

 

(2)    The non-partition agreement described in paragraph (1) can be renewed, but the duration of the renewed agreement cannot exceed five years.

 

  1. (Method  of  partition  of  co-owned  thing)

 

Where  co-owners  cannot  reach  agreement  regarding  the  partition  of  a co-owned  thing,  a  co-owner  may  file  an  action  for  partition.  In  this case, the court may order the partition of the physical thing or where there  is  a  danger  that  partition  of  the  physical  thing  will  cause  a significant  loss  in  the  value  thereof,  or  where  proper  grounds  exist, the  court  may  order  that  the  thing  be  sold  by  compulsory  sale  and  the proceeds  be  allocated  to  the  co-owners  in  accordance  with  their respective share, or may order that one or more co-owners transfer their shares to the other co-owners in exchange for payment of compensation.

 

  1. (Claim  regarding  co-ownership)

 

(1)     If a co-owner has a claim against another co-owner in regard to preservation or administration or for taxes or other charges in relation to  the  co-owned  thing,  he  may  upon  partition  demand  satisfaction  out of  the  portion  that  is  to  accrue  to  the  obligor.

 

(2)    If for the purpose of obtaining the satisfaction described in paragraph (1) it is necessary to sell that portion of the co-owned thing that  is  to  accrue  to  the  obligor,  the  obligee  may  demand  such  sale.

 

  1. (Quasi-co-ownership)

 

Except  as  otherwise  provided  by  law,  the  provisions  regarding

co-ownership  shall  apply  mutatis  mutandis  to  cases  in  which  multiple

persons  share  property  rights  other  than  ownership.

 

 

 

 

Section   VI  Indivisib e  Joint Ownership

 

  1. (Definition  of  indivisible  joint  ownership)

 

Co-ownership by persons who own adjacent parcels of land of a partition that  distinguishes  such  parcels  of  land  or  buildings  on  the  land  from each other, such as a partition wall, moat, bank or [hedge], in an indivisible  manner  is  termed  indivisible  joint  ownership.

 

  1. (Indivisible  joint  ownership  of  partition  wall)

 

Where a partition wall separates adjoining buildings having different heights, such partition wall is presumed to be indivisibly and jointly owned  up  to  the  height  of  the  shorter  building,  and  where  a  partition wall separates adjacent parcels of land that are separated by a yard, garden or courtyard, all of such partition wall is also presumed to be indivisibly  and  jointly  owned.

 

  1. Repair and  improvement  of  indivisibly  and  jointly owned  partition  wall)

 

Persons who share indivisible joint ownership of a partition wall shall be responsible for the repair and improvement thereof in accordance with their respective interests. An indivisible joint owner may be exempted from  bearing  the  expenses  for  repair  or  improvement  of  the  partition wall  by  renouncing  his  indivisible  joint  ownership  interest,  except where  such  partition  wall  constitutes  a  part  of  a  building.

 

  1. (Use  of  indivisibly  and  jointly  owned  partition  wall)

 

Each   indivisible   joint   owner   may   place   a   beam   or   girder   into   the partition  wall  to  a  extent  of  half  of  the  entire  depth  of  the  wall  in order  to  build  a  structure  using  the  partition  wall.

 

  1. (Structure against  indivisibly  and  jointly  owned partition  wall)

 

(1)       An indivisible joint owner may not without the consent of the other indivisible and joint owner make a hole in the partition wall or attach a  structure  that  could  otherwise  damage  the  partition  wall.

 

(2)    In  the  case  described  in  paragraph  (1),  where  the  other indivisible  joint  owner  refuses  to  agree  without  justifiable  reason, the indivisible joint owner may seek a judgment from the court that will be  substituted  in  place  of  such  agreement.

 

(3)      In  the  case  described  in  paragraph  (2),  the  court  may  grant  a judgment that will be substituted for the other invisible joint owner's agreement  in  exchange  for  reasonable  security.

 

  1. (Placing partition wall previously not indivisibly  and jointly owned  into  indivisible  joint

ownership)

 

The  owner  of  land  that  is  in  contact  with  a  partition  wall  may  place

 

 

 

 

the partition wall into indivisible joint ownership by paying the owner of the partition wall the sum of half of the value of the partition wall and half of the value of the land on which the partition wall is built.

 

  1. (Increasing height  of  indivisibly  and  jointly  owned partition  wall)

 

An  indivisible  joint  owner  may  increase  the  height  of  an  indivisibly and jointly owned partition wall. However, the costs of increasing such height and of maintaining the higher part of the wall not subject to indivisible and joint ownership shall be borne by the indivisible and joint  owner  who  increased  the  wall's  height.

 

  1. (Improvement, etc.  of  indivisibly  and  jointly  owned partition  wall)

 

(1)    Where  the  partition  wall  to  be  increased  in  height  cannot withstand such increase, the person desiring the increase in height may rebuild  the  entire  partition  wall  at  his  own  expense.  However,  where the  thickness  of  the  partition  wall  is  to  be  increased,  such  increase shall  occur  on  the  side  of  the  rebuilding  owner.

 

(2)       A neighbor who does not cooperate in the height increase may obtain an  indivisible  joint  ownership  interest  in  the  part  of  the  partition wall formed by the increase in height by (i) paying half of the cost thereof, and (ii) where the partition wall was made thicker, by additionally paying half of the value of the land required for such increase  in  thickness.

 

  1. (Indivisible  and  joint  ownership  of  enclosure)

 

Any enclosure that separates parcels of land shall be presumed to be indivisibly and jointly owned by the owners of the respective parcels.

 

  1. (Expenses  for  preservation  of  enclosure)

 

(1)     An enclosure other than a partition wall that is indivisibly and jointly owned shall be preserved at the expense of all the persons who indivisibly  and  jointly  own  such  enclosure.

 

(2)   An  indivisible  joint  owner  of  an  enclosure  may  escape responsibility for the costs associated therewith by renouncing his indivisible  and  joint  ownership.

 

(3)     An indivisible joint owner of a moat in which water flows may not renounce his indivisible and joint ownership pursuant to the provisions of  paragraph  (2).

 

  1. (Enclosure  not  indivisibly  and  jointly  owned)

 

An  owner  of  an  immovable  that  is  in  contact  with  an  enclosure,  other than  a  partition  wall,  that  is  not  indivisibly  and  jointly  owned  may not demand that the owner of the enclosure place the enclosure into indivisible  and  joint  ownership.

 

 

 

 

  1. (Indivisibly  and  jointly  owned  hedge,  etc.)

 

(1)      An  indivisible  joint  owner  of  a  [hedge]  may  destroy  the  [hedge] to   the   extent   of   such   ownership   interest.   However,   such   owner   is obligated to build a partition wall at the border demarcating his ownership.

 

(2)      The same applies to indivisibly and jointly owned moats and banks that  exist  only  for  the  benefit  of  the  enclosure.

 

Chapter Three POSSESSORY  RIGHTS

 

 

Section   I  Genera                                                      Ru  es

 

 

  1. (Definition  of  possession)

 

 

(1)      "Possession"  refers  to  the  holding  of  a  thing.

 

 

(2)      "Holding"  means  the  state  of  controlling  a  thing  as  a  matter  of fact,  whether  directly  or  indirectly.

 

 

  1. (Direct  possession  and  indirect  possession)

 

(1)      A  thing  may  be  possessed  indirectly  through  another  person.

 

 

(2)      In  cases  described  in  paragraph  (1),  a  person  directly  holding a  thing  is  referred  to  as  a  direct  possessor,  and  a  person  holding  a thing indirectly through another person is referred to as an indirect possessor.

 

 

  1. (Assignment  of  possession)

 

 

(1)      Possession  is  assigned  by  delivery  of  the  thing  in  possession. This   form   of   assignment   of   possession   is   referred   to   as   "actual delivery".

 

 

(2)       Possession may be assigned without actual transfer, by agreement of the parties alone. In this case, the assignee of possession acquires the indirect possession through [the direct possession of] the assignor. This form of assignment of possession is referred to as "assighment of possession  by  agreement"  [in  Khmer  "agreement  on  possession"].

 

 

 

 

 

 

(3)     If the assignee of possession currently actually holds the thing directly, possession may be assigned by agreement of the parties alone. In  this  way,  the  assignor  of  possession  loses  the  indirect  possession that  he  had  through  the  holder  of  the  thing.  This  form  of  assignment of  possession  is  referred  to  as  "summary  delivery".

 

 

(4)      A person who possesses a thing indirectly through another person may assign possession to a third party by agreement with such third party and notice to this effect to the person in direct possession. This form of assignment of possession is referred to as "assignment of possession by  direction".

 

 

  1. (Extinguishment  of  possession)

 

Possession shall be extinguished when the possessor ceases to hold the thing; provided that this shall not apply, where the possessor has been dispossessed  of  the  thing,  if  the  possessor  repossesses  the  thing  or the possessor brings an action for recovery of possession of the thing within  one  year  of  such  dispossession3.

 

 

  1. (Extinguishment  of  possession  of  an  indirect  possessor)

 

 

(1)      The  possession  of  an  indirect  possessor  will  be  extinguished  in the  following  cases:

  1. a) If the indirect possessor declares his intention to abandon his indirect  possession;
  2. b) If a state of affairs arises such that it must be recognized that the direct possessor has denied the possession of the indirect possessor;  or
  3. c) If the  direct  possessor  ceases  to  hold  the  

 

 

 

 

 

3 This sounds like the English action in "detinue", but the translator has not used this  term  because  "return"  as  used  later  in  this  law  extends  to  immovable  as  well as  goods,  unlike  detinue  which  is  limited  to  goods.

5   While  the  term  'claim'  generally  refers  to  an  action  or  demand  deriving  from  a

legal right, in this translation it refers to any substantial right that corresponds to  an  obligation  owed  by  an  obligor  and  is  vested  in  an  obligee.

 

 

 

 

(2)       In cases falling under subparagraph (c) of paragraph (1) and where the possessor has been dispossessed of the thing, the possession shall not be extinguished if the direct possessor or indirect possessor repossesses  the  thing  or  brings  an  action  for  recovery  of  possession of  the  thing  within  one  year  of  such  dispossession.

 

 

  1. (Possession  with  or  without  intention  of  ownership)

 

 

(1)      In  some  cases  of  possession  the  possessor  has  the  intention  to become the owner of the thing possessed and in other cases the possessor does not have such intention. Whether such intention exists or not will be determined on the basis of the objective nature of the ground of acquisition  of  the  possession.

 

 

(2)    If on the basis of the objective nature of the acquisition of possession,  the  possessor  does  not  have  the  intention  to  become  the owner of the thing, the nature of possession shall not be altered into that involving an intention to become the owner unless the possessor declares to the person who put him into possession that he intends to become the owner, or unless he commences possession [anew] on the basis of  a  new  ground  of  acquisition  of  possession  with  the  intention  of becoming  the  owner.

 

 

  1. (Flawed  possession)

 

 

(1)      Possession that is acquired with knowledge that one has no right of possession to it is referred to as "possession in bad faith" and possession  acquired  without  knowledge  that  one  has  no  right  of possession to it as "possession in good faith". If the lack of knowledge results from negligence, the possession is referred to as "negligent possession".

 

 

(2)   "Peaceful  possession"  refers  to  possession  acquired  and maintained without violence; provided that it will still be peaceful possession if a person who has initially acquired possession peacefully uses violence to protect such possession against unlawful infringement by  a  third  party.

 

 

 

 

 

 

(3)  "Open ("kozen") possession" refers to possession without concealment, so that persons having rights over the possessed thing can know  or  see  the  fact  of  such  possession.

 

 

(4)    "Flawed  possession"  refers  to  possession  in  bad  faith,  to possession that despite being in good faith is negligent, to possession that  is  not  peaceful  and  to  possession  that  is  not  open.

 

 

  1. (Presumptions)

 

 

(1)      Possessors  are  presumed  to  be  in  possession  with  the  intention of  becoming  the  owners  of  the  thing.

 

 

(2)      Possessors   are   presumed   to   be   in   possession   in   good   faith, peacefully  and  openly.

 

 

(3)       If there is proof of possession at two different times, possession is presumed to have  been continuous throughout the intermediate time.

 

 

(4)     The possessor is presumed to hold lawfully a right to possess the relevant  thing.

 

 

  1. (Succession  to  possession)

 

 

(1)      A   successor   to   possession   may   at   his   option   assert   his   own possession only or his own possession together with that of his predecessor  in  possession.

 

 

(2)      If he asserts the possession of his predecessor together with his own, he also succeeds to any flaws in the possession of the predecessor. Consequently  if  there  are  flaws  in  the  possession  of  the  predecessor, even if the successor's possession is unflawed, the two possessions together  will  be  flawed.

 

 

Section   II  Rights  to  Demand  Protection  of  Possession

 

 

 

 

  1. (Rights  to  demand  protection  of  possession)

 

 

A possessor, whether direct or indirect, may demand return of the dispossessed  thing  or  removal  of  disturbance  or  prevention  of disturbance to possession in accordance with those set forth in Articles

236(Right to demand return of thing in possession) through 240(Relation with  actions  on  title).

 

 

  1. (Right  to  demand  return  of  thing  in  possession)

 

 

(1)      A possessor who has been dispossessed of a thing may demand return of  said  thing.

 

 

(2)      A right to demand return of a thing may not be exercised against a  person  who  has  acquired  the  thing  from  the  dispossessor,  a  pledgee or other successor in interest; provided that, where such successor knew or  should  have  known  of  the  fact  of  dispossession,  a  right  to  demand return  of  the  thing  may  be  exercised  against  such  successor.

 

 

(3)      An action for return of a thing in possession must be brought not later  than  one  year  from  the  dispossession.

 

 

  1. (Right  to  demand  removal  of  disturbance)

 

 

(1)     Where a possessor's possession has been disturbed, he may demand removal  of  such  disturbance.

 

 

(2)     An action for removal of disturbance must be brought during the continuance of the disturbance or within one year after it has ceased; provided that in cases where the thing possessed has been damaged by structural  work,  the  action  may  not  be  brought  after  the  lapse  of  one year   from   the   commencement   of   such   work,   or   after   the   completion thereof.

 

 

  1. (Damages)

 

 

(1)      Neither Article 236(Right to demand return of thing in possession)

 

nor  Article  237(Right  to  demand  removal  of  disturbance)  precludes  a

 

 

 

 

demand  for  damages  in  tort.

 

 

(2)       An action for damages incurring from dispossession of a thing must be  brought  not  later  than  one  year  from  the  dispossession.

 

 

(3)      An  action  for  damages  incurring  from  disturbance  to  possession must be brought during the continuance of the disturbance or within one year   after   it   has   ceased;   provided   that   in   cases   where   the   thing possessed has been damaged by structural work, the action may not be brought after the lapse of one year from the commencement of such work, or  after  the  completion  thereof.

 

 

  1. (Right  to  demand  prevention  of  disturbance  to  possession)

 

 

(1)    Where  there  is  a  danger  of  disturbance  to  possession,  the possessor may demand prevention of such disturbance; provided that the court,  in  lieu  of  preventing  the  disturbance,  may  require  the  posting of  appropriate  security.

 

 

(2)      An  action  for  prevention  of  disturbance  may  be  brought  so  long as the danger of disturbance exists; provided that in cases where there is a danger that the thing possessed will be damaged by structural work, the action may not be brought after the lapse of one year from the commencement  of  such  work,  or  after  the  completion  thereof.

 

 

  1. (Relation  with  actions  on  title)

 

 

(1)    Ownership, perpetual lease, usufruct, pledge, lease, and other rights that legally justify the holding of a thing are referred to as "title".

 

 

(2)    The defendant to an action for protection of possession is not permitted  to  assert  a  defense  based  on  title  against  the  exercise  of a  right  to  demand  protection  of  possession.

 

 

(3)    Actions for possession and actions based on title shall not be mutually exclusive. The defendant to an action for possession may bring

 

 

 

 

a  counter-action  based  on  title.

 

 

(4)      Actions  for  possession  shall  not  be  adjudicated  upon  grounds relating  to  title.

 

 

Section   III  Protection of  Specia                            Occupants  of  Immovab  e

 

 

  1. (Protection of  occupant  of  immovable  holding  a  certificate of  occupancy)

 

 

(1)      A  person  who  has  been  continuously  using  and  profiting  a  piece of immovable for which a certificate of occupancy has been issued, but over which the registration required for the acquisition of complete ownership   has   not   been   effected   because   the   cadastral   survey   and register have not yet been prepared shall be deemed to be the owner in respect  of  claims  based  on  real  rights.

 

 

(2)      Even if the person described in paragraph (1) allows a third party to use and profit from the immovable in question, the first-mentioned person shall still be deemed to be the owner in respect of claims based on  real  rights.

 

 

(3)     A person who has acquired the certificate of occupancy from the occupant described in paragraph (1) and taken over occupation of the immovable  shall  be  deemed  to  be  the  owner  in  respect  of  claims  based on  real  rights.

 

  1. (Protection of occupant of immovable prior to the enforcement of the  Land  Law)

 

 

(1)     A person who despite being in continuous, peaceful and undisputed occupancy of an immovable that is legally capable of being occupied by a  private  person  for  a  period  of  five  years  prior  to  the  coming  into force  of  the  Land  Law,  has  neglected  to  register  such  occupancy  based on the Land Law, is permitted to exercise a right to demand protection of  possession  against  a  third  party  who  infringes  such  occupancy.

 

 

(2)      A  person  who  begun  continuous  occupation  of  an  immovable  prior

 

 

 

 

to  the  coming  into  force  of  the  Land  Law,  and  obtained  a  permit  from a governmental authority to extend his occupation for a period required for the acquisition of complete ownership is also permitted to exercise a right to demand protection of possession against a third party who infringes  such  occupancy.

 

 

(3)      So   far   as   the   exercise   of   a   right   to   demand   protection   of possession  is  concerned,  a  one-year  period  as  set  froth  in  Articles

236(Right to demand return of thing in possession)through 239(Right to demand prevention of disturbance to possession) shall be replaced with a  period  of  three  years.

 

 

Chapter Four PERPETUAL  LEASES

 

 

  1. (Definition  of  perpetual  leases)

 

 

"Perpetual  lease"  refers  to  a  long-term  lease  of  immovable  for  a  term of  not  less  than  15  years.

 

 

  1. (Formation  of  perpetual  lease)

 

 

(1)     A perpetual lease shall not be valid unless it is established by writing.

 

 

(2)      A  perpetual  lease  that  is  not  in  writing  shall  be  deemed  to  be a lease without a prescribed period, and may be terminated at any time by either party unilaterally in accordance with Article 612(Notice of cancellation  of  lease  without  fixed  term).

 

 

  1. (Requirements  for  perfection  of  perpetual  lease)

 

 

(1)      Unless  the  perpetual  lessee  registers  the  perpetual  lease,  it cannot  be  held  up  against  third  parties.

 

 

(2)      If   the   ownership   of   the   immovable   that   is   the   subject   of   a perpetual  lease  is  assigned,  a  registered  perpetual  lease  may  be  held up  against  the  transferee.

 

 

 

 

 

 

  1. (Term  of  perpetual  lease)

 

 

(1)      The  term  of  a  perpetual  lease  may  not  exceed  50  years.  If  a perpetual lease is established with a term exceeding 50 years, it shall be  shortened  to  50  years.

 

 

(2)      A perpetual lease may be renewed; provided that the renewed term may  not  exceed  50  years  counting  from  the  date  of  renewal.

 

 

  1. (Rental)

 

(1)      The perpetual lessee shall pay the rental to the perpetual lessor at  the  stipulated  time.

 

 

(2)      If  there  is  no  stipulation  of  time  for  payment  of  rental,  the lessee  shall  pay  the  rental  at  the  end  of  each  year;  provided  that  if there is a harvest season, the payment shall be made without delay after such  season.

 

 

  1. (Right  to  demand  increase  or  decrease  of  rental)

 

If the rental is no longer appropriate on account of change in circumstances,   either   party   may   request   the   court   to   increase   or decrease  the  rental  to  an  appropriate  amount.

 

 

  1. (Perpetual  lessor's  right  of  cancellation)

 

 

If  the  perpetual  lessee  fails  to  pay  the  stipulated  rental  for  three years,  the  perpetual  lessor  may  cancel  the  perpetual  lease.

 

 

  1. (Perpetual  lessee's  right  of  cancellation)

 

 

If  no  profit  can  be  derived  from  the  immovable  for  3  years  on  account of unforeseeable circumstances or force majeure, or there is no prospect of  future  profit  exceeding  the  annual  rental  on  account  of  damage  to part of the immovable, the perpetual lessee may cancel the perpetual lease.

 

 

 

 

  1. (Assignment,  etc.  of  perpetual  leases)

 

 

(1)      Perpetual  leases  may  be  assigned  with  or  without  consideration, or  otherwise  disposed.

 

 

(2)      The  perpetual  lessee  may  sublease  the  subject  of  the  perpetual lease.

 

 

(3)      A  perpetual  lease  may  be  inherited.

 

 

  1. (Perpetual  lessee's  real  right  of  claim)

 

 

A  perpetual  lessee  may  exercise  the  same  rights  to  demand  return,  to remove disturbance and to prevent disturbance vis-a-vis an infringement of  the  perpetual  lease  as  the  owner.

 

 

  1. (Termination  of  perpetual  lease)

 

(1)       Upon termination of a perpetual lease, the perpetual lessor cannot demand that the perpetual lessee restore the immovable to its original condition unless the perpetual lessee has destroyed the immovable or fundamentally  changed  its  nature.

 

 

(2)      Upon  termination  of  a  perpetual  lease,  the  lessor  shall  acquire the ownership over any improvements and any structures installed on the immovable  by  the  perpetual  lessee  without  having  to  pay  compensation to  the  perpetual  lessee.

 

 

(3)      A  special  agreement  may  be  made  at  variance  with  paragraphs  (1) and (2); provided that such special agreement cannot be held up against third  parties  unless  it  is  registered.

 

 

  1. (Mutatis  mutandis   application   of   provisions   relating   to leases)

 

 

The provisions relating to "leases" shall apply mutatis mutandis to any matters   relating   to  perpetual   leases   that   are   not   covered   in   this Chapter  4  (Perpetual  Leases).

 

 

 

 

 

 

Chapter Five USUFRUCT

 

 

  1. (Definition  of  usufruct)

 

 

(1)      "Usufruct"  refers  to  the  rights  to  use  and  enjoy  the  profits  of the  immovable  of  another  person,  for  a  period  that  may  not  exceed  the life  of  the  usufructuary.

 

 

(2)     The usufructuary has the right to use the immovable that is the subject  of  the  usufruct  for  its  intended  purposes,  and  to  enjoy  the natural  fruits  and  the  legal  fruits  arising  from  the  immovable.

 

 

  1. (Contractual  usufruct  and  statutory  usufruct)

 

 

(1)      Usufructs  may  be  established  by  agreement  of  the  parties  or  by law.

 

 

(2)      Usufructs  established  by  law  shall  be  subject  to  the  provisions of  this  Chapter  unless  otherwise  provided  by  law.

 

 

(3)   Usufructs  established  by  law  shall  take  precedence  over contractual  usufructs,  unless  otherwise  provided  by  law.

 

 

  1. (Formation  of  usufruct)

 

 

(1)      A  usufruct  may  be  created  in  writing  or  otherwise.

 

 

(2)      The  owner  may  at  any  time  give  notice  of  the  extinguishment  of a usufruct that is not in writing. In cases where the time of extinguishment of the usufruct is not stated in the notice of extinguishment,  or  where  the  period  stated,  counting  from  the  date  of the notice, until the date of extinguishment is less than the applicable period  noted  below,  the  usufruct  shall  be  extinguished  upon  the  lapse of  the  applicable  period  noted  below,  counting  from  the  date  of  the notice:

 

 

 

 

  1. a) in respect  of  a  building,  3  months;  and b)          in  respect  of  land,  1  

 

 

(3)       In the case of a usufruct over land where there is a harvest season, the  notice  of  extinguishment  must  be  given  after  such  harvest  season and  prior  to  the  commencement  of  the  next  cultivation.

 

 

  1. (Requirements  for  perfection  of  usufruct)

 

 

(1)       Unless a usufruct is registered, it cannot be held up against third parties.

 

 

(2)      Where  the  ownership  of  the  immovable  that  is  the  subject  of  a usufruct is assigned, the usufruct may be held up against the transferee if  it  is  registered.

 

 

  1. (Term  of  usufruct)

 

 

(1)      A  specified  term  may  be  provided  for  a  usufruct,  or  it  may  be provided that it will continue until the occurrence of a certain event.

 

 

(2)      If  no  term  is  specified  for  a  usufruct,  it  shall  be  deemed  to continue  until  the  death  of  the  usufructuary.

 

 

  1. (Right  to  collect  natural  fruits)

 

 

(1)      Natural fruits that were on the land at the time of establishment of  the  usufruct  shall  belong  to  the  usufructuary.

 

 

(2)      Natural fruits that are on the land at the time of extinguishment of  the  usufruct  shall  belong  to  the  landowner.

 

 

(3)     In cases described in paragraphs (1) and (2), no claims of unjust enrichment shall be recognized relating to the labor required for the cultivation  of  the  natural  fruits  or  otherwise.

 

 

 

 

(4)    Notwithstanding the provisions of paragraph (1), if there is a perfected  lease  on  the  land  that  is  the  subject  of  the  usufruct,  the lessee  shall  be  entitled  to  collect  the  natural  fruits.

 

 

(5)      Notwithstanding  the  provisions  of  paragraph  (2),  a  lessee  who leased the land from the usufructuary is entitled to collect the natural fruits that have been cultivated prior to the extinguishment of the usufruct.

 

 

  1. (Right  to  collect  legal  fruits)

 

 

Legal fruits shall belong to the usufructuary in proportion to the term of  the  usufruct.

 

 

  1. (Assignment  of  usufruct,  etc.)

 

 

The usufructuary may assign the usufruct with or without consideration, or  otherwise  dispose  it.

 

 

  1. (Lease  of  usufruct  immovable)

 

 

(1)      The usufructuary may lease out the immovable that is the subject of  the  usufruct  for  a  fixed  term  not  exceeding  3  years.

 

 

(2)      The term of the lease described in paragraph (1) may be renewed;

 

provided  that  the  term  of  such  renewal  shall  not  exceed  3  years.

 

 

(3)      If  the  usufruct  is  extinguished,  a  lease  agreement  relating  to the   land   subject   to   the   usufruct   may   not   be   held   up   against   the landowner.

 

 

  1. (Usufructuary's  real  right  of  claim)

 

 

A usufructuary may exercise the same rights to demand return, to remove disturbance and to prevent disturbance vis-a-vis an infringement of the usufruct  as  the  owner.

 

 

 

 

 

 

  1. (Demand  for  extinguishment  of  usufruct)

 

 

(1)    If the usufructuary inflicts significant damage on or does not properly preserve the immovable that is the subject of the usufruct or otherwise breaches the spirit of the usufruct, the owner may demand that the  court  extinguish  the  usufruct.

(2)       A demand for extinguishment under paragraph (1) shall not preclude a  claim  for  damages  in  tort  against  the  usufructuary.

 

 

  1. (Other  grounds  for  extinguishment  of  the  usufruct)

 

 

In addition to the provisions of Article 265(Demand for extinguishment of usufruct), a usufruct shall be extinguished in the following cases:

(a)                  the  death  of  the  initial  usufructuary;

 

(b)                  the  expiry  of  the  term  or  the  fulfillment  of  the  condition prescribed  in  the  usufruct  establishment  agreement;

(c)                  renunciation  of  the  usufruct  by  the  usufructuary;  or

 

(d)                  the  complete  loss  of  the  immovable  that  is  the  subject  of the  usufruct.

 

 

  1. (Effect  of  extinguishment  of  usufruct)

 

 

(1)      Upon  extinguishment  of  a  usufruct,  the  immovable  owner  cannot demand that the usufructuary restore the immovable to its original condition unless the usufructuary has destroyed the immovable or fundamentally  changed  its  nature.

 

 

(2)      Upon termination of a usufruct, the immovable owner shall acquire the ownership over any improvements and any structures installed on the immovable by the usufructuary without having to pay compensation to the usufructuary  or  its  successor(s).

 

 

(3)      A  special  agreement  may  be  made  at  variance  with  paragraphs  (1) and (2); provided that such special agreement cannot be held up against third  parties  unless  it  is  registered.

 

 

 

 

 

 

  1. (Loss  of  building  that  is  the  subject  of  the  usufruct)

 

 

(1)      If  a  building  above  ground  is  the  sole  subject  of  the  usufruct and such building is destroyed, the usufruct may not be exercised over the  land.

 

 

(2)     If the subject of the usufruct is both land and building and the building  is  destroyed,  the  usufruct  over  the  land  shall  survive.

 

 

  1. (Allocation  of  expenses)

 

 

(1)      The  usufructuary  shall  bear  the  cost  of  maintenance  and  repairs of the immovable that is the subject of the usufruct, and the owner shall bear the expense of major repairs; provided that if major repairs have become necessary because the usufructuary has failed to effect maintenance and repairs, the usufructuary shall bear the cost of such major  repairs.

 

 

(2)      "Major  repairs"  under  this  Article  refers  to  changes  of  walls, beams and  pillars and foundations and  to re-roofing, and  "maintenance and  repairs"  refers  to  all  other  repairs.

 

 

  1. (Allocation  of  taxes  and  other  imposts  and  insurance  premiums)

 

 

The   usufructuary   shall   be   obliged   to   pay   taxes   and   other   imposts relating   to   the   subject   immovable   during   the   term   of   the   usufruct together with the premiums on insurance over said immovable contracted by  the  owner  prior  to  the  establishment  of  the  usufruct.

 

 

Chapter Six RIGHT   OF  USE   AND RIGHT  OF  RESIDENCE

 

 

  1. (Definition  of  right  of  use  and  right  of  residence)

 

(1)      "Right   of   use"   refers   to   the   right   to   collect   the   fruits   of immovable, to the extent of the needs of the right holder and his family.

 

 

 

 

(2)    Right of residence refers to the right to occupy part of the building(s),  to  the  extent  required  for  residence  by  the  right  holder and  his  family.

 

  1. (Contractual right    of    use    and    right    of    residence    and statutory  right  of  use  and  right  of  residence)

 

 

(1)      Rights   of   use   and   rights   of   residence   may   be   established   by agreement  of  the  parties  or  may  arise  by  provision  of  law.

 

 

(2)      Rights  of  use  or  residence  established  by  law  shall  be  subject to  the  provisions  of  this  Chapter  6  unless  otherwise  provided  by  law.

 

 

(3)    Rights  of  use  or  residence  established  by  law  shall  take precedence  over  contractual  rights  of  use  or  residence,  unless otherwise  provided  by  law.

 

 

  1. (Formation  of  rights  of  use  and  rights  of  residence)

 

 

(1)      Rights  of  use  and  rights  of  residence  may  be  created  in  writing or  otherwise.

 

 

(2)      The  owner  may  at  any  time  give  notice  of  the  extinguishment  of a  right  of  use  or  right  of  residence  that  is  not  in  writing.  In  cases where   the   time   of   extinguishment   of   the   right   of   use   or   right   of residence is not stated in the notice of extinguishment, or where the period stated, counting from the date of the notice, until the date of extinguishment is less than 3 months, the right of use or right of residence  shall  be  extinguished  upon  the  lapse  of  3  months,  counting from  the  date  of  the  notice.

 

 

  1. (Requirements for perfection of rights of use and rights of residence)

 

(1)      Unless  a  right  of  use  or  right  of  residence  is  registered,    it cannot  be  held  up  against  third  parties.

 

 

(2)      Where the ownership of the immovable that is the subject of a right of use or right of residence is assigned, the right may be held up against

 

 

 

 

the  transferee  if  it  is  registered.

 

 

  1. (Term  of  right  of  use  or  right  of  residence)

 

(1)     A specified term may be provided for a right of use or right of residence,   or   it   may   be   provided   that   it   will   continue   until   the occurrence  of  a  certain  event.

 

 

(2)      If no term is specified for a right of use or right of residence, it  shall  be  deemed  to  continue  until  the  death  of  the  right  holder.

 

 

  1. (Expansion  of  family)

 

A right of use or right of residence shall remain in effect, notwithstanding the expansion of the family on account of marriage or childbirth  after  the  creation  of  such  right.

 

 

  1. (Assignment  of  usufruct,  etc.)

 

 

(1)      Holders of rights of use or rights of residence are not permitted to  assign  or  otherwise  dispose  such  rights.

 

 

(2)      Holders of rights of use or rights of residence are not permitted to  lease  out  the  immovable  that  is  the  subject  of  such  rights.

 

  1. (Demand  for   extinguishment   of   right   of   use   or   right   of residence)

 

 

(1)    If the holder of a right of use or right of residence inflicts significant damage on or does not properly preserve the immovable that is  the  subject  of  such  right  or  otherwise  breaches  the  spirit  of  the right, the owner may demand that the court extinguish the right of use or  right  of  residence  as  the  case  may  be.

 

 

(2)       A demand for extinguishment under paragraph (1) shall not preclude a  claim  for  damages  in  tort  against  the  right  holder.

 

 

  1. (Right  holder's  real  right  of  claim)

 

 

 

 

A holder of a right of use or right of residence may exercise the same rights  to  demand  return,  to  remove  disturbance  and  to  prevent disturbance  vis-a-vis  an  infringement  of  his  right  as  the  owner.

 

 

  1. (Extinguishment  of  right  of  use  or  right  of  residence)

 

 

In addition to the provisions of Article 278(Demand for extinguishment of  right  of  use  or  right  of  residence),  a  right  of  use  or  right  of residence  shall  be  extinguished  for  the  following  reasons:

(a)                  the  death  of  the  right  holder;

 

(b)                  the  expiry  of  the  term  or  the  fulfillment  of  the  condition prescribed  in  the  agreement  creating  such  right;

(c)                  renunciation  of  the  right  by  the  right  holder;  or

 

(d)                  the  complete  loss  of  the  immovable  that  is  the  subject  of the  right.

 

 

  1. (Allocation  of  expenses)

 

 

(1)      If  the  holder  of  a  right  of  use  or  right  of  residence  collects the whole of the fruits of the land or occupies the whole of the building(s),  he   shall   have   the   same   obligation  to   pay   expenses   of repairs and maintenance, taxes and other imposts and insurance premiums as  an  usufructuary.

 

 

(2)      If  the  holder  of  a  right  of  use  or  right  of  residence  collects only   a   portion   of   the   fruits   or   occupies   only   a   portion   of   the building(s), he shall be liable for the expenses described in paragraph (1)  pro  rata  such  portion.

 

 

Chapter Seven EASEMENTS

 

 

Section   I  Genera                                                      Ru  es

 

 

  1. (Definition  of  easement)

 

 

(1)      An  "easement"  is  the  right  to  use  the  land  of  another  for  the benefit of one's own land, in accordance with the purpose specified in

 

 

 

 

the contract of creation; provided that an easement may not be created that  contravenes  public  order.

 

 

(2)      The other person's land that is used for the benefit of one's own land  is  referred  to  as  the  "servient  land",  and  the  land  that  enjoys the  benefit  of  the  easement  is  referred  to  as  the  "dominant  land".

 

 

(3)     A perpetual lessee or usufructuary is also entitled to create an easement  using  the  subject  land  as  the  dominant  land.

 

 

  1. (Formation  of  easement)

 

 

(1)      An  easement  may  be  created  by  writing  or  otherwise.

 

 

(2)     The owner of the servient land may at any time give notice of the extinguishment  of  an  easement  that  is  not  in  writing.  In  cases  where the time of extinguishment of the easement is not stated in the notice of  extinguishment,  or  where  the  period  stated,  counting  from  the  date of  the  notice,  until  the  date  of  extinguishment  is  less  than  1  month, the easement shall be extinguished upon the lapse of 1 month, counting from  the  date  of  the  notice.

 

 

  1. (Requirements  for  perfection  of  easement)

 

 

(1)      Unless  an  easement  is  registered,  it  cannot  be  held  up  against third  parties.

 

 

(2)      An  easement  that  has  been  registered  may  be  held  up  against  a person  acquiring  the  servient  land.

 

 

  1. (Scope of persons entitled to enjoy the benefit of an easement)

 

 

In addition to the owner of the dominant land, a lessee, perpetual lessee, usufructuary or holder of a right of use or right of residence over the dominant  land  is  entitled  to  enjoy  the  benefit  of  an  easement,  except where  otherwise  provided  in  the  contract  creating  the  easement.

 

 

 

 

 

 

  1. (Appurtenant  nature  of  easement)

 

 

(1)      An easement passes along with the ownership of the dominant land if   the   ownership   of   the   dominant   land   is   assigned,   except   where otherwise  provided  in  the  contract  creating  the  easement.

 

 

(2)     An easement may neither be assigned nor made the subject of other rights  separately  from  the  dominant  land.

 

 

  1. (Obligations  of  the  servient  land  owner)

 

 

(1)      The owner of the servient land must not obstruct the exercise of the  easement  or  do  anything  that  reduces  the  utility  thereof.

 

 

(2)    The owner of the servient land may not change the land that is originally  agreed  to  be  the  servient  land  to  other  land  without  the consent of the easement holder; provided that if continuing to use the original servient land as the servient land would cause severe detriment to  the  owner  of  the  servient  land  due  to  a  change  to  circumstances accuring after the establishment of the easement, said owner may offer other  land  as  the  servient  land  that  is  beneficial  to  the  same  degree to the dominant land. If the easement holder does not consent to this, a  judgment  may  be  sought  from  the  court  in  lieu  of  the  said  consent.

 

 

  1. (Obligations  of  the  easement  holder)

 

 

(1)      The easement holder may not use the servient land beyond the scope provided in the contract creating the easement. The easement holder may not alter the servient land or the dominant land in a manner that could have  an  adverse  impact  on  the  condition  of  the  servient  land.

 

 

(2)     If the easement holder breaches paragraph (1), the owner of the servient land may apply to the court for extinguishment of the easement.

 

 

(3)      An  application  for  extinguishment  under  paragraph  (2)  shall  not

 

 

 

 

preclude  a  claim  for  damages  in  tort  against  the  easement  holder.

 

 

(4)     If consideration is prescribed for the easement and the easement holder does not pay the prescribed consideration, the owner of the servient land may apply to the court for extinguishment of the easement.

 

 

  1. (Right of easement holder to erect structures on servient land)

 

 

(1)    The  easement  holder  may  erect  structures  necessary  for  the exercise  of  the  easement  on  the  servient  land.  Upon  extinguishment  of the  easement,  the  easement  holder  shall  remove  such  structures  and restore  the  servient  land  to  its  original  condition.

 

 

(2)    To the extent that this does not obstruct the exercise of the easement, the owner of the servient land may use any structures erected on  the  servient  land  for  the  purpose  of  exercise  of  the  easement.

 

 

(3)      In  cases  described  in  paragraph  (2),  the  owner  of  the  servient land  shall  share  the  costs  of  erecting  and  maintaining  the  structures in  proportion  to  the  profits  it  receives.

 

 

  1. (Allocation  of  expenses  of  structures)

 

 

(1)      Unless  otherwise  provided,  the  owner  of  the  dominant  land  shall pay  the  expenses  of  erection  and  maintenance  of  structures  necessary for  the  exercise  of  the  easement.

 

 

(2)      If there is special agreement for the owner of the servient land to pay the expenses of erection and maintenance of structures and such agreement  is  registered,  the  burden  thereof  shall  pass  to  any  person who  acquires  the  ownership  of  the  servient  land.

 

 

  1. (Easement  holder's  real  right  of  claim)

 

 

An  easement  holder  may  exercise  the  same  rights  to  demand  return,  to remove disturbance and to prevent disturbance vis-a-vis an infringement

 

 

 

 

of  the  easement  as  the  owner.

 

 

  1. (Relinquishment  of   ownership   of   servient   land   in   favor   of easement  holder)

 

 

(1)      Where  these  is  special  agreement  for  the  owner  of  the  servient land to pay expenses under Article 290(Allocation of expenses of structures), said owner may at any time be released from the burden of such  agreement  by  relinquishing  the  ownership  of  that  portion  of  the land  that  is  necessary  for  the  easement  to  the  easement  holder.

 

 

(2)     "Relinquishment" refers to the relinquishment by the owner of the ownership of the servient land based on his unilateral [declaration of] intention  and  the  transfer  of  such  ownership  to  the  easement  holder.

 

 

  1. (Extinguishment  of  easement)

 

 

In     addition     to     cases     provided     in     paragraph     (2)     of     Article

 

288(Obligations of the easement holder), an easement shall be extinguished  in  the  following  cases:

(a)                  the ownership of both the dominant land and the servient land becoming  vested  in  the  same  person;

(b)                  the  complete  destruction  of  the  dominant  land;

 

(c)                  if   a   term   is   prescribed   in   the   contract   of   creation   of easement,  the  expiry  of  such  term;  or

(d)                  renunciation  of  the  easement  by  the  easement  holder.

 

 

  1. (Application for  extinguishment  of  easement  for  which  term  not provided)

 

 

If there is no provision for a term in the contract creating the easement, the  owner  of  the  servient  land  may  file  a  suit  seeking  extinguishment of  the  easement.  The  court  will  determine  whether  the  application  for extinguishment should be approved, taking account of the background to the  creation  of  the  easement,  the  past  term  of  the  easement,  whether there  is  consideration  or  not  and  all  the  other  circumstances.

 

 

 

 

 

 

  1. (Extinguishment  of  easement  by  co-owners)

 

 

(1)      A  single  co-owner  of  the  dominant  land  may  not  extinguish  an easement  in  respect  of  his  share.

 

 

(2)      A  single  co-owner  of  the  servient  land  may  not  extinguish  an easement  in  respect  of  his  share.

 

 

  1. (Subdivision  or  partial  assignment  of  land  and  easements)

 

 

(1)      If the dominant land is subdivided or a portion of it is assigned, the  easement  shall  remain  in  force  for  each  portion  of  said  land; provided  that  if  by  its  nature  it  only  relates  to  a  portion  of  the dominant  land,  it  shall  lapse  in  relation  to  the  other  portion(s)  of said  land.

 

 

If the servient land is subdivided or a portion of it is assigned, the easement shall remain in force for each portion of said land; provided that if by its nature it only relates to a portion of the servient land, it  shall  lapse  in  relation  to  the  other  portion(s)  of  said  land.

Section   II  Easements  and  Prescription

 

 

  1. (Acquisitive  prescription  of  easement)

 

 

(1)       An easement may be acquired by acquisitive prescription, but only where  it  is  continuous  and  apparent.

 

 

(2)      The  period  of  prescription  in  cases  described  in  paragraph  (1) shall  be  10  years  in  the  case  of  good  faith  and  20  years  in  the  case of  bad  faith.

 

 

(3)     "Continuous easement" refers to an easement where without human action  being  required,  the  easement  has  materialized  only  because  of the  location  of  the  place,  and  without  interruption  has  been  [in  the state of] providing a benefit to the dominant land and imposing a burden

 

 

 

 

on  the  servient  land.

 

 

(4)       "Apparent easement" refers to an easement that has become apparent and materialized through an externally visible structure or other vestige.

 

 

  1. (Acquisitive prescription     of    easement    by    one    co-owner    of dominant  land)

 

 

(1)    If one co-owner of the dominant land acquires an easement by prescription,  the  other  co-owners  shall  also  acquire  such  easement.

 

 

(2)      Any  interruption  of  prescription  as  against  co-owners  shall  not be   effective   unless   it   is   effected   against   each   co-owner   who   is exercising  the  easement.

 

 

(3)    If there are two or more co-owners exercising the easement, prescription  shall  run  in  favor  of  all  the  co-owners  notwithstanding that  there  is  cause  for  the  suspension  of  prescription  against  one  of them.

 

 

  1. (Extinctive  prescription  of  easement)

 

 

(1)      If an easement is not exercised for a period of ten years, it shall be  extinguished  by  prescription.

 

 

(2)       The period of extinctive prescription shall be computed in respect of a non-continuous easement, from the time when the easement was last exercised, and in the case of a continuous easement, from the time of occurrence   of   the   event   that   is   obstructing   the   exercise   of   the easement.

 

 

  1. (Interruption or    suspension    of    extinctive    prescription     of easement  where  the  dominant  land  is  co-owned)

 

 

If the dominant land belongs to two or more co-owners, interruption or

 

 

 

 

suspension of prescription occurring in favor of one of them shall inure to  the  benefit  of  the  other  co-owners.

 

 

  1. (Extinctive  prescription  of  part  of  easement)

 

 

If the easement holder does not exercise part of the easement, that part of  the  easement  shall  be  extinguished  by  prescription.

 

 

  1. (Prescriptive acquisition  by  occupant  of  servient  land  and  the fate  of  easements)

 

 

(1)     If the occupant of the servient land fulfills the conditions for acquisitive prescription, the easement shall thereby be extinguished.

 

 

(2)      If  the  easement  holder  exercises  the  easement  within  the  period of occupancy required for acquisitive prescription, the servient land acquired by prescription by the occupant shall be subject to the burden of  the  easement.

 

 

Chapter Eight OWNERSHIP  AND OTHER  REAL   RIGHTS    OF  THE  STATE,  BUDDHIST TEMPLES,    MINORITY  ETHNIC  GROUPS AND OTHER  COMMUNITIES

 

 

  1. (Ownership and other real rights of the state, Buddhist temples, minority ethnic  groups  and  other  communities)

 

 

Ownership and other real rights of the state, Buddhist temples, minority ethnic groups and other communities shall be subject to the provisions of the Civil Code, except where otherwise provided by special law or custom.

 

 

Chapter Nine RIGHTS   CREATED  BY  CONCESSION

 

 

  1. (Rights  created  by  concession)

 

 

The  provisions  of  the  Civil  Code  relating  to  perpetual  leases  shall apply mutatis mutandis to land rights created by concession, within the scope   of   the   conditions   applying   to   such   concession,   except   where

 

 

 

 

otherwise  provided  by  special  law.

 

 

 

BOOK  FOUR "OBLIGATIONS"

 

Chapter One GENERAL PROVISIONS

 

 

Section   I  Causes of  Ob  igation  and  Definitions  of  Severa                   Concepts

 

  1. (Definition  of  obligation)

 

(1)     An obligation is a legal relationship that connects a particular person  with  a  specified  person  by  having  the  particular  person  assume a  certain  duty  with  respect  to  the  specified  person.

 

(2)      The  person  assuming  the  duty  shall  be  called  the  'obligor,'  and the person receiving the benefit of performance of such duty shall be called  the  'obligee.'

 

(3)      An  obligee  shall  possess  those  rights  corresponding  to  the  duty owed by the obligor. [These rights are collectively referred to in this translation  as  a  'claim.5']

 

  1. (Causes  of  obligation)

 

(1)    An obligation may arise from a contract, unilateral legal act, management of affairs without mandate, unjust enrichment, tortious act, or  provision  of  law.

 

(2)      An obligation arising from a contract or unilateral legal act is an obligation created based on the intention of [one or both] parties.

 

(3)      An  obligation  arising  from  the  management  of  affairs  without mandate, unjust enrichment, tortious act or provision of law is an obligation created by law. The provisions set forth in Chapters Three through Seven of this Book shall apply mutatis mutandis to an obligation created  by  law.

 

  1. (Definition  of  declaration  of  intention)

 

(1)      A declaration of intention is an expression of intention made by a  party  with  the  intent  to  create  a  legal  effect.

 

(2)      The  declaration  of  intention  shall  become  effective  when  the notice  thereof  reaches  to  the  other  party.

 

  1. (Definition  of  contract)

 

A  contract  is  the  matching  of  intentions  held  by  two  or  more  parties to  create,  change  or  extinguish  an  obligation.

 

  1. (Definition  of  unilateral  legal  act)

 

 

 

 

(1)    A  unilateral  legal  act  is  an  act  that  creates,  changes  or extinguishes an obligation through the unilateral expression of an intention  to  dispose  of  property  or  through  the  exercise  of  a  right granted  by  contract  or  provision  of  law.

 

(2)      The provisions set forth in Sections II through IV of Chapter Two of  this  Book  shall  apply  mutatis  mutandis  to  unilateral  legal  acts.

 

Section   II  Types and  States  of  Ob  igations

 

  1. (Types  of  obligations)

 

The  subject  matter  of  an  obligation  may  be  the  transfer  of  ownership to,  or  the  right  to  possess,  property  or  money,  or  to  perform  or  not perform  a  certain  act.

 

  1. (Obligation  to  deliver  specific  property)

 

If the subject matter of an obligation comprises delivery of a specific property,  the  obligor  shall  preserve  such  property  with  the  care  of  a good  manager  until  delivery  thereof.

 

  1. (Obligation  to  deliver  property  in  species)

 

(1)    Where  the  property  to  be  delivered  under  an  obligation  is described only   with reference to its class or type, if different levels of  quality  exist  with  regard  to  such  property  to  be  delivered,  the obligor shall be obligated to deliver property of the quality that was designated  by  the  parties.     If  there  is  no  such  designation  of  the quality of the property to be delivered, the obligor shall be obligated to  deliver  property  of  medium  quality.

 

(2)       With regard to obligations to deliver property described only with reference to its class or type, where the obligor has specified the property   to   be   delivered   and   has   completed   all   acts   required   for delivery of that specified property, the obligor has the duty to subsequently  deliver  only  that  specified  property.

 

  1. (Monetary  debt)

 

(1)      If  the  subject  matter  of  an  obligation  comprises  the  payment  of money, the obligor may effect payment in any desired currency. However, the obligee and the obligor may agree that the payment shall be effected by  a  specific  currency.

 

(2)    If the specific currency that forms the subject matter of an obligation has ceased to be legal tender at the time when the obligation becomes  due,  the  obligor  may  effect  payment  in  another  currency.

 

(3)       The  provisions  of  paragraphs  (1)  and  (2)  shall  apply  mutatis mutandis  in  cases  where  the  delivery  of  foreign  currency  forms  the subject  matter  of  the  obligation.

 

  1. (Monetary  debt  in  foreign  currency)

 

 

 

 

Even if the amount of a debt is established in a foreign currency, the obligor may effect payment in Cambodian currency at the exchange rate current at the place of performance and when the debt becomes due. Where the  obligor's  [tender  of]  payment  is  delayed,  the  obligee  may  demand that  the  obligor  calculate  the  amount  of  the  payment  based  on  the currency exchange rate in effect when the payment is actually made. However, if the obligee and the obligor agree otherwise, such agreement shall  prevail.

 

  1. (Legal  interest  rate)

 

With respect to an interest-bearing obligation, the interest rate shall be  5  %  per  annum,  unless  otherwise  agreed  to  between  the  parties.

 

  1. (Interest  on  interest)

 

Where  the  payment  of  interest  is  in  arrears  for  one  year  or  more,  if the   obligor   fails   to   pay   such   interest   after   receipt   of   a   notice demanding payment from the obligee, the obligee may include the amount of  such  interest  in  the  principal.

 

  1. (Choice  of  obligation)

 

If the subject matter of an obligation is to be determined by choosing from among two or more acts of performance, the right to choose shall belong to the obligor. However, the obligor may grant the right to choose to  the  obligee  or  to  a  third  party  by  specific  agreement.

 

  1. (Exercise  of  right  to  choose)

 

The  right  to  choose  shall  be  exercised  by  giving  notice  to  the  other party. Where the obligor is vested with the right to choose, such right shall  be  deemed  to  be  exercised  through  the  delivery  of  the  property chosen  by  the  obligor.    Where  a  third  party  is  vested  with  the  right to  choose,  the  right  to  choose  shall  be  exercised  through  the  giving of  notice  to  either  the  obligor  or  the  obligee.

 

  1. (Transfer  of  right  to  choose)

 

(1)     After an obligation becomes due, where either the obligor or the obligee  holding  the  right  to  choose  receives  a  notice  from  the  other party instructing the right holder to make a choice within a reasonable fixed period of time but fails to make a choice within such period, the right  to  choose  shall  be  deemed  transferred  to  the  other  party.

 

(2)      Where  the  right  to  choose  is  vested  with  a  third  party,  if  the third  party  receives  a  notice  from  the  obligor  or  the  obligee instructing the third party to make a choice within a reasonable fixed period of time but fails to make a choice within such period, the right to  choose  shall  be  deemed  transferred  to  the  obligor.

 

  1. (Determination of    choice     of    obligation     when    performance impossible)

 

(1)      If,  among  the  acts  of  performance  that  form  the  subject  matter

 

 

 

 

of an obligation subject to choice, one or more of such acts have either been impossible from inception or have subsequently become impossible for  a  reason  not  attributable  to  either  party,  the  subject  matter  of the  obligation  shall  comprise  the  remaining  acts  of  performance.

 

(2)      If  an  act  of  performance  has  become  impossible  due  to  the  fault of an obligor who does not hold the right to choose, the party who is entitled to choose may choose the act of performance that was rendered impossible  and  demand  compensation  for  damages  from  the  obligor.

 

(3)      If any act of performance has become impossible due to the fault of  an  obligee  who  does  not  hold  the  right  to  choose,  the  obligor  who is entitled to choose may, by choosing the act of performance that was rendered  impossible,  be  released  from  the  obligation.

 

(4)     If any act of performance has become impossible due to a reason attributable to the party who holds the right to choose, the right to choose  shall  be  deemed  transferred  to  the  other  party.

 

  1. (Retroactive  effect  of  choice)

 

The   choice   shall   have   retroactive   effect   from   the   time   that   the obligation  arose.

 

Section   III  Conditions,  Time  and  Period

 

 

Sub-section  I  Conditions

 

  1. (Meaning  of  conditions)

 

(1)      One  or  both  parties  to  a  contract  or  unilateral  legal  act  may impose  conditions  on  the  obligation  created  thereby.

 

(2)      Conditions  are  events,  the  occurrence  of  which  is  uncertain.

 

(3)       If   an   obligation   is   subject   to   a   condition   precedent,   the obligation shall become effective upon the fulfillment of the condition. If  an  obligation  is  subject  to  a  condition  subsequent,  the  obligation shall  cease  to  be  effective  upon  the  fulfillment  of  the  condition.

 

  1. (Disposition  of  right  subject  to  condition)

 

A claim that is subject to a condition may be the object of an inheritance, disposition or security interest.                                     Furthermore, an obligation subject to  a  condition  may  be  succeeded  to  in  accordance  with  the  provisions regarding  inheritance,  etc.

 

  1. (Impairment  of  pending  benefit)

 

(1)      Neither party to an obligation subject to a condition may, while such  condition  is  pending,  impair  the  benefits  that  the  other  party stands  to  receive  if  the  condition  is  fulfilled.

 

(2)      Where  a  third  party  impairs  the  benefits  mentioned  in  paragraph

 

 

 

 

(1),  if  such  third  party's  act  constitutes  a  tortious  act,  the  third party  shall  be  liable  for  damages.

 

  1. (Constructive  fulfillment  of  conditions)

 

If a party for whom the fulfillment of a condition would be detrimental intentionally obstructs the fulfillment of such condition, the other party  may  treat  the  condition  as  having  been  fulfilled.

 

 

Sub-section  II  Time

 

  1. (Meaning  of  time)

 

(1)    If  an  obligation  is  subject  to  a  commencement  time,  its performance  may  not  be  demanded  until  such  time  has  arrived.

 

(2)      If an obligation is subject to a termination time, it shall cease to  be  valid  when  such  time  arrives.

 

  1. (Benefit  of  time)

 

(1)      Time is presumed to be stipulated for the benefit of the obligor.

 

(2)    The benefit of time may be waived. However, if the other party suffered  damages  due  to  the  waiver,  the  waiving  party  shall  be  liable for  such  damages.

 

  1. (Forfeiture  of  benefit  of  time)

 

The  obligor  shall  lose  the  benefit  of  time  in  the  following  cases:

(a)                  where  the  obligor  has  been  declared  bankrupt;

(b)                  where the obligor has destroyed or diminished the security;

(c)                  where  the  obligor  has  failed  to  furnish  the  security  that the  obligor  was  bound  to  furnish;  or

(d)                  where an event that was agreed upon between the parties has

occurred.

 

Sub-section  III  Period

 

  1. (Designation  of  period)

 

A  period  may  be  designated  in  terms  of  hours,  minutes  or  seconds,  or in  terms  of  days,  weeks,  months  or  years.

 

  1. (Calculation of period established in terms of seconds, minutes or hours)

 

If  a  period  has  been  fixed  in  terms  of  hours,  minutes  or  seconds,  it shall  be  computed  from  the  first  moment  to  the  last  moment.

 

  1. (Calculation of  period  established  in  terms  of  days,  weeks, months  or  years)

 

(1)      If a period has been established in terms of days, weeks, months

 

 

 

 

or years, the first day of such period shall not be included in the computation; provided, however, that this shall not apply if the period begins  at  midnight.

 

(2)      In  cases  mentioned  in  paragraph  (1),  the  period  shall  terminate at  the  end  of  the  last  day  of  the  period.

 

(3)      If  the  last  day  of  a  period  falls  on  a  national  holiday,  Sunday or any other holiday established by laws or ordinances, the period shall terminate  at  the  end  of  the  immediately  following  business  day.

 

  1. (Calculation  of  period  by  solar  calendar)

 

(1)       If a period has been established in terms of weeks, months or years, it  shall  be  computed  in  accordance  with  the  calendar.

 

(2)      If  a  period  does  not  commence  at  the  beginning  of  a  week,  month or year, such period shall terminate on the day in the last week, month or year preceding the day corresponding to that on which it commenced. However,  if  the  period  has  been  fixed  in  terms  of  months  or  years  and there  is  no  corresponding  day  in  the  last  month  or  year,  the  last  day of  the  month  shall  be  the  day  of  termination.

 

Chapter Two DECLARATION  OF  INTENTION  AND CONTRACT

 

Section   I  Formation  of  Contract

 

  1. (Formation  of  contract  via  offer  and  acceptance)

 

A  contract  is  formed  when  an  offer  and  an  acceptance  thereof  conform to  each  other.

 

  1. (Definition  of  offer)

 

(1)     An offer is an invitation to enter into a contract based on the offeror's intention to be legally bound by the other party's acceptance thereof.

 

(2)       An offer shall take effect when it reaches the other party. However, an  offer  shall  not  take  effect  if  a  notice  of  revocation  has  reached the  other  party  simultaneously  with  or  prior  to  the  offer.

 

  1. (Offer  with  acceptance  period;  revocation)

 

(1)      An  offer  may  be  made  subject  to  an  acceptance  period.

 

(2)      An  offer  that  specifies  an  acceptance  period  cannot  be  revoked.

 

(3)     If the offeror does not receive notice of acceptance within the specified acceptance period, the offer shall automatically lapse upon the  expiration  of  the  acceptance  period.  The  offer  shall  lapse  if  a notice of refusal from the other party reaches the offeror, even where such  notice  is  received  within  the  specified  acceptance  period.

 

 

 

 

  1. (Offer  with  no  acceptance  period;  revocation)

 

(1)      An   offer   that   states   no   acceptance   period   and   is   made   inter praesentes where the offeree can respond at once shall lapse unless it is  accepted  forthwith  by  the  offeree.

 

(2)      An   offer   that   states   no   acceptance   period   and   is   made   inter absentes  cannot  be  revoked  by  the  offeror  within  a  reasonable  period of  time.

 

(3)      A  revocation  of  an  offer  shall  take  effect  when  notice  thereof reaches the offeree, provided that such notice reaches the offeree prior to  the  offeree's  dispatch  of  a  notice  of  acceptance.

 

  1. (Formation  of  contract  on  receipt  of  acceptance)

 

A  contract  shall  be  formed  when  the  notice  of  acceptance  is  received by  the  offeror.

 

  1. (Delayed  acceptance)

 

An acceptance that reaches the offeror after the expiration of the acceptance  period  shall  be  deemed  a  new  offer.

 

  1. (Acceptance  of  offer  with  modification)

 

(1)       If  the  acceptor  attaches  a  condition  or  any  other  modification to the acceptance, such purported acceptance shall be deemed a new offer. A  contract  shall  be  formed  when  the  original  offeror  accepts  such  new offer.

 

(2)      If the condition or modification attached to the acceptance does not substantially change the original offer, the intended acceptance shall  serve  as  an  acceptance  of  the  original  offer.    The  contents  of the contract shall incorporate the condition or modification contained in  the  intended  acceptance  unless  the  offeror  raises  an  objection  to the condition or modification immediately after receipt of the acceptance.

 

  1. (Formation  of  contract  by  acts  recognized  as  acceptance)

 

In the event that a notice of acceptance is not required under the intention of the offeror or under applicable trade customs, the contract shall be formed when the act that is recognized as an acceptance is performed.

 

  1. (Revocation  of  offer  made  to  unspecified  party)

 

An offer made to unspecified parties made through advertising or other method may be revoked only using the same method employed to make the offer.

 

Section   II  Va  idity  of  Dec aration  of  Intention  and Contract

 

  1. (Nullity  of  declaration  of  intention)

 

 

 

 

 

A  declaration  of  intention  shall  be  void  in  the  following  cases:

(a)                  where       the   declaration   of   intention   is   fictitious   as described       in     Article     345(Fictitious     declaration     of intention);

(b)                  where  the  declaration  of  intention  is    given  subject  to  a mental reservation    as    defined    in    Article    346(Mental reservation);  or

(c)                  where  the  party  otherwise  lacks      a  true  intent  to  create  a

legal  effect.

 

  1. (Rescission  of  declaration  of  intention)

 

In the following cases, a declaration of intention may be rescinded as a defective declaration pursuant to provisions set forth in this Section II  and  Section  III:

(a)                  where  the  declaration  of  intention  is  given  as  the  result of  mistake;

(b)                  where  the  declaration  of  intention  is  given  as  the  result of the other party's fraud, duress or misrepresentation; or

(c)                  where  the  declaration  of  intention  is  given  as  the  result of   the   other   party's   act   that   aims   to   obtain   excessive profits  and  exploits  the  surrounding  situation.

 

  1. (Extinction of  effect  of  contract  due  to  nullity  or  rescission of  declaration  of  intention)

 

A  contract  formed  by  the  matching  of  an  offer  and  an  acceptance  shall lose   effect   upon   the   nullity   or   rescission   of   the   declaration   of intention  [on  which  either  the  offer  or  the  acceptance  was  based].

 

  1. (Fictitious  declaration  of  intention)

 

(1)     A fictitious declaration of intention given in collusion with the other  party  shall  be  void.

 

(2)      The   invalidity   of   the   declaration   of   intention   described   in paragraph  (1)  cannot  be  asserted  against  a  bona  fide  third  party.

 

  1. (Mental  reservation)

 

A declaration of intention given with the knowledge that it does not reflect the true intention of the declarant shall not be void. However, if the other party is aware that such declaration does not reflect the true intention of the declarant, the declarant can assert the invalidity of  the  declaration  against  such  other  party.

 

  1. (Mistake)

 

(1)      Where a party gives a declaration of intention based on a mistake with  regard  to  a  material  aspect  of  the  contract,  if  the  other  party could have been aware of such mistake, such party may rescind the declaration  of  intention.

 

(2)      Where a party gives a declaration of intention based on a mistake

 

 

 

 

with regard to a particular matter in the contract which such party deems important, if the other party could have been easily aware of the importance of the particular matter for such party as well as of the mistake,  such  party  may  rescind  the  declaration  of  intention.

 

(3)     Where both parties have made declarations of intention based on mistakes  with  regard  to  a  material  aspect  of  the  contract,  each  party may  rescind  the  declaration  of  intention  even  though  the  other  party could  not  have  been  aware  of  such  mistake.

 

(4)      The  effect  of  the  rescission  of  a  declaration  of  intention  by reason of mistake may not be asserted against a third party other than the other party and his general successor if the third party is ignorant of the mistake and such ignorance was not the result of the third party's negligence.

 

  1. (Fraud)

 

(1)    A  person  whose  declaration  of  intention  is  induced  by  the fraudulent conduct of the other party may rescind such declaration with respect  to  such  other  party.

 

(2)       A declaration of intention that is based on the fraudulent conduct of a third party may be rescinded only if the other party knew or could have  known  of  the  fraudulent  conduct.

 

(3)       A rescission of a declaration of intention may be asserted against the other party, his successor in interest or other third parties. However, if the successor in interest or another third party has acted in good faith and without negligence, the rescission of the declaration of intention may not be asserted against such successor in interest or party.

 

  1. (Misrepresentation)

 

(1)      Where a fact asserted by the other party in the course of entering into a contract is not in accord with the truth, a party who gave declaration  of  intention  believing  in  the  truth  of  the  asserted  fact may  rescind  the  declaration  of  intention  if  such  party  would  not  have given such declaration of intention if the party had known that the asserted  fact  was  untrue.

 

(2)    If  the  person  making  the  misrepresentation  was  negligent, paragraph  (1)  shall  not  preclude  the  other  party  who  gave  the declaration  of  intention  from  seeking  damages.

 

  1. (Duress)

 

(1)     A person who gives a declaration of intention while under duress exerted by the other party or a third party may rescind such declaration of  intention.

 

(2)      If,  in  the  course  of  entering  into  a  contract,  a  party  to  the contract  took  advantage  of  an  economically  or  socially  superior position  or  otherwise  unfairly  took  advantage  of  a  situation  in  which

 

 

 

 

it  was  difficult  for  the  other  party  to  oppose  such  party,  the  other party  may  rescind  the  declaration  of  intention.

 

(3)    The  rescission  of  declaration  of  intention  referred  to  in paragraph (2) may not be asserted against a third party who is ignorant of the defect in the declaration of intention and such ignorance is not the  result  of  the  third  party's  negligence.

 

  1. (Conduct  resulting  in  excessive  benefits)

 

If a party enters into a contract while taking advantage of the other party's financial difficulties, ignorance or inexperience, and thereby obtains excessive profits or benefits, the other party may rescind the declaration  of  intention.

 

  1. (Contract in violation of laws or public order and good morals)

 

(1)       Even where the declarations of intention of both parties are given of  the  parties'  own  free  will,  the  contract  shall  be  null  and  void  in the  following  cases:

(a)                  where   the   contents   of   the   contract   violate   a   mandatory provision  of  law;  or

(b)                  where the contents of the contract contravene public order and  good  morals.

 

(2)      If a part of a contract violates a mandatory provision of law or public  order  and  good  morals,  where  to  uphold  the  remainder  of  the contract   would   not   contravene   the   reasonable   expectations   of   the parties, only the part of the contract in violation of provision of law or  public  order  and  good  morals  shall  be  void.

 

  1. (Initial  impossibility)

 

(1)       Even where it was impossible to implement the content of a contract at the time of its execution, the contract shall not be void as a result. However, this shall not preclude either party to the contract from rescinding  declaration    of    intention    based    on    mistake    if    the requirements  for  mistake  are  met.

 

(2)    A  party  to  the  contract  who  should  have  known  that  the implementation  of  the  content  of  the  contract  was  impossible  at inception shall be liable to the other party for damages in accordance with the provisions of Article 395(Requirements for damages) et seq. regarding non-performance if the other party suffered any damages  due to  the  execution  of  the  contract.

 

Section   III  Inva  idity and Rescission

 

  1. (Ratification  of  void  act)

 

(1)    An 'act' shall mean a declaration of intention, contract or unilateral  legal  act  for  the  purposes  of  this  Section  III.

 

(2)      A  void  act  shall  become  a  valid  act  when  it  is  ratified  by  the actor  once  the  ground  for  its  invalidity  ceases  to  exist.

 

 

 

 

 

  1. (Voidable  act)

 

(1)      A voidable act is valid until it is rescinded by a person having the  right  to  rescind  such  act.

 

(2)      Where  a  voidable  act  is  rescinded  by  a  person  having  the  right to  rescind  such  act,  the  act  shall  be  void  from  its  inception.

 

(3)     Where a voidable act is ratified by a person having the right to rescind  such  act,  the  act  is  conclusively  valid.

 

  1. (Person  entitled  to  rescind  act)

 

(1)       Where a voidable act is to be rescinded on the ground of a defective declaration of intention, the rescission may be effected by the person that gave the defective declaration of intention or by his legal representative.       An  heir  or  other  person  who  has  succeeded  to  the contractual position of the person giving the defective declaration of intention  may  also  exercise  the  right  of  rescission.

 

(2)      A  rescission  based  on  minor  status  or  other  limitation  on  the capacity to act may be carried out by the incompetent person or by such person's legal representative.   The heir or legatee of such person may also  exercise  the  right  of  rescission.

 

  1. (Method  of  rescission  or  ratification)

 

Where the other party to a voidable act is identified, rescission or ratification shall be carried out with notification to the other party. The  rescission  or  ratification  shall  be  effectuated  when  the notification  thereof  reaches  the  other  party.

 

  1. (Ratifying  persons,  conditions  of  ratification)

 

(1)    Ratification may be carried out by a person having a right of rescission. However, where the rescission was based on a defective declaration of intention, the ratification may be carried out after the person having a right of rescission learns of the cause of rescission, and where the rescission was based on an act performed by an incompetent person,  the  ratification  may  be  carried  out  after  the  circumstances giving  rise  to  the  rescission  no  longer  exist.

 

(2)    The  provisions  of  paragraph  (1)  shall  not  apply  where  the ratification  is  carried  out  by  the  legal  representative  of  an incompetent  person.

 

  1. (Constructive  ratification)

 

A voidable act shall be deemed ratified where any of the following facts occurs after the time that ratification may be carried out pursuant to the provisions of Article 358(Ratifying persons, conditions of ratification):

(a)                  full or partial performance of an obligation arising due to a voidable act or the giving of security for such obligation;

 

 

 

 

(b)                  the  exercise  of  a  right  obtained  through  a  voidable  act  or a  demand  for  performance  by  the  other  party;  or

(c)                  a total or partial transfer or other disposition of a right obtained  through  a  voidable  act.

However,  this  shall  not  apply  where  it  is  specifically  stated  at  the time  such  fact  occurs  that  ratification  shall  not  be  carried  out.

 

  1. (Extinctive  prescription  of  right  of  rescission)

 

(1)      A right of rescission, as well as the right to demand the return of unjust enrichment that accompanies the exercise of a right of rescission, shall be extinguished if it is not exercised within three years of the date on which ratification may be performed.  The provisions regarding interruption of prescription shall not apply to this period.

 

(2)    Notwithstanding the provisions of paragraph (1), a right of rescission,   as   well   as   the   right   to   demand   the   return   of   unjust enrichment, shall be extinguished upon the expiration of ten years from the  date  of  the  act  subject  to  rescission.

 

(3)      Where  multiple  persons  have  a  right  of  rescission  regarding  the same  act,  the  provisions  of  paragraphs  (1)  and  (2)  above  shall  apply to  each  such  person's  right  of  rescission.

 

Section   IV  Agency

 

  1. (Definition  of  agency)

 

Agency  is  defined  as  a  relationship  wherein  where  a  representative enters into a contract with another party by stating that he is acting on behalf of a principal within the scope of the agency authorization, the  effects  of  the  contract  are  imputed  directly  to  the  principal.

 

  1. (Creation  of  agency  authorization)

 

An agency authorization can be created by contract between the principal and  the  agent  or  by  law.

 

  1. (Scope  of  agency  authorization)

 

(1)      The   scope   of   an   agency   authorization   is   established   in   the contract that confers the agency authorization on the agent. Where an agency authorization is established by law, the scope of the agency authorization  is  established  by  the  provisions  of  such  law.

 

(2)    Where there is no provision regarding the scope of the agency authorization,  an  agent  is  entitled  to  conduct  acts  to  preserve  or improve   [the   thing   or   right   comprising   the   subject-matter   of   the agency.] However, this shall not apply to acts of improvement that would alter  the  nature  of  such  thing  or  right.

 

  1. (Limitations  on  agency  authorization)

 

(1)      An  agent  is  not  entitled  to  conduct  acts  with  respect  to  which the interests of the principal conflict with the interests of the agent,

 

 

 

 

even where such acts are otherwise within the scope of the agency authorization.   However,   this   shall   not   apply   where   the   principal consents  thereto.

 

(2)      Dealings  between  the  agent  and  the  principal  are  presumed  to involve  conflicting  interests  between  the  principal  and  the  agent.

 

(3)    Where an agent represents both a principal and a third party, paragraphs  (1)  and  (2)  shall  apply  mutatis  mutandis  to  acts  that  give rise to conflicting interests between the principal and the third party.

 

  1. (Grounds  for  extinction  of  agency  authorization)

 

(1)     An agency authorization conferred by a principal via contract is extinguished  by  any  of  the  following:

(a)                  the  death,  bankruptcy  or  dissolution  of  the  principal;

(b)                  the  death  or  bankruptcy  of  the  agent,  or  a  restriction  on the  agent's  capacity  to  act;  or

(c)                  the  termination  of  the  trust,  employment  or  other  legal relationship  that  gave  rise  to  the  agency  authorization.

 

(2)      A agency created by law is extinguished for reasons specified by law.

 

  1. (Agency  without  authorizaton)

 

Where a person conducts an act as agent for another without having an agency authorization, the effects of that act shall not be attributable to the putative principal. However, this shall not apply where the act is  ratified  by  the  putative  principal.

 

  1. (Ratification  of  act  performed  without  agency  authorization)

 

(1)      The  effect  of  ratification  cannot  be  asserted  against  the  other party  unless  such  ratification  is  exercised  against  the  other  party.

 

(2)   An  act  conducted  without  agency  authorization  that  is subsequently ratified is valid retroactively from the time it is conducted.  However,  where  rights  accrue  to  a  third  party  between  the time  that  act  is  conducted  and  the  time  of  ratification,  such  rights may  not  be  infringed.

 

(3)      The other party to an act conducted without agency authorization may  demand  that  the  putative  principal  indicate  within  a  reasonable period of time designated by the other party whether the putative principal ratifies such act. If the putative principal does not respond within the established period of time, ratification shall be deemed to have  been  rejected.

 

(4)   The  other  party  to  a  contract  executed  without  agency authorization may rescind the contract until it is ratified by the putative principal. A putative principal may not ratify an act conducted without  agency  authorization  after  rescission  by  the  other  party.

 

  1. (Liability  of  person  acting  without  agency  authorization)

 

 

 

 

 

Where a person who executes a contract as agent for another cannot establish    the    existence    of    an    agency    authorization    or    obtain ratification  from  the  putative  principal,  such  person  is  responsible for either performing under the contract or paying damages, at the election of the other party. However, where the other party knew of the lack of an agency authorization [when the contract was executed], the person acting without agency authorization shall be exempted from such liability. Where the person acting without agency authorization acted without  negligence  in  regard  to  the  absence  of  agency  authorization, and the other party's ignorance of the lack of agency authorization was due to negligence, such person shall not be liable under the provisions of  this  Article.

 

  1. (Agency  by  estoppel)

 

(1)      Where an agent executes a contract outside the scope of the agency authorization, and the other party believed without negligence that the agent was authorized to enter into the contract, the principal is responsible  for  performing  under  the  contract.

 

(2)       Where, after the extinction of an agency authorization, the former agent  enters  into  a  contract  with  another  party  as  the  agent  of  the former principal, the former principal is responsible for performing under the contract. However, this shall not apply where the other party knew of the extinction of the agency authorization, or where the other party's ignorance of such extinction was due to the other party's negligence.

 

(3)     Where, despite the absence of an agency authorization, a putative principal gives the impression that an agency authorization has been conferred  on  another,  or  allows  another  person  to  give  the  impression that  he  has  received  an  agency  authorization,  the  putative  principal is obligated to the other party to make performance under the contract.

 

  1. (Anonymous  acts  of  agency)

 

Where  an  agent  engages  in  a  transaction  with  the  intent  of  acting  on behalf  of  a  principal  without  disclosing  such  intent,  the  other  party has the election of treating the contract as executed between such party and  the  principal  or  as  executed  between  such  party  and  the  agent. However,  where  the  other  party  knew  [when  the  contract  was  executed] that  the  agent  was  acting  on  behalf  of  the  principal,  the  other  party can treat the contract as executed only between such party and the principal.

 

  1. (Defective  act  of  agency)

 

(1)      Where the validity of a declaration of intention may be affected on   the   grounds   of   mistake,   fraud,   or   duress,   or   the   knowledge   or negligent ignorance of certain circumstances, the existence of facts giving  rise  to  such  grounds  shall  be  determined  with  respect  to  the agent.

 

(2)      When  applying  paragraph  (1),  where  the  principal  has  authorized

 

 

 

 

the agent to execute a particular contract, the principal cannot assert the agent's ignorance of facts if they were known to the principal, or of facts of which the principal was ignorant due to the principal's own negligence.

 

  1. (Capacity  of  agent)

 

A principal can confer an agency authorization on a person who has a limited  capacity  to  engage  in  legal  acts.  In  this  case,  a  contract executed between an agent having a limited capacity to act and another party cannot be rescinded by the principal on account of the agent's limited  capacity.

 

  1. (Sub-agency)

 

A person authorized as an agent pursuant to a contract with a principal may not appoint a sub-agent. However, this shall not apply where the principal consents or circumstances exist that make such sub-agency unavoidable.

 

  1. (Liability  of  agent  where  sub-agent  has  been  appointed)

 

(1)       Where an agent appoints a sub-agent in the circumstances described in the second sentence of Article 373(Sub-agency), the agent is responsible to the principal in connection with the appointment and supervision  of  the  sub-agent.

 

(2)    Where an agent appoints a sub-agent on the instructions of the principal, the agent is not responsible for the conduct of the sub-agent unless the agent knew that the sub-agent was unfit or untrustworthy and the agent failed to either notify the principal of such fact or remove the  sub-agent.

 

(3)       Where an agent appoints a sub-agent under circumstances other than those described in Article 373(Sub-agency), the acts of the sub-agent shall  not  be  imputed  to  the  principal.  However,  where  the  other  party [to   a   contract   entered   into   by   the   sub-agent]   is   unaware   of   the sub-agent's  lack  of  authority,  and  such  lack  of  knowledge  is  not  the result  of  his  negligence,  the  other  party  may  demand  that  the  agent perform  [under  the  contract]  or  pay  damages.

 

  1. (Status  of  sub-agent)

 

(1)    An act that is conducted by a sub-agent within the sub-agent's authority and is accompanied by the sub-agent's express statement that the act is conducted on behalf of the principal is binding on the principal.

 

(2)     A sub-agent has the same rights and obligations as an agent with respect  to  the  principal.

 

(3)       The  provisions  of  this  Section  IV  shall  apply  mutatis  mutandis to the relationship between a principal and a sub-agent, who shall be deemed  an  agent  for  purposes  hereof.

 

 

 

 

Section   V    Contract  for  the  Benefit  of  a Third  Party

 

  1. (Definition)

 

(1)     The parties to a contract can agree to confer a right or benefit arising under the contract upon a third party. In this case, the person who is to perform a duty under the contract for the third party is termed the contract donor, and the other party to the contract is termed the contract  donee.  The  person  to  receive  the  right  or  benefit  is  termed a  third-party  beneficiary.

 

(2)      A third-party beneficiary is entitled to make a direct demand on the  contract  donor  for  performance.

 

  1. (Third-party  beneficiary)

 

The  third-party  beneficiary  need  not  exist  when  the  promise  to  confer the  right  or  benefit  is  made  if  the  standards  for  determining  the third-party    beneficiary's    identity    are    clear.    However,    where    a third-party beneficiary does not exist at the scheduled time for performance of the duty by the contract donor and cannot be identified, the  promise  to  perform  the  contract  for  the  benefit  of  a  third  party loses its effect, and the contract donor shall be discharged from the contract upon performance of his duties with respect to the contract donee.

 

  1. (Declaration  of  intention  to  receive  right  or  benefit)

 

(1)      A contract donee may, at any time prior to an intended third-party beneficiary's declaration of intention to accept the right or benefit, extinguish the third-party beneficiary's right to receive the right or benefit via notification to the contract donor and the third-party beneficiary.

 

(2)      Where the third-party beneficiary declares an intention to accept the  right  or  benefit,  the  parties  to  the  contract  may  not  thereafter alter  or  extinguish  the  third-party  beneficiary's  right.

 

  1. (Defense  of  contract  donor)

 

A contract donor under a contract to confer a right or benefit on a third party   may   assert   against   the   third-party   beneficiary   any   defenses arising  under  the  contract.

 

  1. (Invalidity,  rescission  or  termination  of  contract)

 

(1)     Where grounds for invalidity or rescission of the contract exist between the contract donee and contract donor, either party may assert the  invalidity  of  or  seek  to  rescind  the  contract  in  accordance  with the provisions of Section III or Chapter Two of this Book concerning invalidity and rescission, notwithstanding the existence of a provision in  the  contract  conferring  a  right  or  benefit  on  a  third  party.

 

(2)     A contract donor may terminate the contract on the ground of the contract donee's breach thereof. Where the contract donor's breach  is

 

 

 

 

grounds for termination, and the third-party beneficiary has already declared an intention to accept the right or benefit, the contract donee can terminate the contract only with the consent of the third-party beneficiary.

 

Chapter Three PERFORMANCE  OF   CONTRACT

 

  1. (Obligor's  duty  to  perform  obligation)

 

(1)   An  obligor  shall  perform  its  contractual  obligations  in accordance with the purpose of the contract and the principle of good faith.

 

(2)     The obligation of a party is extinguished by a performance that complies  with  the  standard  established  in  paragraph  (1).

 

  1. (Right  to  demand  performance  of  obligation)

 

(1)    An obligee is entitled to demand that the obligor perform the obligation  either  with  or  without  filing  a  lawsuit.

 

(2)      Notwithstanding  the  provisions  of  paragraph  (1),  an  obligee  may not   file   a   lawsuit   demanding   performance  where   the   parties   to   the contract have agreed not to  seek  judicial enforcement of  performance.

 

(3)      Even where a lawsuit seeking judicial enforcement of performance is  barred  under  paragraph  (2),  if  the  obligor  carries  out  such performance  voluntarily,  the  obligee  may  receive  and  retain  the benefits  thereof.

 

  1. (Defense  of  simultaneous  performance)

 

Each   party   to   a   bilateral   contract   may   refuse   to   perform   its   own obligation until the other party tenders the performance of its obligation. However, this shall not apply where the time for performance of  the  other  party's  obligation  has  not  arrived.

 

  1. (Defense  of  insecurity)

 

A party to a bilateral contract who is required to perform an obligation in  advance  of  the  other  party  may  refuse  to  perform  the  obligation  if there is a significant risk that the other party will not substantially perform its obligation in accordance with its intended purpose. However, this   shall   not   apply   where   the   other   party   provides   security   or otherwise  takes  a  measure  that  extinguishes  the  existing  risk.

 

  1. (Application of  provisions  relating  to  performance  as  a  ground for  extinction  of  obligation)

 

In addition to the provisions of this Chapter Three, the provisions of Section I of Chapter Seven of this Book regarding performance as a ground for extinction of obligation shall also apply to 'performance of contract.'

 

 

 

 

Chapter Four REMEDIES   FOR  BREACH  OF  CONTRACT

 

Section   I  Genera                             Ru  es  Concerning  Non-Performance

 

  1. (Definition  and  types  of  non-performance)

 

'Non-performance' is defined as an obligor's failure to perform an obligation arising under a contract. The types of 'non-performance' are as  follows:

  1. a) cases in  which  performance  cannot  be  carried  out  by  the established     time    for    performance    due    to    a    delay    in performance;
  2. b) cases in  which  performance  is  impossible;
  3. c) cases in which full and complete performance in accordance with the  intended  purpose  of  the  obligation  is  not  carried out;  and
  4. d) other  cases   in   which   performance   is   not   carried   out   in

accordance  with  the  intended  purpose.

 

  1. (Remedies  for  non-performance)

 

Where an obligor fails to perform an obligation, the obligee may demand specific performance, damages, or termination of the contract, in accordance  with  the  provisions  set  forth  in  Sections  II  through  IV  of this  Chapter  IV.

 

  1. (Delayed  performance)

 

An obligor shall be liable for delayed performance if he fails to perform the  obligation  at  the  time  described  below:

  1. a) where performance  is  to  occur  at  a  time  certain,  when  such time  has  arrived;
  2. b) where performance  is  to  occur  at  a  time  that  is  uncertain, when  the  obligor  knows  that  such  time  has  arrived;  or
  3. c) where no time for performance is specified, when the obligor receives a  demand  for  

 

  1. (Impossibility  of  performance)

 

(1)     Where it is physically impossible to perform the obligation, the performance is deemed impossible. Performance shall also be deemed impossible  where  performance  is  determined  to  be  impossible  from  a social  or  economic  standpoint.

 

(2)      Where  it  is  established  prior  to  the  time  for  performance  that the performance of an obligation will be impossible at the time for performance, the performance shall be deemed impossible when such impossibility  is  established.

 

  1. (Incomplete  performance)

 

Incomplete performance refers to cases where an obligation has been performed   but   the   act   of   performance  was   not   complete,   where   only partial  performance  was  carried  out,  or  where  for  any  other  reason

 

 

 

 

complete performance in accordance with the intended purpose of the obligation  was  not  carried  out.

 

  1. (Other  non-performance)

 

In   addition   to   the   types   of   non-performance   described   in   Articles

388(Delayed performance) through 390(Incomplete performance), where there is a breach of any other duty arising under the contract, the contract  shall  be  deemed  non-performed.

 

  1. (Multiple  remedies)

 

Where multiple remedies are available to the obligee, the obligee may select any or all of such remedies so long as they are not in mutual conflict.

 

Section   II  Specific  Performance

 

  1. (Court  order  for  specific  performance)

 

Where an obligor does not voluntarily perform an obligation, the obligee may seek an order of specific performance from the court, except where the nature of the obligation is not suitable for specific performance. The  provisions  set  forth  in  the  Civil  Enforcement  Law  shall  apply  to the  proceedings  of  specific  performance.

  1. (Relationship  to  demand  for  performance  and  other  remedies) Where the obligor fails to perform an obligation, the obligee may demand

damages either instead of performance or together with performance so

long  as  there  is  no  conflict  between  these  two  demands.

 

Section   III  Damages

 

  1. (Requirements  for  damages)

 

(1)      Where  an  obligation  is  not  performed,  the  obligee  may  demand damages from the obligor for any resulting harm. However, if the obligor proves that the non-performance was not the fault of the obligor, the obligor  is  not  liable  for  damages.

 

(2)      Where  an  obligor  uses  another  person  as  an  assistant  to  assist in carrying out performance of the obligation, the obligor may not avoid liability unless the obligor proves that the obligor was not negligent in the selection of and supervision over the assistant and that the assistant  was  not  at  fault.

 

  1. (Special  rules  for  monetary  obligations)

 

(1)      Where the subject matter of the obligation is the payment of money, the obligor is not exempted from payment of interest for delay even where the obligor proves that the delay in payment was the result of force majeure. The interest for delay shall be calculated based on the legal rate of interest. Where an agreed-upon interest rate exceeds the legal

 

 

 

 

interest  rate,  the  agreed-upon  interest  rate  shall  be  applied.

 

(2)     The obligor shall be exempted from liability for damages beyond interest  for  delay  if  the  obligor  proves  that  the  obligor  was  not  at fault  for  the  non-performance.

 

  1. (Concept  of  damages)

 

(1)       The obligee may demand as damages (a) compensation for the benefit of performance that would have been received under the contract, as well as (b) expenditures that were wasted due to the non-performance to the extent  that  such  expenditures  do  not  duplicate  amounts  received  as benefit of performance damages, and (c) additional expenditures or burdens  resulting  from  non-performance.

 

(2)      The court may, based on a demand from the obligee, order payment of  damages  for  mental  harm.  The  amount  of  damages  payable  for  mental harm shall be determined by the court after consideration of the surrounding  circumstances.

 

  1. (Scope  of  damages)

 

The   obligor   shall   provide   compensation   for   the   following   types   of damages:

  1. a) Normally occurring  damages  suffered  by  the  obligee  due  to non-performance;
  2. b) Regarding special  damages  suffered  by  the  obligee  due  to special circumstances, [such damages shall be compensated] where the occurrence of such special damages could have been anticipated by the parties when the contract was However, this shall not apply where the parties did not take the           possible      occurrence      of      special      damages      into consideration  when  the  contract  was  executed;  and
  3. c) Notwithstanding subparagraphs     (a)    and    (b),    where    the

non-performance is the result of [the obligor's] malicious intent or bad faith conduct, the court may, based on the obligee's demand for damages, order that the obligor pay to the obligee as damages the profit or benefit obtained by the obligor  from  the  conduct  comprising  the  non-performance.

 

  1. (Grounds  for  reduction  of  damages)

 

(1)    Where  the  obligee's  negligence  or  fault  contributed  to  the occurrence  of  non-performance  or  damages,  the  court  may  reduce  the amount  of  damages  to  be  paid  by  the  obligor  to  the  extent  that  the obligee's  conduct  contributed  thereto.

 

(2)     Where damages have been expanded due to the obligee's negligent failure to mitigate damages, the court may reduce the amount to be paid by  the  obligor  in  proportion  to  the  amount  of  the  damages  that  could have  been  mitigated  by  the  obligee.

 

  1. (Liquidated  damages,  etc.)

 

(1)      The  obligor  and  obligee  may  separately  and  in  advance  establish

 

 

 

 

conditions  for  the  payment  of  damages  and  an  amount  to  be  paid.

 

(2)      A  special  agreement  exempting  the  obligor  from  liability  for non-performance that is intentional or the result of gross negligence is  void.

 

(3)      Where  the  parties  agree  on  the  amount  of  damages,  the  court  may not  increase  or  reduce  the  agreed-upon  amount.     However,  where  the amount  fixed  by  the  parties  as  liquidated  damages  is  either  grossly higher or grossly lower than the amount of damages calculated in accordance  with  the  provisions  of  Article  398(Scope  of  damages),  the court  may  increase  or  decrease  the  liquidated  damages  amount  fixed  by the  parties.

 

(4)    The  liquidation  of  damages  does  not  obstruct  a  claim  for performance  or  for  termination  of  the  contract.  An  amount  fixed  and agreed  to  by  the  parties  as  damages  for  delay  shall  not  be  binding  on the parties where the obligee seeks termination of the contract and compensation for damages as a substitute for [the delivery of] the property  comprising  the  subject  matter  of  the  contract.

 

(5)     A penalty for breach of contract shall be presumed to constitute liquidated  damages.

 

  1. (Compensation  in  money)

 

Compensation   for   damages   for   non-performance   shall   be   made   by   the obligor in money. However, this shall not apply where the parties separately  agree  otherwise.

 

  1. (Subrogation  by  compensation)

 

Where an obligee has received as damages compensation for the value of the property or right comprising the subject matter of the obligation, the obligor shall be automatically subrogated to the position of the obligee  in  regard  to  that  property  or  right.

 

  1. (Extinctive  prescription)

 

The period of extinctive prescription applicable to the right to demand compensation  for  damages  based  on  non-performance  is  five  years  from the  time  when  the  damages  occurred.

 

Section   IV  Termination  of  Contract

 

  1. (Termination  for  non-performance)

 

Where  one  of  the  parties  to  a  bilateral  contract  commits  a  material breach of the contract, the other party may terminate the contract immediately.

 

  1. (Material  breach  of  contract)

 

(1)      A  material  breach  of  contract  occurs  where,  as  a  result  of  one party's breach of a contract, the purpose of the contract for the other

 

 

 

 

party cannot be achieved, and shall be deemed to occur in any of the following  situations:

  1. a) where after a failure to perform at the specified time, the other party  demands  that  the  non-performing  party  perform the obligation by establishing a period of performance of reasonable   length,   and   the   obligation   is   not   performed within  such  period;
  2. b) where a  party  fails  to  perform  at  the  specified  time,  and the purpose of the contract cannot be achieved if performance

is  not  made  at  the  specified  time;

  1. c) where it  is  impossible  to  carry  out  the  essential  act  of performance;  and
  2. d) where the  magnitude  of  the  breach  is  so  substantial  that

trust                             between     the    parties     is    destroyed     and     further performance  cannot  be  expected.

 

(2)      The   non-performing   party   may   not   prevent   termination   of   the contract based on the reasons set forth in paragraph (1) on the ground that  the  non-performance  occurred  without  fault  on  his  part.

 

  1. (Method  of  exercise  of  right  of  termination)

 

(1)      A  party  having  the  right  to  terminate  a  contract  may  terminate the contract by expressing an intention to terminate to the other party. Such  an  intention  may  be  expressed  by  means  other  than  a  lawsuit.

 

(2)     An expression of an intention to terminate may not be revoked or withdrawn.

 

(3)    An expression of an intention to terminate may be subject to a condition  precedent.

 

  1. (Termination  in  cases  of  multiple  parties)

 

(1)      Where one of the parties comprises multiple persons, termination of  the  contract  must  be  effected  by  all  of  such  persons  to  the  other party  or  by  the  other  party  to  all  of  such  persons.

 

(2)      In   the   case   described   in   paragraph   (1),   where   the   right   of termination is extinguished as to one person, it is extinguished as to all  persons.

 

  1. (Effect  of  termination)

 

(1)      Termination  of  a  contract  relieves  both  parties  of  their  duties under  the  contract  except  for  the  duty  to  pay  damages.

 

(2)    Upon termination, a party that has received all or part of a performance under the contract shall return those items received as performance to the other party and return the other party to the other party's original state. Where both parties are required to return the other party to the party's original state, these duties shall be carried out  simultaneously.

 

(3)      A party required to return money as a result of termination shall

 

 

 

 

return the money with interest computed from the date on which the money was received. A party required to return property or other benefit due to  termination  shall  return  any  benefit  received  thereby.

 

(4)      The  legitimate  interests  of  third  parties  may  not  be  prejudiced by  a  termination.

 

  1. (Right  of  termination  when  subject  matter  is  destroyed)

 

(1)    Where due to the intentional act of a person having a right of termination a thing comprising the subject-matter of a contract is lost, destroyed or rendered incapable of being returned, or where such thing is   changed   into   a   thing   of   a   different   type   due   to   processing   or reworking,  the  right  of  termination  shall  be  extinguished.

 

(2)      Where  a  right  of  termination  is  exercised  by  a  person  who  is incapable of returning the thing in the case described in paragraph (1), the value of the thing shall be paid in money, such value not to exceed the  actual  price  thereof  [as  fixed  in  the  contract].

 

(3)     Where a thing has been destroyed or rendered incapable of being returned  due  to  the  negligence  of  or  any  other  reason  attributable  to the other party, the person possessing a right of termination is not obligated  to  return  the  price  of  the  thing  pursuant  to  the  provisions of  Paragraph  (2).

 

  1. (Extinctive  prescription)

 

The period of extinctive prescription of the right of termination based on non-performance as well as the right to demand actions to return to the original state that existed prior to the execution of the contract is  five  years  from  the  time  when  the  non-performance  occurred.

 

  1. (Agreed-upon right of termination and termination by agreement)

 

(1)      The parties to a contract may agree under the contract that either one or both of the parties shall be given a right of termination.  The provisions of Articles 406(Method of exercise of right of termination) through 409(Right of termination when subject matter is destroyed) pertaining to termination granted by law shall apply  mutatis mutandis to the method and effect of an agreed-upon right of termination unless the  parties  agree  otherwise.

 

(2)      Even in the absence of a contractual provision regarding a right of termination, the parties to a contract may agree to terminate the contract.  However,  the  legitimate  interests  of  third  parties  may  not be  prejudiced  thereby.

 

Chapter Five BURDEN  OF  RISK

 

  1. (Extinction of     obligation     in     case     of     impossibility      of performance)

 

If performance of an obligation has become impossible without the fault

 

 

 

 

of the obligor, the obligation shall be extinguished and the obligee may not  demand  performance  thereof.

 

  1. 413. (Burden of  risk  in  a  contract  to  transfer  title  to  specific property)

 

(1)      Where  the  subject  matter  of  a  bilateral  contract  is  to  transfer title to specific property and the property is destroyed, lost or damaged without the faults of either party, the obligor shall bear the risk thereof,  and  may  not  demand  counter-performance.

 

(2)      The risk of destruction, loss or damage of the property comprising the subject matter of the contract shall be transferred to the obligee upon any of the following events unless otherwise provided for in the contract:

  1. a) when the   obligor   delivers   the  property  or   transfers  the

registration of the title thereto to the obligee, or substantial control over the property is otherwise judged to be  shifted  to  the  obligee;

  1. b) whenthe obligor has made a proper tender of performance; or
  2. c) when the   obligee   has  unreasonably  refused  to   accept  the performance  of  the  

 

  1. 414. (Burden  of  risk  associated  with  other  types  of  rights)

 

The provisions of Article 413(Burden of risk in a contract to transfer title to specific property) shall apply mutatis mutandis to the establishment or transfer of rights in rem other than ownership, claims or  other  rights.

 

  1. 415. (Burden of risk where the subject matter of contract constitutes unspecified property)

 

(1)     Where the subject matter of a bilateral contract constitutes the transfer of title to non-specific property and the property to be delivered has not yet been specified, even if the property which the obligor was preparing for a tender of performance was destroyed or lost without the fault of the obligor, the obligation shall not be extinguished, and the obligor remains obligated to perform under the contract.

 

(2)      The  provisions  of  Article  413(Burden  of  risk  in  a  contract  to transfer title to specific property) shall apply mutatis mutandis after the  property  to  be  delivered  has  been  specified.

 

  1. 416. (Contract  subject  to  condition  precedent)

 

Where the property comprising the subject matter of a bilateral contract subject to a condition precedent is destroyed, lost or damaged prior to fulfillment of the condition without the fault of the obligor, the risk of such destruction, loss or damage shall be borne by the obligor.  The provisions of Article 412(Extinction of obligation in case of impossibility of performance) shall apply mutatis mutandis after the condition  has  been  fulfilled.

 

 

 

 

  1. 417. (Burden of  risk  in  bilateral  contract  involving  commission  or omission  of  act)

 

Where one of the parties to a bilateral contract has an obligation to perform  or  not  perform  a  certain  act  and  the  carrying   out  of  this obligation becomes impossible without the faults of both parties, the obligation shall be extinguished. In such a case, the obligor may not demand  counter-performance.

 

  1. 418. (Impossibility  due  to  fault  of  obligee)

 

Where the performance of an obligation in a bilateral contract becomes impossible without the fault of the obligor but due to the fault of the obligee,      the      obligor      does      not      lose      the      right      to      demand counter-performance. However, where the obligor receives a benefit from being exempted from his obligation, he must deliver such benefit to the obligee.

 

Chapter Six EFFECT   OF  OBLIGATION  AGAINST  THIRD  PARTIES

 

Section   I  Subrogation  by the  Ob  igee

 

  1. (Obligee's  right  of  subrogation)

 

(1)      An  obligee  may,  where  necessary  to  preserve  his  claim,  exercise a right held by the obligor in place of the obligor. However, this shall not apply to a right that is personal to the obligor, a right the exercise of  which  is  entrusted  to  the  complete  discretion  of  the  obligor,  or  a right  that  may  not  be  made  the  subject  of  attachment.

 

(2)       An obligee may, where necessary to receive satisfaction of a claim held by the obligee, exercise via subrogation a right possessed by an obligor  having  a  close  connection  to  such  claim.

 

  1. (Requirements  for  exercise  of  right  of  subrogation)

 

(1)      In  order  for  an  obligee  to  exercise  the  right  provided  for  in Article  419(Obligee's  right  of  subrogation),  the  obligor  himself  may not  have  previously  exercised  such  right.

 

(2)      An obligee may not exercise via subrogation a right possessed by the obligor before the obligee's own claim has ripened without the permission of the court. However, this shall not apply to an act of preservation.

 

  1. (Defense  of  third-party  obligor)

 

A third-party obligor facing the exercise of an obligee's right of subrogation may assert against the subrogating obligee any defenses possessed  by  the  third-party  obligor  against  his  own  obligee.

 

  1. (Relationship  between  subrogating  obligee  and  obligor)

 

Where the obligor is notified of the obligee's exercise of the obligor's

 

 

 

 

rights  via  subrogation,  the  obligor  may  not  exercise  such  rights  once more  against  a  third-party  obligor.  However,  this  shall  not  preclude the obligor from accepting performance made by the third-party obligor.

 

  1. (Effect  of  obligee's  right  of  subrogation)

 

(1)    The effect of an obligee's exercise of a right of subrogation regarding  a  right  held  by  the  obligor  shall  inure  directly  to  the obligor.

 

(2)    Where the obligor cannot accept performance from a third party obligor, an obligee who exercises a right of subrogation can demand that the  third-party  obligor  tender  performance  directly  to  the  obligee.

  1. (Effect of exercise of right of subrogation and other obligees) Where    performance    is    received    by    a    subrogating    obligee    from    a

third-party  obligor  due  to  exercise  of  a  right  of  subrogation  by  the obligee, the thing delivered as such performance shall be preserved for the benefit of all obligees until it is delivered to the obligor. However,

this  shall  not  apply  to  cases  described  in  paragraph  (2)  of  Article

419(Obligee's  right  of  subrogation).

 

Section   II  Avoidance of  Fraudu  ent  Act

 

  1. (Requirements  for  avoidance  of  fraudulent  act)

 

(1)      An obligee may petition the court to order that an act conducted by the obligor with the knowledge that the act would infringe on the obligee's claim be rescinded, and that a person who receives a benefit from  the  act  of  the  obligor  return  the  thing  delivered  or  make restitution  for  the  value  thereof.

 

(2)      The  rescission  referred  to  in  paragraph  (1)  shall  be  denied  if the person who received a benefit from the obligor's act or a subsequent acquirer  was  not  aware  of  the  infringement  of  the  obligee's  claim  at the   time   of   the   obligor's   act   or   at   the   time   of   the   subsequent acquisition. However, the obligee may seek rescission against a benefiting person or subsequent acquirer who paid no consideration for the benefit or the acquisition even if such person did not know of the infringement  of  the  obligee's  claim.

 

(3)      The provisions of paragraphs (1) and (2) shall not apply to acts that  were  not  intended  to  acquire  a  property  right6.

 

  1. (Claims  to  be  preserved)

 

The provisions of Article 425(Requirements for avoidance of fraudulent act) shall also apply to an obligee having a non-monetary claim. However, the claim must be transformed into a monetary claim by the end of oral argument  proceedings  on  which  a  judgment  of  rescission  is  based.

 

 

 

 

6   See  the  footnote  to  Article  195  for  the  explanation  of  'property  right.'

 

 

 

 

  1. (Method  of  rescission  of  fraudulent  act)

 

Where no other appropriate method exists to achieve restitution by a person receiving a benefit from the obligor's act or a subsequent acquirer, an obligee who exercises a right of rescission may demand that the benefiting person or subsequent acquirer deposit the thing obtained with  an  authorized  depository  office.

 

  1. (Effect  of  rescission  of  fraudulent  act)

 

A    rescission    conducted    pursuant    to    the    provisions    of    Article

425(Requirements for avoidance of fraudulent act) shall inure to the benefit  of  all  obligees.

 

  1. (Period  for  exercise  of  right  of  rescission  of  fraudulent  act)

 

(1)      The right of rescission established in Article 425(Requirements for  avoidance  of  fraudulent  act)  shall  expire  if  it  is  not  exercised within one year of the time that the ground for rescission is first discovered  by  the  obligee,  or  within  three  years  of  the  occurrence  of the  act  giving  rise  thereto.

 

(2)     The provisions of law pertaining to interruption of a period of prescription shall not apply to the expiration period of a right of rescission  as  provided  in  paragraph  (1).

 

Chapter Seven  EXTINCTION OF OBLIGATION

 

  1. 430. (Grounds  for  extinction  of  obligation)

 

Obligations  shall  be  extinguished  on  the  following  grounds:

  1. a) by  performance,   set-off,   release,   novation   or   merger   as

provided  in  Sections  I  through  V  of  this  Chapter  Seven;

  1. b) by impossibility  of  performance  without  the  fault  of  the obligor  as  provided  in  Chapter  Five  of  this  Book;
  2. c) by the fulfillment of a condition subsequent as provided in Section III of Chapter One, or by termination of the contract as provided  in  Section  IV  of  Chapter  Four;
  3. d) byextinctive prescription as provided in Chapter Eight; or
  4. e) by the  exercise  of  a  right  of  rescission  pursuant  to  the provisions  of  Section  III  of  Chapter  

 

Section   I  Performance

 

 

Sub-section  I  Genera                            provisions  regarding  performance

 

  1. (Performing  person)

 

(1)     An obligation may be performed by a third party as well as by the obligor.

 

(2)      If   the   purpose   of   the   obligation   cannot   be   achieved   by   the performance of a third party, the third party may not perform the obligation  unless  the  obligee  consents.

 

 

 

 

 

(3)      The  obligor  and  the  obligee  may  agree  not  to  allow  performance by  a  third  party.

 

  1. (Authority  of  disposition  of  performing  person)

 

(1)      A  performance  made  by  a  person  who  neither  owns  the  property delivered   for   the   purpose   of   performance  nor   has   the   authority   to dispose  of  it  shall  not  be  a  valid  performance.

 

(2)    Where the person making performance did not own the property delivered   for   the   purpose   of   performance,   he   cannot   recover   such property until valid performance is made. However, the owner of such property may recover the property from the person receiving the invalid performance.

 

(3)      Where a person carrying out performance lacks capacity to dispose of  the  property  delivered  for  the  purpose  of  performance,  such  person may rescind the act of performance.  Paragraph (2) shall apply mutatis mutandis to the return of the property delivered for the purpose of performance.

 

  1. (Good faith  consumption,  transfer  or  acquisition  by  bona-fide obligee)

 

(1)      In   the   cases   described   in   paragraphs   (2)   and   (3)   of   Article

432(Authority of disposition of performing person), where the property

delivered for the purpose of performance constituted movable property and the obligee has consumed or transferred in good faith the items received as performance, such performance shall be deemed valid and the performing  person  may  not  demand  the  return  of  such  property.

 

(2)     In the case described in paragraph (1), the owner of the property delivered for the purpose of  performance may demand reimbursement for such property from the receiver of performance, unless such receiver acquired  ownership  of  the  property  in  accordance  with  the  provisions set forth in Article 192(Bona fide acquisition of ownership of movable) regarding good faith acquisition. However, an obligee that has compensated the owner of the property delivered for the purpose of performance may demand reimbursement for such amount from the obligor.

 

  1. (Power  to  accept  performance)

 

(1)      Performance  is  invalid  unless  it  is  carried  out  for  the  obligee or  other  person  authorized  to  receive  the  performance.

 

(2)      Where  the  obligor  performs  his  obligation  for  a  person  who  does not  have  power  to  receive  performance,  the  obligor  must  perform  once more for the obligee at the obligee's request. However, the person who made performance may demand that the unauthorized receiver of the performance return the property delivered for the purpose of the performance.

 

  1. (Restriction  of  power  to  accept  performance)

 

 

 

 

(1)      Where  a  claim  held  by  an  obligee  has  been  subject  to  attachment by an order of the court, the obligee shall not have the power to accept performance  made  by  the  obligor,  and  the  obligor  may  not  make performance  to  the  obligee.

 

(2)      Paragraph  (2)  of  Article  434(Power  to  accept  performance)  shall apply  mutatis  mutandis  to  the  case  in  which  an  obligor  that  has  been barred  from  making  payment  makes  performance  to  his  obligee.

 

  1. (Performance  to  quasi-holder  of  claim)

 

(1)      A performance made to a person who appears to be the obligee but who in fact is not the true obligee shall be treated as valid if the performing party believed the receiver to be the true obligee and such belief  was  not  the  result  of  gross  negligence.

 

(2)      In  cases  described  in  paragraph  (1),  the  true  obligee  may  not demand that the obligor perform again. However, the true obligee may demand that the person receiving the performance return the property delivered  for  the  purpose  of  the  performance.

 

  1. (Manner  of  performance)

 

An obligor shall perform the obligation in accordance with the purpose of  the  obligation  and  in  good  faith.

 

  1. (Partial  performance)

 

An obligee is not required to accept partial performance. However, where an obligee accepts a performance knowing that it is partial, the performance  is  effective  to  the  extent  it  is  accepted.

 

  1. (Performance  with  substitute  property)

 

(1)       Where with the consent of the obligee an obligor makes a substitute act of performance that differs from the originally intended act of performance,  it  shall  have  the  same  effect  as  a  valid  performance.

 

(2)    An  obligee  and  obligor  can  agree  that  a  substitute  act  of performance be made in place of the originally intended act of performance.  In  such  a  case  the  obligor  may  choose  to  perform  either the originally intended act of performance or the agreed substitute act of performance, except where the right to choose has been given to the obligee.

 

  1. (Time  of  performance,  performance  before  set  time)

 

(1)    An  obligor  shall  perform  the  obligation  at  the  time  for performance  as  determined  in  each  of  the  sub-paragraphs  of  Article

388(Delayed  performance).

 

(2)    A performance may be made before it is due except where early performance  would  harm  the  interests  of  the  obligee.

 

  1. (Hours  of  performance)

 

 

 

 

 

An obligor shall effect performance during regular business hours in accordance  with  prevailing  customs  and  in  good  faith.

 

  1. (Place  of  performance)

 

Where the place of performance is not agreed to between the parties, performance of an obligation to deliver specific property shall be made at the place where the property was located at the time the obligation arose.  For  other  obligations,  the  performance  shall  be  made  at  the current  residence  of  the  obligee.

 

  1. (Costs  of  performance)

 

In the absence of an agreement regarding the costs of performance, such costs shall be borne by the obligor. However, if an increase in the costs of  performance  is  due  to  a  change  in  the  residence  of  the  obligee  or to some other act of the obligee, such increase shall be borne by the obligee.

 

  1. (Delivery  of  receipt)

 

The performing party may demand a receipt from the person accepting the performance.

 

  1. (Return  of  documents)

 

If documents evidencing the obligation exist, the performing party may demand the return of such documents when the entire obligation has been performed.

 

 

Sub-section  II  Assignment  of  Performance

 

  1. (Assignment  via  designation)

 

(1)      Where  an  obligor  owes  to  the  same  obligee  multiple  obligations of  the  same  type,  if  a  tender  of  performance  is  not  sufficient  to discharge all of the obligations, the performing party may at the time of performance designate the obligation to which the performance shall be  assigned.

 

(2)      If  the  performing  party  does  not  make  the  designation  described in paragraph (1), the party accepting the performance may make the assignment when performance is accepted. However, the [provisions of] statutory assignment shall apply if the performing party makes an immediate  objection  to  such  assignment.

 

(3)      The assignment described in paragraphs (1) and (2) shall be made via  notice  to  the  other  party.

 

  1. (Statutory  assignment)

 

If neither the performing party nor the party receiving performance make an   assignment   of   performance,   the   performance   shall   be   assigned

 

 

 

 

according  to  the  following  rules:

  1. a) Betweenthe obligations that are due and those that are not

due,  the  former  shall  have  priority.

  1. b) Where all of the obligations are either due or not due, the obligation as to which discharge would confer the greatest

benefit  on  the  obligor  shall  have  priority.

  1. c) If the  obligor  would  benefit  equally  from  the  discharge  of all  obligations,  the  obligation  which  first  became  due  or will  become  due  shall  have  
  2. d) Among multiple  obligations  that  are  equal  in  regard  to  the benefit of discharge for the obligor and that become due at the   same    time,    the    performance    shall    be    assigned    in proportion  to  the  amount  of  each  

 

  1. (Order  of  assignment  among  costs,  interests  and  principal)

 

If an obligor as to one or more obligations is obligated to pay interest and costs in addition to principal, a performance that is insufficient to  discharge  all  of  these  shall  be  assigned  in  the  order  of  costs, interest and principal. However, if the obligor and the obligee have agreed  otherwise,  such  agreement  shall  prevail.

 

  1. (Performance  for  two  or  more  obligees)

 

The     provisions     of     Articles     446(Assignment     via     designation),

447(Statutory assignment) and 448(Order of assignment among costs, interests and principal) shall apply mutatis mutandis where the obligor

owes multiple obligations to different obligees and the  obligation  as to which the obligor's performance was directed cannot be determined.

 

Sub-section  III  Tender  and Deposit

 

  1. (Meaning  and  basic  effect  of  tender  of  performance)

 

(1)     Tender of performance shall mean that the obligor has completed preparations  for  an  act  of  performance  and  has  asked  the  obligee  to accept  such  performance.

 

(2)      Even  where  the  obligor  has  made  a  tender  of  performance,  if  an obligee does not take the actions necessary to accept the performance, the  obligor  is  relieved  of  liability  for  non-performance.

 

(3)    Where the obligor who owes a monetary obligation with interest accruing thereon makes a tender of performance, if the obligee does not accept the performance, the obligor shall subsequently not be required to  pay  interest  thereon.

 

  1. (Method  of  tender)

 

A tender of performance must constitute an actual tender of performance in  accordance  with  the  intended  purpose  of  the  obligation.  However, where the obligee has refused in advance to accept the tender of performance, or an act on the part of the obligee is necessary for performance of the obligation, it is sufficient for the obligor to give notice   to   the   obligee   that   preparations   for   performance   have   been

 

 

 

 

completed  and  demand  the  obligee's  acceptance  of  performance.

 

  1. (Effect  of  tender)

 

Where an obligee does not accept a tender of performance, the following effects  shall  occur,  in  addition  to  the  effect  described  in  Article

450(Meaning  and  basic  effect  of  tender  of  performance):

  1. a) where the  obligor  bears  the  risk  in  a  bilateral  contract, the  risk  shall  be  transferred  to  the  obligee;
  2. b) the  obligee    shall    lose    the    defense    of    simultaneous performance  in  a  bilateral  contract;  and
  3. c) the obligor may be exempted from the obligation by carrying out

 

  1. (Delayed  receipt)

 

(1)      Where  the  obligee  has  in  advance  refused  to  accept  performance, or   where   tender   of   performance   has   been   made   to   the   obligee,   if performance is not accepted due to the obligee's fault, the obligor may demand   damages   from   the   obligee   for   any   injury   caused   by   such non-acceptance.

 

(2)    Where the obligee's non-acceptance of a tender of performance constitutes a material breach of the obligee's contractual duties, the obligor  may  terminate  the  contract.

 

  1. (Deposit)

 

(1)       An obligor may discharge the obligation by depositing the property comprising the subject matter of the obligation with an authorized depository  office  in  the  following  situations:

  1. a) where the performing party has made a tender of performance, but the obligee refuses to accept or cannot accept the performance; or
  2. b) where  the   identity   of   the   obligee   cannot   be   determined without  any  fault  of  the  

 

(2)     The performing party may recover the property deposited until the obligee  has  accepted  the  deposit  or  a  judgment  declaring  the  deposit valid  has  become  final  and  binding.  In  such  a  case,  the  deposit  shall be deemed not to have occurred. However, this shall not apply where a pledge  or  hypothec  has  been  extinguished  as  a  result  of  the  deposit.

 

(3)      The details and procedures governing deposit shall be prescribed in  the  [Official  Deposit  Act].

 

  1. (Obligor's  right  to  sell)

 

If the property comprising the subject matter of the obligation is not suitable for official deposit, or is in danger of perishing or being damaged, the obligor may, with the permission of the court, sell the property via public auction and deposit the proceeds with an authorized depository office. The same applies where the cost of preserving the property  is  prohibitive.

 

 

 

 

Sub-section  IV   Subrogation  by performance

 

  1. (Subrogation  by  performance)

 

(1)      A person who has procured a discharge through his own performance or other expenditure and thereby obtains the right to demand indemnification from the obligor may exercise via subrogation the claim held  by  the  obligee  and  all  other  rights  associated  therewith.

 

(2)      The provisions of Article 500(Conditions for asserting assignment of  claim  belonging  to  specified  person)  shall  apply  mutatis  mutandis to  the  situation  described  in  paragraph  (1).

 

(3)   The notification described in Articles 910(Requirements for indemnification) and 930(Notification as requirement for indemnification) may be substituted for the notification described in paragraph (2). However, where a date-certified instrument is demanded in connection with provisions as to which paragraph (2) hereof applies mutatis  mutandis,  the  notification  described  in  this  paragraph  shall also  be  provided  by  means  of  a  date-certified  instrument.

 

  1. (Scope  of  subrogation;  relationships  among  subrogees)

 

(1)      A  person  who  has  been  subrogated  to  the  position  of  an  obligee through the operation of Article 456(Subrogation by performance) may exercise, within the scope of indemnification that can be demanded based on his own right, any and all rights that were possessed by the obligee by virtue of the automatic effect of the principal claim or that derive from a security interest. However, this shall not apply to rights that directly accompany the contractual position of the obligee under the contract.

 

(2)      The  following  conditions  shall  apply  to  a  subrogee:

  1. a) Unless the  existence  of  a  subrogation  is  entered  in  the

registration  of  a  preferential  right,  pledge  of  immovable or   hypothec   that   is   created   over   any   of   the   obligor's property,   a   guarantor   or   third   party   security   provider cannot assert his subrogation to the position of an obligee against a third-party acquirer who acquires an immovable comprising the object of such preferential right, pledge or hypothec.

  1. b) A third-party acquirer who acquires a thing comprising the object of  any  security  interest  from  an  obligor  shall  not be subrogated to the position of an obligee with respect to a  
  2. c) A third-party acquirer who acquires a thing comprising the object of any security interest from an obligor shall be subrogated to  the  position  of  an  obligee  with  respect  to other third-party acquirers who acquire the objects of other security interests from such obligor in proportion to their respective  values  of  the  acquired  
  3. d) The provisions  of  sub-paragraph  (c)  shall  apply  mutatis

mutandis to the relationship between third party security providers as described in Article 758.a.763(Definition of security  provider  and  third  party  acquirer).

 

 

 

 

  1. e) As between  guarantors  and  third  party  security  providers, subrogation to the position of the obligee shall be made in accordance with the number of persons of each However, where there are multiple third-party security providers, subrogation to the position of the obligee shall be made in accordance              with    the    respective    prices    of    the    things [provided      for    security    by    each    third-party    security provider] with regard to the portion of the obligation remaining after subtracting the portion for which [a group of]  guarantors  is  responsible.

 

  1. (Partial  subrogation)

 

(1)      Where subrogated performance of a part of an obligation has been made, a subrogee shall exercise the rights of the obligee together with the  obligee  to  the  extent  of  the  partial  performance.  However,  where the subrogee seeks to execute these rights, the obligee's consent must be  obtained.  Furthermore,  at  the  request  of  the  obligee,  such  rights or ranking shall be transferred to the obligee at no cost to the extent of  the  remaining  obligation.

 

(2)      In  the  case  described  in  paragraph  (1),  only  the  obligee  may terminate the contract on the ground of non-performance. However, the subrogee  shall  be  compensated  to  the  extent  of  the  subrogee's performance  and  interest  thereon.

 

  1. (Subrogated performance  by  a  third  party  and  certificate  of claim/object  of  security)

 

(1)    An obligee who has received full performance via subrogated performance  shall  deliver  to  the  subrogee  a  certificate  of  claim  and any  object  of  security  possessed  by  the  obligee.

 

(2)      Where  subrogated  performance  has  been  made  with  respect  to  a portion of the claim, the obligee shall indicate on the claim instrument that subrogation has been carried out and shall ensure that the subrogee supervises the preservation of the object of security possessed by the obligee.

  1. (Obligation  to  preserve  security  for  benefit  of  subrogee) Where  a  person  exists  who  could  be  subrogated  to  the  position  of  an

obligee pursuant to the provisions of Article 456(Subrogation by performance), and the security has been lost or diminished due to the intentional  or  negligent  act  of  the  obligee,  a  person  qualified  to invoke such subrogation may be exempted from his own responsibility or seek damages to the extent that such person is no longer able to receive indemnification  due  to  such  loss  or  diminution.

 

Section   II  Set-off

 

  1. (Meaning and    conditions    of    statutory    set-off    and    set-off contract)

 

(1)      A  set-off  means,  where  two  persons  owe  each  other  obligations

 

 

 

 

having the identical subject-matter, the extinction of both obligations to  the  extent  that  their  respective  amounts  are  equal.

 

(2)     In order to exercise a set-off, both obligations must be due for performance.

 

(3)      The parties may enter into a set-off contract whereby obligations not having an identical subject-matter shall be extinguished. However, the right of a third party who is ignorant of such contract may not be infringed  thereby.

 

  1. (Method  of  set-off)

 

(1)      A   set-off   shall   be   effected   by   a   party's   declaration   of   an intention  to  set-off  against  the  other  party.

 

(2)      A  party  may  declare  a  set-off  subject  to  a  condition  precedent, but  may  not  declare  a  set-off  subject  to  a  condition  subsequent  or  to a  time  fixed.

 

  1. (Timing  of  effect  of  set-off)

 

Where the requirements for a set-off are satisfied, if a party declares a set-off, the set-off shall have effect of retroactively extinguishing the two obligations as of the time that the obligations became suitable for  a  set-off.

 

  1. (Limitations  on  set-off)

 

(1)      If either or both of the obligations are not suitable for a set-off in  light  of  the  nature  of  the  obligation(s),  a  set-off  may  not  be executed.

 

(2)      If  there  is  an  agreement  between  the  parties  not  to  declare  a set-off, neither party may declare a set-off. However, such an agreement may  not  be  asserted  against  a  bona  fide  third  party.

 

  1. (Set-off  when  the  counter-obligation  is  subject  to  defense)

 

(1)      A party may not execute a set-off if [the counter-obligation owed by the other party] is subject to any defense exercisable by the other party.

 

(2)      An obligation as to which the period of prescription or the period for exercise has elapsed may be set off by the obligee where the requirements for a set-off were met prior to the elapsing of such period.

 

  1. (Set-off  of  obligation  arising  out  of  tort)

 

An  obligor  who  owes  an  obligation  arising  out  of  tort  may  not  assert the  extinction  of  such  obligation  based  on  a  set-off.

 

  1. (Obligation  prohibited  from  being  attached)

 

Where   attachment   of   an   obligation   [by   the   obligee's   creditors]   is

 

 

 

 

prohibited, the obligor may not assert the extinction of such obligation based  on  a  set-off.

 

  1. (Obligation  under  attachment  order)

 

(1)      Where an obligation is under an order of attachment initiated by a third party, the obligor may set off the obligation only against a counter-obligation owed by the other party and obtained prior to such attachment, and when the counter-obligation becomes due. However, this shall not apply to cases where such counter-obligation will become due later  than  the  obligation  owed  and  to  be  set  off  by  the  obligor.

 

(2)      The second sentence of paragraph (1) shall not apply if there is an agreement between the parties allowing a set-off of obligations irrespective  of  the  time  for  performance  thereof.

 

  1. (Assignment  in  case  of  set-off)

 

If one or both of the parties to a set-off owe more than one obligation suitable for set-off, the party declaring a set-off may designate the obligations which are to be extinguished by the set-off.   If a set-off is declared without the designation described in the first sentence of this Article, the provisions regarding assignment of performance shall apply  mutatis  mutandis.

 

Section   III  Re ease

 

  1. (Release  as  unilateral  legal  act)

 

An obligation is extinguished when an obligee expresses to the obligor an  intention  to  release  the  obligor  from  the  obligation.

 

  1. (Partial  release)

 

An  obligee  may  declare  a  partial  release  from  an  obligation.

 

  1. (Limitation  on  release)

 

If  an  obligation  is  under  attachment  by  a  third  party  or  the  power  of the obligee to dispose of the obligation is restricted for any other reason,  the  obligee  may  not  release  the  obligor  from  the  obligation.

 

Section   IV  Novation

 

  1. (Meaning  of  novation)

 

(1)      A   novation   shall   refer   to   a   contract   that   extinguishes   the original obligation and creates a new obligation in its place as between the  same  obligee  and  obligor.

 

(2)    The original obligation is extinguished at the moment that the novation  contract  described  in  paragraph  (1)  becomes  effective.

 

  1. (Non-extinction  of  original  obligation)

 

 

 

 

 

If  an  obligation  created  by  a  novation  contract  is  not  effective  due to an illegal cause or an unexpected reason, or has been rescinded, the original  obligation  is  not  extinguished.

 

  1. (Transfer  of  security  right)

 

(1)     If so agreed to between the parties to the novation contract, a pledge,  hypothec  or  other  security  interest  established  in  regard  to the original obligation may be transferred to a new obligation to the extent   that   it   falls   within   the   scope   of   the   original   obligation. However, a security interest provided by a third party shall not be transferred  without  the  third  party's  consent.

 

(2)    With  regard  to  a  quasi-loan  for  consumption,  the  agreement mentioned in the first sentence of paragraph (1) shall be presumed to exist.

 

Section   V    Merger

 

  1. (Merger  of  claim  and  obligation)

 

(1)       Where an obligation and a claim [corresponding to such obligation] belong to one and the same person, such obligation and claim shall be extinguished  via  merger.

 

(2)      If  the  claim  mentioned  in  paragraph  (1)  comprises  the  object  of a right possessed by a third party, such claim is not extinguished by merger.

 

Chapter Eight EXTINCTIVE  PRESCRIPTION  REGARDING CLAIMS

  1. (Definition  of  extinctive  prescription  regarding  claim) Extinctive prescription regarding a claim refers to the  extinction of

a claim based on an obligee's continuous failure to exercise the claim for  a  certain  period  of  time.

  1. (Commencement of extinctive prescription period for claim) Extinctive  prescription  regarding  a  claim  runs  from  the  time  that  the

claim  is  capable  of  being  exercised.

 

  1. (Extinctive  prescription  period  for  general  claim)

 

The extinctive prescription period for claims is five years, except as otherwise  provided  in  this  Code  or  in  other  laws  or  ordinances.

 

  1. (Short  extinctive  prescription  period)

 

The extinctive prescription period for a claim pertaining to the price of a product or service sold or provided by a manufacturer or merchant to  a  non-merchant  is  two  years.

 

 

 

 

  1. (Extinctive  prescription  period  for  established  claim)

 

(1)   The  extinctive  prescription  period  for  a  claim  that  is definitively   established   through   a   final   and   binding   judgment,   a judicial settlement, or other determination having the effect of a final and binding judgment shall be five years from the time when it is definitively established, even where a prescription period of less than five  years  is  otherwise  established  by  law.

 

(2)      The  provisions  of  paragraph  (1)  shall  not  apply  where  the  time for performance has not occurred as of the time that the claim is definitively  established.

  1. (Retroactive effect of extinctive prescription regarding claim) The  effect  of  extinctive  prescription  of  a  claim  is  retroactive  from

the  date  of  commencement  of  the  period  thereof.

 

  1. (Invocation  of  extinctive  prescription  regarding  claim)

 

(1)     A court cannot render a judgment based on extinctive prescription regarding a claim unless extinctive prescription is invoked by a party.

 

(2)      Extinctive prescription regarding a claim may be invoked only by an   obligor,   a   joint   obligor,   a   guarantor,   a   third   party   security provider    and    a    third    party    acquirer    as    specified    in    Article

758.a.763(Definition  of  security  provider  and  third  party  acquirer),

or other person possessing a legally recognized interest in the invocation  of  extinctive  prescription.

 

(3)     Where extinctive prescription regarding a claim is invoked by an obligor, third parties shall also receive the benefit of the extinctive prescription.  Where  extinctive  prescription  regarding  a  claim  is invoked by a person having a right to do so other than the obligor, the invocation  is  effective  only  as  between  such  person  and  the  obligee.

 

  1. (Renunciation of  benefit  of  extinctive  prescription  regarding claim)

 

The benefit of extinctive prescription cannot be renounced in advance. The  benefit  of  an  extinctive  prescription  the  period  for  which  has already  been  completed  can  be  renounced.

 

  1. (Scope of  persons  to  whom  effect  of  renunciation  of  benefit  of extinctive  prescription  regarding  claim  extends)

 

A renunciation of the benefit of extinctive prescription of a claim is effective  only  as  between  the  obligee  and  the  renouncing  party  having the  right  to  invoke  extinctive  prescription.

  1. (Grounds for interruption of extinctive prescription of claims) Extinctive   prescription   regarding   a   claim   is   interrupted   by   the

occurrence  of  any  of  the  following  events:

  1. a) filing of    a    lawsuit,     participation     in    a    bankruptcy

 

 

 

 

proceeding,  or  the  equivalent  exercise  of  a  claim;

  1. b) anact of execution or issuance of a preliminary injunction;

or

  1. c) partial repayment,     payment     of    interest,     provision     of security  or  acknowledgement  of  the  existence  of  the  claim

by  some  other  method.

 

  1. (Effect of  interruption  of  extinctive  prescription  regarding claim;  scope  of  persons)

 

Where   extinctive   prescription   regarding   a   claim   is   interrupted   as against an obligor, other persons may not contest the effect of that interruption. Where extinctive prescription regarding a claim is interrupted against a person who is not the obligor and has a right to invoke extinctive prescription, the interruption is effective only between the obligee and such person entitled to invoke extinctive prescription.

 

  1. (Lawsuit)

 

A judicial action does not interrupt extinctive prescription where the action  is  dismissed  without  prejudice  or  discontinued.

  1. (Rescission  of  act  of  execution  or  preliminary  injunction) Where  an  act  of  execution  or  preliminary  injunction  is  rescinded  upon

the  motion  of  a  right-holder  or  for  failure  to  comply  with  conditions

imposed  by  law,  interruption  of  extinctive  prescription  effected  by such  act  shall  be  deemed  not  to  have  occurred.

 

  1. (Act of execution or preliminary injunction conducted as against person other  than  obligor)

 

An act of execution or preliminary injunction conducted as against a person other than the obligor interrupts extinctive prescription as to the  obligor  only  where  the  obligor  is  notified  of  such  act.

 

  1. (Running  of   extinctive   prescription   period   regarding   claim following  interruption)

 

(1)      An   extinctive   prescription   period   that   was   interrupted   shall begin  anew  from  the  time  that  the  ground  for  interruption  no  longer exists.

 

(2)     An extinctive prescription period that was interrupted due to the filing of a lawsuit shall begin anew from the time that the decision resolving  the  lawsuit  becomes  final  and  binding.

 

  1. (Suspension of completion of extinctive prescription period upon demand with  or  without  filing  of  lawsuit)

 

(1)      Where  a  right-holder  demands  satisfaction  of  such  right  within six months of the completion of an extinctive prescription period, the extinctive prescription period is not completed as against such person until  six  months  elapses  after  the  time  of  the  demand.  However,  a

 

 

 

 

subsequent demand for satisfaction by the right-holder shall not delay the  completion  of  the  extinctive  prescription.

 

(2)     Even where a lawsuit does not have the effect of interrupting the extinctive prescription period due to the dismissal without prejudice or discontinuation of the lawsuit, a demand shall be deemed to have been provided  continuously  from  the  time  the  complaint  was  filed  until  the time the lawsuit was dismissed or discontinued. In this case, the extinctive prescription period is not  completed as against the person who brought the lawsuit until six months have elapsed from the date of dismissal  or  discontinuation.

 

(3)   Where the right-holder asserts his right as a defendant in litigation, such assertion shall be deemed a continuous demand during the pendency of the lawsuit from the time at which it is made. In this case,  the  extinctive  prescription  period  is  not  completed  as  against such person until six months have elapsed from the date on which the judgment  in  the  case  becomes  final  and  binding.

 

  1. (Suspension  of   completion   of   extinctive   prescription   period regarding  rights  pertaining  to  minors  or  incompetent  persons)

 

Where there is no legal representative for a minor or incompetent person within six months prior to the completion of an extinctive prescription period, the extinctive prescription period for claims is not perfected as  against  such  person  until  six  months  elapses  after  the  time  such person attains the age of majority or a legal representative is retained on  the  person's  behalf.

 

  1. (Suspension of completion of extinctive prescription regarding rights between  spouses)

 

Where one spouse possesses a right with respect to the other, extinctive prescription regarding such right is not completed until six months elapses  after  the  marriage  is  dissolved.

 

  1. (Suspension of   completion  of   extinctive  prescription  due   to natural  disaster)

 

Where a right-holder is unable to interrupt extinctive prescription within six months prior to the completion of the extinctive prescription period due to natural disaster or other force majeure, extinctive prescription  is  not  completed  until  six  months  elapses  after  the  time that  such  force  majeure  ceases  to  exist.

 

  1. (Performance in  order  to  satisfy  right  subject  to  extinctive prescription)

 

A person who provides a performance in order to satisfy a right subject to completed extinctive prescription may not thereafter seek repayment, even  where  the  performance  is  provided  without  knowledge  of  the  fact that  such  right  was  subject  to  completed  extinctive  prescription.

 

  1. (Extinctive prescription for property rights other than claims and ownership)

 

 

 

 

 

Except as otherwise provided in this Code or in other laws or ordinances, the period for extinctive prescription regarding property rights other than claims and ownership shall be 15 years. The provisions pertaining to  extinctive  prescription  regarding  claims  shall  apply  mutatis mutandis  to  extinctive  prescription  for  property  rights  other  than claims  and  ownership.

 

Chapter Nine ASSIGNMENT   OF   CLAIMS   AND ASSUMPTION OF  OBLIGATIONS

 

Section   I  Assignment  of  C  aims

 

  1. (Assignability of     claims,     special     agreement     prohibiting assignment)

 

(1)      A   claim   may   be   assigned   unless   the   nature   of   the   claim   is inconsistent with such an assignment. In such a case, the assignee shall become  a  new  obligee.

 

(2)      Assignment   of   a   claim   can   be   prohibited   by   a   declaration   of intention by the partie(s), even where the nature of the claim is not inconsistent  therewith.

 

(3)      The declaration of intention referred to in paragraph (2) cannot be asserted against a third party having no knowledge thereof. However, this shall not apply where the third party's lack of knowledge is the result  of  the  third  party's  gross  negligence.

 

  1. (Establishment  of  assignment  of  claim)

 

The  assignment  of  a  claim  shall  take  effect  only  through  agreement between   the   obligee   seeking   to   assign   the   claim   and   the   assignee. However, in order to assert the assignment of a claim against the obligor or a third party, the conditions established in Article 500(Conditions for asserting assignment of  claim belonging to  specified person) must be  met.

 

  1. (Conditions  for   asserting   assignment   of   claim   belonging   to specified  person)

 

(1)      The assignment of a claim belonging to a specified person cannot be asserted as against the obligor or any third party unless the assignor has given notice thereof to the obligor or the obligor has consented thereto  to  the  assignor  or  the  assignee.

 

(2)      The   notice   or   consent   described   in   paragraph   (1)   cannot   be asserted  against  a  third  party  other  than  the  obligor  unless  they  are given  in  a  date  certified  writing.

 

  1. (Priority  among  multiple  assignments)

 

(1)      Where  one  claim  has  been  assigned  multiple  times,  the  priority among such assignments shall be determined based on the chronological order  of  the  times  at  which  the  competing  written  and  date-certified

 

 

 

 

notifications  thereof  reach  the  obligor,  or  of  the  times  at  which  the obligor gives written and date-certified consents thereto. In this case, the obligor must perform the obligation owed to the obligee having the priority  position.

 

(2)      In  the  situation  described  in  paragraph  (1),  where  the  priority among the notifications or consents cannot be clearly determined, they shall be deemed to have arrived or been given at the same time. In this case, each assignee may demand performance from the obligor for the entirety of the assigned obligation. Where the obligor performs the obligation  to  one  obligee,  the  obligation  is  extinguished.

 

(3)       In the case described in paragraph (2), the obligor can be relieved of  the  obligation  by  making  a  deposit  of  the  thing  comprising  the subject-matter  of  the  obligation.

 

  1. (Effect  of  notification  and  consent)

 

(1)      If   the   obligor   has   given   the   consent   described   in   Article

500(Conditions for asserting assignment of claim belonging to specified

person) without raising any objection, he cannot assert against the assignee any defenses that he could have asserted against the assignor. However,  if  the  obligor  has  made  payment  or  incurred  a  new  obligation to the assignor in order to discharge the original obligation, he may recover such payment or treat such new obligation as if it had not been incurred.

 

(2)     Where the assignor has merely given notice of the assignment, the obligor  may  assert  against  the  assignee  any  defenses  that  came  into being  against  the  assignor  prior  to  the  receipt  of  the  notice.

 

  1. (Assignment  of  negotiable  claim)

 

The conditions governing assignment of a claim payable to order or other claim regarding which an instrument representing such claim has been issued  shall  be  established  separately  by  special  law.

 

Section   II  Assumption  of  Ob  igations

 

  1. (Possibility  of  assumption  of  obligation)

 

(1)      An  obligation  that  can  be  performed  by  a  third  party  other  than the  obligor  can  be  assumed  by  a  third  party.

 

(2)    The assumption of an obligation may be prohibited through a declaration  of  intention  by  partie(s).

 

  1. (Establishment  of  assumption  of  obligation)

 

The assumption of an obligation takes effect based on agreement between the   obligor   and   the   person   assuming   the  obligation  or   between   the obligee  and  such  person.

 

  1. (Rights  of  obligee)

 

 

 

 

(1)      An  obligee's  rights  against  the  obligor  are  not  extinguished  by an assumption of the obligation. In this case, the obligor and the party assuming the obligation are jointly and severally responsible with respect  to  the  obligee.

 

(2)     A party who assumes an obligation may exempt the obligor with the consent  of  the  obligee.

 

  1. (Defenses  after  obligation  is  assumed)

 

Where  an  obligation  is  assumed,  the  assuming  party  may  assert  against the  obligee  any  defenses  possessed  by  the  obligor  up  to  the  time  that the  assumption  came  into  existence.

 

  1. (Assumption  of  performance)

 

Where a person assumes responsibility for performance of an obligation based on agreement between the obligor and the assuming party without assuming the obligation itself, the obligee may not demand performance from  the  assuming  party.

 

Section   III  Assignment  of  Contractua                                     Position

 

  1. (Assignment  of  contractual  position)

 

(1)       A person who has executed a contract with another person may assign to  a  third  party  his  position  under  the  contract.  However,  this  shall not apply where assignment is inconsistent with the nature of the contract.  Moreover,  assignment  of  a  party's  contractual  position  may be   prohibited   by   the   agreement   of   the   parties.   In   this   case,   the provisions of paragraph (3) of Article 498(Assignability of claims, special agreement prohibiting assignment) pertaining to assignment of obligations  shall  apply  mutatis  mutandis.

 

(2)     Where the assignment of a contractual position is substantially disadvantageous  to  the  other  party  to  the  contract,  the  party  seeking to  assign  the  contractual  position  shall  obtain  the  approval  of  the other  party  to  the  contract  to  the  assignment.

 

  1. (Establishment  of  assignment  of  contractual  position)

 

The  assignment  of  a  contractual  position  shall  take  effect  only  upon the  agreement  of  the  assignee  and  the  party  to  the  contract  who  is seeking to assign the contractual position. However, in order to assert the assignment against the other party to the contract or a third party, the conditions for assertion set forth in Article 500(Conditions for asserting assignment of claim belonging to specified person) pertaining to  assignment  of  obligations  must  be  met.

 

  1. (Effect  of  assignment  of  contractual  position)

 

Where a contractual position has been assigned, all of the rights and obligations   possessed   by   the   assignor   shall   be   transferred   to   the assignee unless a specific declaration of intention is made to the contrary.   In   this   case,   the   provisions   of   Article   502(Effect   of

 

 

 

 

notification and consent) pertaining to assignment of claims and of Article 507(Defenses after obligation is assumed) pertaining to the assumption  of  obligations  shall  apply  mutatis  mutandis.

 

 

 

BOOK FIVE  "PARTICULAR  TYPES   OF  CONTRACTS /  TORTS"

 

Chapter One SALE

 

Section   I  Genera                                                  Provisions

 

  1. (Nature  of  sale)

 

A sale is a contract whereby one party, called the 'seller', is obligated to  transfer  ownership  or  other  property  rights 7 to  the  other  party, called the 'buyer,' and the buyer is obligated to pay the purchase price to  the  seller.

 

  1. (Formation  of  sale  contract)

 

A sale contract is formed based only on the agreement of the parties thereto  unless  otherwise  provided  by  law.  However,  the  parties  may require as a condition for the formation of the contract the execution of a notarial instrument or a written instrument signed by the parties in  their  individual  capacities.

 

  1. (Unilateral  promise  to  sell  or  purchase)

 

(1)       Where a promise is made with respect to either a sale or a purchase, the   sale   shall   become   effective   from   the   time   that   the   promisee expresses  to  the  promisor  an  intention  to  complete  the  sale.

 

(2)       Where no period is fixed for the expression of intention described in paragraph (1), the promisor may issue a notification to the promisee demanding          the   expression   of   intention   within   a   fixed   period   of reasonable  length  regarding  whether  the  promisee  intends  to  complete the sale.  If the promisee fails to provide the expression of intention within  such  period,  the  promise  shall  lapse.

 

  1. (Earnest  money)

 

Where  the  buyer  has  paid  earnest  money  to  the  seller,  the  buyer  may rescind the contract by giving up his earnest money, and the seller may rescind the contract by refunding twice the amount thereof.   However, neither   party   may   rescind   the   contract   after   the   other   party   has commenced  performance  thereof.

 

  1. (Sale  after  tasting)

 

(1)      A  sale  of  goods8   of  a  type  that  are  customarily  tasted  before

 

 

7   See the footnote to Article 2-4-20-1 of Book Three for the explanation of 'property right.'

8   See the footnote to Article 1-1-1 of Book Three for the explanation on the usage

 

 

 

 

purchase shall be formed when the [prospective] buyer accepts the sale after  carrying  out  such  tasting.

 

(2)      Where no period is fixed for the [prospective] buyer's acceptance, the seller may issue a notification to the [prospective] buyer demanding a definite answer within a fixed period of reasonable length regarding whether the [prospective] buyer accepts the sale.  If the [prospective] buyer fails to provide an answer within such period, the [prospective] buyer  shall  be  deemed  to  have  refused  to  enter  into  the  sale.

 

  1. (Trial  sale)

 

(1)     A trial sale shall become effective when the [prospective] buyer accepts the sale within the trial period or when the trial period has lapsed  without  the  [prospective]  buyer's  expression  of  any  intention in regard to sale. If the [prospective] buyer refuses to receive the delivery  of  the  goods,  the  sale  contract  shall  be  deemed  not  formed.

 

(2)      Where no period is fixed for trial, the [prospective] seller may issue a notification to the [prospective] buyer demanding a definite answer within a fixed period of reasonable length regarding whether the [prospective] buyer accepts the sale.    If the [prospective] buyer continues  to  use  the  goods  without  providing  an  answer  within  that period,  the  [prospective]  buyer  shall  be  deemed  to  have  accepted  the sale.

 

  1. (Sale  price)

 

(1)      The parties to a sale shall fix under the contract the amount of the  sale  price  or  establish  a  formula  to  determine  such  amount.

 

(2)      The amount of the sale price may be determined in accordance with the  present  or  future  market  price  of  certain  merchandise  or  based  on the appraisal of a third party who is appointed by a method designated by the parties. Where an appraisal by a third party is based on mistake, or where the appraisal appears to violate principles of fairness, the contract party that would be harmed as a result may object to such appraisal.

 

(3)       The  parties  to  the  contract  may  fix  the  sale  price  at  a  certain definite amount or based on indefinite or lifetime installment payments. However, where a third party is to appraise the sale price in accordance with the provisions of paragraph (2), the sale price shall be fixed as

a certain definite amount, except where the parties have explicitly authorized  the  third  party  [to  fix  the  sale  price  based  on  indefinite

or  lifetime  installment  payments].

 

  1. (Sales  Expenses)

 

Unless otherwise agreed to between the parties, the cost of preparing written instruments and other expenses incurred in connection with the execution of a contract of sale shall be borne equally by both parties.

 

 

 

of  'goods.'

 

 

 

 

 

  1. (Mutatis mutandis application to other types of contract in which either or  both  parties  provide  consideration)

 

The provisions of this Chapter One shall apply mutatis mutandis to contracts, other than sale contracts, in which either or both parties provide  consideration.

 

Section   II  Parties to  and Goods  Covered  by Sa e  Contract

 

  1. (Parties  to  sale  contract)

 

Any natural or juridical person may sell or purchase [goods or rights]

except  where  prohibited  by  law.

 

  1. (Persons  who  may  not  be  buyers  (1))

 

(1)      An  administrator  appointed  by  law,  court  order  or  contract  may not be a buyer, either directly or through a third party, of goods that the  administrator  has  been  entrusted  to  sell.

 

(2)   Paragraph  (1)  shall  apply  mutatis  mutandis  to  government officials responsible for the execution or administration of compulsory sale.

 

(3)      Where   a   sale   is   conducted   in   violation   of   the   provisions   of paragraphs  (1)  and  (2),  such  sale  may  be  rescinded  only  by  the  person who owned  the goods  prior to the sale or  by the heir of such  person or such  person's  successor  in  interest.

 

  1. (Persons  who  may  not  be  buyers  (2))

 

(1)      A judge, prosecutor, court clerk or other court official may not be a buyer, either directly or through a third party, of goods or rights as  to  which  civil  actions  are  pending  before  the  court  at  which  such person  works  or  practices.

 

(2)       Paragraph (1) shall apply mutatis mutandis to lawyers and notaries public becoming buyers of goods or rights involved in actions in which they  are  retained.

 

(3)      Where a sale is conducted in violation of paragraphs (1) and (2), such  sale  may  be  rescinded  only  by  the  seller,  the  opposing  party  in a civil action involving the goods or rights, or their respective heirs or  successors  in  interest.

 

  1. (Goods  that  may  be  sold)

 

Any good or right, including one that comes into existence in the future, may be the object of a contract of sale, except for goods or rights that are not transferable by their nature, or those as to which transfer is prohibited  by  law.

 

 

 

 

Section   III  Effect of  Sa e  Contract

 

  1. (Transfer  of  title)

 

With respect to the transfer of title to the goods under a contract of sale, the general rules provided for in Articles 133(Creation, transfer and alternation of real rights by agreement) and 134(Perfection)shall apply  to  contracts  of  sale.

 

 

Sub-section  I  Ob  igations  of  Se                                              er

 

  1. (Seller's  duty  to  provide  explanation)

 

A  seller  is  required  to  provide  the  buyer  with  a  clear  explanation concerning (i) the contents of the obligations to be assumed by the buyer, and   (ii)   the   legal   circumstances   surrounding   the   goods   or   rights comprising  the  object  of  a  sale,  particularly,  in  the  case  of  a  sale of immovable property, the state of the title, encumbrances, boundaries, etc.

 

  1. (General  obligations  of  seller)

 

The  seller  owes  to  the  buyer,  in  accordance  with  the  terms  of  the contract and the provisions of this Code, (i) an obligation to transfer the  property  right  sold  [in  the  goods],  (ii)  an  obligation  to  deliver the goods, (iii) an obligation to preserve such goods until they are delivered, and (iv)  an obligation to deliver all  instruments required to  evidence  proof  of  title  thereto.

 

  1. (Obligation to  transfer  the  right  and  warranty  liability  of seller)

 

(1)      The  seller  owes  an  obligation  to  transfer  the  property  right  of the  subject  matter  of  the  sale  to  the  buyer.

 

(2)      In the event that a right belonging to a third party is the object of a sale, the seller is obligated to acquire such right and thereafter transfer  it  to  the  buyer.

 

(3)      If,  in  the  case  described  in  paragraph  (1),  the  seller  cannot acquire  the  right  and  thereafter  transfer  it  to  the  buyer,  the  buyer may  rescind  the  contract.  In  such  a  case,  if  the  buyer  was  not  aware at the time the contract was executed that the right did not belong to the  seller,  the  buyer  may  also  demand  compensation  for  damages.

 

  1. (Rescission of  contract  by  seller  who  sells  right  of  another person)

 

(1)      Where  a  seller  is  unaware  when  a  contract  is  executed  that  the right to be sold does not belong to the seller, and if the seller is subsequently unable to acquire the right and transfer it to the buyer, the seller may rescind the contract by compensating the buyer for any damages [incurred by the buyer in connection with the attempted sale].

 

 

 

 

(2)      In  the  case  described  in  paragraph  (1),  if  the  buyer  was  aware when the contract was executed that the right to be sold did not belong to the seller, the seller may rescind the contract without compensating the  buyer  for  damages.

 

  1. (Warranty liability  of  seller  when  part  of  right  sold  belongs to  another  person)

 

(1)      If  part  of  a  right  comprising  the  object  of  a  sale  belongs  to  a third party and the seller cannot subsequently acquire that part and transfer  it  to  the  buyer,  the  buyer  may  demand  a  reduction  of  the purchase  price  proportional  to  the  percentage  of  that  part.

 

(2)      In  the  case  described  in  paragraph  (1),  the  buyer  may  terminate the  contract  if  the  buyer  was  unaware  when  the  contract  was  executed that the part of the right did not belong to the seller and it is judged that the buyer would not have purchased the right if the object of the sale  comprised  the  remaining  part  only.

 

(3)      In case described in paragraphs (1) and (2), if the buyer was not aware when the contract was executed that part of the right comprising the object of the sale did not belong to the seller, the buyer may also demand  compensation  for  damages.

 

(4)      Where the buyer was not aware when the contract was executed that part  of  the  right  comprising  the  object  of  the  sale  did  not  belong  to the  seller,  the  buyer's  rights  as  provided  for  in  paragraphs  (1),  (2) and (3) must be exercised within one year from the date that the buyer became aware of such fact. Where the buyer was aware when the contract was  executed  that  part  of  the  right  comprising  the  object  of  the  sale did  not  belong  to  the  seller,  these  buyer's  rights  must  be  exercised within  one  year  from  the  date  of  execution  of  the  contract.

 

  1. (Seller's  warranty  liability  when  encumbrance  exists)

 

(1)      Where  goods  comprising  the  object  of  a  sale  are  subject  to  a perpetual lease, usufruct, right of use, right of residence, servitude, leasehold,  right  of  retention  or  pledge,  and  due  to  such  encumbrance the buyer cannot enjoy the use of all or a part of such goods or receive profits therefrom, the buyer  may demand compensation for  damages from the   seller   if   the   buyer   was   not   aware   of   the   existence   of   such encumbrance  when  the  contract  was  executed.

 

(2)      In  the  case  described  in  paragraph  (1),  if  the  purpose  of  the buyer's   execution   of   the   contract   cannot   be   achieved   due   to   the existence of the encumbrance, the buyer may also terminate the contract if the buyer was not aware of the existence of the encumbrance when the contract  was  executed.

 

(3)      The  rules  set  forth  in  paragraphs  (1)  and  (2)  shall  also  apply to cases where a servitude that was represented as existing with regard to immovable property comprising the object of the sale does not in fact exist.

 

(4)      In the case described in paragraphs (1), (2) and (3), the buyer's

 

 

 

 

rights to terminate the contract and to demand compensation for damages must be exercised within one year from the date that the buyer learned of  such  fact.

 

  1. (Seller's  warranty  liability  when  real  security  exists)

 

(1)      Where  the  immovable  property  to  be  sold  under  the  sale  contract is subject to a preferential right, a pledge that bars the obligee from using  or  receiving  benefits  from  the  property,  or  a  hypothec,  if  the buyer has lost ownership due to the exercise of such security interest, the  buyer  may  terminate  the  contract.

 

(2)    If any costs or expenses are incurred by the buyer to preserve ownership, the buyer may demand reimbursement of such costs and expenses from  the  seller.

 

(3)      In  either  of  the  cases  mentioned  in  paragraphs  (1)  and  (2),  the buyer  may  demand  compensation  for  any  damages  sustained.

 

  1. (Seller's warranty liability in case of compulsory sale by public auction)

 

(1)      In  the  case  of  a  compulsory  sale,  the  buyer  may,  in  accordance with  the  provisions  of  Articles  528(Obligation  to  transfer  the  right and warranty liability of seller) through 532(Seller's warranty liability when real security exists), either rescind the contract or demand  a  reduction  of  the  purchase  price  from  the  obligor.

 

(2)       In the case described in paragraph (1), if the obligor is insolvent, the buyer may demand from any obligee to whom any share of the proceeds has  been  distributed  the  return  of  some  or  all  of  such  proceeds.

 

(3)      In  the  case  described  in  paragraphs  (1)  and  (2),  if  the  obligor was aware of non-existence of the right [to be sold] and nevertheless failed to disclose it to the auctioning body or if the obligee was aware of such non-existence and nonetheless demanded a compulsory sale, the buyer  may  demand  damages  from  such  parties.

 

  1. (Warranty  by  seller  of  a  claim)

 

(1)     The seller of a claim shall be liable as to the existence of that claim.

 

(2)      Where the seller of a claim warrants the solvency of the obligor, such seller is presumed to have warranted the obligor's solvency as at the  time  the  contract  was  executed.

 

(3)      Where the seller of a claim that has not yet become due warrants the future solvency of the obligor, such seller is presumed to have warranted the obligor's solvency as on the date on which the obligation is  to  be  performed.

 

  1. (Agreement regarding  discharge  from  or  limitation  of  warranty liability)

 

 

 

 

Even if it is agreed between the seller and the buyer that the seller's liability    arising    from    the    warranties    set    forth    in    Articles

528(Obligation to transfer the right and warranty liability of seller) through  534(Warranty  by  seller  of  a  claim)  are  discharged  or  limited, the  seller  may  not  be  relieved  of  liability  in  regard  to  any  fact  of which the seller was aware and nevertheless failed to disclose, or in regard  to  any  right  that  the  seller  created  in  favor  of,  or  assigned to,  a  third  party.

 

  1. (Obligation  to  deliver  conforming  goods)

 

(1)     The seller has an obligation to deliver to the buyer goods that conform  to  the  contract.

 

(2)    Except  where  the  parties  have  agreed  otherwise,  the  goods delivered  to  the  buyer  shall  be  deemed  nonconforming  goods  in  any  of the  following  situations:

  1. a) wherethe goods do not conform to the quantity, quality and

description  required  by  the  contract;

  1. b) where the  goods  differ  from  those  that  the  seller  held  out

to the buyer as a sample or model in terms of their quantity, quality  or  description;

  1. c) where  the   goods   are   not   fit   for   a   particular   purpose expressly  or  impliedly  made  known  to  the  buyer  when  the

contract  was  executed;

  1. d) where the goods are not fit for the purposes for which goods of the  same  description  would  ordinarily  be  used;  or
  2. e) where the goods are not contained or packaged in the manner usual for such goods or in a manner adequate to preserve and protect the  

 

  1. (Conforming  Goods  Warranty  Liability)

 

(1)      Where the goods are nonconforming in any respect at the time that the  risk  passes  to  the  buyer,  even  if  the  existence  of  such nonconformance  becomes  apparent  after  the  passage  of  such  risk,  the buyer may, in accordance with in the terms of the contract and the provisions  of  this  Code,  demand  that  substitute  goods  be  delivered  or that such nonconformance be remedied, terminate the contract or reduce

the  purchase  price  as  against  the  seller9.

 

(2)    The seller shall owe the Conforming Goods Warranty Liability described in paragraph (1) in regard to any nonconformance that occurs due to a breach of any of the seller's obligations, including any nonconformance that occurs after the time indicated in paragraph (1).

 

(3)     Where the seller warrants that for a certain period of time after delivery  the  goods  will  remain  fit  for  their  ordinary  purpose  or  for some particular purpose, or will retain specified qualities or characteristics, if there is a breach of such warranty, the seller shall owe  the  same  Conforming  Goods  Warranty  Liability.

 

 

 

9   The  seller's  liability  covered  under  Article  1-3-13  shall  be  referred  to  as

'Conforming  Goods  Warranty  Liability'  in  this  translation.

 

 

 

 

(4)      If  when  the  contract  was  executed  the  buyer  was  aware  that  the goods were nonconforming in any respect, or was unaware of such nonconformance  as  a  result  of  gross  negligence,  the  seller  shall  not owe the Conforming Goods Warranty Liability with respect to such nonconformance.

 

  1. (Seller's  right  to  remedy  nonconformance)

 

(1)      If  the  seller  has  delivered  goods  before  the  date  for  delivery, he may, up to that date, remedy any nonconformance in the goods delivered so long as the buyer's interests are not unfairly prejudiced thereby. However, the buyer shall not be precluded from exercising the right to demand  compensation  for  damages.

 

(2)      The  seller  may,  even  after  the  date  for  delivery,  remedy  at  his own expense any nonconformance in the goods so long as the buyer's interests are not unfairly prejudiced thereby. However, the buyer shall not  be  precluded  from  exercising  the  right  to  terminate  the  contract and  the  right  to  demand  compensation  for  damages.

 

  1. (Right  to  demand  complete  performance)

 

(1)      The   buyer   may   demand   that   the   seller   [fully   and   completely] perform its obligations. However, this shall not apply where the buyer has  resorted  to  a  remedy  that  is  inconsistent  with  such  demand.

 

(2)      Where  the  goods  are  nonconforming  in  any  respect,  the  buyer  may demand  that  the  seller  deliver  substitute  conforming  goods.  However, this shall not apply where supplying goods of the same description would cause undue burden to the seller in consideration of the surrounding circumstances.

 

(3)      Where  the  goods  are  nonconforming  in  any  respect,  the  buyer  may demand that the seller remedy the nonconformance. However, this shall not  apply  where  remedying  the  goods  would  cause  undue  burden  to  the seller  in  consideration  of  the  surrounding  circumstances.

 

(4)       The buyer may fix an additional period of time of reasonable length for the seller's performance of its obligations. Unless the buyer has received  notice  from  the  seller  that  the  seller  does  not  intend  to perform within such period, the buyer may not resort to any remedy for breach   of   contract   during   such   period.   However,   the   buyer   is   not deprived   thereby   of   the   right   to   demand   compensation   for   damages incurred  due  to  the  delayed  performance.

 

  1. (Buyer's  right  to  terminate)

 

If the goods delivered are nonconforming in any respect and such nonconformance prevents the achievement of the buyer's purpose for entering  into  the  contract,  the  buyer  may  terminate  the  contract.

 

  1. (Right  to  demand  price  reduction)

 

Where the goods delivered are nonconforming in any respect, regardless of whether or not the price has already been paid, the buyer may demand

 

 

 

 

reduction of the price by a percentage that reflects the difference between the value of the goods actually delivered and the value that conforming goods would have had at the time of delivery.   However, where the seller has remedied the nonconformance in accordance with Article

539(Right   to   demand   complete   performance),   or   where   the   buyer   has

refused to accept an offer by the seller to remedy the nonconformance without good cause, the buyer may not demand a reduction of the price.

 

  1. (Buyer's  right  to  demand  damages)

 

The buyer may demand compensation for damages, in accordance with the provisions set forth in Section III, Chapter Four of Book Four, independently of or together with any remedies provided for in Articles

539(Right to demand complete performance) through 541(Right to demand price  reduction).

 

  1. (Special provisions  regarding  excess  or  deficiency  in  area  of land)

 

(1)      Where  the  total  area  of  specified  land  is  indicated,  and  a  sale has been executed based on a fixed price per unit area, but the actual area is less than the indicated area, the buyer may demand, in accordance with the provisions set forth in Articles 539(Right to demand complete performance) through 542(Buyer's right to demand damages), (i) delivery of the deficient portion, (ii) a reduction in the purchase price reflecting the deficiency or (iii) termination of the contract, and/or (iv) compensation for damages, unless otherwise agreed to between the parties.

 

(2)      Where  the  total  area  of  specified  land  is  indicated,  and  a  sale has been executed based on a fixed price per unit area, but the actual area exceeds the indicated area, if the seller was unaware of such excess without  negligence  on  his  part,  the  seller  may  demand  an  increase  in the  purchase  price  reflecting  the  excess  amount  of  land,  unless otherwise  agreed  to  between  the  parties.

 

(3)      Where  the  total  area  of  specified  land  is  indicated  and  a  sale has  been  executed  based  on  a  single  price  for  the  entire  parcel,  even if  the  actual  area  is  less  than  the  indicated  area,  the  buyer  may  not demand (i) delivery of the deficient portion, (ii) a reduction in the purchase price reflecting the deficiency, (iii) termination of the contract or (iv) compensation for damages. However, this shall not apply to cases where (i) the seller knew of the deficiency of the actual area, (ii)  the  seller  guaranteed  the  accuracy  of  the  indicated  size  of  the area,  or  (iii)  the  deficiency  exceeds  five  percent  of  the  indicated area.

 

(4)      Where  the  total  area  of  specified  land  is  indicated  and  a  sale has  been  executed  based  on  a  single  price  for  the  entire  parcel,  the seller  may  not  demand  an  increase  in  the  purchase  price  even  if  the actual area exceeds the indicated area. However, this shall not apply where  the  excess  area  exceeds  five  percent  of  the  indicated  area,  and the  seller  was  ignorant  of  such  fact  without  negligence  on  his  part.

 

(5)      In a case in which the seller demands an increase in the purchase

 

 

 

 

price based on the provisions of paragraphs (2) or (4), the buyer may terminate  the  contract.

 

  1. (Period  for  exercise  of  rights)

 

(1)     The rights provided for in Articles 539(Right to demand complete performance)    through    541(Right    to    demand    price    reduction)    and

543(Special provisions regarding excess or deficiency in area of land)

must  be  exercised  within  one  year.  However,  the  provisions  of  Article

479(Extinctive  prescription  period  for  general  claim)  shall  apply  to the right to demand damages described in paragraph (1) and in the second sentence of paragraph (2) of Article 543(Special provisions regarding excess  or  deficiency  in  area  of  land).

 

(2)      The period described in the first sentence of paragraph (1) shall be  computed  from  the  dates  identified  below:

  1. a) for the  buyer,  the  date  that  the  buyer  knew  or  should  have known of the existence of the nonconformance or damage; and
  2. b) for the  seller,  the  date  of  execution  of  the  

 

  1. (Special  provisions  regarding  discharge  from  or  limitation  on

Conforming  Goods  Warranty  Liability)

 

Even if the seller and the buyer agree to discharge or limit the seller's Conforming  Goods  Warranty  Liability  arising  from  the  provisions  set forth in Articles 537(Conforming Goods Warranty Liability) et seq, the seller may not be relieved of liability in regard to any nonconformance regarding which the seller had knowledge and nevertheless failed to disclose.

 

  1. (Obligation  to  deliver  goods)

 

(1)      The seller is obligated to deliver the goods to the buyer at the time  and  the  place  provided  for  in  the  contract.

 

(2)      When  the  delivery  date  is  not  provided  for  in  the  contract,  the seller is obligated to deliver the goods immediately after the buyer demands  the  delivery  thereof.

 

(3)     If the place of delivery is not provided for in the contract, the seller shall effect the delivery, in the case of the sale of a specified good,  at  the  place  where  such  specified  good  was  located  at  the  time of  execution  of  the  contract,  and  in  other  cases,  at  the  domicile  of the  buyer.

 

(4)       The costs of delivery shall be borne by the seller unless otherwise agreed to by the parties. However, any increase in the costs of delivery attributable  to  a  change  in  the  buyer's  address,  etc.  shall  be  borne by  the  buyer.

 

  1. (Manner  of  Delivery)

 

Delivery  of  property  shall  be  effected  through  actual  delivery, delivery by declaration, transfer by direction, or constitutum possessorium  in  accordance  with  the  provisions  described  in  Article

 

 

 

 

228(Assignment of possession). The delivery of an immovable may be effected through the actual delivery of the keys to the structures comprising or residing on such immovable or of the documents evidencing title  thereto.

 

  1. (Defenses  of  simultaneous  performance,  insecurity)

 

(1)      The seller may refuse to deliver the goods until the buyer tenders payment of the purchase price. However, this shall not apply where the buyer's  obligation  has  not  yet  become  due  or  where  it  is  agreed  that the obligation to deliver the goods is to be performed prior to payment of  the  purchase  price.

 

(2)      Even  where  the  seller  has  granted  the  buyer  a  grace  period  for the payment of the purchase price, if the buyer becomes bankrupt or insolvent after the execution of the contract, or has concealed his insolvency  prior  to  execution  of  the  contract,  the  seller  may  refuse to  deliver  the  goods.    However,  this  shall  not  apply  where  the  buyer has provided the seller with security or has otherwise taken a measure that  has  extinguished  such  insecurity.

 

  1. (Obligation  to  preserve  goods)

 

(1)      The seller of a specified good shall preserve such good with the care of a good manager until it is delivered.   The same rule shall apply with   respect   to   the   seller   of   a   fungible   good   after   specification thereof.

 

(2)      If a good is destroyed, lost or damaged due to the seller's failure to  conform  to  the  duty  of  care  set  forth  in  paragraph  (1),  the  seller shall be liable to the buyer in accordance with the terms of the contract and  the  provisions  of  Section  III,  Chapter  Four  of  Book  Four  of  this Code.

 

  1. (Right  to  acquire  fruits)

 

If a good comprising the object of a sale produces natural fruits before it  is  delivered  to  the  buyer,  such  fruits  shall  belong  to  the  seller unless  otherwise  agreed  to  between  the  parties.    The  same  rule  shall apply  where  the  good  produces  rent  or  other  legal  fruits.

 

 

Sub-section  II  Ob  igations  of  Buyer

 

 

  1. (General  obligations  of  buyer)

 

The buyer is obligated to pay the purchase price to the seller, and to receive  the  goods  that  the  buyer  has  purchased.

 

  1. (Obligation  to  pay  purchase  price)

 

(1)      The  buyer  is  obligated  to  pay  the  purchase  price  agreed  upon  in the  contract  at  the  time  and  place  agreed  upon  in  the  contract.

 

(2)      If a time for the delivery of goods is provided for in the contract,

 

 

 

 

such  time  is  presumed  to  apply  to  the  payment  of  the  purchase  price.

 

(3)      If  the  contract  does  not  provide  for  either  a  time  for  delivery or a time for the payment of the purchase price, the buyer is obligated to pay the purchase price immediately after the seller's demand for payment.

 

(4)    Where the place to effect payment of the purchase price is not provided for in the contract, if the purchase price is to be paid simultaneously with the delivery of the goods, payment shall be effected at  the  place  of  the  delivery.

 

  1. (Damages  for  delayed  payment)

 

Even where payment of the purchase price is delayed, the buyer need not pay  damages  for  the  delayed  performance  until  he  receives  delivery  of the  goods.

 

  1. (Right to  refuse  payment  when  third  party  claims  interest  in goods)

 

(1)      Where  a  third  party  claims  an  interest  in  the  goods  comprising the object of the sale, thereby resulting in a risk to the buyer of the loss of all or part of the right purchased by the buyer, the buyer may refuse  to  pay  the  purchase  price  in  proportion  to  the  extent  of  such risk.  However,  this  shall  not  apply  where  the  seller  has  provided  the buyer  with  adequate  security.

 

(2)      In  the  cases  described  in  paragraph  (1),  the  seller  may  demand that   the   buyer   deposit   the   amount   of   the   purchase   price   with   an authorized  depository  office.

 

  1. (Defenses  of  simultaneous  performance,  insecurity)

 

(1)     The buyer may refuse to pay the purchase price until the seller tenders  performance  of  his  obligation.  However,  this  shall  not  apply when the seller's obligation has not yet become due or where it is agreed that the obligation to pay the purchase price shall be performed prior to  the  seller's  performance.

 

(2)    Even where the buyer has granted the seller a grace period for performance,    if    there    is    a    significant    risk    of    the    seller's non-performance,   the   buyer   may   refuse   to   pay   the   purchase   price. However,  this  shall  not  apply  where  the  seller  has  provided  the  buyer with  security  or  has  otherwise  taken  a  measure  that  has  extinguished such  insecurity.

 

  1. (Delayed  Receipt)

 

(1)      In   the   event   of   a   delay   in   the   performance   of   the   buyer's obligation to receive the goods, the seller may demand compensation for damages or terminate the contract in accordance with the provisions set forth  in  Sections  III  and  IV,  Chapter  Four  of  Book  Four.

 

(2)      In the case described in paragraph (1), if the goods is destroyed,

 

 

 

 

lost  or  damaged  due  to  any  reason  other  than  the  seller's  negligence, the  buyer  shall  assume  the  risk  of  such  destruction,  loss  or  damage.

 

(3)      If the buyer refuses to receive delivery of the goods even though the  seller  has  tendered  delivery  thereof,  the  seller  may  deposit  the goods  with  the  official  depository  office  or  sell  them  in  accordance with  the  provisions  of  Articles  454(Deposit)  and  455(Obligor's  right to  sell).

 

Section   IV  Termination  of  Contract  By Exercise  of  Repurchase  Right

 

  1. (Special  agreement  for  repurchase)

 

(1)      The seller may, based on a special agreement for repurchase that is clearly provided for in the written contract of sale, terminate the contract by returning the purchase price paid by the buyer and the costs described  in  Article  560(Exercise  of  Repurchase).

 

(2)    A  contract  of  sale  that  includes  a  special  agreement  for repurchase shall not be effective unless the written instrument is attested.

 

  1. (Period  for  repurchase)

 

(1)     No period for repurchase shall exceed five years with respect to immovable  property  and  two  years  with  respect  to  movable  property.  If a  longer  period  has  been  fixed,  it  shall  automatically  be  reduced  to five years with respect to immovable property or two years with respect to  movable  property.

 

(2)    If  a  period  has  been  once  fixed  for  repurchase,  it  cannot subsequently  be  extended.

 

(3)      If   no   period   has   been   fixed   for   repurchase,   the   seller   must exercise   the   right   of   repurchase   within   the   period   set   forth   in paragraph  (1)  of  this  article.

 

  1. (Perfection of  special  agreement  for  repurchase  against  third parties)

 

(1)       The buyer may exercise any and all rights associated with the owner. However, if such exercise contravenes the purpose of special agreement for  repurchase,  the  buyer  shall  be  liable  for  breach  of  the  contract.

 

(2)      The  special  agreement  for  repurchase  shall  be  effective  even against third parties only if it is registered simultaneously with the execution  of  the  sale  contract.

 

  1. (Exercise  of  Repurchase)

 

(1)      The  seller  may  not  repurchase  the  goods  sold  unless  he  tenders the purchase price and all costs incurred in connection with [the execution  of]  the  contract  within  the  period  of  repurchase.

 

(2)      Where the buyer or a subsequent transferee has made expenditures

 

 

 

 

in connection with the good, if they are necessary expenditures, the seller shall provide reimbursement for the entire amount thereof, while if they are merely useful expenditures, the seller must provide reimbursement of, at the seller's election, either the amount of such expenditures or the increase in the value of the goods attributable to such  expenditures  to  the  extent  that  such  increase  in  value  continues to  exist.

 

  1. (Sale including  special  agreement  for  repurchase  of  co-owned good)

 

(1)      Where  co-owners  sell  all  of  a  co-owned  good  by  entering  into  a single  contract  that  includes  a  special  agreement  for  repurchase,  if one of the co-owners demands repurchase either of his share only or of the  entire  co-owned  good,  the  buyer  need  not  respond  to  such  demand.

 

(2)      Where all co-owners sell their respective shares of the co-owned good  by  entering  into  separate  contracts  that  include  a  special agreement for repurchase, each co-owner may repurchase his respective share  separately  from  the  other  co-owners.

 

  1. (Effect  of  non-exercise  of  right  of  repurchase)

 

Where  a seller does not exercise  a right of repurchase within a period fixed in accordance with Article 558(Period for repurchase), the right of  repurchase  shall  be  extinguished,  and  the  buyer's  ownership  shall not  thereafter  be  subject  to  a  demand  for  restitution.

 

Chapter Two EXCHANGE

 

  1. (Definition)

 

An  exchange  shall  take  effect  when  parties  agree  to  transfer  to  one another  property  rights10   other  than  money.

 

  1. (Mutatis  mutandis   application   of   provisions   relating   to sale)

 

The  rules  relating  to  sale  shall  apply  mutatis  mutandis  to  exchange.

 

Chapter Three GIFT

 

 

  1. (Definition)

 

A  gift  is  a  contract  which  comes  into  effect  when  one  party  declares the intention to give property to another party free of charge, and the other  party  accepts  it.

 

  1. (Transfer  of  ownership)

 

Transfer  of  the  ownership  of  an  object  pursuant  to  a  contract  of  gift

 

 

10   See  the  footnote  to  Article  195  for  the  explanation  of  "property  rights".

 

 

 

 

shall   be   subject   to   the   general   principles   provided   in   Articles

133(Creation,  transfer  and  alternation  of  real  rights  by  agreement),

134(Perfection),   159(Acquisition   of   ownership   over   immovable)   and

186(Acquisition  of  ownership  over  movable).

 

  1. (Gift  not  in  writing)

 

Even  where  a  promise  of  gift  is  made,  if  it  is  not  put  into  writing, either   party   to   the   contract   of   gift   may   revoke   the   contract   by withdrawing his declaration of intention; provided however that the declaration of intention may not be withdrawn in respect of any portion of  the  gift  of  which  performance  has  been  completed.

 

  1. (Rescission  of  gift  on  account  of  breach  of  trust,  etc.)

 

(1)      If the donee commits a serious breach of trust against the donor, the  donor  shall  be  entitled  to  rescind  the  gift.

 

(2)      Rescission of a gift under paragraph (1) in respect of any portion of the gift of which performance has been completed may be effected only within  the  period  of  5  years  following  the  occurrence  of  the  serious breach  of  trust.

 

  1. (Rescission  of  gift  on  account  of  poverty  of  donor)

 

(1)      If  the  donor  is  reduced  to  a  state  of  extreme  poverty  and  is  no longer able to maintain the living of himself and persons whom he has obligation   to   provide   with   support   after   making   a   declaration   of intention  to  gift,  the  donor  shall  be  entitled  to  rescind  the  gift.

 

(2)      Rescission of a gift under paragraph (1) in respect of any portion of the gift of which performance has been completed may be effected only within  the  period  of  5  years  following  said  performance.

 

  1. (Effect  of  rescission  of  gift)

 

In  the  event  of  rescission  of  a  gift  under  Articles  568(Rescission  of gift  on  account  of  breach  of  trust,  etc.)  and  569(Rescission  of  gift on account of poverty of donor), the donor shall be entitled to demand return  of  the  gift  in  accordance  with  the  provisions  relating  to  the return  of  unjust  enrichment.

 

  1. (Alleviation  of  warranty  liability)

 

A  donor  shall  not  be  liable  for  any  defect  or  deficiency  in  the  thing or right which forms the subject matter of the gift; provided that this shall not apply if the donor is aware of such defect or deficiency but fails  to  advise  the  donee  thereof.

 

  1. (Periodical  gift)

 

A gift of which the subject matter is periodical performance shall lapse upon  the  death  of  either  the  donor  or  the  donee.

 

  1. (Gift  subject  to  a  charge)

 

 

 

 

 

(1)    A gift of which the donee is obliged to carry out a specified performance in order to receive the gift is referred to as a gift subject to  a  charge.

 

(2)      In the case of a gift subject to a charge, the donor shall assume the  same  warranty  liability  as  a  seller  to  the  extent  of  the  charge.

 

(3)      In the case of a gift subject to a charge, if one party performs, such  party  shall  be  entitled  to  demand  that  the  other  party  perform.

 

(4)      In the absence of specific agreement, one party to a contract of gift  subject  to  a  charge  may  withhold  his  performance  until  the  other party  [tenders  to]  perform.

 

(5)      If  the  donee  does  not  execute  the  charge,  the  donor  of  a  gift subject to a charge shall be entitled to terminate the contract of gift in  accordance  with  the  provisions  relating  to  termination.

 

  1. (Gift  upon  death)

 

(1)      A  gift  which  is  to  become  effective  upon  the  death  of  the  donor shall  be  referred  to  as  a  "gift  upon  death"  (donatio  mortis  causa).

 

(2)      The provisions relating to testamentary gifts shall apply mutatis mutandis  to  the  effect  of  a  gift  upon  death.

 

Chapter Four LOAN FOR   CONSUMPTION

 

 

 

Section   I  Definition and Formation  of  Loans  for  Consumption

 

  1. (Definition  of  loan  for  consumption)

 

A loan for consumption is a contract whereby one party, called the lender, assumes  an  obligation  to  entrust  the  free  use  of  money,  foodstuffs, paddy or other fungible objects for a specified term to another party, called  the  borrower,  who  assumes  the  obligation  to  return  objects  of the  same  type,  quality  and  quantity  as  those  received  from  the  lender upon  the  expiry  of  the  said  term.

 

  1. (Formation  of  contract  of  loan  for  consumption)

 

A contract of loan for consumption is formed by agreement of the lender and  the  borrower  alone.

  1. (Revocation of contract of loan for consumption not in writing) Either party shall be entitled to revoke at any time a contract of loan

for consumption without interest that is not in writing; provided that this shall not apply to any portion of the object of the loan that has been  delivered  by  the  lender.

 

  1. (Termination for deterioration of borrower's creditworthiness)

 

 

 

 

 

(1)     If after the formation of a contract of loan for consumption but before delivery of the object thereof the economic situation of the borrower   deteriorates   and   performance   of   the   obligation   to   return becomes  doubtful,  the  lender  shall  be  entitled  to  terminate  the contract.

 

(2)     If a lender who has terminated a contract under paragraph (1) has received interest, commission or other consideration in advance, the lender  shall  return  the  same  to  the  borrower.

 

  1. (Quasi-loan  for  consumption)

 

(1)     If a person who assumes an obligation to deliver money or other fungible  objects  other  than  pursuant  to  a  loan  for  consumption  agrees with the obligee to make such objects the subject matter of a loan for consumption,  a  loan  for  consumption  shall  be  formed  thereby.

 

(2)       In cases described in paragraph (1), any security for the original obligation  shall  be  presumed  to  be  transferred  to  the  new  obligation.

 

 

Section   II  Loans for  Consumption  With Interest

 

  1. (Claim  for  interest)

 

(1)    "Interest"  refers  to  that  amount  of  money  or  other  things calculated by multiplying a certain percentage by the number of things loaned and delivered to the borrower, as the price for consumption thereof.

 

(2)      In  respect  of  paragraph  (1),  the  things  loaned  and  delivered  to the borrower are referred to as the principal, and the percentage multiplied   by   the   number   of   things   constituting   the   principal   is referred  to  as  the  "interest  rate".

 

(3)      The parties to a contract of loan for consumption may by agreement bring  into  existence  a  claim  [separate  from  the  loan]  having  as  its subject   matter   the   payment   of   interest;  provided   that   a   claim   for interest  shall  not  come  into  effect  unless  it  is  in  writing  and  bears the  signature  of  the  borrower.

 

(4)      If  an  agreement  to  bring  into  existence  a  claim  for  interest  is made without writing, and the borrower, with awareness of the applicability of the proviso to paragraph (3), voluntarily pays the interest,  the  claim  shall  be  valid  to  the  extent  of  such  payment.

 

  1. (Legal  interest  rate11   and  agreed-on  interest  rate)

 

(1)      The  interest  rate  shall  be  that  provided  by  law  or  by  agreement of  the  parties.

 

(2)      If  the  parties  have  agreed  to  the  payment  of  interest  but  have

 

 

11   See  Article  315.

 

 

 

 

not specified an interest rate, the interest rate specified in this Code or  by  special  law  shall  apply.

 

(3)      If  the  interest  rate  agreed  by  the  parties  is  not  specified  in a document that complies with the formalities provided in paragraph (3) of  Article  580(Claim  for  interest),  it  shall  have  no  effect.

 

  1. (Limitations  on  interest)

 

(1)       The maximum interest rate refers to the upper limit on the interest rate that may be legally agreed by the parties, as provided by law or ordinances.

 

(2)     The interest rate agreed by the parties may exceed the legal rate provided   in   paragraph   (2)   of   Article   581(Legal   interest   rate   and agreed-on interest rate), but may not exceed the maximum interest rate.

 

(3)    If the agreement of the parties provides for an interest rate exceeding  the  maximum  interest  rate,  such  agreement  shall  be  invalid in respect of that portion of interest that exceeds the maximum interest rate, and the borrower shall only be obliged to pay interest calculated on  the  basis  of  said  maximum  rate.

 

(4)      If  interest  in  excess  of  the  maximum  interest  rate  has  already been  paid,  such  excess  portion  shall  be  deemed  to  have  been  allocated to repayment of principal. If even after such allocation of the excess portion to principal there still remains a surplus on the side of the lender, this must be returned to the borrower together with damages in the form of interest at the legal interest rate calculated from the date of  the  payment  which  caused  such  surplus  to  arise  until  the  date  of return.

 

(5)      In  the  application  of  this  Article,  if  there  is  a  difference between the amount of principal stipulated under the contract and the number or amount of things actually delivered by the lender to the borrower, for example, if the lender deducts the amount of interest that will accrue in the future from the stipulated principal in advance, and deliver the remaining to the borrower, the number or amount of things actually  delivered  shall  be  taken  as  the  principal  amount.

 

(6)      In  the  application  of  this  Article,  money  and  all  other  things other than principal received by the lender in relation to the contract of loan for consumption shall be deemed to be interest, regardless of whether they are described as honorarium, commission, survey fee or howsoever otherwise; provided that this shall not apply to contract execution  fees  and  expenses  of  repayment.

 

  1. (Time  of  payment  of  interest  and  statutory  compound  interest)

 

(1)      Unless otherwise specifically provided, interest shall be payable upon the expiry of each year after delivery of the object; provided that if the object must be returned prior to the expiry of one year from delivery,  interest  shall  be  paid  at  the  time  of  return.

 

(2)      If more than one year's interest is in arrears, and the borrower

 

 

 

 

does  not  pay  such  interest  despite  notice  from  the  lender,  the  lender may  compound  such  interest  with  the  principal.

 

 

Section   III  Lender's Ob  igation  to  Lend

 

  1. (Obligation  to  lend  object)

 

(1)      The  lender  assumes  an  obligation  to  allow  the  borrower  to  use things  that  are  in  conformity  with  the  contract.

 

(2)      From the time of delivery of the object, the borrower can freely use,  profit  from  and  dispose  of  the  things  loaned  and  shall  bear  the risk of destruction or loss thereof or damage thereto that is not attributable  to  fault  on  the  part  of  the  lender.

 

  1. (Lender's warranty liability for things delivered belonging to another person)

 

(1)      In the case of a contract of loan for consumption with interest, a  lender  who  delivers  things  that  are  not  his  own  property  shall  be obliged either to acquire the ownership thereof and transfer it to the borrower,  or  to  substitute  other  things  owned  by  the  lender;  provided that the borrower shall not be entitled to demand delivery of substitute things  after  consuming  the  things.

 

(2)    If the lender is unable to fulfill the obligation described in paragraph (1), the borrower shall be entitled to terminate the contract.

 

(3)     In cases described in paragraphs (1) or (2), a borrower who has accepted delivery of things loaned without knowing that the lender had no  title  thereto  may  demand  compensation  for  damage  from  the  lender.

 

(4)       In the case of a contract of loan for consumption without interest, the   provisions  of   paragraphs  (1),   (2)   and   (3)   shall   apply   mutatis mutandis if the lender has delivered things belonging to another person with knowledge that he had no right to dispose of them and without disclosing  this  fact  to  the  borrower.

 

(5)      If  a  borrower  of  things  owned  by  a  person  other  than  the  lender returns the things delivered or the value thereof to the owner, he shall be exempted from the obligation to return vis-a-vis the lender, except where substitute things have been delivered and accepted by the borrower in  accordance  with  paragraphs  (1)  or  (4).

 

  1. (Right of    termination    of   lender    who    has    delivered    things belonging  to  another  person)

 

A  lender  who  has  unknowingly  delivered  things  belonging  to  another person and who is unable to transfer the ownership of those things or substitute things to the borrower may terminate the contract; provided that if the borrower, in good faith, has a claim for compensation for damage under Article 585(Lender's warranty liability for things delivered belonging to another person), such termination shall only be permitted  if  such  damage  has  been  compensated.

 

 

 

 

 

  1. (Loan for consumption of defective things and lender's warranty liability)

 

(1)      In the case of a contract of loan for consumption with interest, if there is a hidden defect in any things delivered by the lender, the borrower who has received the things without knowing of the defect may demand replacement by things without defect and compensation for any damage.

 

(2)       In the case of a contract of loan for consumption without interest, a  borrower  who  has  received  defective  things  may  return  the  value  of the  defective  things;  provided  that  if  the  lender  knew  of  the  defect but  did  not  advise  the  borrower  thereof,  paragraph  (1)  shall  apply mutatis  mutandis.

 

Section   IV  Borrower's  ob igation  to  return

 

  1. (Borrower's  obligation  to  return)

 

(1)      The  borrower  has  an  obligation  to  return,  on  the  return  date, things  of  the  same  type,  quality  and  quantity  as  those  received  by delivery  from  the  lender.

 

(2)      The  borrower  of  a  loan  for  consumption  with  interest  must  pay interest  according  to  the  provisions  of  Articles  581(Legal  interest rate   and   agreed-on   interest   rate)   through   583(Time   of   payment   of interest  and  statutory  compound  interest).

 

  1. (Return  in  form  of  value)

 

(1)    If  the  borrower  becomes  unable  to  return  things  loaned  in accordance with Article 588(Borrower's obligation to return), the borrower shall be obliged to pay the value of the things loaned on the date  of  return  at  the  place  of  return.

 

(2)      If in a case described in paragraph (1) the date or place of return has not been specified, the amount of money equivalent to the value of the  things  loaned  on  the  date  and  at  the  place  of  conclusion  of  the contract  shall  be  payable.

 

  1. (Change  in  value  of  currency,  etc.)

 

In the absence of specific agreement, even if the value of the currency or  things  fluctuates  prior  to  the  date  of  return,  the  borrower  must return the same number or unit of currency or things that were delivered to  him.

 

  1. (Time  of  return)

 

(1)      If the parties have stipulated the date of return, the lender is not permitted to demand return of the object prior to said date; provided that   this   shall   not   apply   if   the   borrower   has   been   served   with   a bankruptcy  notice,  or  causes  the  destruction  or  diminishment  of  the

 

 

 

 

security.

 

(2)      If the parties have not stipulated the date of return, the lender may give notice of demand of return within a reasonable period of time designated  by  him.

 

(3)       In the case of a contract of loan for consumption without interest, the  borrower  may  return  the  object  at  any  time.

 

(4)      In  the  case  of  a  contact  of  loan  for  consumption  with  interest, the borrower may return the object prior to the agreed date of return; provided  that  if  damage  is  thereby  caused  to  the  lender,  the  borrower must compensate such damage in accordance with Article 327(Benefit of time).

 

  1. (Place  of  return)

 

If there has been no agreement between the parties concerning the place of return, the borrower must return the object by bringing it to the permanent  residence  of  the  lender.

 

Chapter Five LEASE

 

 

 

Section   I  Genera                                                  Provisions

 

  1. (Definition  of  lease)

 

(1)      A  lease  is  a  contract  whereby  one  party  allows  another  party  to use  and  profit  from  a  certain  thing  for  consideration.

 

(2)      Things  comprising  the  subject  matter  of  a  lease  may  be  movables or  immovables.

 

  1. (Formation  of  lease)

 

A  lease  comes  into  effect  when  one  party  promises  to  allow  the  other party to use and take profit from a certain thing, and the other party promises  to  pay  rent  in  exchange.

 

  1. (Conditions  for  perfection  of  lease  of  immovable)

 

(1)      A   lease   of   an   immovable   may   be   held   up   against   a   subsequent acquirer of any real right over the immovable by virtue of the fact that the lessee has occupied, and continuously used and profited from the leased  immovable.

 

(2)      A  lessee  actually  occupying  a  leased  property  may  exercise  the same  rights  as  the  owner  to  demand  return  [of  a  dispossessed  thing], for   removal   of   disturbance   and/or   for   prevention   of   disturbance, against  an  infringement  of  the  lease  rights.

 

  1. (Lease  period)

 

 

 

 

(1)      A lease may be entered into with or without stipulating a period.

 

(2)      A  lease  of  an  immovable  not  in  writing  shall  be  deemed  to  be  a lease  without  stipulation  of  period.

 

(3)      A  lease  of  an  immovable  for  which  a  period  of  15  years  or  more is  stipulated  shall  be  a  perpetual  lease,  that  is  a  real  right.

 

(4)      A  lease  of  an  immovable  for  which  a  period  of  15  years  or  more has  been  stipulated  but  which  has  not  been  registered  shall  be  valid as  a  lease  until  the  expiry  of  the  15-year  period.

 

 

Section   II  Effect of  Lease

 

  1. (Right and obligation of lessee to use and profit in accordance with normal  method)

 

(1)      The lessee shall have the right and obligation to use and profit from the leased property in a manner that is consistent with the contract or  the  nature  of  the  property.

 

(2)       If the lessee infringes the obligation described in paragraph (1), the  lessor  may  terminate  the  contract.

 

(3)      The lessor shall not interfere with the use and taking of profits by  lessee  in  the  normal  manner.

 

  1. (Lessee's  duty  of  care  as  prudent  manager)

 

(1)      The lessee has a duty to manage the leased property with the care of  a  prudent  manager.

 

(2)       If the lessee infringes the obligation described in paragraph (1), the  lessor  may  terminate  the  contract.

 

  1. (Duty  to  repair)

 

The lessor has a duty to carry out repairs required for the use and profit from  the  leased  property.

 

  1. (Preservative  action  by  lessor)

 

(1)    The lessee shall not obstruct any action by the lessor that is required  to  preserve  the  leased  property.

 

(2)      If  the  lessor  proposes  to  take  action  to  preserve  the  leased property against the wishes of the lessee, and as a result of such action it would become impossible for the lessee to achieve the objectives for which  he  entered  into  the  lease,  the  lessee  may  demand  a  reduction  of the  rental  or  may  terminate  the  contract.

 

  1. (Right  of  lessee  to  demand  reimbursement  of  expenditures)

 

(1)      If  the  lessee  outlays  any  necessary  expenditure  that  should  be

 

 

 

 

borne  by  the  lessor,  the  lessee  may  immediately  demand  reimbursement from  the  lessor.

 

(2)       If the lessee pays for improvements or other beneficial expenses, the  lessee  may  demand  upon  the  expiry  of  the  lease  that  the  lessor reimburse  the  lessee  for  the  amount  actually  disbursed  by  the  lessee or the increase in value of the property, at the discretion of the lessor, so long as the increase in value of the leased property remains in effect. However,   upon   application   by   the   lessor,   the   court   may   grant   a reasonable  time  for  such  reimbursement.

 

  1. (Lessor's  liability  for  defects  in  leased  property)

 

(1)      If  there  is  a  hidden  defect  in  the  leased  property  of  which  the lessee was unaware, the lessee may demand repair of such defect or replacement  by  a  property  without  defect,  together  with  compensation for  damage.

 

(2)      The  lessor  may  repair  the  defect  at  the  lessor's  own  expense  as long  as  this  does  not  impose  an  unreasonable  burden  on  the  lessee; provided  that  this  shall  not  bar  any  claim  by  the  lessee  for  damages.

 

(3)      In lieu of making a demand described in paragraph (1), the lessee may demand reduction of the rental commensurate with the defect retroactive  to  the  time  that  the  lessee  received  the  delivery  of  the leased  property.

 

(4)      If as a result of the hidden defect it is impossible for the lessee to achieve the objectives for which he entered into the lease, the lessee may  terminate  the  contract.

 

(5)    Any demand for repairs, replacement, reduction of rental or termination must be made not later than one year from when the lessee became aware or should have become aware of the fact giving rise to such demand.

 

  1. (Right  of   claim   for   reduction   of   rental   or   termination   for decrease  of  income)

 

(1)     If a lessee who has leased land with a view to profit therefrom receives less profit than the amount of the rental by reason of force majeure, he may demand that the rental be reduced to the amount of such profit.

 

(2)      In cases described in paragraph (1), if a lessee receives profit less  than  the  amount  of  the  rental  for  two  or  more  years  successively by reason of force majeure, the lessee may terminate the lease contract.

 

  1. (Right  of   claim   for   reduction   of   rental   or   termination   for partial  loss  of  leased  property)

 

(1)      If  a  part  of  the  leased  property  is  destroyed  or  lost  otherwise than by reason of negligence on the part of the lessee, the lessee may demand reduction of the rent proportional to the part that has been destroyed  or  lost.

 

 

 

 

 

(2)      In cases described in paragraph (1), if the remaining part alone is not sufficient to enable the lessee to attain the objectives for which the lease was entered into, the lessee may terminate the lease contract.

 

  1. (Transfer  of  lease  rights  and  sublease)

 

(1)      Except   in   the   case   of   a   perpetual   lease,   the   lessee   is   not permitted to transfer his lease rights, or to sublease the leased property,  without  the  permission  of  the  lessor.

 

(2)      If  contrary  to  paragraph  (1)  the  lessee  allows  a  third  party  to use  or  profit  from  the  leased  property,  the  lessee  may  terminate  the lease  contract.

 

  1. (Sublease)

 

(1)     If a lessee lawfully subleases the leased property, the sublessee shall assume the lease obligations directly vis-a-vis the lessor. An advance payment to the sublessor cannot be held up as payment of the sublease  rental  to  the  lessor.

 

(2)    The provisions of paragraph (1) shall not prevent the lessor exercising  his  rights  against  the  lessee.

 

  1. (Obligation  to  pay  and  time  of  payment  of  rental)

 

(1)      The lessee assumes an obligation to pay the rental to the lessor at  the  agreed  time.

 

(2)      If there is no specific provision in the contract concerning the time  of  payment  of  rental,  it  shall  be  paid  at  the  end  of  each  month in  the  case  of  movables  and  buildings,  and  at  the  end  of  each  year  in the case of land; provided that if there is a harvest season the rental shall  be  paid  without  delay  upon  the  close  of  such  season.

 

  1. (Lessee's  duty  to  report)

 

If repairs are required to the leased property or a third party asserts any rights over it, the lessee shall report without delay to the lessor, except  where  the  lessor  is  already  aware  of  such  fact.

 

 

Section   III  Termination  of                                                   ease

 

  1. (Expiry  of  term)

 

A  lease  for  which  a  term  has  been  provided  shall  terminate  upon  the expiry  of  such  term.

 

  1. (Refusal  of  renewal  of  immovable  lease)

 

In the case of a lease of an immovable, the parties shall be deemed to have  agreed  to  renewal  of  the  term  of  such  lease  unless  a  party  has declared  his  intention  to  refuse  to  renew  not  later  than  three  months

 

 

 

 

prior to the expiry of the term of the lease, in the case of a building, and not later than one year prior to the expiry of the term of the lease in the case of land; provided that the lease as renewed shall be a lease without  fixed  term.

 

  1. (Tacit  renewal)

 

In the case of a lease of a movable, if  the lessee continues to use  or profit from the leased property after the expiry of the lease term, and moreover  the  lessor  is  aware  of  this  fact  and  makes  no  objection,  the lease  shall  be  presumed  to  have  been  renewed  as  a  lease  without  fixed term   and   with   conditions  identical   to   those   of   the   original   lease (except  for  the  term).

 

  1. (Notice  of  cancellation  of  lease  without  fixed  term)

 

(1)      If no term is fixed for a lease in the contract, either party may give notice of cancellation at any time. If the notice of cancellation does not fix a time of termination of the lease contract, or the period from the time of the notice until the time of termination stated therein is less than the applicable period set forth below, the lease contract shall  terminate  upon  the  expiry  of  the  applicable  period  set  forth below:

  1. a) 1 day  in  the  case  of  movables
  2. b) 3 months  in  the  case  of  buildings c)           1  year  in  the  case  of  

 

(2)      In  the  case  of  a  lease  of  land  which  has  a  harvest  season,  the notice of cancellation shall be given after the end of the harvest season and  before  the  commencement  of  the  next  cultivation.

 

  1. (Reservation  of  right  of  cancellation)

 

Even in cases where parties have fixed a term for the lease, if one or both parties have reserved the right to cancel within such term, the provisions of Article 612(Notice of cancellation of lease without fixed term)  shall  apply  mutatis  mutandis.

 

  1. (Non-retroactivity  of  termination)

 

Termination  of  a  lease  shall  have  effect  only  for  the  future.

 

  1. (Obligation  to  return  leased  property)

 

(1)     Upon termination of a lease, the lessee shall restore the leased property to its original condition and return it to the lessor immediately.

 

(2)      Except for wear and tear arising from normal use, the lessee shall be  liable  to  repair,  or  pay  compensation  for,  all  damage  arising  due to  fault  on  his  part.

 

  1. (Lessee's  right  of  removal)

 

Upon  termination  of  the  lease,  the  lessee  may  remove  any  things  that

 

 

 

 

have  been  attached  to  the  leased  property.

 

  1. (Successor's right  to  terminate  after  death  of  lessee)

 

The   lessee's   successor(s)   may   terminate   the   lease   contract   if   the successor(s)  do  not  wish  to  continue  it.

 

618.       (Period     for

exercise        of

right

to

claim

damages

and/or

reimbursement  of

expenses)

 

 

 

 

 

 

Any claim by the lessor for damages for loss arising from the lessee's use  or  profit  taking  in  breach  of  the  spirit  of  the  contract,  and  any claim  by  the  lessee  for  reimbursement  of  expenses  disbursed  by  the lessee,  must  be  made  not  later  than  one  year  following  the  return  of the  leased  property  to  the  lessor.

 

 

Section   IV  Profit-sharing  Lease

 

  1. (Definition  of  profit-sharing  lease)

 

A contract whereby a landowner [("lessor")] lends land or livestock to another person [("lessee")] and allows the lessee to profit therefrom subject  to  sharing  the  profits  with  the  lessor  is  referred  to  as  a "profit-sharing  lease".

 

  1. (Method  of  sharing  profits)

 

Unless  otherwise  agreed,  profits  shall  be  shared  equally.

 

  1. (Lessee's  right  to  dispose  of  profits)

 

The  lessee  may  only  dispose  of  any  profits  distributable  to  himself after completing the distribution of the profits that are due to the lessor.

 

Chapter Six LOAN   FOR  USE

 

 

  1. (Definition  of  loan  for  use)

 

A loan for use refers to a contract pursuant to which one party allows another  party  to  use  and  profit  from  a  certain  thing  free  of  charge.

 

  1. (Conditions  for  formation  of  loan  for  use)

 

A  loan  for  use  comes  into  effect  by  virtue  of  one  party  receiving  a certain  thing  from  the  other  party  subject  to  a  promise  to  return  it after  using  and  profiting  from  it  free  of  charge.

 

  1. (Borrower's  obligations)

 

(1)     The borrower shall manage the thing borrowed with the care of a prudent  manager.

 

 

 

 

(2)      The  borrower  shall  use  and  profit  from  the  thing  borrowed  in  a manner that is consistent with the contract or the nature of the thing borrowed.

 

(3)      The borrower shall not allow any third party to use or profit from the  thing  borrowed  without  the  permission  of  the  lender.

 

(4)      The  lender  may  terminate  the  contract  if  the  borrower  breaches the  provisions  of  paragraphs  (1),  (2)  or  (3).

 

  1. (Allocation  of  expenses)

 

(1)       The borrower shall bear the normal necessary expenses of the thing borrowed.

 

(2)      If the borrower disburses necessary expenses other than the normal necessary expenses, such as major repairs, or beneficial expenses such as for improvements of the thing borrowed, the borrower may demand upon the  expiry  of  the  loan  that  the  lender  reimburse  the  borrower  either for  the  amount  actually  disbursed  by  the  borrower  or  the  increase  in value  of  the  thing  borrowed,  at  the  discretion  of  the  lender,  so  long as  the  increase  in  value  of  the  thing  borrowed  remains  in  effect; provided, however, that upon application by the lender, the court may permit  a  reasonable  time  for  such  reimbursement.

 

  1. (Warranty  liability  of  lender)

 

The lender assumes no liability for warranty of any defect in the thing borrowed  or  deficiency  in  the  title  thereto;  provided  that  this  shall not  apply  where  the  lender  was  aware  of  such  defect  or  deficiency  but did  not  advise  the  borrower  thereof.

 

  1. (Termination of  loan  for  use  for  expiry  of  term  or  completion of  use  and  taking  of  profits)

 

(1)      A  loan  for  use  with  a  specified  term  shall  terminate  upon  the expiry  of  the  said  term.

 

(2)      If no term has been specified by the parties, but the purpose of the  loan  for  use  has  been  specified,  the  loan  for  use  shall  terminate upon completion of use and taking of profits in accordance with such purpose; provided, however, that if the use and taking of profits have not been completed on account of neglect by the borrower, the loan for use  shall  terminate  upon  the  expiry  of  a  sufficient  time  for  such  use and  taking  of  profits.

 

  1. (Lender's  right  of  cancellation)

 

(1)      If neither the term nor the purpose is specified, the lender may give  notice  of  cancellation  of  the  loan  for  use  at  any  time.

 

(2)      Even  before  the  expiry  of  the  term  or  the  completion  of  use  and taking of profits, if the lender has urgent and unforeseeable need for the  loaned  thing,  he  may  give  notice  of  cancellation  of  the  loan.

 

 

 

 

  1. (Borrower's  right  of  cancellation)

 

Regardless of whether a term has been specified, the borrower may give notice of cancellation of the loan; provided that if the lender has the benefit of time, the borrower shall be liable to compensate the lender for  any  damage  arising  from  the  notice  of  cancellation.

 

  1. (Termination  of  loan  for  use  upon  the  death  of  the  borrower) A  loan  for  use  shall  terminate  upon  the  death  of  the  borrower.
  2. (Obligation  to  return  borrowed  thing)

 

(1)      Upon termination of the loan for use, the borrower shall restore the borrowed thing to its original condition and immediately return it to  the  lender.

 

(2)      Except  for  wear  and  tear  arising  from  normal  use,  the  borrower shall be liable to repair, or pay compensation for, all damage arising due  to  any  cause  attributable  to  the  fault  on  his  part.

 

  1. (Borrower's  right  of  removal)

 

Upon termination of the loan for use, the borrower may remove any things that  have  been  attached  to  the  borrowed  thing.

 

  1. (Period for    exercise     of    right     to    claim     damages     and/or reimbursement  of  expenses)

 

Claims  by  the  lender  for  damages  arising  from  the  borrower's  use  or profit  taking  in  breach  of  the  spirit  of  the  contract,  and  claims  by the borrower for reimbursement of expenses disbursed by the borrower, must be made not later than one year following the return of the borrowed thing  to  the  lender.

 

Chapter Seven MANDATE

 

 

  1. (Definition  of  mandate)

 

"Mandate" refers to a contract whereby one party, called the "mandator", grants to another party, called the "mandatary", the power to perform certain  business  on  behalf  of  the  mandator.

 

  1. (Mandate  in  principle  gratuitous)

 

(1)       A mandate may be onerous or gratuitous. If no intention is declared that  the  mandate  be  onerous,  it  shall  be  presumed  to  be  gratuitous.

 

(2)    Article  641(Mandatary's  right  to  demand  remuneration)  shall govern  remuneration  in  the  event  that  the  mandate  is  onerous.

 

  1. (Formalities  of  contract)

 

 

 

 

A contract of mandate shall be formed by agreement of the parties alone.

 

  1. (Mandatary's  duty  of  care)

 

(1)      The  mandatary  shall  perform  the  mandated  business  in  accordance with the tenor of the mandate, and with the care of a prudent manager; provided  that  this  shall  not  prevent  the  parties  from  agreeing  on  a lesser  standard  of  care  for  the  mandatary.

 

(2)    If the mandatary breaches the mandatary's duty of care under paragraph (1) and thereby inflicts damage on the mandator, the mandator may  claim  compensation  for  such  damage  from  the  mandatary.  In  such  a case, if the mandate is gratuitous, the court may reduce the amount of compensation.

 

  1. (Mandatary's  duty  to  report)

 

The mandatary shall report on the progress of the conduct of the mandated business  whenever  requested  by  the  mandator,  and  upon  termination  of the  mandate  shall  provide  a  detailed  final  report.

 

  1. (Mandatary's  obligation  to  deliver)

 

(1)      The  mandatary  must  deliver  to  the  mandator  all  money  and  other things received in the course of performing the mandated business.  The mandatary  must  also  deliver  the  received  fruits  to  the  mandator.

 

(2)      The  mandatary  must  transfer  to  the  mandator  any  rights  obtained by  the  mandatary  in  its  own  name  on  behalf  of  the  mandator.

 

  1. (Mandatary's  liability  to  compensate  for  money  spent)

 

If the mandatary spends for his own benefit money that must be delivered to  the  mandator  or  that  must  be  used  for  the  benefit  of  the  mandator, he must pay interest to the mandator as from the date of such spending. The mandatary shall also be liable to compensate the mandator for damage, if  any.

 

  1. (Mandatary's  right  to  demand  remuneration)

 

(1)    The  mandatary  cannot  demand  remuneration  unless  there  is a specific  agreement  with  regard  thereto.

 

(2)      If a mandatary is to receive remuneration, he can only demand it when  the  mandated  duty  has  been  performed;  provided  that  if  there  is a provision for remuneration to be paid on the basis of a period, payment may  be  demanded  upon  the  expiry  of  such  period.

 

(3)      If a mandate terminates in the course of its performance for cause not  attributable  to  fault  on  the  part  of  the  mandatary,  the  mandatary may demand remuneration in proportion to the performance already effected.

 

  1. (Advance  payment  of  expenses  by  mandator)

 

 

 

 

Where expenses are necessary in order to perform the mandated business, the mandator shall pay such expenses in advance upon demand by the mandatary.

 

  1. (Mandatary's  right  to  demand  reimbursement  of  expenses,  etc.)

 

(1)      If  a  mandatary  pays  any  expenses  that  are  considered  necessary for the performance of the mandated business, the mandatary may demand from the mandator the reimbursement of such expenses together with interest  thereon  from  the  date  on  which  they  are  defrayed.

 

(2)    If the mandatary has assumed an obligation that is considered necessary for the performance of the mandated business, the mandatary may require the mandator to discharge such obligation in mandatary's place,  or  if  the  obligation  is  not  yet  due,  to  provide  reasonable security.

 

(3)      If  a  mandatary,  without  fault  on  his  part,  sustains  damage  as  a result  of  performing  the  mandated  business,  the  mandatary  may  demand that  the  mandator  compensate  such  damage;  provided  that  where  such damage arises from the intention or negligence of a third party, the mandatary  may  only  claim  compensation  from  the  mandator  to  the  extent that  he  is  unable  to  receive  compensation  from  such  third  party.

 

  1. (Termination  of  mandate)

 

(1)      A  mandate  may  be  terminated  by  either  party  at  any  time.

 

(2)      If a party terminates a mandate at a time that is unfavorable to the other party, the terminating party shall compensate the other party for any damage, provided that this shall not apply where there are unavoidable  grounds.

 

  1. (Non-retroactivity  of  termination)

 

Termination of a mandate shall have effect only for the future; provided that  this  shall  not  preclude  the  making  of  a  claim  for  damages  where a  party  has  been  negligent.

 

  1. (Grounds  of  termination  of  mandate)

 

(1)      In  addition  to  termination  pursuant  to  Article  644(Termination of  mandate),  a  mandate  shall  terminate  for  the  following  grounds:

  1. a) death of  the  mandator  or  mandatary;
  2. b) the mandator  or  mandatary  being  served  with  a  declaration

of  bankruptcy;

  1. c) the mandator being served with a declaration of commencement of guardianship  or  curatorship;
  2. d) the mandatary      being     served     with     a     declaration      of

commencement  of  guardianship  or  curatorship;

  1. e) if the    mandator    or    mandatary     is    a    corporation,     its dissolution;
  2. f) if the  mandator  or  mandatary  is  a  corporation,  its  merger

with  another  corporation;  or

  1. g) the occurrence  of  any  other  ground  agreed  by  the  

 

 

 

 

 

(2)      Even   where   a   ground   described   in   items   (i)   through   (vi)   of paragraph (1) occurs, the parties may agree that the mandate shall not terminate; provided that this shall not apply in the cases of death or commencement of guardianship of the mandatary, or dissolution or merger of  the  mandatary  where  it  is  a  corporation.

  1. (Duties of mandatary in emergency after termination of mandate) In the case of an emergency arising after the termination of the mandate,

the  mandatary,  his  successor  or  legal  representative  shall  take  all

necessary  measure  until  the  mandator,  his  [heir]  or  legal representative  is  able  to  deal  with  the  mandated  business.

  1. (Conditions  for  perfection  of  termination  of  mandate) Regardless  of  whether  it  relates  to  the  mandator  or  to  the  mandatary,

no  ground  of  termination  of  a  mandate  can  be  set  up  against  the  other party  unless  said  other  party  is  given  notice  thereof  or  is  aware thereof.

 

Chapter Eight CONTRACT  FOR   WORK

 

 

  1. (Definition  of  contract  for  work)

 

A contract for work is a contract whereby one party [(the "contractor")] assumes the obligation to complete agreed work and the other party [(the "principal")]   assumes   the   obligation   to   pay   remuneration   for   the results  of  such  work.

 

  1. (Time  of  payment  of  remuneration)

 

The remuneration shall be paid simultaneously with the delivery of the object of the work; provided that if no delivery of a thing is required, the contractor may demand the remuneration after the completion of the work.

 

  1. (Obligation  to  complete  work  without  defect)

 

(1)     The contractor assumes an obligation vis-a-vis the principal to complete  the  work  without  defect.

 

(2)      Work  shall  be  deemed  to  be  defective  if  it  does  not  conform  to the nature agreed. If the nature of the work has not been agreed, work shall  be  deemed  to  be  defective  if  it  is  not  fit  for  the  use  assumed in  the  contract,  and  if  no  specified  use  is  assumed  in  the  contract, the  work  shall  be  deemed  to  be  defective  if  it  is  not  fit  for  normal use.

 

(3)      Work  shall  be  deemed  to  be  defective  if  the  contractor  produces work  that  is  different  from  that  ordered,  or  deficient  in  quantity.

 

  1. (Demand  for  subsequent  completion)

 

 

 

 

 

(1)      If   the   work   is   defective,   the   principal   may   demand   that   the contractor effect subsequent completion within a reasonable time designated by the principal. In such a case, the contractor at his option may  either  rectify  the  defect  or  redo  the  work.

 

(2)      The contractor may refuse to effect subsequent completion if the cost  thereof  is  excessive  in  comparison  with  the  detriment  resulting from  the  defect.

 

(3)       If the contractor redoes the work, he may demand that the principal return  the  defective  work.

 

  1. (Rectification  of  defect  by  principal)

 

(1)     After the expiry of the reasonable time fixed for the subsequent completion  of  the  work,  the  principal  may  rectify  the  defect  himself and  demand  payment  of  the  cost  of  rectification  by  the  contractor.

 

(2)      If the subsequent completion [by the contractor] is unsuccessful, or if relying on the contractor in effecting the subsequent completion of the work is judged to be unduly detrimental to the principal, the principal may also rectify the defect himself and demand payment of the cost  thereof  by  the  contractor.

 

(3)      In  cases  falling  under  paragraphs  (1)  or  (2),  the  principal  may demand  that  the  contractor  pay  the  cost  of  rectification  in  advance.

 

(4)      The  provisions  of  paragraphs  (1),  (2)  or  (3)  shall  not  apply  to cases where the contractor had refused to effect subsequent completion on the basis of paragraph (2) of Article 652(Demand for subsequent completion).

 

  1. (Principal's  right  of  termination)

 

(1)      The  principal  may  terminate  the  contract  on  the  ground  of  the defect  in  the  work  in  accordance  with  the  provisions  of  Book  Four, Chapter Four, Section IV (Termination of contract). The same shall apply to cases where subsequent completion by the contractor is unsuccessful or  where  relying  on  the  contractor  in  effecting  the  subsequent completion   of   the   work   is   judged   to   be   unduly   detrimental   to   the principal.

 

(2)      The  provisions  of  paragraph  (1)  shall  not  apply  to  buildings  or other structures on land. However, where because of a major defect the structure has no use value to the principal, the provisions of paragraph (1)  shall  apply.

 

  1. (Right  of  principal  to  demand  reduction  of  price)

 

(1)    After the expiry of the reasonable time fixed for subsequent completion of the work, the principal may demand reduction of the remuneration for the work on the ground of the defect in the work by declaration  of  intention  to  the  contractor.    The  same  shall  apply  to cases where subsequent completion by the contractor is unsuccessful or

 

 

 

 

where relying on the contractor in effecting the subsequent completion of  the  work  is  judged  to  be  unduly  detrimental  to  the  principal.

 

(2)      In response to the demand by the principal described in paragraph (1), the remuneration for the work shall be reduced by the ratio of the value  of  the  defective  work  to  the  value  of  the  work  without  defect.

 

  1. (Principal's  right  to  demand  damages)

 

(1)       In  lieu  of,  or  in  addition  to  exercising  his  rights  provided  in Articles  652(Demand  for  subsequent  completion)  through  655(Right  of principal to demand reduction of price), a principal may make a demand for damages in accordance with the provisions of Book Four, Chapter Four, Section  III  (Damages),  provided  that  a  demand  for  damages  in  lieu  of subsequent completion may only be made in cases where, after the expiry of  the  reasonable  time  fixed  for  subsequent  completion  of  the  work, subsequent   completion   by   the   contractor   is   unsuccessful   or   where relying on the contractor in effecting the subsequent completion of the work  is  judged  to  be  unduly  detrimental  to  the  principal.

 

(2)      Where  the  cost  of  subsequent  completion  is  considered  excessive in  comparison  with  the  detriment  resulting  from  the  defect,  the principal  may  not  demand  as  damages  under  paragraph  (1)  the  amount  of the  cost  of  rectification  of  the  defect.

 

  1. (Treatment  of   cases   where   the   defect   is   the   result   of   the materials  or  directions  of  the  principal)

 

(1)     The provisions of Articles 652(Demand for subsequent completion) through  656(Principal's  right  to  demand  damages)  shall  not  apply  in cases  where  the  defect  in  the  work  arose  as  a  result  of  the  nature  of the materials provided by the principal or the directions given by the principal; provided that mere wishes expressed by the principal shall not  be  deemed  to  be  directions.

 

(2)      The provisions of paragraph (1) shall not apply if the contractor was aware that the materials or directions were not appropriate but did not  advise  the  principal  to  this  effect.

 

  1. (Period  for  exercise  of  rights)

 

(1)   The rights provided in Articles 652(Demand for subsequent completion)   through   655(Right   of   principal   to   demand   reduction   of price)  must  be  exercised  within  a  period  of  1  year.

 

(2)      The period described in paragraph (1) shall be computed from the time that principal became aware or ought to have become aware of the defect.

 

  1. (Special  agreements  exempting  warranty  liability)

 

Even where a special agreement has been made exempting or limiting any liabilities provided in Articles 652(Demand for subsequent completion) through 655(Right of principal to demand reduction of price), the contractor  shall  not  be  entitled  to  any  exemption  or  limitation  of

 

 

 

 

liability in respect of any fact of which he was aware but did not advise the  principal.

  1. (Principal's  right  of  termination  while  work  is  uncompleted) So long as the contractor has not completed the work, the principal may

terminate  the  contract  at  any  time  by  paying  damages.

 

Chapter Nine CONTRACT   OF   EMPLOYMENT

 

 

  1. (Contract  of  employment)

 

(1)      A  contract  of  employment  is  formed  by  the  promises  of  one  party to  perform  services  under  employment,  and  another  party  to  pay  wages for  it.

 

(2)    The party who promises to perform services under employment is referred  to  as  the  "employee"  and  the  other  party  as  the  "employer".

 

  1. (Specification  of  working  conditions)

 

(1)      At  the  time  of  conclusion  of  the  contract  of  employment,  the employer must specify the wages, working hours and other working conditions  for  the  employee.

 

(2)      The employee may terminate the contract of employment immediately if the actual working conditions differ from those specified in accordance  with  paragraph  (1).

 

  1. (Duty  of  care  relating  to  safety)

 

When establishing and managing the place, facilities and equipment  to be used for the employee's work, the employer shall be obliged to take care  to  protect  the  worker's  life  and  health,  etc.  from  danger.

 

  1. (Personal  exclusivity  of  employment  contract)

 

(1)      Without the permission of the employee, the employer cannot assign his  rights  to  a  third  party.

 

(2)      Without  the  permission  of  the  employer,  the  employee  may  not procure  a  third  party  to  perform  services  in  his  place.

 

(3)      If a party breaches paragraph (1) or paragraph (2), the contract of  employment  may  be  terminated.

 

  1. (Application  of  Labor  Law)

 

Employment  contracts  shall  be  governed  by  the  provisions  of  the  Labor

Law  in  addition  to  those  of  this  Code.

 

Chapter Ten BAILMENT

 

 

 

 

 

Section   I  Genera                               Provisions Re ating  to  Bai  ment

 

  1. (Definition  of  bailment)

 

(1)      Bailment  refers  to  a  contract  whereby  one  party,  the  bailee, accepts  a  thing  for  custody  for  a  certain  period  from  another  party, the  bailor,  and  promises  to  return  the  identical  thing  to  the  bailor upon  the  expiry  of  the  period  of  custody.

 

(2)     Except where there is specific agreement, the bailor assumes no obligation to pay remuneration to the bailee; provided that the bailee may demand reasonable remuneration from the bailor even in the absence of   specific   agreement   if   the   bailee   has  concluded   the   contract   of bailment  as  its  own  business  or  where  there  is  a  provision  of  law  to this  effect.

 

  1. (Requirement  of  delivery  of  thing  for  effective  contract)

 

(1)      A   contract   of   bailment   is   formed   by   virtue   of   receiving   the delivery by the bailee of a thing comprising the object of the bailment in  accordance  with  an  agreement.

 

(2)       If a thing comprising the object is already possessed by the bailee, the  contract  of  bailment  is  formed  by  virtue  of  the  agreement  to  the effect  that  a  bailment  relationship  shall  be  formed.  In  the  case  of  a thing  possessed  by  a  third  party,  the  contract  of  bailment  is  formed

at  the  time  when  the  possession  is  assigned  by  direction12.

 

  1. (Effectiveness  of  consensual  contract  of  bailment)

 

If there is a mere agreement between the parties to form a bailment in the  future,  either  party  may  withdraw  from  such  agreement  at  any  time until delivery of the object of the bailment; provided that in the case of  a  promise  to  form  an  onerous  contract  of  bailment,  if  in  breach  of such promise the party who is to become the bailee causes damage to the other party by refusing to receive the delivery of the object of the bailment, he must compensate the other party for such damage unless he has  a  good  reason  for  such  refusal.

 

  1. (Bailment  contract  concluded  by  non-owner)

 

Even if the bailor is not the owner of the object of the bailment, the bailment contract is validly formed. In such a case, even if a suit claiming return of the thing is filed by the owner against the bailee, the bailee can return the thing to the bailor; provided that this shall not apply where the owner's claim is found to be valid [by the court].

 

  1. (Bailee's  duties)

 

(1)      A bailee shall be obliged to keep custody of the thing bailed with the  care  of  a  prudent  manager.

 

 

12   See  paragraph  (4)  of  Article  228.

 

 

 

 

 

(2)      The  bailee  may  not  use  the  thing  bailed  without  the  consent  of the  bailor.

 

  1. (Liability  of  bailee)

 

(1)      The  bailee  shall  be  liable  to  pay  damages  if  he  destroys,  loses or damages the object of the bailment; provided that this shall not apply if the bailee proves that such destruction, loss or damage was not the result  of  negligence  on  his  part.

 

(2)      In the case of a bailment effected at the request of the bailee, the bailee shall not be exempted from liability for destruction or loss of  or  damage  to  the  object  of  the  bailment  unless  he  proves  force majeure.

 

(3)      In  the  case  of  hotels,  lodging  houses,  restaurants,  bathhouses or other facilities where guests congregate, the owner of the facility who accepts bailment of things by guests shall not be exempted from liability for destruction or loss of or damage to the object of the bailment  unless  he  proves  force  majeure.

 

  1. (Reduction  of  liability  of  gratuitous  bailee)

 

In the case of a gratuitous bailment, the court may reduce the liability of  the  bailee  in  damages,  taking  into  account  the  financial  situation of  both  the  parties  and  other  circumstances  generally.

 

  1. (Mitigation  of  liability  where  valuables  not  declared)

 

The court may reduce the liability of the bailee in damages where the bailor  has  deposited  cash,  negotiable  instruments  or  other  valuable items  without  declaring  the  type  and  the  value  thereof  to  the  bailee.

 

  1. (Duty  of  personal  custody)

 

(1)      The  bailee  may  not  without  the  permission  of  the  bailor  entrust the  custody  of  the  object  of  the  bailment  to  any  third  party.

 

(2)      In cases where the bailee is permitted to entrust the custody of the object of the bailment to a third party, the bailee shall be liable for  the  choice  of  and  the  supervision  of  the  sub-bailee.

 

  1. (Sub-bailment)

 

(1)      The   provisions   of   Chapter   10   (Bailment)   shall   apply   mutatis mutandis  to  the  relationship  of  the  bailee  and  the  sub-bailee.

 

(2)     The sub-bailee shall have the same rights and obligations as the bailee  vis-a-vis  the  bailor.

 

(3)       If the sub-bailee returns the object of the bailment to the bailor, he  shall  be  exempted  from  the  obligation  to  return  it  to  the  bailee.

 

  1. (Bailee's  notice  obligation)

 

 

 

 

 

If  a  third  party  files  a  suit  against  the  bailee  claiming  any  rights over  the  object  of  the  bailment  or  seizes  it,  the  bailee  shall  report to  the  bailor  without  delay.

 

  1. (Bailee's  obligation  to  return)

 

Even where the parties have stipulated a time for return of the object of  the  bailment,  the  bailor  may  demand  return  thereof  at  any  time.

 

  1. (Return  by  bailee)

 

(1)      If the parties have not stipulated a time for return of the object of  the  bailment,  the  bailee  may  return  it  at  any  time.

 

(2)      If a time for return has been stipulated, the bailee may not return the  object  prior  to  such  time  except  in  unavoidable  circumstances.

 

  1. (Details  of  obligation  to  return)

 

(1)      The  bailee  assumes  an  obligation  to  return  to  the  bailor  the identical  thing  received  at  the  time  of  the  bailment.

 

(2)      In  cases  where  the  bailee  is  not  liable  for  destruction  or  loss of or damage to the object of the bailment, the bailee shall be obliged to  deliver  to  the  bailor  any  insurance  money  or  other  things  received as replacement for the original object that was destroyed, lost or damaged.

 

  1. (Treatment of  fruits,  etc.)

 

If the bailee receives any fruits or income from the object of the bailment,  the  bailee  must  deliver  the  same  to  the  bailor.

 

  1. (Bailment  of  money)

 

(1)      If  a  bailee  accepts  a  bailment  of  money,  the  bailee  must  keep custody of it in the manner prescribed in the contract. In such a case, the bailee does not assume any liability to pay interest, except where this  is  specifically  agreed.

 

(2)      Where the money can be kept as a bank deposit, the provisions of

Article  680(Treatment  of  fruits,  etc.)  shall  apply  to  interest.

 

  1. (Expense  of  return  of  object)

 

In  the  case  of  a  gratuitous  bailment,  the  bailor  shall  bear  the  cost of return of the object of the bailment; provided that where the bailee changes the location of the object, the bailee shall bear any increase in  the  cost  of  return  resulting  from  such  change.

 

  1. (Obligation  of  bailor  to  reimburse  costs)

 

(1)      The bailor shall be required to pay the costs of keeping the object of  the  bailment.

 

 

 

 

 

(2)       The bailee may demand that the bailor compensate him for any damage suffered  on  account  of  the  object  of  the  bailment  without  negligence on  the  part  of  the  bailee.

 

  1. (Place  of  return)

 

In  the  absence  of  any  specific  provision  in  the  contract,  the  object of the bailment shall be returned at the place where it should be kept; provided that if the bailee has changed the location of the object for good  reason,  it  may  be  returned  at  its  current  location.

 

  1. (Bailee's  right  of  retention)

 

The bailee may retain the object of the bailment until such time as the bailor pays any costs and damages prescribed in paragraphs (1) and (2) of  Article  683(Obligation  of  bailor  to  reimburse  costs).

 

 

Section   II  Ming  ing  of  objects of  bai  ment

 

  1. (Mingling  of  objects  of  bailment)

 

Where a bailee has accepted for bailment objects of the same type from multiple   bailors   and   under   the   contract   such   objects   can   be   kept together without being separated, each bailor shall have a right proportionate to the quantity of his own object over the whole of the objects  kept  together  by  the  bailee.

 

 

Section   III  Bai  ment  for  consumption

 

  1. (Bailment  for  consumption)

 

If  there  is  provision  in  the  bailment  contract  permitting  the  bailee to consume the object of the bailment, the bailee assumes an obligation to  return  an  object  of  identical  type  and  quantity  to  the  bailor.

 

  1. (Mutatis mutandis application of provisions governing loan for consumption)

 

The provisions governing loan for consumption shall apply mutatis mutandis to a bailment for consumption under Article 687(Bailment for consumption); provided that if no time of return is provided in the contract,  the  bailor  may  demand  return  at  any  time.

 

 

Section   IV  Bai  ment  of  object in  dispute

 

  1. (Definition  of  bailment  of  object  in  dispute)

 

A  bailment  of  an  object  in  dispute  refers  to  an  agreement  by  a  number of   persons   to   deposit   with   a   third   party   an   object   of   which   the first-mentioned parties are disputing the right of possession or ownership pending the conclusive determination of the holder of such rights.

 

 

 

 

 

  1. (Parties  to  bailment  of  object  in  dispute)

 

(1)      Where   an   object   in   respect   of   which   a   number   of   parties   are claiming rights is in the possession of another party, the disputing parties, with the consent of the possessor of the object, may conclude an agreement to place the custody of the object with a third party. In such  a  case,  the  bailment  agreement  will  come  into  force  at  the  time of  delivery  of  the  object  in  dispute  by  the  current  possessor  to  the third  party.

 

(2)      In  cases  described  in  paragraph  (1),  the  disputing  parties  may also conclude a bailment agreement that makes the current possessor the bailee  of  the  object  in  dispute.

 

  1. (Condition  of  validity)

 

A  bailment  of  an  object  in  dispute  shall  not  be  valid  unless  all  the parties  claiming  rights  over  the  said  object  consent.

 

  1. (In  principal  onerous)

 

In  the  case  of  a  bailment  of  an  object  in  dispute,  the  bailors  assume an obligation to pay remuneration to the bailee. If there is no agreement by the parties as to remuneration, the bailee may demand a reasonable amount  of  remuneration  from  the  bailors.

 

  1. (Return  of  object  in  dispute)

 

Upon the conclusion of the dispute, the bailee shall return the object to  the  party  found  to  be  entitled  to  it.

  1. (Termination of bailment agreement concerning object in dispute) The  bailee  may  not  return  the  object  in  dispute  to  the  bailors  prior

to  the  resolution  of  the  dispute  unless  all  the  bailors  agree.

 

  1. (Bailment  of  object  in  dispute  by  court  order)

 

The  court  may  order  the  object  in  dispute  placed  in  the  custody  of  a third  party  even  in  the  absence  of  agreement  by  the  parties.

 

Chapter E  even PARTNERSHIP

 

 

  1. (Definition  of  partnership)

 

A  partnership  contract  refers  to  a  contract  for  the  establishment  of an organization without judicial person's status for the purpose of carrying on a common undertaking with contributions made by each party.

 

  1. (Establishment  of  partnership)

 

(1)      A partnership refers to an organization established by agreement

 

 

 

 

of  partners  to  contribute  to  and  carry  on  a  common  undertaking.

 

(2)      The  contributions  to  be  made  by  each  partner  may  take  the  form of  services  instead  of  property  rights.

 

(3)      If  a  partner  contributing  money  is  late  in  payment,  in  addition to  interest  in  arrears  he  shall  be  liable  for  any  damage  suffered  by the  partnership  as  a  result  of  such  delay.

 

(4)      In case where any party among the parties who agreed to establish the partnership lacks or has defect in his declaration of intention and such declaration of intention is rescinded, such party shall be deemed to  have  withdrawn  from  the  partnership  and  the  partnership  shall  be deemed to have been established by the other parties; provided that if by reason of the lack of the withdrawing party the objective of the partnership cannot be attained, the partnership shall be deemed not to have  been  established.

 

  1. (Co-ownership  of  partnership  property)

 

(1)      The   contributions   of   the   partners   and   all   other   partnership property  shall  be  co-owned  by  all  the  partners.

 

(2)      No  partner  may  seek  partition  of  the  partnership  property  prior to the dissolution of the partnership; provided however that where all the partners agree, a partner may seek partition of the partnership property  prior  to  the  dissolution  of  the  partnership.

 

(3)      A partition described in the proviso of paragraph (2) may not be set up against a third party who entered into a transaction with the partnership  prior  to  the  partition.

 

(4)     The partners may not dispose of their shares in the partnership property.

 

  1. (Method  of  conducting  business)

 

(1)     In the absence of any provision in the contract that mandates the business  of  the  partnership  to  a  particular  partner  or  a  third  party, each  partner  shall  have  the  power  to  conduct  said  business;  provided that the conduct of the business of the partnership shall be determined by  a  majority  of  the  partners.

 

(2)      Where the conduct of the business of the partnership is mandated by  the  contract  to  more  than  one  partner  or  third  party,  said  conduct shall  be  determined  by  a  majority  of  said  persons.

 

(3)      Notwithstanding  the  provisions  of  paragraphs  (1)  and  (2),  any partner  or  manager  of  the  business  may  conduct  the  ordinary  business of the partnership alone; provided that this shall not apply if any other partner or manager raises an objection before the completion of such business.

 

  1. (Mutatis mutandis application of provisions governing mandate)

 

 

 

 

The   provisions   of   Articles   637(Mandatary's   duty   of   care)   through

643(Mandatary's right to demand reimbursement of expenses, etc.) shall

apply  mutatis  mutandis  to  managing  partners  of  a  partnership.

 

  1. (Resignation  or  dismissal  of  managing  partner)

 

(1)      A  managing  partner  may  not  resign,  nor  may  the  managing  partner be  dismissed,  without  good  reason.

 

(2)      The approval of a majority of the other partners must be obtained in  order  to  dismiss  a  managing  partner  for  good  reason.

 

  1. (Right  to  inspect  status  of  business  and  assets)

 

Whether or not they are managing partners, all partners shall have the right  to  inspect  the  business  and  the  partnership  assets.

 

  1. (Right to demand dividends, ratio of distribution of profit and loss)

 

(1)      The  partners  shall  periodically  calculate  the  profit  and  loss, and  may  demand  a  dividend  in  the  event  of  a  profit.

 

(2)     If the partners have not stipulated the ratio of distribution of profit and loss, it shall be based on the value of each partner's contribution.

 

(3)       If a stipulation has been made of the distribution ratio for profit or loss alone, such ratio shall be presumed to apply to both profit and loss.

 

  1. (Apportionment  of  losses  among  partners  vis-a-vis  creditor)

 

(1)    A  creditor  of  the  partnership  who  was  not  aware  of  the apportionment of losses among the partners at the time the creditor's claim came into existence may exercise his rights against each partner equally.

 

(2)    Each partner shall be jointly liable with the partnership for partnership obligations to creditors up to the limit of the partner's apportioned  liability  for  losses.

 

  1. (Prohibition  of  set-off  of  partnership's  claim)

 

A debtor of the partnership cannot set off his debt against a claim that the  debtor  holds  against  a  partner.

 

  1. (Voluntary  withdrawal)

 

(1)      If no period has been stipulated in the contract for the duration of  the  partnership,  or  if  such  duration  is  stipulated  to  be  the  life of a certain partner, any partner may withdraw at any time; provided, however, that no partner may withdraw at a time that would be unfavorable to  the  partnership  except  for  unavoidable  reason.

 

 

 

 

(2)     Even if a duration has been stipulated for the partnership, any partner  may  withdraw  for  unavoidable  reason.

 

(3)      Withdrawal  shall  be  effected  by  declaration  of  intention  to  all the  other  partners.

 

  1. (Involuntary  withdrawal)

 

In addition to the cases described in Article 706(Voluntary withdrawal), a  partner  shall  withdraw  upon  the  occurrence  of  any  of  the  following events:

  1. a) Death;
  2. b) Bankruptcy;
  3. c) Being served     with    a    declaration     of    commencement     of guardianship;  or
  4. d)

 

  1. (Expulsion)

 

Expulsion of a partner may be done only for reasonable cause, with the consent  of  all  the  other  partners;  provided  that  expulsion  cannot  be set  up  against  the  expelled  partner  until  he  has  been  given  notice thereof.

 

  1. (Return  of  share  to  withdrawing  partner)

 

(1)      Accounts  shall  be  taken  between  a  withdrawing  partner  and  the other  partners  on  the  basis  of  the  status  of  the  partnership  property at  the  time  of  withdrawal.

 

(2)       Regardless of the type of contribution, the share of a withdrawing partner  may  be  returned  in  cash.

 

(3)      With regard to any matter that was not yet concluded at the time of   withdrawal,  account   shall   be   taken   upon   the   conclusion  of   such matter.

 

(4)      An   expelled   partner's   share   shall   be   returned   together   with interest at the legal interest rate calculated from the date of notice of  expulsion  until  return.

 

  1. (Dissolution  of  partnership)

 

(1)      A  partnership  shall  be  dissolved  upon  the  occurrence  of  any  of the  following  events:

  1. a) The conclusion, or the impossibility of conclusion, of the business that  was  the  objective  of  the  partnership;
  2. b) Unanimous agreement  of  the  partners;
  3. c) The partners  having  been  reduced  to  one  person;  or
  4. d) The expiry of the duration of the partnership stipulated in the partnership  

 

(2)    Where  there  is  unavoidable  reason,  any  partner  may  demand dissolution  of  the  partnership.

 

 

 

 

(3)     A demand under paragraph (2) shall be effected by declaration of intention  to  all  the  other  partners.

 

  1. (Non-retroactivity)

 

The  dissolution  of  a  partnership  shall  not  have  retroactive  effect.

 

  1. (Liquidators)

 

(1)      If  a  partnership  is  dissolved,  the  liquidation  shall  be  carried out by all the partners jointly, or by liquidator(s) appointed by the partners.

 

(2)   Unless otherwise provided in the partnership contract, the appointment of liquidator(s) shall be determined by a majority of the partners.

 

  1. (Conduct  of  business  by  liquidators)

 

If there is more than one liquidator, Article 699(Method of conducting business)  shall  apply  mutatis  mutandis.

 

  1. (Resignation  or  dismissal  of  liquidator(s))

 

Where liquidator(s) have been selected from among the partners by unanimous    agreement    of    the    partners,    the    provisions    of    Article

701(Resignation or dismissal of managing partner) shall apply mutatis mutandis.

 

  1. (Duties and  powers  of  liquidators,  method  of  distribution  of surplus  property)

 

(1)      The  provisions  of  Article  71(Duties  and  powers  of  liquidators) shall  apply  mutatis  mutandis  to  the  duties  and  powers  of  the liquidators.

 

(2)      Surplus property shall be distributed in proportion to the value of  each  partner's  contribution.

 

Chapter Twe  ve LIFE ANNUITY

 

 

  1. (Definition  of  life  annuity  contract)

 

(1)      A contract of life annuity refers to a contract pursuant to which one  party,  the  annuity  debtor,  promises  to  assume  an  obligation  to deliver money periodically to another party, the annuity creditor,  or to a third party, until the death of the annuity debtor, annuity creditor or third party, and in exchange the annuity creditor promises to assume the burden of the obligation to pay or perform as consideration thereto.

 

(2)      A  contract  of  life  annuity  shall  not  be  valid  unless  it  is  in writing.

 

 

 

 

(3)     An annuity creditor shall acquire a preferential right over the performance   delivered   by   the   other   party   in   exchnge   for   the   life annuity.

 

  1. (Calculation  of  life  annuity)

 

A  life  annuity  shall  be  calculated  on  a  daily  basis.

 

  1. (Non-performance  of  annuity  obligation)

 

(1)      If  the  annuity  debtor  neglects  to  deliver  the  annuity  or  fails to  perform  any  other  of  his  obligations,  the  other  party  may  rescind the  life  annuity  contract  and  demand  that  any  thing  already  delivered be returned on an as-is basis; provided that the other party must return any  subsisting  profits  to  the  life  annuity  debtor.

 

(2)    The provisions of paragraph (1) shall not preclude a claim for damages.

 

  1. (Death  attributable  to  fault  of  annuity  debtor)

 

If the death of a person on whose death the life annuity is to terminate occurs due to a cause attributable to fault on the part of the annuity debtor, the court, on the application of the annuity creditor or his successor, may declare that the [life annuity] shall continue to exist for  a  reasonable  period.

 

  1. (Testamentary  gift  of  life  annuity)

 

The provisions of this Chapter 12 (Life annuity) shall apply mutatis mutandis  to  a  testamentary  gift  of  a  life  annuity.

 

Chapter Thirteen  COMPROMISE

 

 

  1. (Definition)

 

A compromise is a contract involving mutual promises by the parties to a  dispute  to  resolve  such  dispute  by  concessions.

 

  1. (Subject  matter  of  compromise)

 

(1)      In  order  to  make  a  compromise,  the  parties  must  have  the  power to  dispose  of  the  subject  matter  involved  in  the  compromise.

 

(2)      A  compromise  purporting  to  validate  legal  relations  that  are invalid on account of breach of mandatory law or public order and good morals  shall  be  invalid.

 

  1. (Penalty  clause)

 

A compromise contract may include a provision for a penalty to be imposed on  a  party  breaching  the  contract.

 

 

 

 

  1. (Effect  of  compromise)

 

Where by virtue of a compromise it is admitted that one of the parties possesses the right in dispute, or that the other party does not possess such    right,    and    thereafter    it    is    confirmed    that    in    fact    the first-mentioned  person  did  not  possess  the  right  in  question  or  that the  other  party  did  possess  it,  such  right  shall  be  treated  as  having been transferred to the first-mentioned party, or extinguished, as the case  may  be,  by  virtue  of  the  compromise.

 

  1. (Mistake  relating  to  rights,  etc.  in  dispute)

 

Even where one of the parties has made a compromise based on a mistake as to the ownership of the right or a fact that forms the basis of the calculation of the subject matter in dispute, if the parties have made the compromise by making concessions concerning the ownership of the relevant  right  or  the  existence  of  the  fact  or  the  value  in  question, etc.,  the  compromise  cannot  be  rescinded  on  the  ground  of  mistake  as to  the  ownership  of  the  right,  the  existence  of  the  fact  or  the  value in  question,  etc.

 

Chapter Fourteen MANAGEMENT   OF  AFFAIRS    WITHOUT MANDATE

 

 

  1. (Duty  of  manager  of  affairs  without  mandate)

 

(1)      "Management  of  affairs  without  mandate"  refers  to  entering  into the management of affairs on behalf of another person despite not being authorized to do so, and the person who does this is referred to as the "manager  [of  affairs]".

 

(2)      The  manager  shall  take  the  care  of  a  prudent  manager  and  manage the   affairs   in   the   manner   most   advantageous   to   the   principal   in accordance  with  the  nature  of  the  affairs.

 

(3)      If  the  manager  is  aware  of  or  should  be  aware  of  the  intention of  the  principal,  he  shall  conduct  the  management  in  accordance  with such  intention.

 

  1. (Urgent  management  of  affairs)

 

If   the   manager   manages   the   principal's   affairs   in   order   to   avoid imminent danger to the principal's life, reputation or property, the manager  assumes  no  liability  to  compensate  any  damage  that  arises  as a  result  thereof,  except  where  there  is  mala  fide  or  gross  negligence on  the  part  of  the  manager.

 

  1. (Manager's  obligation  to  give  notice)

 

The manager shall give notice without delay to the principal of his commencement of management, except where the principal is already aware of  this  fact.

 

  1. (Manager's  obligation  to  continue  management)

 

 

 

 

 

The manager must continue management until such time as the principal, his  successor  or  legal  representative  is  ready  to  conduct  such management; provided that if continuation would clearly be contrary to the intention of the principal or detrimental to his interests, the management  shall  be  discontinued.

  1. (Application mutatis mutandis of provisions governing mandate) The provisions  of  Articles  638(Mandatary's  duty  to  report)  through

640(Mandatary's  liability  to  compensate  for  money  spent)  shall  apply

mutatis  mutandis  to  management  of  affairs  without  mandate.

 

  1. (Manager's  right  to  demand  reimbursement  of  expenses)

 

(1)      If a manager pays a beneficial expense on behalf of the principal, he  may  demand  reimbursement  from  the  principal.

 

(2)    If the manager assumes a beneficial liability on behalf of the principal, the provisions of paragraph (2) of Article 643(Mandatary's right to demand reimbursement of expenses, etc.) shall apply mutatis mutandis.

 

(3)     If the manager conducts affairs contrary to the intention of the principal, the provisions of paragraphs (1) and (2) shall apply mutatis mutandis to the extent that the principal is actually enriched thereby.

 

  1. (Manager's  right  to  demand  remuneration)

 

A manager may demand that the principal pay the amount of normal remuneration for management of affairs carried out by the manager after the  principal  becomes  aware  of  the  fact  of  management,  in  cases  where such   management   is   included   in   the   occupation   or   business   of   the manager.

 

Chapter Fifteen UNJUST    ENRICHMENT

 

 

  1. (Requirements  and  effect  of  unjust  enrichment)

 

(1)      A   person   who   without   legal   cause   derives   a   benefit   from   the property  or  services  of  another  and  thereby  causes  loss  to  said  other shall be obliged to return such benefit to the extent that it subsists.

 

(2)      Where   a   person   receives   the   benefit   of   performance   under   a contract, if such contract is or becomes void, the person receiving the benefit  from  such  performance  shall  be  obliged  to  return  the  benefit to the person who effected such performance, in the same manner as under paragraph  (1).

 

  1. (Obligation  to  return  benefit  received  mala  fide)

 

(1)      Where a person receiving a benefit under Article 733(Requirements and effect of unjust enrichment) was aware that there was no legal ground

 

 

 

 

or that the contract was void, the said person shall be obliged to return any benefit subsisting at the time he became aware of the said fact together  with  interest  thereon.

 

(2)    A person who has received a benefit under a contract that is invalidated  due  to  an  intent  or  negligence  of  such  person  shall  be obliged to return such benefit together with interest in the same manner as  under  paragraph  (1).

 

(3)       The person receiving the benefit under paragraphs (1) or (2) shall be obliged to compensate any damage suffered by the person who incurred the  loss  [by  enriching  the  first-mentioned  person].

 

  1. (Discharge  when  there  is  no  obligation)

 

A  person  who  effects  performance  in  [purported]  discharge  of  an obligation that does not exist may demand return of those delivered by the performance; provided however that, where such person was aware at the time of performance that the obligation did not exist, he may not demand  return  of  those  delivered  by  the  performance.

 

  1. (Discharge  before  maturity)

 

A  person  who  effects  performance  in  discharge  of  an  obligation  prior to its maturity may not demand return of those delivered by such performance; provided that where an obligor effects discharge without being aware that the obligation has not yet matured, the obligee shall return any benefit  derived from the obligation being discharged prior to  maturity.

 

  1. (Discharge  of  obligation  of  another)

 

(1)    A person not being the obligor who effects performance of an obligation  in  purported  discharge  thereof  under  the  mistaken  belief that  the  obligation  is  his  own,  may  demand  return  of  those  delivered by such performance; provided however that, where the obligee, being unaware of the mistake on the part of the person who effects performance and believing that this constitutes a valid discharge of the obligation, destroys  the  documentary  evidence  of  the  existence  of  the  obligation or relinquishes security thereover, the person who effected the performance may not demand return of those delivered by the performance.

 

(2)      The  provisions  of  paragraph  (1)  shall  not  preclude  the  exercise by the person who effects performance in purported discharge of an obligation  of  the  right  to  demand  reimbursement  by  the  obligor.

 

  1. (Performance  for  illegal  cause)

 

Under  this  Chapter  15  (Unjust  Enrichment),  if  a  demand  by  the  person who has suffered loss for return of unjust enrichment would be in breach of public order and good morals or any law regarding public order, such demand  shall  not  be  allowed.

 

 

 

 

 

 

Chapter Sixteen  TORTS

 

  1. (Definitions  of  intent  and  negligence)

 

For  the  purposes  of  this  Chapter,  an  intentional  or  negligent  act  is either  of  the  following  types  of  act:

  1. a) an act that harms another where  the actor has foreseen that a particular result would occur but accepted the occurrence of  such  result;  or
  2. b) an act  with  respect  to  which  (i)  a  person  having  the  same profession  or  experience  as  the  actor  could  have  foreseen that a particular result would normally occur from the act, but the actor failed to foresee the result due to an absence of   care,   and   (ii)   the   actor   owes   a   duty   to   avoid   the occurrence of such result but neglected to fulfill such

 

  1. (Elements  of  general  tort  and  burden  of  proof)

 

(1)      A person who intentionally or negligently infringes on the rights or  benefits  of  another  in  violation  of  law  is  liable  for  the  payment of  damages  for  any  harm  occurring  as  a  result.

 

(2)       Paragraph (1) shall apply mutatis mutandis to cases where a harm has  occurred  due  to  non-performance  of  a  certain  act  with  respect  to which  the  actor  owes  a  duty  to  perform  such  act.

 

(3)      Except  as  otherwise  provided  in  this  Code  or  in  other  laws,  the person   seeking   damages   must   prove   the   intent   or   negligence  of   the tortious actor, the causal relationship between the actions of the tortious actor and the harm that occurred, and the harm suffered by the injured  party.

 

  1. (Damages  for  non-economic  harm)

 

The   person   liable   under   the   provisions   of   Article   740(Elements   of general tort and burden of proof) must also pay damages for non-economic harm.

 

  1. (Lack  of  competence  to  assume  liability)

 

(1)      A  minor  under  the  age  of  14  cannot  be  held  liable  in  tort.

 

(2)      A   person   who   due   to   mental   defect   or   other   reason   lacks   the capacity to understand the legal ramifications of their actions when committing a tortious act cannot be held liable in tort. However, this shall not apply where the person's condition was invited through intent or  negligence.

 

 

  1. (Liability  of  persons  having  a  duty  to  supervise)

 

(1)      A person who has a legal duty to supervise a minor under the age of   14   or   a   person   who   due   to   mental   defect   lacks   the   capacity   to

 

 

 

 

understand   the   legal   ramifications   of   their   actions   is   liable   for damages  for  any  harm  caused  to  others  by  the  actions  of  the  minor  or person  lacking  capacity.

 

(2)      A  person  who  has  a  legal  duty  to  supervise  a  minor  14  years  old or older is jointly liable with the minor for damages for any harm caused to  others  by  the  actions  of  the  minor.

 

(3)    A person under a duty of supervision who is liable for damages pursuant to paragraph (2) can avoid liability by proving that he had fulfilled  his  duty  to  provide  regular  and  consistent  supervision.

 

  1. (Employer's  liability)

 

(1)      A person who uses an employee to perform work is liable for damages caused  in  violation  of  law  to  another  in  the  performance  of  that  work by  the  employee  through  the  employee's  intent  or  negligence.

 

(2)      A   person   who   is   charged   with   performing   supervision   of   the employee  in  place  of  the  employer  bears  the  same  liability  as  the employer. However, this shall not apply where supervision was properly performed.

 

(3)      An employer or substitute supervisor may demand compensation from the  employee  in  proportion  to  their  degree  of  negligence.

 

  1. (Tortious  act  of  juridical  person)

 

(1)      Where  a  director  or  other  legal  representative  of  a  juridical person intentionally or negligently causes harm to another in violation of  law  in  the  exercise  of  such  person's  duties,  the  juridical  person is  liable  for  the  payment  of  damages.

 

(2)      A juridical person that pays damages in accordance with paragraph (1) may demand compensation from the representative who committed the tortious  act.

 

  1. (Tortious  act  of  public  official)

 

(1)    Where  a  public  official  who  exercises  the  public  authority possessed by the national government or a governmental entity intentionally or negligently harms another in violation of law in the course of his public duties, the national government or governmental entity  is  liable  for  the  payment  of  damages.

 

(2)      In  the  case  described  in  paragraph  (1),  the  national  government or governmental entity may demand compensation from the public official if  the  official's  act  constituted  a  serious  breach  of  the  official's duty  to  avoid  the  occurrence  of  the  result.

 

  1. (Liability  of  animal  possessor)

 

The  possessor  of  an  animal  is  liable  for  damages  for  any  harm  caused to  another  by  the  possessed  animal.

 

 

 

 

  1. (Product  liability)

 

(1)     Where an unreasonably dangerous defect exists in a manufactured movable and harm results to another due to such defect, the manufacturer of the movable is liable for damages. However, this shall not apply where the defect could not have been discovered based on the scientific standards  existing  at  the  time  of  manufacture.

 

(2)      The manufacturer of a movable that incorporates a defective part or  material  is  also  liable  for  damages  as  a  manufacturer.

 

(3)      For  the  purposes  of  this  Article,  the  importer  of  an  imported movable  shall  be  deemed  the  manufacturer.

 

(4)      For  the  purposes  of  this  Article,  a  person  who  affixes  his  name on a movable as a manufacturer or distributor shall be deemed the manufacturer.

 

  1. (Liability  for  dangerous  item)

 

A  person  who  owns  or  manages  an  automobile  or  other  transportation apparatus, an explosive item, a radioactive substance, a toxic chemical, a toxic organism or any other highly dangerous item is liable for damages for  any  harm  caused  to  another  thereby.  However,  this  shall  not  apply where the harm occurred due to an unavoidable force, or where there was no failure in the person's management of the dangerous item and the harm was  caused  by  the  act  of  the  injured  party  or  a  third  party.

 

  1. (Liability  for  structure  affixed  to  land)

 

(1)      Where harm results to another due to a failure in the installation or control of a structure affixed to or appurtenant to land, the person who  manages  the  structure  and  the  owner  of  the  structure  are  jointly liable for damages. However, the person who manages the structure shall be exempted from liability if he proves that he exercised proper control over  the  structure.

 

(2)      The  relative  proportions  of  liability  between  the  person  who managed the structure and the owner of the structure shall be determined in accordance with their relative contributions to the failure in the installation  or  control  of  the  structure.

 

  1. (Joint  tort)

 

(1)     Where harm is caused jointly by the acts of several persons, each actor  is  jointly  liable  for  the  resulting  harm.

 

(2)     In the case described in paragraph (1), where a joint tortfeasor proves his individual percentage contribution to the harm, such actor shall  be  liable  only  for  that  percentage  of  the  total  harm.  However, this shall not apply where it is determined that the actors engaged in a  conspiracy  or  otherwise  colluded  in  causing  the  harm.

 

(3)    Where a joint tortfeasor voluntarily pays the entire amount of damages, the joint tortfeasor may demand indemnification from the other

 

 

 

 

jointfeasors in accordance with their respective contributions to the harm.

 

  1. (Definitions of justifiable self-defense and emergency escape)

 

(1)     An act of justifiable self-defense is a harmful act that is made against an unlawful harmful conduct but is necessary in order to defend the physical well-being or the property of oneself or another from such conduct, and involves a situation in which the harmful conduct and the act of self-defense are closely related in time and there is no disparity in the means of self-defense employed and the severity of the harmful conduct  [to  be  prevented  thereby].

 

(2)      An act of emergency escape is an act that causes harm to another but was necessary in order to defend the physical well-being or the property of oneself or another from a present or impending danger, and involves a situation in which there is no disparity in the means of emergency escape and the severity of the danger [to be avoided thereby].

 

  1. (Grounds  for  excuse  from  illegality  or  responsibility)

 

(1)      A tortfeasor shall be excused from responsibility for harm caused by  the  tortfeasor  where  the  injured  party  consented  to  or  assumed  the risk of such harm. However, this shall not apply where such consent or assumption  of  risk  contravenes  prevalent  social  standards.

 

(2)      A person who causes harm while engaged in justifiable self-defense or emergency escape shall not be held responsible for harm that results therefrom. In this case, the person committing the unlawful conduct that gave  rise  to  such  justifiable  self-defense  or  emergency  escape  shall be  held  responsible  for  the  resulting  harm.

 

(3)    A  person  who  commits  an  act  that  is  deemed  reasonable  and acceptable  under  prevalent  social  standards  shall  not  be  held responsible  for  the  harm  caused  thereby.

 

  1. (Principle  of  monetary  damages;  exceptions)

 

(1)      Damages  shall  be  paid  in  money  in  principle.

 

(2)     Where money would not provide an appropriate remedy, the injured party  may  demand  restitution  or  injunctive  relief.

 

(3)      A person who suffers harm to their honor or reputation may demand, in  addition  to  damages,  that  the  tortfeasor  take  measures  to  restore the  injured  party's  honor  or  reputation,  such  as  a  published  apology.

 

  1. (Calculation  of  damages)

 

(1)     When calculating the economic loss caused by a tortious act, the difference  between  the  economic  situation  that  would  be  presumed  to exist   had   the   tortious   act   not   occurred   and   the   actual   economic situation after the tortious act occurred shall be calculated using statistics  and  other  materials  to  the  extent  possible.

 

 

 

 

(2)    When calculating the mental or emotional distress caused by a tortious act, [the amount of damages] shall be determined taking into account such factors as the degree of culpability of the tortious actor, the type and degree of harm, and the tortious actor's conduct after committing  the  tortious  act.

  1. (Damages  for  harm  caused  by  loss  or  destruction  of  a  thing) Where  a  thing  is  destroyed  or  damaged  by  a  tortious  act,  the  injured

party may seek compensation  for  the price of the damaged or destroyed thing,  the  cost  of  repair,  etc.

 

  1. (Damages  for  wrongful  death)

 

(1)     Where the injured party dies as the result of a tortious act, such injured party shall acquire a right to demand damages for economic harm and   emotional   distress   suffered   prior   to   death.   As   used   herein,

'economic harm' includes medical expenses which have already been paid

or  which  the  injured  party  is  obligated  to  pay  from  the  date  of  the tortious  act  until  the  date  of  death,  as  well  as  other  expenditures,

income  which  the  injured  party  was  unable  to  receive  between  the  date of  the  tortious  act  and  the  date  of  death,  etc.

 

(2)      Where  a  person  who  is  obligated  by  law,  custom  or  contract  to provide  support  to  a  dependent  dies  as  the  result  of  a  tortious  act, the dependent may demand damages for economic harm suffered as a result of the injured party's death. As used herein, economic harm includes support  that  the  dependent  was  unable  to  receive  as  a  result  of  the injured party's death, expenditures made in place of the injured party, funeral  expenses,  etc.

 

(3)     Where the injured party dies as the result of a tortious act, the injured party's spouse, relatives within the first degree of consanguinity and relatives living in the same household as the injured party may demand damages for emotional distress they have suffered due to  the  injured  party's  death.

 

  1. (Damages  for  bodily  harm)

 

Where an injured party suffers bodily harm as the result of a tortious act,   the   injured   party   may   demand   damages   for   economic   harm   and emotional distress suffered thereby. As used herein, economic harm includes medical expenses already paid or expected to be paid in the future, loss of income while receiving medical treatment, future income that cannot be received due to the residual effects of the injury, etc. As used herein, emotional distress includes emotional distress suffered while  receiving  medical  treatment,  future  emotional  distress,  etc.

 

  1. (Damages for  mental  or  emotional  distress  caused  by  injury  to honor  or  reputation)

 

Where one's honor or reputation is damaged by a tortious act, the injured party  may  seek  damages  for  mental  or  emotional  distress  accompanying the  drop  in  one's  social  standing.

 

 

 

 

  1. (Set-off  of  losses  and  benefits)

 

Where  an  injured  party  receives  a  gain  or  benefit  from  the  result  of a  tortious  act,  the  amount  of  such  gain  or  benefit  shall  be  deducted from the amount of recoverable damages when such damages are calculated.

 

  1. (Set-off  for  contributory  negligence)

 

Where  the  negligence  of  the  injured  party  or  that  of  a  person  under  a duty to supervise the injured party contributed to the occurrence or aggravation of the injury, the court may take the degree of contribution of  such  negligence  into  account  when  calculating  the  amount  of recoverable  damages.

 

  1. (Extinctive  prescription)

 

The right to demand damages on account of a tortious act shall be extinguished  by  prescription  upon  the  expiration  of  three  years  from the time that the injured party or such party's legal representative becomes aware that he is entitled to seek damages against the tortious actor,  or  ten  years  from  the  time  that  the  tortious  act  occurred.

 

 

 

BOOK  SIX "SECURITY"13

 

Chapter One GENERAL PROVISIONS

 

  1. (Definition  of  security  provider  and  third  party  acquirer)

 

(1)      A person who creates a real security right over his own property so   as   to   secure   the   debt   of   another   shall   be   called   a   'security provider'.

 

(2)      A  person  who  receives  the  assignment  of  the  object  of  a  real security  right  created  by  the  debtor  to  secure  his  own  debt  shall  be called  a  'third  party  acquirer.'

 

  1. (Types  of  real  security  rights)

 

(1)       The types of real security rights are limited to those established in the Civil Code or in special laws, and no other type of real security may  be  created.

 

(2)       The  five  types  of  real  security  rights  established  in  the  Civil Code are (i) rights of retention, (ii) preferential rights, (iii) pledge, (iv)  hypothec  and  (v)  security  right  by  way  of  transfer  of  title.

 

 

 

13   In the translation of this Book, the terms 'debt,' 'debtor,' and 'creditor' are used in lieu of 'obligation,' 'obligor' and 'obligee' (the terms used in the Khmer original).  Because  it  is  assumed  that  cases  to  which  this  Book  will  apply  will typically  involve  monetary  obligations,  it  is  thought  that  the  use  of  such  terms will  aid  in  understanding  the  underlying  concepts.  However,  regardless  of terminology,  the  provisions  of  this  Book  should  be  understood  to  apply  to  both monetary  and  non-monetary  obligations.

 

 

 

 

 

  1. (Object  of  real  security  right)

 

A thing or right which cannot be transferred cannot comprise the object of a real security right. However, the lack of transferability of a thing shall  not  prevent  the  creation  of  a  right  of  retention  with  regard thereto.

 

  1. (Subordinate  nature  of  real  security  right)

 

(1)       A real security right is established in order to secure an existing debt. A real security right may also be established in order to secure a  debt  to  be  incurred  in  the  future  if  it  can  be  specified.

 

(2)      Where  a  debt  is  not  formed  due  to  the  absence  of  the  necessary elements  thereof,  real  security  is  not  formed  as  well.

 

(3)      Where a debt is void or rescinded due to a defective declaration of  intention  or  other  reason,  the  real  security  right  is  also  void.

 

(4)      Where  a  debt  is  extinguished  due  to  satisfaction,  prescription or  other  reason,  the  real  security  right  is  also  extinguished.

 

(5)      The provisions set forth in paragraphs (1) through (4) shall not apply  to  a  floating  hypothec  that  is  created  to  secure  multiple  debts to  be  accrued  under  a  continuing  contract.

 

  1. (Subordinate nature  of  real  security  when  a  secured  claim  is assigned  to  another)

 

(1)       Where  a  claim  secured  by  real  security  is  assigned,  the  real security   is   assigned   as   well   to   the   assignee   of   the   claim   unless otherwise [agreed to] [between the assignor and the assignee] [To check]. However, where it is required that the holder of a real security right possess the object of the real security right, the assignee of the claim must  acquire  possession  thereof.

 

(2)      The  provisions  of  paragraph  (1)  shall  not  apply  to  claims  that are  secured  by  a  floating  hypothec.

 

  1. (Indivisibility  of  real  security  right)

 

The  effect  of  the  real  security  right  shall  extend  over  the  whole  of the  thing  or  right  comprising  the  object  of  the  security  right  until the  holder  of  the  real  security  right  has  received  full  satisfaction of  the  secured  claim.

 

  1. (Power  to  extend  the  effect  of  real  security)

 

Except for cases referred to in Article 804(Power to pursue third party acquirer)  concerning  preferential  rights  and  Article  891(Disposition of object by [security creator]) concerning a right of security by way of transfer of title, where the object of a real security right is transferred to a third party, the holder of the real security right may assert   the   effect   of   his   security   right   against   the   third   party;

 

 

 

 

provided that such holder fulfills and complies with the established requirements  for  such  assertion.

 

  1. (Enforcement  of  real  security  right)

 

Where the holder of a real security right does not receive satisfaction of   the   secured   claim,   he   may   enforce   the   real   security   right   in accordance  with  procedures  established  by  law.

 

 

Chapter Two RIGHT  OF  RETENTION

 

  1. (Meaning  of  right  of  retention)

 

(1)      Where a person possessing a thing belonging to another has a claim arising in regard to such thing, the person may retain the thing until the  claim  is  satisfied.  However,  if  the  claim  has  not  yet  become  due, the  right  of  retention  shall  not  be  created.

 

(2)    The  provisions  of  paragraph  (1)  shall  not  apply  where  the possession  commenced    as  a  result  of  a  tortious  act.

 

  1. (Preferential  application  of  fruits14)

 

(1)      The  holder  of  a  right  of  retention  may  collect  fruits  produced by the thing retained and apply them to satisfy the secured claim in preference  to  other  creditors.

 

(2)       The  fruits described  in  paragraph  (1)  must  first  be  applied  to the payment of the interest and the surplus, if any, to the principal.

 

  1. 773.(Duty   of   holder   of   right   of   retention   to   preserve   the   thing retained)

 

(1)       The holder of a right of retention shall possess the thing retained with  the  care  of  a  good  manager.

 

(2)     The holder of a right of retention may not use, lease or give as security the thing retained without the consent of the debtor. However, the  holder  of  a  right  of  retention  may  use  the  thing  retained  so  long as  such  use  is  necessary  to  preserve  the  thing.

 

(3)      Where the holder of a right of retention violates the provisions of paragraphs (1) and (2), the debtor may demand the extinction of the right  of  retention.

 

  1. 774.(Right  to  demand  reimbursement  of  expenditures)

 

(1)     Where the holder of a right of retention has defrayed necessary expenses in regard to the thing retained, he may seek reimbursement for such  expenses  from  the  owner.

 

(2)      Where  the  holder  of  a  right  of  retention  has  defrayed  useful

 

 

14   See  Article  127  for  the  definition  of  'fruit.'

 

 

 

 

expenses in regard to the thing retained, he may seek reimbursement from the  owner  of,  at  his  option,  either  the  amount  defrayed  or  the  amount by which the value of the thing has increased, so long as the increase in value remains in effect. However, the court may upon application of the  owner  grant  him  reasonable  time  for  reimbursement.

 

  1. 775.(Extinctive  prescription  regarding  claim)

 

The exercise of a right of retention shall not interrupt or suspend a period  of  extinctive  prescription  with  regard  to  the  secured  claim.

  1. 776.(Extinction  of  right  of  retention  by  furnishing  of  security) The  debtor  may  demand  the  extinction  of  a  right  of  retention  upon  the

furnishing  of  adequate  security.

 

  1. 777.(Extinction  of  right  of  retention  by  loss  of  possession)

 

(1)      A  right  of  retention  is  extinguished  by  the  loss  of  possession of the thing retained. However, this shall not apply to cases where the thing retained has been leased or pledged with the consent of the debtor in accordance with the provisions of paragraph (2) of Article 773(Duty of  holder  of  right  of  retention  to  preserve  the  thing  retained).

 

(2)      Even  where  the  holder  of  a  right  of  retention  loses  possession of the thing retained, if the holder of the right of retention regains possession of the thing retained pursuant to the provisions of Article

236(Right to demand return of thing in possession) possession shall be deemed  to  have  continued  uninterrupted.

 

Chapter Three PREFERENTIAL  RIGHTS

 

Section   I  Genera                                                  Provisions

 

  1. 778.(Definition  of  preferential  rights)

 

(1)    A creditor holding a preferential right has a right to obtain satisfaction of the claim from particular assets [designated for each type  of  preferential  rights]  in  priority  to  other  creditors.

 

(2)     The three types of preferential rights are a general preferential right,  a  preferential  right  over  a  [specific]  movable,  and  a preferential  right  over  a  [specific]  immovable.

 

  1. 779.(Subrogation)

 

(1)     A preferential right may also be exercised against money or other things which the debtor is entitled to receive due to a sale, lease or loss  of,  or  damage  to  the  object  of  such  preferential  right.  However, the  holder  of  the  preferential  right  must  levy  an  order  of  attachment over the claim to receive such money or things prior to the payment or delivery  thereof.

 

(2)      The same shall apply to money to be paid as the price of creating

 

 

 

 

a  real  right  over  the  object  of  the  preferential  right.

 

Section   II  Genera                                          Preferentia       Right

 

  1. 780.(Definition  of  general  preferential  right)

 

A  person  having  a  claim  arising  from  any  of  the  causes  provided  below has  a  preferential  right  over  all  of  the  property  of  the  debtor:

  1. a) Expenses for  common  benefit b) Claims  held  by  employee
  2. c) Funeral expenses
  3. d) Supply of  daily  

 

  1. 781.(Expenses  for  common  benefit)

 

(1)      A  preferential  right  for  expenses  for  common  benefit  exists  in regard to expenses related to the preservation, liquidation or distribution of the debtor's property incurred for the benefit of all creditors.

 

(2)      Where the expenses described in paragraph (1) have been incurred for the benefit of only some of the creditors, the preferential rights exists  only  as  against  those  creditors  who  have  benefited  therefrom.

 

  1. 782.(Preferential  right  for  claims  held  by  employee)

 

A  preferential  right  for  claims  held  by  an  employee  exists  in  regard to any and all claims which the employee possesses under the labor contract..

 

  1. 783.(Preferential  right  for  funeral  expenses)

 

(1)    A preferential right for funeral expenses exists in regard to expenses   incurred   for   a   funeral   conducted   in   accordance   with   the deceased  debtor's  station  in  life.

 

(2)       The preferential right described in paragraph (1) exists in regard to expenses incurred for a funeral conducted in accordance with the station  in  life  of  a  deceased  relative  whom  the  debtor  was  obligated to  support.

 

  1. 784.(Preferential  right  for  supply  of  daily  necessities)

 

A  preferential  right  for  the  supply  of  daily  necessities  exists  in regard to the past six months' supply of food, drink and other daily necessities required for the  subsistence of the  debtor, relatives who live  with  the  debtor  and  whom  the  debtor  is  obligated  to  support,  and the  debtor's  servants.

 

Section   III  Preferentia                                Right  Over  Specific  Movab  es

 

  1. 785.(Definition  of  preferential  right  over  movables)

 

A person having a claim arising out of any of the following events has

 

 

 

 

a  preferential  right  over  a  specific  movable  belonging  to  the  debtor:

  1. a) Lease of  immovable  property
  2. b) Carriage of  passengers  or  goods c)     Preservation  of  movable  property d)                         Sale  of  movable  property
  3. e) Supply of  seeds,  seedlings,  or  

 

  1. 786.(Preferential  right  based  on  lease  of  immovable  property)

 

A  preferential  right  based  on  the  lease  of  immovable  property  exists over movables of the lessee in order to secure the rent and other obligations  of  the  lessee  arising  under  the  lease.

 

  1. 787. (Scope of preferential right based on lease of immovable property

-  normal  case)

 

(1)      A   preferential   right   held   by   the   lessor   of   land   exists   over movables attached to the leased land or installed in buildings thereon, as well as over movables provided for use of the land and over the fruits from  such  land  that  are  in  the  possession  of  the  lessee.

 

(2)     A preferential right held by the lessor of a building exists over movables  installed  in  the  building  by  the  lessee.

 

  1. 788. (Scope  of   preferential   right   based   on   lease   of   immovable property  -  assignment  or  sublease)

 

In the event of an assignment of a lease or a sublease, the preferential right of a lessor shall extend to the movables of the assignee or sublessee.  The  same  shall  apply  to  any  money  that  the  assignor  or sublessor  is  to  receive.

  1. 789.(Scope of preferential right based on lease of immovable property) Where  all  of  the  assets  of  a  lessee  are  liquidated,  the  preferential

right of the lessor exists only with regard to rent and other obligations owing for the previous, current and succeeding lease terms, and the reparation of any damage occurring during the previous and current lease

terms.

 

  1. 790. (Scope of preferential right based on lease of immovable property

-  in  case  of  deposit)

 

Where  a  lessor  has  received  a  deposit,  his  preferential  right  exists only with respect to the portion of his claim that cannot be satisfied from  the  deposit.

 

  1. 791.(Preferential  right  for  carriage)

 

A preferential right held by a carrier exists over the baggage in the possession of the carrier with regard to the costs of carriage of the passenger  or  the  baggage  and  incidental  charges.

 

  1. 792.(Bona  fide  acquisition)

 

 

 

 

The provisions of Article 192(Bona fide acquisition of ownership of movable) regarding bona fide acquisition shall apply mutatis mutandis to preferential rights as set forth in Articles 786(Preferential right based  on  lease  of  immovable  property)  through  791(Preferential  right for  carriage).

 

  1. 793.(Preferential  right  for  preservation  of  a  movable)

 

(1)     A preferential right for preservation of movables exists over a movable  in  regard  to  costs  incurred  for  the  preservation  thereof.

 

(2)     The preferential right described in paragraph (1) also exists in regard to costs incurred for the preservation, ratification or exercise of  the  title  or  other  right  pertaining  to  the  movable.

 

  1. 794.(Preferential  right  for  sale  of  a  movable)

 

A preferential right for sale of a movable exists over the movable in regard  to  the  price  and  interest  thereon.

 

  1. 795.(Preferential right for supply of seeds, seedlings or fertilizer)

 

(1)      A   preferential   right   for   the   supply   of   seeds,   seedlings   or fertilizer exists, in regard to the price thereof and the interest thereon,  over  the  fruits  derived  from  the  land  on  which  they  are  used for  a  period  of  one  year  from  the  time  they  are  used.

 

(2)     The preferential right described in paragraph (1) exists, for the supply  of  livestock  feed  provided  for  the  breeding  of  livestock,  over the livestock or the fruits derived from the livestock for a period of one  year  from  the  time  the  feed  is  used.

 

(3)     The preferential right described in paragraph (1) exists, for the supply  of  silkworm  eggs  or  mulberry  leaves  provided  for  the  breeding of silkworms, over the things produced from the silkworm eggs or the mulberry  leaves.

 

Section   IV  Preferentia                             Right  Over  Specific  Immovab  es

 

  1. 796.(Preferential  right  over  immovables)

 

A person having a claim that arises out of any of the following events has  a  preferential  right  over  a  specific  immovable  of  the  debtor:

  1. a) Preservation of  an  immovable
  2. b) Work on  an  immovable
  3. c) Sale of  an  

 

  1. 797.(Preferential  right  for  preservation  of  an  immovable)

 

(1)      A preferential right for preservation of an immovable exists over the immovable in regard to costs incurred for the preservation thereof.

 

(2)     The preferential right described in paragraph (1) also exists in regard  to  costs  necessary  for  the  preservation,  ratification  or exercise  of  the  title  or  other  right  pertaining  to  the  immovable.

 

 

 

 

 

  1. 798.(Preferential  right  for  work  on  an  immovable)

 

(1)    A preferential right for work on an immovable exists over the immovable in regard to construction costs incurred in relation thereto by  artisans,  engineers  and  contractors.

 

(2)      The  preferential  right  described  in  paragraph  (1)  exists  only where the increase in the value of the immovable due to such work still remains,  and  only  with  respect  to  such  increase  in  value.

 

  1. 799.(Preferential  right  for  sale  of  an  immovable)

 

A preferential right for sale of an immovable exists over the immovable in  regard  to  the  price  and  interest  thereon.

 

Section   V    Ranking of  Preferentia                                           Rights

 

  1. 800.(Ranking  of  general  preferential  rights)

 

(1)   Where  multiple  general  preferential  rights  exist,  their respective   priority   rankings   shall   follow   the   order   prescribed   in Article  780(Definition  of  general  preferential  right).

 

(2)      Where a general preferential right and a preferential right over a specific property coexist, the preferential right over a specific property  shall  have  priority.  However,  a  preferential  right  for expenses for common benefit shall have priority as against all creditors benefited  thereby.

 

  1. 801.(Ranking  of  preferential  rights  over  movables)

 

(1)      Where multiple specific preferential rights coexist over the same movable,  their  respective  priority  rankings  shall  be  as  follows:

First  rank:        Preferential  rights  for  lease  of  an  immovable  or for  carriage;

Second rank:    Preferential right for preservation of a movable, except           that    where    two    or    more    persons    have preserved the movable, the person whose acts of preservation    have    occurred    later    shall    take priority;  and

Third  rank:                     Preferential  right  for  sale  of  a  movable  or  for

supply  of  seeds,  seedlings  or  fertilizer.

 

(2)      Where a person having a preferential right of the first rank was aware at the time that he acquired his claim of the existence of a person having a preferential right of the second or third rank, his rank shall be  inferior  to  that  of  all  persons  having  preferential  right  of  the second or third rank. A person having a preferential right of the first rank  is  also  inferior  to  a  person  who  has  preserved  a  thing  for  the benefit  of  such  person  having  a  preferential  right  of  the  first  rank.

 

(3)    The top priority ranking regarding fruits shall belong to the supplier of seeds, seedlings or fertilizer, while the second priority ranking  shall  belong  to  the  lessor  of  the  land.

 

 

 

 

 

  1. 802.(Ranking  of  preferential  rights  over  immovables)

 

(1)      Where multiple specific preferential rights coexist over the same immovable, their respective priority rankings shall follow the order prescribed  in  Article  796(Preferential  right  over  immovables).

 

(2)     Where successive sales of the same immovable have occurred, the priority rankings of the sellers' preferential rights shall follow the chronological  order  of  the  sales.

 

  1. 803.(Preferential  rights  of  same  rank)

 

Where two or more persons have preferential rights over the same object and their priority rankings are equal, they shall receive satisfaction in  proportion  to  the  amounts  of  their  respective  claims.

 

Section   VI  Effect of  Preferentia                                          Right

 

  1. 804.(Power  to  pursue  third  party  acquirer)

 

[Where a third party acquires a movable comprising the object of a preferential right from the debtor,] once the debtor has delivered the movable  to  the  third  party  acquirer,  the  holder  of  the  preferential right  may  not  exercise  the  preferential  right  over  the  movable.

 

  1. 805.(Relationship  to  pledge  over  movable)

 

Where  a  preferential  right  and  a  pledge  coexist  over  a  movable,  the pledgee  shall  have  the  same  right  as  the  person  having  a  preferential right of the first rank mentioned in Article 801(Ranking of preferential rights  over  movables).

 

  1. 806.(Effect  of  general  preferential  right)

 

(1)    A person having a general preferential right may not receive satisfaction out of immovables unless he has first resorted to property other than immovables and failed to obtain full satisfaction therefrom.

 

(2)      With regard to immovables, satisfaction must first be sought out of  those  that  are  not  subject  to  a  specific  security  right15.

 

(3)    If  a  person  having  a  general  preferential  right  fails  to participate in a distribution of the proceeds in accordance with the provisions of paragraphs (1) and (2), he may not, to the extent of what he would have received through such participation, exercise his preferential  right  as  against  a  registered  third  party.

 

(4)      The  provisions  of  paragraphs  (1)  through  (3)  shall  not  apply  to cases where a distribution is to be made of the price of an immovable comprising the object of a specific security right prior to that of the

 

 

 

15   The term 'specific security right' refers to a preferential right over a specific immovable,  pledge,  hypothec  or  security  right  by  way  of  transfer  of  title.

 

 

 

 

price  of  non-immovables.

 

  1. 807.(Effect  of  general  preferential  right  against  third  party)

 

The  holder  of  a  general  preferential  right  may,  even  where  the  right is   not   registered   over   an   immovable,   assert   such   right   against   a creditor who has no specific security right over the immovable. However, such  right  may  not  be  asserted  against  a  registered  third  party.

 

  1. 808. (Effect of preferential right for preservation of immovable against third  party)

 

(1)    The  effect  of  a  preferential  right  for  preservation  of  an immovable   may   not   be   asserted   against   a   third   party   unless   it   is registered  immediately  after  the  act  of  preservation  has  been completed.

 

(2)     The amount of increase in the value of the immovable arising from preservation shall  be determined by an  expert for appraisal appointed by the court at the time of participation in the distribution is sought.

 

  1. 809. (Effect of preferential right for work on immovable against third party)

 

(1)      The  effect  of  a  preferential  right  for  work  on  an  immovable  may not be asserted against a third party unless the right is registered immediately  after  the  work  has  been  completed.

 

(2)      The amount of increase in the value of the immovable arising from the  work  performed  shall  be  determined  by  an  expert  appointed  by  the court  at  the  time  participation  in  the  distribution  is  sought.

 

  1. 810. (Relationship between    hypothec    and    preferential     right    for preservation  of  an  immovable  or  work  on  an  immovable)

 

A preferential right registered in accordance with Articles 808(Effect of preferential right for preservation of immovable against third party)and   809(Effect   of   preferential   right   for   work   on   immovable against  third  party)  may  be  exercised  in  preference  to  a  hypothec.

 

  1. 811. (Effect of preferential right for sale of immovable against third party)

 

The effect of a preferential right for sale of an immovable may not be asserted against a third party unless a statement that the sales price or interest thereon has not been paid is registered simultaneously with [the  execution]  of  the  sale  contract.

  1. 812.(Mutatis mutandis application of provisions regarding hypothec) In   addition   to   the   provisions   of   this   Chapter,   the   provisions   of

Articles  843(Scope  of  effect  of  hypothec)  through  845(Effect  of hypothec over fruits), 848(Ranking of hypothecs), 849(Scope of claims

secured),     850(Compulsory     sale     of     hypothecated     property)     and

856(Sub-hypothecation)  through  860(Ranking  of  disposal  of  hypothec)

 

 

 

 

regarding hypothec shall apply mutatis mutandis to the effect of preferential  rights.

 

Chapter Four PLEDGE

 

Section   I  Genera                                                  Provisions

 

  1. 813.(Meaning  of  pledge)

 

A  pledgee  is  entitled  to  hold  possession  of  the  thing  that  he  has received  from  the  debtor  or  a  third  party  as  security  for  his  claim, and to obtain satisfaction of his claim out of such thing in preference to  other  creditors.

 

  1. 814.(Subrogation)

 

(1)      A pledge may also be exercised against money or other things which the  debtor  is  entitled  to  receive  due  to  a  sale  or  loss  of,  or  damage to   the   thing   pledged.   However,   the   pledgee   must   levy   an   order   of attachment over the claim to receive such money or things prior to the payment  or  delivery  thereof.

 

(2)      The same shall apply to money to be paid as the price of creating a  real  right  over  the  thing  pledged.

 

  1. 815.(Formation  of  pledge  and  requirement  of  delivery)

 

(1)      A pledge shall be created when the thing to be pledged is delivered to the pledgee by the debtor or a third party who provides the security.

 

(2)     The delivery referred in Paragraph (1) includes summary delivery provided  by  Paragraph  (3)  of  Article  228(Assignment  of  possession).

 

  1. 816.(Prohibition  against  pledger  retaining  direct  possession)

 

A pledgee may not allow the pledger to retain direct possession of the thing  pledged.

 

  1. 817.(Scope  of  secured  claim)

 

Unless otherwise provided in the act of creation thereof, a pledge shall secure the principal, interest, penalties, expenses for enforcement of the pledge, expenses for preservation of the thing pledged, and damages arising  from  nonperformance  of  the  debt  or  from  latent  defects  in  the thing  pledged.

 

  1. 818.(Retention  of  thing  pledged)

 

A  pledgee  may  retain  the  thing  pledged  until  he  obtains  satisfaction of his claim [the scope of which is] mentioned in Article 817(Scope of secured claim). However, this right cannot be asserted against any creditor  who  has  priority  over  the  pledgee.

 

  1. 819.(Priority  right  to  receive  satisfaction  from  fruits)

 

 

 

 

 

(1)       A pledgee is entitled to receive the fruits produced from the thing pledged and obtain satisfaction of the claim in priority to other creditors.

 

(2)     The fruits described in paragraph (1) shall first be applied to interest on the debt, and the remainder, if any, shall be thereafter applied  to  the  principal.

 

  1. 820.(Pledgee's  duty  to  preserve  thing  pledged)

 

(1)      A  pledgee  shall  possess  the  thing  pledged  with  the  duty  of  care of  a  good  manager.

 

(2)      Where  a  pledgee  violates  the  provisions  of  paragraph  (1),  the debtor  may  demand  the  extinction  of  the  pledge.

 

  1. 821.(Pledgee's  right  to  reimbursement)

 

(1)      Where a pledgee has defrayed necessary expenses in regard to the thing  pledged,  he  may  seek  reimbursement  for  such  expenses  from  the owner.

 

(2)       Where a pledgee has defrayed useful expenses in regard to the thing retained, he may seek reimbursement from the owner of, at his option, either the amount defrayed or the amount by which the value of the thing has  increased,  so  long  as  the  increase  in  value  remains  in  effect. However,  the  court  may  upon  application  of  the  owner  grant  him reasonable  time  for  reimbursement.

 

  1. 822.(Extinctive  prescription  of  claim)

 

The exercise of a pledge shall not interrupt or suspend a period of extinctive  prescription  with  regard  to  the  claim  .

 

  1. 823.(Sub-pledge)

 

(1)      A pledgee may sub-pledge the thing pledged in order to secure his own  debt  with  the  consent  of  the  pledger.

 

(2)      A   pledgee   may   within   the   duration   of   the   original   pledge sub-pledge the thing pledged on his own responsibility. In such a case, the pledgee shall be responsible even for damages due to force majeure that  would  not  have  occurred  if  the  thing  had  not  been  sub-pledged.

 

(3)      Where the thing pledged is sold by compulsory sale and the price is  apportioned,  the  sub-pledgee  may  receive  full  satisfaction  of  his claim  from  and  to  the  extent  of  the  amount  to  be  apportioned  to  the pledgee.  However,  during  the  period  that  the  claim  of  the  sub-pledgee has not yet become due, the sub-pledgee may only demand that the amount to  be  received  be  officially  deposited.

 

  1. 824.(Prohibition  against  forfeiture  agreement)

 

Unless otherwise provided for in this Code or other law, a pledger may

 

 

 

 

not, either in the act of creation of the pledge or by a contract executed before  the  time  the  debt  becomes  due,  agree  that  the  pledgee  shall acquire ownership of the thing pledged or dispose of it in a manner other than  that  provided  for  by  law.

 

  1. 825.(Third  party  security  provider's  right  of  indemnification)

 

If a person who has pledged his own property to secure the debt of another discharges the debt or loses ownership of the thing pledged due to the enforcement  of  the  pledge,  he  is  entitled  to  receive  indemnification from the debtor in accordance with the provisions of this Code regarding guaranty.

 

Section   II  P  edge Over  Movab  e

 

  1. 826.(Requirements  for  asserting  pledge)

 

The pledgee of a movable cannot assert the pledge against a third party unless  he  continuously  holds  possession  of  the  thing  pledged.

 

  1. 827.(Loss  of  possession)

 

If  the  pledgee  of  a  movable  is  deprived  of  possession  of  the  thing pledged, he can recover it only by an action for recovery of possession.

 

  1. 828.(Use  of  or  receipt  of  benefits  from  thing  pledged  by  pledgee)

 

(1)      A  pledgee  may  not  use  or  lease  the  thing  pledged  without  the consent  of  the  debtor.  However,  the  pledgee  may  use  the  thing  pledged so  long  as  such  use  is  necessary  to  preserve  the  thing.

 

(2)      Where  a  pledgee  violates  the  provisions  of  paragraph  (1),  the debtor  may  demand  the  extinction  of  the  pledge.

 

  1. 829.(Summary  enforcement  of  pledge)

 

(1)      If  the  pledgee  of  a  movable  does  not  obtain  satisfaction  of  his claim, he may apply to the court to have the thing pledged appropriated to himself in satisfaction of the debt to the extent of its value as appraised by an expert, provided that reasonable grounds exist for doing so. In such case the pledgee must provide the debtor with advance notice of  the  application.

 

(2)      In the case referred to in paragraph (1), where the value of the thing  pledged  as  determined  by  expert  appraisal  exceeds  the  amount  of the debt, the pledgee of the movable shall return the excess amount to the  owner  of  the  thing  pledged.

 

  1. 830.(Ranking  of  pledges  over  movable)

 

If multiple pledges have been created over the same movable, their respective priority rankings shall follow the chronological order of their  creation.

 

 

 

 

Section   III  P  edge Over  Immovab  e

 

  1. 831.(Pledgee's  right  to  use  and  receive  profits)

 

The pledgee of an immovable may use and receive the profits of the immovable  in  accordance  with  its  ordinary  use.

 

  1. 832.(Costs  of  management,  )

 

The  pledgee  of  an  immovable  shall  pay  the  costs  of  management  thereof and  shall  bear  all  other  charges  pertaining  to  such  immovable.

 

  1. 833.(Interest)

 

The pledgee of an immovable may not demand interest on the secured claim.

 

  1. 834.(Validity  of  special  provisions)

 

The   provisions   of   Articles   831(Pledgee's   right   to   use   and   receive profits) through 833(Interest) shall not apply where otherwise provided in  the  act  of  creation  of  a  pledge.

 

  1. 835.(Duration)

 

(1)      The duration of a pledge of an immovable cannot exceed five years. If a pledge of an immovable is created for a longer period, such period shall  be  reduced  to  five  years.

 

(2)      The  pledge  of  an  immovable  may  be  renewed.  However  the  renewal period  cannot  exceed  five  years  from  the  time  of  renewal.

  1. 836.(Mutatis mutandis application of provisions regarding hypothec) In addition to the provisions of this Section, the provisions of Chapter

Five (Hypothec) shall apply mutatis mutandis to pledges of immovables.

 

Section   IV  P  edge Over  Right/C  aim

 

  1. 837.(Object  of  pledge  over  rights)

 

(1)      Any  property  right16   may  comprise  the  object  of  a  pledge.

 

(2)      In addition to the provisions of this Section IV, the provisions of Sections I, II and III shall apply mutatis mutandis to the pledges mentioned  in  paragraph  (1).

 

  1. 838.(Requirements   for   assertion   of   pledge   over   claim   in   name   of specific  creditor)

 

(1)      Where a claim belonging to a specific creditor is made the object of a pledge, the pledge cannot be asserted against the original debtor of such claim or any other third party unless such original debtor has

 

 

16   See  the  footnote  to  Article  195  for  the  explanation  of  'property  right.'

 

 

 

 

been  notified  of  the  creation  of  the  pledge  or  unless  he  has  given consent  thereto.

 

(2)      The  notice  and  consent  described  in  paragraph  (1)  may  not  be asserted  against  a  third  party  other  than  the  original  debtor  unless they  are  evidenced  by  a  date  certified  writing.

 

  1. 839.(Enforcement  of  pledge  through  collection  of  debt)

 

(1)      A pledgee may directly collect the debt comprising the object of the  pledge.

 

(2)     If the subject-matter of the claim is money, the pledgee may only obtain payment of such portion thereof as corresponds to the amount of the  secured  claim  held  by  him.

 

(3)      In  the  case  described  in  paragraph  (2),  if  the  claim  described above becomes due earlier than the pledgee's claim, the pledgee may require  the  original  debtor  to  deposit  the  amount  payable.  In  such  a case,  the  pledge  shall  exist  over  the  money  deposited.

 

(4)      If the subject-matter of the claim is not money, the pledgee has a  pledge  over  the  thing  to  be  received  as  satisfaction  thereof.

 

 

 

Chapter Five HYPOTHEC

 

Section   I  Nature of  Hypothec

 

  1. 840. (Nature  of  hypothec)

 

(1)    A hypothee is entitled to obtain satisfaction of his claim in preference  to  other  creditors  out  of  the  immovable  property  that  has been  furnished  as  security  by  the  debtor  or  a  third  party  without transfer  of  possession.

 

(2)    A perpetual lease or usufruct may also be made the object of a hypothec.   The   provisions   of   this   Chapter   Five   shall   apply   mutatis mutandis  in  such  a  case.

 

(3)     Where a special law allows a certain type of property other than immovable property to be the object of a hypothec, such law shall apply.

 

Section   II  Creation  of  Hypothec

 

  1. 841. (Creation  of  hypothec)

 

A  hypothec  is  created  through  an  agreement  reached  between  a  creditor and   a   debtor   or   third   party   that   furnishes   immovable   property   as security.

 

  1. 842. (Asserting  hypothec)

 

A hypothee may not assert the hypothec against a third party who is not

 

 

 

 

the hypothecator unless the instrument creating a hypothec is notarized and  registered  in  the  land  registry.

 

Section   III  Effect of  Hypothec

 

  1. 843. (Scope  of  effect  of  hypothec)

 

(1)    [The effect of] a hypothec shall extend to all things that are attached  to  and  form  part  of  the  land  comprising  the  object  of  the hypothec when the hypothec is created, including buildings residing thereon. It also extends to things that attach to the land after the hypothec  is  created.

 

(2)      A contract creating a hypothec may not contain any provision that is  contrary  to  the  provisions    set  forth  in  paragraph  (1).

 

  1. 844. (Effect of  hypothec  on  land  over  building  owned  by  third party)

 

Where  based  on  a  perpetual  lease,  usufruct  or  leasehold  a  third  party owns a building on the land comprising the object of the hypothec [when the hypothec is created], [the effect of] the hypothec does not extend to  the  building.

 

  1. 845. (Effect  of  hypothec  over  fruits)

 

The provisions of Article 843(Scope of effect of hypothec) do not apply to the fruits produced from the immovable comprising the object of the hypothec. However, this shall not apply after the immovable is subject to  an  order  of  attachment.

 

  1. 846. (Subrogation)

 

(1)      A  hypothec  may  be  enforced  against  money  or  other  things  which the  hypothecator  is  entitled  to  receive  by  reason  of  the  sale  or  loss of,  or  damage  to,  the  object  thereof.

 

(2)      A hypothec may be enforced against fruits that are produced after the  object  of  the  hypothec  is  subject  to  an  order  of  attachment.

 

  1. 847. (Right of indemnification of a third party security provider) If   a   person   who   creates   a   hypothec   to   secure   the   debt   of   another

discharges  the  debt  or  loses  ownership  of  the  hypothecated  immovable

as a result of the enforcement of the hypothec, such person is entitled to demand indemnification from the debtor in accordance with the provisions  of  this  Code  regarding  guaranty.

 

  1. 848. (Ranking  of  hypothecs)

 

Where multiple hypothecs have been created on an immovable in order to secure multiple debts, the rank of their priority shall be based on the order  of  their  registration.

 

 

 

 

  1. 849. (Scope  of  claims  secured)

 

(1)    Where a hypothee is entitled to receive interest or periodic payments,  he  can  enforce  the  hypothec  only  in  regard  to  payments  due for the last two years. However, if a special registration was made in regard to periodic payments for an earlier period after they became due, the  hypothec  may  also  be  enforced  in  regard  to  such  payments  from  the time  of  such  registration.

 

(2)      Where a hypothee is entitled to demand damages due to the debtor's default,  the  provisions  of  paragraph  (1)  shall  apply  in  regard  to  the last two years. However, the damages together with interest and other periodic  payments  may  not  exceed  the  total  amount  due  over  those  two years.

 

Section   IV  Enforcement  of  Hypothec

 

  1. 850. (Compulsory  sale  of  hypothecated  property)

 

In  the  event  of  a  failure  to  perform  on  a  debt,  a  hypothee  may  apply to  the  court  for  compulsory  sale  of  the  hypothecated  immovable.

 

  1. 851. (Compulsory  sale  of  buildings  owned  by  third  party)

 

(1)     Where the hypothecator or a third party erects a building on land after it is hypothecated, and the hypothecator owns that building, the hypothee  may  demand  the  compulsory  sale  of  the  building  together  with the hypothecated land.   However, if the price of the land together with the building thereon is less than the price of the land as a vacant plot, the hypothee may demand that the hypothecator remove the building prior to  the  compulsory  sale  of  the  land.

 

(2)      Where  a  third  party  owns  the  building  on  the  hypothecated  land based on a perpetual lease, usufruct or leasehold, if the third party cannot assert such perpetual lease, usufruct or leasehold against the hypothee, the hypothee may demand the compulsory sale of the building together  with  the  hypothecated  land.

 

  1. 852. (Third  party  acquirer's  application  to  purchase)

 

A third party acquirer of a hypothecated immovable may purchase the immovable  at  the  compulsory  sale.

 

  1. 853. (Third  party  acquirer's  right  to  reimbursement)

 

Where a third party acquirer has defrayed necessary or useful expenses in regard to a hypothecated immovable, he may obtain reimbursement from the   proceeds   of   the   sale   of   the   immovable   with   priority   over   the hypothee.

 

  1. 854. (Simultaneous or  staggered  application  of  proceeds  in  case of  joint  hypothec)

 

(1)      Where two or more immovables are hypothecated to secure the same claim   and   their   proceeds   from   compulsory   sale   are   to   be   applied

 

 

 

 

simultaneously to its satisfaction, the burdens of satisfaction of the claim shall be allocated in proportion to the value of each immovable.

 

(2)       [Where two or more immovables are hypothecated to secure the same claim,] if the proceeds of only one of the immovables are to be so applied, the  hypothee  may  obtain  full  satisfaction  of  his  claim  therefrom.  In this case, the hypothee next in rank may exercise the right of the prior hypothee  via  subrogation  to  the  extent  of  the  amount  that  the  prior hypothee would have received out of the other immovables in accordance with  the  provisions  of  paragraph  (1).

 

  1. 855. (Joint  hypothec  -  registration  of  subrogation)

 

A person who enforces a right of hypothec via subrogation in accordance with the provisions of paragraph (2) of Article 854(Simultaneous or staggered application of proceeds in case of joint hypothec) must enter the  subrogation  in  the  registry  of  the  hypothec.

 

Section   V    Disposa                                               of  Hypothec

 

  1. 856. (Sub-hypothecation)

 

(1)       A hypothee may hypothecate his right of hypothec in order to secure the         debt     of     himself     or     another.     This     is     referred     to     as

'sub-hypothecation'.

 

(2)      Where  a  hypothecated  thing  is  sold  by  compulsory  sale  and  the proceeds  are  apportioned,  the  sub-hypothee  may  receive  full satisfaction of his claim from and to the extent of the amount to be apportioned to the hypothee. However, during the period that the claim of the sub-hypothee has not yet become due, the sub-hypothee may demand only  that  the  amount  to  be  received  be  officially  deposited.

 

  1. 857. (Transfer  or  waiver  of  hypothec)

 

(1)      A  hypothee  may  transfer  or  waive  his  right  of  hypothec  for  the benefit  of  another  creditor(s)  of  the  same  debtor.

 

(2)       A transferee of a right of hypothec may exercise the received right of hypothec as security for his own debt. In this case, the provisions of paragraph (2) of Article 856(Sub-hypothecation) shall apply mutatis mutandis.

 

(3)      A person who waives a right of hypothec may not thereafter assert the  right  of  hypothec  against  the  creditor(s)  for  whose  benefit  the waiver  was  made.

 

  1. 858. (Transfer,  waiver  or  change  of  ranking)

 

(1)      A  hypothee  may  transfer  or  waive  his  priority  ranking  for  the benefit of another  hypothecary creditor of the  same debtor. Moreover, a   hypothee   may   change   the   priority   of   his   ranking   among   multiple hypothees with the consent of the other hypothees. However, where such a  change  would  affect  the  interests  of  another  party,  such  party's consent  must  be  obtained.

 

 

 

 

 

(2)      Where the object of a right of hypothec is sold by compulsory sale and the proceeds are apportioned among multiple hypothees, a transferee of  a  priority  ranking  in  regard  to  the  right  of  hypothec  may  receive full satisfaction of his claim from and to the extent of the total amount to  be  apportioned  to  [both  the  transferor  and  the  transferee].

 

(3)      Where the object of a right of hypothec is sold by compulsory sale and the proceeds are apportioned among multiple hypothees, a hypothee who has received a waiver of a priority ranking in regard to the right of hypothec may, as between himself and the hypothee who has waived the priority ranking, receive equal repayment from and to the extent of the total  amount  to  be  apportioned  to  [both  of  them].

 

(4)       A hypothee who consents to a change in priority ranking may enforce the  right  of  hypothec  in  accordance  with  such  consent.

 

  1. 859. (Effect  of  disposal  of  hypothec)

 

(1)      The       disposal       of       a       hypothec       described       in       Articles

856(Sub-hypothecation),    857(Transfer    or    waiver    of    hypothec)    and

858(Transfer, waiver or change of ranking) shall be ineffective unless it  is  notarized  and  entered  in  the  registration  thereof

 

(2)    The disposal of a hypothec may not be asserted as against the principal debtor, a guarantor, hypothecator or their respective successors unless the principal debtor is notified of such disposal or consents  thereto.

 

(3)    Where the principal debtor receives notice of or consents to a disposal of a right of hypothec as described in paragraph (2), repayment made without the approval of a person receiving the benefit of such disposal  may  not  be  asserted  against  such  person.

 

  1. 860. (Ranking  of  disposal  of  hypothec)

 

If    in    the    case    described    in    Articles    856(Sub-hypothecation),

857(Transfer or waiver of hypothec) and 858(Transfer, waiver or change

of ranking) the hypothee has disposed of his right of hypothec for the benefit  of  two  or  more  persons,  the  rank  of  priority  of  the  rights  of the  persons  benefiting  from  such  disposal  shall  be  determined  by  the order  of  entries  in  the  registration  of  the  hypothec.

 

Section   VI  Extinction of  Hypothec

 

 

Sub-section  I  Extinction  by demand

 

  1. 861. (Payment  of  price)

 

Where  a  third  party  who  has  purchased  ownership  of  or  perpetual  lease or usufruct on the hypothecated immovable pays the price thereof to the hypothee on the hypothee's demand, the hypothec shall be thereby extinguished  in  favor  of  the  third  party.

 

 

 

 

 

Sub-section  II  Extinction  by prescription

 

  1. 862. (Acquisition  of  hypothec  via  extinctive  prescription)

 

A hypothec may be not be extinguished by prescription in favor of the debtor or the hypothecator unless the claim secured thereby is extinguished  at  the  same  time.

 

  1. 863. (Extinction  of   hypothec   by   acquisition   of   hypothecated immovable  by  acquisitive  prescription)

 

Where a person other than the debtor or the hypothecator has completed possession  of  a  hypothecated  immovable  that  satisfy  the  requirements for acquisitive prescription regarding such immovable, the hypothec shall  be  extinguished  thereby.  However,  this  shall  not  apply  where  a third  party  acquirer  of  the  hypothecated  immovable  acquires  the immovable  with  knowledge  of  the  existence  of  the  hypothec.

 

Section   VII   Revo ving Hypothec

 

  1. 864. (Definition  of  revolving  hypothec)

 

(1)      A hypothec may be created between a creditor and a debtor to secure unspecified claims, within a maximum credit limit, that may occur from a certain type of transactions conducted on an ongoing basis. A hypothec of  this  nature  is  referred  to  as  a  revolving  hypothec.

 

(2)      The   extent   of   the   unspecified   claims   that   are   secured   by   a revolving hypothec must be set forth in the agreement creating the revolving  hypothec.

 

  1. 865. (Extent  of  secured  claims)

 

The hypothee under a revolving hypothec may exercise the hypothec within the maximum credit limit in connection with the entire amount of the finalized principal as well as the interest or other periodic payments and  damages  that  have  occurred  as  a  result  of  default  on  the  debts.

 

  1. 866. (Amendment  of  the  extent  of  secured  claims)

 

(1)     The parties to a revolving hypothec agreement may through their mutual agreement amend the extent of the claims secured by the revolving hypothec  during  the  period  of  time  until  the  principal  is  finalized.

 

(2)      Amendment pursuant to paragraph (1) shall not require the consent of  subordinate  hypothees  or  any  other  third  party.

 

(3)      An  amendment  pursuant  to  paragraph  (1)  must  be  registered  prior to  the  finalizing  of  the  principal.

 

  1. 867. (Amendment  of  maximum  credit  limit)

 

(1)      The  parties  to  a  revolving  hypothec  agreement  may  through  their

 

 

 

 

mutual agreement amend the maximum credit limit of a revolving hypothec.

 

(2)      The  consent  of  parties  with  an  interest  must  be  obtained  in  the event  of  an  amendment  as  set  forth  in  paragraph  (1).

 

(3)      An amendment set forth in paragraph (1) cannot be set up against any third party other than the persons who have consented pursuant to paragraph  (2)  unless  the  amendment  is  registered.

 

  1. 868. (Date  of  finalization  of  principal)

 

(1)      It  shall  be  possible  to  prescribe  a  date  on  which  finalization should take place of the principal to be secured under a revolving hypothec.  It  shall  also  be  possible  to  amend  the  prescribed  date.

 

(2)     The provisions of paragraph (2) of Article 866(Amendment of the extent of secured claims) shall apply mutatis mutandis to paragraph (1).

 

(3)      The date set forth in paragraph (1) must be within five (5) years of  the  date  on  which  it  is  prescribed  or  amended.

 

(4)    The amendment of the date set forth in paragraph (1) must be registered  prior  to  said  date.

 

  1. 869. (Assignment  of  secured  claim  or  assumption  of  debt)

 

(1)      A  person  who  acquires  a  claim  from  the  revolving  hypothee  prior to   the   finalization  of   the   principal   may   not   exercise   a   revolving hypothec  in  connection  with  said  claim.  A  person  who  has  made  payment for  or  on  behalf  of  the  debtor  prior  to  finalization  of  the  principal also shall not be able to exercise a revolving hypothec through subrogation.

 

(2)      If  a  debt  is  assumed  by  a  third  party  prior  to  finalization  of the principal, the revolving hypothee shall not be able to exercise a revolving  hypothec  in  connection  with  the  assumed  debt.

 

  1. 870. (Inheritance by    hypothee    or    debtor    under    a    revolving hypothec)

 

(1)    When a succession has commenced in connection with a revolving hypothee   prior   to   the   finalizing   of   the   principal,   the   revolving hypothec  shall  secure  the  claims  that  exist  at  the  time  of  the commencement   of   the   succession.   The   revolving   hypohtec   shall   also secure  the  claims  that  the  successor  acquires  after  the  commencement of the succession that are prescribed by agreement between the successor and  the  hypothecator.

 

(2)      If  a  succession  has  commenced  in  connection  with  a  debtor  prior to the finalizing of the principal, the revolving hypothec will secure the debts that exist at the time of the commencement of the succession. The  revolving  hypothec  shall  also  secure  the  debts  that  are  incurred by the successor after the commencement of the succession that are prescribed  by  agreement  between  the  hypothee  and  the  hypothecator.

 

 

 

 

(3)     The provisions of paragraph (2) of Article 866(Amendment of the extent of secured claims) shall apply mutatis mutandis to an agreement set  forth  in  paragraph  (1)  or  (2).

 

(4)      If  an  agreement  as  set  forth  in  paragraph  (1)  or  (2)  is  not registered within six (6) months after the succession commences, the principal  to  be  secured  shall  be  deemed  to  have  been  finalized  at  the time  that  succession  has  commenced.

 

  1. 871. (Merger  of  hypothee  or  debtor  under  a  revolving  hypothec)

 

(1)      If a merger has occurred in connection with a corporate hypothee to a revolving hypothec prior to the finalizing of the principal, the revolving  hypothec  shall  secure  the  claims  that  exist  at  the  time  of the merger, and shall also secure the claims acquired after the merger by the surviving corporation or the corporation established as a result of  the  merger.

 

(2)      If  a  merger  has  occurred  in  connection  with  a  corporate  debtor prior to the finalizing of the principal, the revolving hypothec shall secure  the  debts  that  exist  at  the  time  of  the  merger,  and  shall  also secure  the  debts  incurred  by  the  surviving  corporation  or  the corporation  that  is  established  as  a  result  of  the  merger.

 

(3)    In the event of paragraph (1) or paragraph (2), the revolving hypothecator may demand the finalizing of the principal to be secured under the revolving hypothec; provided that this shall not apply in the case  of  paragraph  (2)  if  the  debtor  is  the  hypothecator  under  the revolving  hypothec.

 

(4)      If a demand pursuant to paragraph (3) has been made, the principal to be secured under the revolving hypothec shall be deemed to have been finalized  at  the  time  of  the  merger.

 

(5)      A demand pursuant to paragraph (3) cannot be made if two (2) weeks have expired from the date that the hypothecator under the revolving hypothec  has  become  aware  of  the  merger.  The  same  shall  apply  if  one (1)  month  has  expired  from  the  date  of  the  merger.

 

  1. 872. (Division of hypothee or debtor under a revolving hypothec, prior to  finalization)

 

(1)    If a division occurs of a corporate hypothee under a revolving hypothec,   prior   to   the   finalizing   of   the   principal,   the   revolving hypothec  shall  secure  the  claims  that  occurred  at  the  time  of  the division, as well as the claims acquired after the division, by the corporation that divided, or the corporation that was established or assumed  the  business  as  a  result  of  the  division.

 

(2)      If a division occurs in connection with a corporate debtor, prior to the finalizing of the principal, the revolving hypothec shall secure the debts that exist at the time of the division, as well as the debts that  are  incurred  after  the  division,  by  the  corporation  that  divided or  the  corporation  that  was  established  or  assumed  the  business  as  a result  of  the  division.

 

 

 

 

 

(3)      The   provisions   of   paragraphs   (3),   (4)   and   (5)   of   Article

871(Merger of hypothee or debtor under a revolving hypothec) shall apply

mutatis  mutandis  to  paragraphs  (1)  and  (2)  hereof.

 

  1. 873. (Disposition  of  revolving  hypothec)

 

(1)   The  hypothee  under  a  revolving  hypothec  cannot  make  any disposition as set forth in paragraph (1) of Article 857(Transfer or waiver of  hypothec), or paragraph (1) of Article  858(Transfer, waiver or   change   of   ranking),   prior   to   the   finalizing   of   the   principal; provided,  however,  that  this  shall  not  prevent  a  disposition  as  set forth  in  Article  856(Sub-hypothecation).

 

(2)      The provisions of paragraph (3) of Article 859(Effect of disposal of hypothec) shall not apply to repayments made prior to the finalizing of  the  principal  in  the  case  of  the  proviso  to  paragraph  (1).

 

  1. 874. (Transfer  of  revolving  hypothec)

 

(1)      The  hypothee  of  a  revolving  hypothec  may  obtain  the  consent  of the  hypothecator  under  the  revolving  hypothec,  and  transfer  the revolving  hypothec  prior  to  finalizing  of  the  principal.

 

(2)    The hypothee of a revolving hypothec may divide the revolving hypothect into two revolving hypothecs, and transfer one of these in accordance with paragraph (1). In this event if that revolving hypothec has been the subject of rights of a third party, the rights of said third party shall be extinguished in connection with  the revolving hypothec that  was  transferred.

 

(3)      The  hypothee  under  a  revolving  hypothec  must  obtain  the  consent of  the  third  party  set  forth  in  paragraph  (2)  in  order  to  make  the transfer  set  forth  therein.

 

  1. 875. (Partial  transfer  of  revolving  hypothec)

 

A hypothee under a revolving hypothec may obtain consent from the hypothecator  under  the  revolving  hypothec  prior  to  the  finalizing  of the  principal,  and  transfer  a  portion  of  the  revolving  hypothec  and share  the  same  with  the  acquiring  party.

 

  1. 876. (Sharing  of  revolving  hypothec)

 

(1)    The co-owners of a revolving hypothec shall receive payment in proportion to the amounts of the claims held by each; provided that if prior  to  finalizing  the  principal  a  different  ratio  is  prescribed,  or it is prescribed that one of the parties shall receive payment in preference to other parties, then payment shall be received as so prescribed.

 

(2)      A co-owner of a revolving hypothec may obtain the consent of the other  co-owners  and  transfer  his  rights  under  the  revolving  hypothec in    accordance    with    the    provisions    of    paragraph    (1)    of    Article

874(Transfer  of  revolving  hypothec).

 

 

 

 

 

  1. 877. (Effect of transfer of revolving hypothec by a hypothee under a revolving hypothec who has received the transfer or waiver of priority ranking)

 

If a hypothee under a revolving hypothec who has received the transfer or waiver of priority ranking from other hypothecary creditor transfers or  partially  transfers  said  revolving  hypothec,  the  acquiring  party shall  acquire  the  benefit  of  the  transfer  or  waiver  of  said  ranking.

 

  1. 878. (Joint  revolving  hypothec)

 

The  provisions  of  Articles  854(Simultaneous  or  staggered  application of proceeds in case of joint hypothec) and 855(Joint hypothec - registration of subrogation) shall apply in connection with a revolving hypothec,  only  if  it  is  registered  [with  all  of  the  immovables]  that a revolving hypothec is created over more than one immovable as security over the same claims, simultaneously with the creation of the revolving hypothec.

 

  1. 879. (Amendment,  transfer   or   finalizing   of   a   joint   revolving hypothec)

 

(1)      Any  amendment  of  the  extent  of  claims  secured  by  or  the  debtors or maximum credit limit of a revolving hypothec registered pursuant to Article 878(Joint revolving hypothec), or the transfer or partial transfer thereof shall not have effect unless registered in connection with  all  of  the  immovables.

 

(2)    The principal secured by a revolving hypothec that has been registered pursuant to Article 878(Joint revolving hypothec) shall be finalized even if cause for finalization has occurred in connection with only  one  immovable.

 

  1. 880. (Cumulative  revolving  hypothec)

 

A person who has revolving hypothecs over more than one immovable may exercise those revolving hypothecs in preference to other subordinate creditors up to each maximum credit limit in connection with the price for each immovable except in the event of Article 878(Joint revolving hypothec).

 

  1. 881. (Demand  for  finalization  of  principal)

 

(1)    The  hypothecator  under  a  revolving  hypothec  may  demand  the finalizing  of  the  principal  to  be  secured  if  three  years  have  passed since the creation of the revolving hypothec; provided that this shall not  apply  if  a  date  has  been  prescribed  on  which  the  principal  is  to be  finalized.

 

(2)    The  hypothecator  under  a  revolving  hypothec  may  demand  the finalizing  of  the  principal  to  be  secured  if  as  a  result  of  a  change of  the  scope  of  claims  to  be  secured,  termination  of  transaction,  or other cause, it becomes definite that no more principal will arise which is  to  be  secured.

 

 

 

 

 

(3)      The hypothee under a revolving hypothec may demand the finalizing of  the  principal  to  be  secured;  provided  that  this  shall  not  apply  if a  date  has  been  prescribed  on  which  the  principal  is  to  be  finalized.

 

(4)    If a demand is made pursuant to paragraph (1), (2) or (3), the principal  to  be  secured  shall  be  finalized  with  the  expiration  of  two weeks  from  the  time  of  the  demand.

 

  1. 882. (Cause  for  finalizing  of  principal)

 

(1)      In  addition  to  cases  in  which  a  demand  for  finalizing  has  been made as set forth in Article 881(Demand for finalization of principal), the   principal   to   be   secured   under   a   revolving   hypothec   shall   be finalized  in  the  following  circumstances:

  1. a) if the  hypothee  under  the  revolving  hypothec  has  made  a

petition for compulsory sale of the immovable under the hypothec,  provided  that  this  shall  be  limited  to  cases  in which  the  compulsory  sale  procedures  have  commenced;

  1. b) ifthe hypothee under the revolving hypthec has attached the

immovable under the hypothec, through a disposition for arrears;

  1. c) if two weeks have passed since the hypothee became aware that compulsory sale procedures have been commenced or attachment

through a disposition for arrears has been made against the immovable  under  the  hypothec;  or

  1. d) if  the   debtor   or   the   hypothecator   under   the   revolving

hypothec  has  received  a  declaration  of  bankruptcy.

 

(2)      If  the  effect  of  a  compulsory  sale  or  attachment  pursuant  to paragraph (1)(c) or a declaration of bankruptcy pursuant to paragraph (1)(d) has been extinguished, the finalizing of the principal shall be deemed  not  to  have  taken  place;  provided  that  this  shall  not  apply  if a third party has acquired the revolving hypothec or the rights created over  the  same  on  the  basis  that  the  principal  has  been  finalized.

 

  1. 883. (Demand  for  reduction  of  maximum  credit  limit)

 

(1)      After  the  principal  has  been  finalized,  the  hypothecator  under the revolving hypothec may demand the reduction of the maximum credit limit  of  the  revolving  hypothec  to  the  amount  that  is  the  sum  of  the debt currently existing and the amount of interest and other periodical payments that will accrue for two years thereafter, as well as the amount of  damages  for  default.

 

(2)      The  demand  of  paragraph  (1)  need  only  be  made  for  one  immovable in  connection  with  the  reduction  of  the  maximum  credit  limit  of  a revolving hypothec that is registered pursuant to Article 878(Joint revolving  hypothec).

 

  1. 884. (Demand  for  extinguishing  of  revolving  hypothec)

 

(1)      If the amount of the debt currently existing after the finalizing of   the   principal   exceeds   the   maximum   credit   limit   of   a   revolving hypothec, a person who has created the revolving hypothec to secure the

 

 

 

 

debts of another, or a third party who has acquired over the immovable under  the  revolving  hypothec  ownership  or  perpetual  lease,  or  a leasehold that can be set up against third parties may, by paying or depositing with a depository office an amount equivalent to the maximum credit  limit,  demand  that  the  revolving  hypothec  be  extinguished.  In this event, the payment or deposit shall have the effect of performance [as  a  ground  of  extinction  of  debt].

 

(2)      A  revolving  hypothec  with  a  registration  prescribed  in  Article

878(Joint revolving hypothec) (Joint revolving hypothec) shall be extinguished if a demand set forth in paragraph (1) is made against one of  the  immovables.

 

(3)      The debtor, guarantor or their successor in interest cannot make a  demand  for  extinguishing  as  prescribed  in  paragraph  (1).

 

(4)       A third party who has acquired ownership or another right set forth in paragraph (1) that is encumbered by a condition precedent cannot make a request for extinguishing as prescribed in paragraph (1) during the period of time that the existence or absence of said condition remains undetermined.

 

 

 

Chapter Six TRANSFER  AS  SECURITY17

 

 

Section   I  Definition of  Transfer  as  Security

 

  1. 885. (Definition  of  transfer  as  security)

 

(1)      A  transfer  as  security  shall  mean  the  transfer  of  the  ownership of  a  prescribed  movable  owned  by  a  debtor  or  a  third  party,  to  the creditor,  for  the  purposes  of  securing  a  debt.  In  this  event,  the ownership over the property shall be re-transferred to the person who provided  the  security  when  the  debt  is  paid  in  full.

 

(2)      It shall be possible to have more than one movable, for which the scope is defined according to the type of movable, the location or other standards, be the object of a transfer as security as one aggregate movable, even if there are changes in the individual movables included therein.

 

Section   II  Formation  of  Security Interest  Under  a Transfer  as  Security

 

 

  1. 886. (Creation  of  security  interest  under  a  transfer  as  security)

 

A   security   interest  under   a   transfer   as   security   shall   be   created through  an  agreement  between  the  creditor  and  the  debtor  or  the  third party  providing  the  movable(s)  for  the  transfer  as  security.

 

 

 

17   This is essentially the same as a common law "chattel mortgage," and only applies to  movables.

 

 

 

 

  1. 887. (Perfection  of  security  interest  under  a  transfer  as  security)

 

A  security  interest  under  a  transfer  as  security  cannot  be  held  up against  a  third  party  other  than  the  [security  creator]  unless possession of the object is assigned pursuant to Article 228(Assignment of  possession).

 

Section   III  Effect of  Security Interest  Under  a Transfer  as  Security

 

  1. 888. (Extent  of   effect   of   security   interest   under   a   transfer   as security)

 

(1)      [The effect of] a security interest under a transfer as security shall extend to all things that are affixed to and form part of the object of the security interest of the transfer as security at the time of the creation  thereof.  It  shall  also  extend  to  all  things  that  are  affixed to the object subsequent to the creation of the security interest under the  transfer  as  security.

 

(2)      Provisions  to  the  contrary  may  be  set  forth  in  the  agreement creating  the  security  interest  under  the  transfer  as  security.

 

  1. 889. (Effect of  security  interest  under  a  transfer  as  security  on fruits)

 

(1)      If  the  [security  creator]  or  a  third  party  on  instruction  from the [security provider] directly possesses the object, the provisions of  Article  888(Extent  of  effect  of  security  interest  under  a  transfer as security) shall not apply to the fruits thereof; provided that this shall not apply after the holder of the security interest under the transfer as security has demanded delivery of the object pursuant to paragraph (2) of Article 895(Conversion to cash or conclusive transfer of  ownership).

 

(2)      If  the  holder  of  the  security  interest  under  the  transfer  as security or a third party on instruction from said holder directly possesses the object, the provisions of Article 819(Priority right to receive  satisfaction  from  fruits)  concerning  pledges  shall  apply mutatis  mutandis  to  fruits  produced  from  the  object.

 

  1. 890. (Subrogation)

 

(1)       The security interest under a transfer as security may be executed against money or other things to be received by the [security creator], as  a  result  of  sale,  loss  or  destruction  of,  or  damage  to  the  object of the transfer as security; provided that it cannot be executed against the money or other thing after it has been paid or delivered to the [security  creator].

 

(2)      Notwithstanding  the  provisions  of  paragraph  (1)  above,  if  the object  under  the  transfer  as  security  consists  of  the  movables prescribed in paragraph (2) of Article 885(Definition of transfer as security), and the [security creator] plans to sell [any portion of the individual movables included therein] to another, the security interest under  the  transfer  as  security  cannot  be  exercised  against  the  sale

 

 

 

 

proceeds.

 

  1. 891. (Disposition  of  object  by  [security  creator])

 

(1)      Where  a  [security  creator],  who  continues  his  direct  possession over the object even after the security interest under a transfer as security has been created, assigns said object to a third party, or has created a real security right over said object in favor of a third party, if  said  third  party  satisfies  the  requirements  set  forth  in  Article

192(Bona  fide  acquisition  of  ownership  of  movable),  said  third  party may set up its rights against the holder of the security interest under the  transfer  as  security.

 

(2)      Notwithstanding  the  provisions  of  paragraph  (1)  above,  if  the object  under  the  transfer  as  security  consists  of  the  movables prescribed in paragraph (2) of Article 885(Definition of transfer as security), and the [security creator] plans to sell [any portion of the individual movables included therein] to another, and if the [security creator]  who  continues  to  be  in  direct  possession  of  the  object  even after  the  creation  of  the  transfer  as  security  sells  the  object  to  a third party, the holder of the security interest under the transfer as security shall not be able to set up his security interest against the third party regardless of whether the third party satisfies the requirements  set  forth  in  Article  192(Bona  fide  acquisition  of ownership  of  movable).

 

(3)     Where another person on instruction from the [security creator] continues direct possession over the object even after the security interest under a transfer as security has been created, if the [security creator] assigns said object to a third party, or has created a real security right over said object in favor of a third party, the provisions of  paragraph  (1)  or  (2)  shall  apply  mutatis  mutandis.

 

  1. 892. (Extent  of  secured  claim)

 

The security interest under the transfer as security shall secure the principle, interest, penalty, expenses for enforcing the security interest  under  the  transfer  as  security,  the  expenses  for  preserving the  object,  as  well  as  compensation  for  damage  resulting  from  default on   obligations,   or   an   hidden   defect   in   the   object,   except   where otherwise  provided  in  the  act  of  creation.

 

  1. 893. (Special provisions in the event that the holder of the security interest under the transfer as security takes direct possession of the object)

 

(1)      If  the  holder  of  the  security  interest  under  the  transfer  as security or a third party on instruction from the holder takes direct possession of the object, the provisions of Articles 818(Retention of thing  pledged),  820(Pledgee's  duty  to  preserve  thing  pledged),  and

821(Pledgee's  right  to  reimbursement)  shall  apply  mutatis  mutandis.

 

(2)      In  case  where  a  third  party  has  a  direct  possession  over  the subject matter by the direction of the holder of the security interest under  the  transfer  as  security,  who  transfered  the  ownershp  of  the

 

 

 

 

subject matter to another third party or provided it as security for another third party, the provision of Paragraph (1) shall apply mutatis mutandis.

 

  1. (Disposition of object by holder of security interest under the transfer as  security)

 

Where the holder of the security interest under the transfer as security who is in direct possession of the object assigns the object to a third party,  or  creates  a  real  security  right  in  favor  of  a  third  party,  if the third party satisfies the requirements set forth in Article 192(Bona fide acquisition of ownership of movable), the third party may set said rights  up  against  the  [security  creator].

 

Section   IV  Enforcement  of  the  Security  Interest Under  the  Transfer  as  Security

 

  1. (Conversion  to  cash  or  conclusive  transfer  of  ownership)

 

(1)      If the debt is not discharged, the holder of the security interest under the transfer as security may by giving notice to the [security creator]  take  a  measure  by  himself  to  convert  the  object  to  cash,  or obtain  the  ownership  of  the  object  conclusively.

 

(2)     If in the event of paragraph (1) the object is held in the direct possession of the [security creator] or a third party on the instruction of  the  [security  creator],  a  demand  for  delivery  of  the  object  may  be made  against  said  person.

 

(3)      If in the event of paragraph (1) the price of the object exceeds the  amount  of  debt  payable,  the  holder  of  the  security  interest  under the transfer as security must pay the [security] creator the difference as  a  settlement.

 

  1. (Right  of  retrieval  of  a  person  who  provides  the  security)

 

The  person  who  provides  the  security  may,  even  after  the  payment  date of the debt has passed and until the settlement payment set forth in paragraph (3) of Article 895(Conversion to cash or conclusive transfer of  ownership)  is  made,  tender  the  entire  amount  of  the  debt  and  show this fact to the holder of the security interest under the transfer as security, and retrieve the object under the transfer as security; provided, however, that if the price of the object encumbered by the security interest under the transfer as security does not exceed the amount of the debt that is payable, the preceding shall not apply after the holder of the security interest under the transfer as security has notified  the  person  who  provides  the  security  to  that  effect.

 

 

 

Chapter Seven GUARANTY

 

 

Section   I  Formation  of  Guaranty

 

 

  1. (Formation  of  contract  of  guaranty)

 

 

 

 

 

(1)       A  guaranty  shall  be  formed  when  (i)  a  prospective  guarantor undertakes  to  the  obligee  that  in  the  event  the  obligor  ['principal obligor']  fails  to  perform  his  obligation  ['underlying  obligation'], the  prospective  guarantor  will  perform  the  whole  or  part  of  such obligation  together  with  the  obligor  ['guarantor's  obligation'],  and (ii)  the  obligee  accepts  such  undertaking.

 

(2)       A  rider  providing  security  for  loss,  which  shall  constitute  a guaranty obligation independent from the underlying obligation, may be executed  as  part  of  a  contract  of  guaranty.  However,  this  shall  be limited  to  situations  in  which  the  provision  of  security  for  loss  or guaranty  constitutes  part  of  the  business  of  the  person  assuming  the obligations  imposed  by  such  rider.

 

(3)      Where  assumption  of  the  guaranty  obligation  does  not  constitute part of the business of the prospective guarantor, the obligee shall provide the prospective guarantor with any and all material information concerning the guaranty obligation to be assumed, thereby giving the prospective  guarantor  a  chance  to  fully  deliberate  [whether  to  enter into  the  contract  of  guaranty  based  on  such  information].

 

(4)       Where  the  obligee  fails  to  carry  out  the  duty  described  in paragraph  (3),  the  guarantor  may  rescind  the  contract  of  guaranty.

 

  1. (Formality  of  contract  of  guaranty)

 

(1)    A  guaranty  undertaking  made  without  being  recorded  in  an instrument or document may be revoked at any time. However, this shall not   apply   where   the   guarantor   has   voluntarily   set   to   perform   the guaranty  obligation.

 

(2)    The provisions of paragraph (1) shall also apply to a guaranty undertaking  made  in  connection  with  a  monetary  obligation  where  the amount of the guaranty obligation is not set forth in the guarantor's handwriting.

 

(3)    The contents of the guaranty obligation shall be specifically described  in  the  guaranty  instrument  or  document.

 

  1. (Floating  guaranty)

 

(1)      Notwithstanding   the   provisions   of   paragraphs   (2)   and   (3)   of Article 898(Formality of contract of guaranty), a floating guaranty contract that guarantees the performance of unspecified future obligations accruing from a certain continuing legal relationship shall be valid and effective only if the continuing legal relationship forming the  basis  of  the  underlying  obligations  is  specified.

 

(2)     If the term of the guaranty is not stated in the floating guaranty contract,  the  guarantor  may,  after  a  reasonable  period  of  time  has elapsed since the date of execution of the contract, terminate the floating  guaranty  contract.

 

(3)      If  the  principal  obligor's  business  or  financial  position  has

 

 

 

 

deteriorated substantially since the date of execution of the floating guaranty contract, the guarantor may immediately terminate the floating guaranty  contract.

 

(4)      Upon the death of a guarantor under a floating guaranty contract, only the floating guarantor's obligations regarding the underlying obligations in existence at the time of the guarantor's death shall be subject  to  succession.

 

Section   II  Effect of  Guaranty

 

  1. (Scope  of  guaranty)

 

(1)    A guaranty obligation shall include interest accruing on the underlying obligation, penalties, damages and all other charges incidental  to  the  underlying  obligation.

 

(2)       A guaranty contract may specify the amount of penalties or damages payable  for  non-performance  of  the  guaranty  obligation.

 

  1. (Nature  of  guaranty)

 

(1)      Where  an  underlying  obligation  does  not  exist,  a  guaranty  shall not be created. However, a guaranty can be created with regard to an underlying obligation that could arise in the future or an underlying obligation  subject  to  a  condition.

 

(2)      If   the   guarantor's   burden   is   more   onerous   than   that   of   the underlying  obligation  with  respect  to  either  the  object  or  the  terms and conditions of the obligation, the guarantor's obligation shall be reduced  in  accordance  with  the  scope  of  the  underlying  obligation.

 

(3)    The extinction of the underlying obligation shall operate to extinguish  the  guaranty  obligation  as  well.

 

(4)      A demand for performance or any other ground for interruption of a prescription period against the principal obligor shall also be effective  against  the  guarantor.

 

(5)      Except  as  otherwise  provided  for  in  the  guaranty  contract,  when the  claim  owed  to  the  principal  obligor  was  assigned,  the  claim  owed to the guarantor shall also be deemed to have been assigned to the assignee.

 

  1. (Rights  of  guarantor)

 

(1)      The  guarantor  is  entitled  to  invoke  prescriptive  extinction  of the  underlying  obligation.

 

(2)      The  principal  obligor's  waiver  of  the  benefit  of  prescription shall  not  be  effective  against  the  guarantor.

 

(3)     The guarantor may raise any defenses available to the principal obligor.

 

 

 

 

(4)      Where  the  principal  obligor  is  entitled  to  rescind  or  terminate [the contract giving rise to the underlying obligation], the guarantor may  refuse  to  perform  the  guaranty  obligation.

 

(5)       Where  the  principal  obligor  is  entitled  to  a  set-off  of  the underlying  obligation  by  virtue  of  a  counter-obligation  owed  by  the obligee,  the  guarantor  may  refuse  to  perform  the  guaranty  obligation to  the  extent  that  the  underlying  obligation  would  be  extinguished  by the  exercise  of  the  set-off.

 

  1. (Guaranty  of  voidable  obligation)

 

Where a guarantor who offers a guaranty or security against loss as part of  his  business  assumes  a  guaranty  obligation  regarding  the  voidable obligation while being aware of grounds for rescission [of the contract giving  rise  to  the  underlying  obligation],  the  guarantor  shall  be presumed to have assumed an independent obligation regarding the same subject  matter  as  that  of  the  underlying  obligation.

 

  1. (Qualification  as  guarantor)

 

(1)      Where an obligor has a duty to furnish a guarantor to the obligee, the guarantor must be a person of full legal capacity who has sufficient financial  ability  to  effect  performance.

 

(2)       If  the  guarantor  ceases  to  fulfill  the  conditions  set  forth  in paragraph  (1),  the  obligee  may  demand  that  the  obligor  replace  the guarantor  with  a  person  who  fulfills  such  conditions.

 

(3)     If the obligor is unable to furnish a guarantor who fulfills the conditions set forth in paragraph (1), the obligee may demand that the obligor  furnish  other  security  in  lieu  thereof.

 

(4)       This  Article  shall  not  apply  in  cases  where  the  obligee  has designated  the  guarantor.

 

  1. (Meaning  of  joint  guaranty  and  principle  of  joint  guaranty)

 

(1)       [A  guarantor  who  is  obligated  to  perform  jointly  and  severally with  the  principal  obligor]  may  not  (i)  demand  of  the  obligee  that performance  be  demanded  from  the  principal  obligor  prior  to  the guarantor,  or  (ii)  exempt  oneself  from  enforcement  of  the  guaranty obligation  by  establishing  that  the  principal  obligor  has  sufficient resources  to  tender  performance  and  is  easily  subject  to  execution.

 

(2)      In the absence of an agreement to the contrary, the guarantor is bound to perform the guaranty obligation jointly and severally with the principal  obligor.

 

  1. (Effect  of  events  occurring  with  respect  to  guarantor)

 

Events  that  occur  with  respect  to  the  guarantor  shall  have  no  effect with  respect  to  the  principal  obligor.  However,  this  shall  not  apply to a demand or other grounds for the interruption of prescription that is  made  or  occurred  to  a  guarantor  who  has  been  commissioned  by  the

 

 

 

 

principal  obligor.

 

  1. (Co-guarantors)

 

(1)       Where multiple persons undertake to be guarantors in a contract, each guarantor is obligated with respect to the entire amount of the underlying  obligation.

 

(2)       In  the  absence  of  an  agreement  to  apportion  the  guaranty obligation  among  the  co-guarantors  and  limit  each  co-guarantor's liability vis-a-vis the obligee to the  apportioned share  thereof, the burden of the guaranty obligation shall be presumed to be shared equally among  all  co-guarantors.

 

Section   III  Indemnification

 

  1. (Commissioned guarantor's  right  to  indemnification)

 

(1)       Where  a  guarantor  commissioned  by  the  principal  obligor  has effected performance on behalf of the principal obligor or has otherwise extinguished  the  underlying  obligation  at  his  expense,  the  guarantor is  entitled  to  demand  indemnification  from  the  principal  obligor.

 

(2)       The  guarantor  described  in  paragraph  (1)  may  demand indemnification of the actual amount paid by him and interest accruing thereon from the time of payment, as well as compensation for damages.

 

(3)       A guarantor commissioned by a principal obligor may preemptively exercise  his  right  to  indemnification  in  any  of  the  following  cases:

  1. a) Where the  guarantor  has  without  negligence  on  his  part received the issuance of a judgment ordering performance to the obligee, and such judgment has become final and binding;
  2. b) Wherethe principal obligor has been declared bankrupt, and

the  obligee  does  not  file  for  a  distribution  in  the

bankruptcy  procedure;

  1. c) Where the  underlying  obligation  has  become  due;  or
  2. d) Where the  deadline  for  performance  of  the  underlying obligation is not fixed and its maximum period of performance

cannot be established, and five years have elapsed since the date  of  execution  of  the  guaranty  contract.

 

(4)       A principal obligor who has received a demand for indemnification from the guarantor pursuant to paragraph (1) may, so long as the obligee has not received full and complete performance of the obligation, demand that  the  guarantor  furnish  security  or  procure  a  discharge  from  the obligation  for  the  benefit  of  the  principal  obligor.

 

(5)       In the case described in paragraph (4), the principal obligor may relieve himself from liability for indemnification by making a deposit with  the  official  depository  office,  furnishing  security  to  the guarantor or procuring a discharge from the obligation for the benefit of  the  guarantor.

 

  1. (Voluntary guarantor's  right  to  indemnification)

 

 

 

 

Where a guarantor who did not be commissioned by the principal obligor has  effected  performance  on  behalf  of  the  principal  obligor  or  has otherwise  caused  the  principal  obligor  to  be  released  from  the underlying obligation at the guarantor's expense, the principal obligor shall indemnify the guarantor to the extent that the principal obligor was  enriched  thereby.               However,  if  the  guaranty  was  provided  against the will of the principal obligor, the principal obligor shall indemnify the guarantor to the extent that the principal obligor continues to be enriched.

 

  1. (Requirements for  indemnification)

 

(1)       Where the guarantor has, without notifying the principal obligor that  he  received  a  demand  for  performance  from  the  obligee,  effected performance  of  the  obligation  or  otherwise  procured  the  discharge thereof  at  his  own  expense,  and  if  the  principal  obligor  has  had  any means of defense against the obligee, the principal obligor may set it up against the guarantor's demand for indemnification.   However, if the mean  of  defense  so  set  up  is  a  set-off,  the  guarantor  may  demand  that the  obligee  perform  the  counter-obligation  that  might  have  been extinguished  if  it  had  been  set-off.

 

(2)       If, as a result of the guarantor's failure to notify the principal obligor that he has procured the discharge of the obligation at his own expense,  the  principal  obligor  has  also  effected  in  good  faith performance of the obligation or otherwise procured a discharge at the principal  obligor's  expense,  the  principal  obligor  may  treat  his performance  or  other  act  of  discharge  as  effective.

 

  1. (Right to  indemnification  of  guarantor  on  behalf  of  one  of several  obligors)

 

A  guarantor  on  behalf  of  one  of  several  joint  obligors  or  obligors  of an  indivisible  joint  obligation  may  obtain  indemnification  from  the other  obligors  in  proportion  to  their  respective  shares.

 

  1. (Right to  indemnification  of  co-guarantors)

 

(1)     If one of several co-guarantors has effected performance of the guaranty  obligation  or  otherwise  procured  a  common  discharge  thereof at his own expense, such guarantor may demand indemnification from the other guarantors in proportion to their respective shares of the burden.

 

(2)       In the case described in paragraph (1), the guarantor may demand indemnification  with  respect  to  the  actual  amount  paid  and  interest accruing  thereon,  as  well  as  compensation  for  damages.

 

(3)       In  the  case  of  a  co-guaranty  that  contains  an  agreement  to apportion  the  guaranty  obligation  among  the  co-guarantors  and  limit each co-guarantor's liability vis-a-vis the obligee to the apportioned share  thereof,  if  one  of  the  co-guarantors  has  procured  at  his  own expense a common discharge of the obligation in excess of his share of the burden, the provisions of Articles 909(Voluntary guarantor's right to  indemnification),  910(Requirements  for  indemnification)  and

911(Right  to  indemnification  of  guarantor  on  behalf  of  one  of  several

 

 

 

 

obligors)  shall  apply  mutatis  mutandis.

 

Section   IV  Subrogation

 

  1. (Subrogation following  performance)

 

(1)       A  guarantor  who  has  effected  performance  of  the  underlying obligation or otherwise procured discharge thereof at his own expense shall  acquire  the  obligee's  rights  in  connection  with  the  underlying obligation,  and  shall  be  entitled  to  exercise  in  lieu  of  the  obligee the  security  interests  securing  such  rights.

 

(2)       In  the  case  described  in  paragraph  (1),  a  guarantor  who  has obtained a partial discharge may exercise the obligee's rights and the associated  security  interests  concurrently  with  the  obligee  in proportion to the value of the discharge obtained by the guarantor.   In this  case,  the  right  of  termination  may  be  exercised  solely  by  the obligee.  However,  in  the  event  of  termination,  [the  terminating obligee] shall return to the subrogor the amount for which the discharge was  obtained  and  interest  thereon.

 

  1. (Duty to  deliver  documents,  etc.)

 

(1)       An  obligee  who  has  obtained  full  satisfaction  by  virtue  of  the guarantor's  performance  or  other  expenditure  must  deliver  to  the guarantor the instrument certifying the underlying obligation and the property  held  in  the  obligee's  possession  as  security.

 

(2)       If the guarantor's performance or other expenditure has been made with  respect  to  only  part  of  the  obligation,  the  obligee  shall  record the  fact  of  the  subrogation  in  the  instrument  and  allow  the  guarantor to  supervise  the  preservation  of  the  property  held  in  the  obligee's possession  as  security.

 

  1. (Duty to  preserve  security)

 

An  obligee  who  has  obtained  satisfaction  by  virtue  of  the  guarantor's performance or other expenditure is obligated to preserve the security for  the  benefit  of  the  guarantor  who  made  such  performance  or  other expenditure.

 

  1. (Ranking of  subrogors)

 

(1)       A guarantor who effects performance or other expenditure may not thereafter  be  subrogated  to  the  rights  of  the  obligee  as  against  a third-party acquirer of an immovable provided as security  unless  [the fact  of  subrogation]  is  registered  after  such  performance  or  other expenditure.

 

(2)       A  guarantor  shall  be  subrogated  to  the  rights  of  the  obligee  as against  third  party  security  providers  only  in  accordance  with  the proportion  of  the  number  of  third  party  security  providers  to  that  of guarantors.

 

  1. (Mutatis mutandis  application  of  provisions  regarding

 

 

 

 

subrogation  of  performing  party)

 

With  respect  to  subrogation  arising  out  of  a  guarantor's  performance or other expenditure, in addition to the provisions set forth in this Section VI, the provisions of Sub-section IV, Section I, Chapter Seven of  Book  Four  shall  apply  mutatis  mutandis.

 

 

Chapter Eight JOINT   OBLIGATION

 

 

Section   I  Creation  of  Joint Ob  igation

 

  1. (Definition  of  joint  obligation)

 

(1)      Where   multiple   persons   have   assumed   a   joint   obligation,   the obligee may demand full or partial performance from any individual obligee  or  from  all  of  the  obligees  simultaneously  or  separately.

 

(2)      Where   one,   several   or   all   joint   obligors   have   been   declared bankrupt, the obligee may seek distribution of the entire amount of the obligation  in  the  bankruptcy  proceedings  for  each  of  such  obligors.

 

  1. (Creation  of  joint  obligation)

 

(1)      A  joint  obligation  is  created  by  a  provision  of  law  or  by  the express or implied agreement between the obligee and each of multiple obligors who are acknowledged to have in common an intention of being obligated  jointly  with  the  others.

 

(2)      The  agreement  described  in  paragraph  (1)  may  be  reached  between the obligee and all obligors simultaneously or between the obligor and each  obligor  separately.

 

(3)      The obligee can exempt any obligor from the joint liability with other  obligors.

 

(4)     An obligor who is exempted from the joint liability is thereafter liable only for that share of the obligation assumed by the obligor prior to  the  exemption.

 

(5)     Each joint obligor is presumed to bear an equal share of the total obligation.

 

  1. (Nullification  or  revocation  regarding  obligor)

 

The existence of grounds for nullification or revocation of an act regarding  a  joint  obligor  shall  not  affect  the  validity  of  the obligation  assumed  by  the  remaining  joint  obligors.

 

Section   II  Effect of  Events  Occurring  Regarding  Sing  e  Joint  Ob  igor

 

  1. (Universal effect of demand or other ground for interruption of prescription period)

 

 

 

 

A demand for performance or other act that serves to interrupt a period of  prescription  that  is  made  with  respect  to  one  joint  obligor  shall be  effective  against  all  other  joint  obligors.

 

  1. (Universal  effect  of  performance,  etc.)

 

Where  one  joint  obligor  makes  performance,  substitute  act  of performance or performance by deposit, the obligation is thereby extinguished  with  respect  to  the  other  joint  obligors  as  well.

 

  1. (Universal  effect  of  offset)

 

(1)      Where  one  joint  obligor  has  a  claim  against  the  obligee,  the obligor's offset of the claim against the obligation shall serve to extinguish  the  obligation  on  behalf  of  all  joint  obligors.

 

(2)     While the obligor possessing the claim described in paragraph (1) does  not  exercise  an  offset  of  such  claim  against  the  obligation,  the other  obligors  may  refuse  to  perform  with  respect  to  that  obligor's share  of  the  obligation.

 

  1. (Universal  effect  of  novation)

 

The  execution  of  a  novation  between  the  obligee  and  any  joint  obligor shall  serve  to  extinguish  the  obligation  for  all  obligors.

 

  1. (Universal  effect  of  merger)

 

A merger between the obligee and any joint obligor shall be deemed to constitute  performance  by  that  obligor.

 

  1. (Universal  effect  of  exemption)

 

(1)      An exemption given to one joint obligor with respect to the entire obligation is effective with respect to the other obligors only to the extent of the share of the obligation for which that obligor is responsible.

 

(2)      Where an exemption with respect to part of the obligation is given to one joint obligor, the exemption's effect with respect to the other obligors  shall  be  proportional  to  the  effect  it  would  have  had  if  it had  constituted  an  exemption  with  respect  to  the  entire  obligation.

 

  1. (Universal  effect  of  prescription)

 

(1)       Where one joint obligor invokes the benefit of a prescription that has  been  perfected  with  respect  to  that  obligor,  the  other  obligors shall be exempted from the obligation to the extent of the share of the obligation  for  which  that  obligor  was  responsible.

 

(2)      In  the  case  described  in  paragraph  (1),  where  the  prescription has been perfected but the benefit of prescription has not been invoked, the  other  obligors  may  invoke  such  prescription  with  respect  to  the share of the obligation for which the obligor originally eligible to invoke  prescription  was  responsible.

 

 

 

 

 

  1. (Principle  of  relative  effect)

 

Except as provided in Articles 921(Universal effect of demand or other ground for interruption of prescription period) through 927(Universal effect of prescription), an event occurring with respect to one joint obligor  shall  have  no  effect  with  respect  to  the  other  obligors.

 

Section   III  Indemnification

 

  1. (Performing  obligor's  right  to  indemnification)

 

(1)       Where a joint obligor has obtained a discharge from the obligation through his own performance or other expenditure, and the other joint obligors have consequently been discharged as  well, the  joint obligor may demand indemnification from the other obligors with respect to their respective shares of the obligation. Where the performance or other expenditure  of  a  joint  obligor  covers  only  a  part  of  the  obligation, and  that  obligor  and  the  other  joint  obligors  receive  a  discharge  to that extent, the obligor may demand indemnification in accordance with the percentage of the entire obligation that was discharged by such performance  or  expenditure.

 

(2)      The  demand  for  indemnification  described  in  paragraph  (1)  may include legal interest incurred after the date of discharge through performance or other expenditure, as well as unavoidable expenses and other  losses.

 

  1. (Notification  as  requirement  for  indemnification)

 

(1)      Where  a  joint  obligor,  without  notifying  the  other  obligors  of the  receipt  of  a  demand  for  performance  by  the  obligee,  obtains  a discharge from the obligation through his own performance or other expenditure, thereby discharging the other joint obligors as well, another  obligor  who  had  grounds  to  defend  against  the  obligee's  claim may raise such grounds, to the extent of such obligor's share of the obligation, as a defense to a claim for indemnification by the joint obligor  who  obtained  a  discharge  from  the  obligation  through performance or other expenditure. However, where the other obligor's grounds  for  defending  against  the  obligee  consist  of  an  offset  [with a counter-obligation owed by the obligee], the obligor against whom the defense    is    raised    may    demand    that    the    obligee    perform    such counter-obligation  that  should  have  been  extinguished  by  the  offset.

 

(2)      Where  a  joint  obligor  obtains  a  discharge  from  the  obligation through  his  own  performance  or  other  expenditure  and  fails  to  notify the other obligors that they are thereby discharged from the obligation as well, and another joint obligor thereafter obtains a discharge from the obligation by tendering performance or other expenditure to the obligee without knowledge of the discharge obtained as a result of the first joint obligor's performance or expenditure, the second joint obligor may deem his own performance or other action discharging the obligation  as  effective.

 

(3)      Where  performance  or  other  expenditure  that  would  discharge  the

 

 

 

 

obligation are made by multiple joint obligors, if the notification described in paragraphs (1) and (2) is not provided, the discharging performance  or  other  expenditure  that  is  made  first  in  time  shall  be deemed  effective.

  1. (Indemnification where joint obligor lacks financial capacity) Where    a    joint    obligor    lacks    the    financial    capacity    to    make

indemnification,     the     amount     of     that     obligor's     liability     for

indemnification shall be borne by the obligor demanding indemnification and by the remaining joint obligors having such capacity in proportion to their respective share of the obligation. However, where the obligor demanding indemnification is negligent, such obligor may not demand indemnification from the other obligors for the financially incapable obligor's  share  of  the  obligation.

 

  1. (Exemption of    joint     liability     and    financially     incapable obligor's  share)

 

Where a joint obligor obtains an exemption from the joint liability with other   obligors,   if   any   of   the   other   obligors   lacks   the   financial capacity to make indemnification, the  obligee shall assume that share of the indemnification amount imputed to the financially incapable obligor for which the obligor exempted from the joint liability would otherwise  be  liable.

 

Section   IV  Subrogation  by Performance

 

  1. (Subrogation)

 

(1)     Where a joint obligor obtains the right to demand indemnification from the other obligors, such obligor shall succeed to the claims possessed  by  the  obligee  against  the  other  obligors  to  the  extent  of such indemnification, and shall be subrogated to the position of the obligee  in  regard  to  any  security  interests  securing  such  claims.

 

(2)       The provisions of Book Four, Chapter Seven, Section I, Sub-section IV shall apply mutatis mutandis to the subrogation of an obligor seeking indemnification.

 

Section   V    Other  Situations Invo  ving  Mu   tip  e  Ob  igors

 

  1. (Indivisible obligation, sham obligation, divisible obligation)

 

(1)       Where   multiple   obligors   owe   the   same   obligation   to   a   single obligee,  if  the  obligors  are  not  acknowledged  to  have  in  common  an intention to assume  joint and  several responsibility with  the others, the  provisions  of  Article  918(Definition  of  joint  obligation)  shall apply  mutatis  mutandis.  However,  where  performance  of  the  obligation is divisible, and divided performances will not harm the obligee, each obligor  shall  assume  a  divided  and  separate  obligation  corresponding to his respective share. Where each obligor's share cannot be determined, each  share  shall  be  presumed  to  be  equal.

 

 

 

 

(2)      In  the  case  described  in  the  first  sentence  of  paragraph  (1), events occurring with respect to one obligor shall not affect the other obligors except in the cases described in Article 922(Universal effect of performance, etc.) and paragraph (1) of Article 923(Universal effect of  offset).

 

(3)      Where  one  obligor  described  in  the  first  sentence  of  paragraph (1)  obtains  a  discharge  of  the  obligation  through  his  own  performance or other expenditure and the other obligors are thereby discharged as well, if it is necessary to preserve fairness between the performing obligor  and  the  other  obligors,     the  performing  obligor  may,  to  the extent necessary to preserve fairness among the obligors, demand indemnification  from  the  other  obligors.

 

 

BOOK  SEVEN  "RELATIVES"

 

 

Chapter One GENERAL PROVISIONS

 

 

  1. (Scope  of  relatives)

 

"Relatives"  refers  to  the  persons  listed  below:

  1. a) Relatives by    consanguity     up    to    the    sixth    degree    of relationship;
  2. b) Spouses; and

 

  1. c) Relatives by affinity up to the third degree of

 

 

  1. (Calculation  of  degree  of  relationship)

 

(1)      The  degree  of  relationship  is  determined  by  counting  the  number of  generations  between  the  relatives.

 

 

(2)      The degree of relationship between collateral relatives depends on  the  number  of  generations  ascending  from  one  of  the  relatives,  or his or her spouse, back to the common ancestor, and then descending from such  ancestor  to  the  other  relative.

 

 

  1. (Arising  of  relationship  from  adoption)

 

 

The same relationship as between relatives by consanguinity arises  on the  date  of  an  adoption  between  the  adoptee  on  the  one  hand  and  the adopter  and  his  or  her  relatives  by  consanguinity  on  the  other  hand.

 

 

  1. (Extinguishment  of  affinity)

 

 

 

 

 

 

(1)      Affinity  shall  be  terminated  by  divorce.

 

 

(2)      The  same  as  set  forth  in  paragraph  (1)  shall  apply  if  after  the death  of  a  spouse,  the  surviving  spouse  remarries  or  declares  his  or her  intention  to  terminate  affinity.

 

 

  1. (Extinguishment of relationship by dissolution of adoption)

 

 

The relationship between an adoptee, his or her spouse, his or her lineal descendants and their spouses on the one hand, and the adopter and his or her relatives by consanguity on the other hand, is terminated by the dissolution  of  the  adoption.

 

 

  1. (Mutual obligations  of  respect  and  prevention  of  violence within  families)

 

 

(1)       Members of families shall respect each other's rights and freedom, and  shall  support  each  other.

 

 

(2)      Family members shall prevent domestic violence and infringements of  each  other's  human  rights.

 

 

Chapter Two  ENGAGEMENT

 

 

  1. (Formation  of  engagement)

 

 

An engagement shall be formed by promising to marry in the future between a  man  and  a  woman  and  performing  the  ceremony  of  engagement.

 

 

  1. (Return  of  engagement  gift)

 

 

Where  an  engagement  is  dissolved,  a  party  who  has  presented  an engagement gift to the other party in the expectation of the formation of  marriage  may  demand  the  return  of  such  gift  from  the  other  party.

 

 

  1. (Liability  for  improper  revocation)

 

 

 

 

Where an engagement is revoked by one of the parties without good reason, the other party may demand compensation for damage arising from such revocation.

 

 

  1. (Time  limit  for  filing  suit)

 

 

A suit relating to Article 942(Return of engagement gift) or to Article

 

943(Liability for improper revocation) must be filed not later than one year  following  the  dissolution  of  the  engagement.

 

 

Chapter Three MARRIAGE

 

 

Section   I  Formation  of  Marriage

 

 

Sub-section  I  Requirements  for marriage

 

 

  1. (Marriageable  age)

 

Neither men nor women may marry until they have reached the age of 18; provided  that  if  one  of  the  parties  has  reached  the  age  of  18  and  the other  party  is  at  least  16  and  less  than  18  years  of  age,  the  parties may    marry    with    the    consent    of    the    parents    or    guardian    of    the last-mentioned  party.

 

 

  1. (Prohibition  of  bigamy)

 

A  person  who  has  a  spouse  may  not  effect  an  additional  marriage.

 

 

  1. (Period  of  prohibition  of  remarriage)

 

(1)      A woman may not remarry until 120 days have elapsed from the day of  the  dissolution  or  annulment  of  her  previous  marriage.

 

 

(2)     The provisions of paragraph (1) shall not apply if the woman was already   pregnant   from   before   the   dissolution   or   annulment   of   the previous   marriage   and   has   given   birth,   or   if   she   has   a   doctor's certificate  that  she  is  not  pregnant.

 

 

  1. (Prohibition of marriage between relatives by consanguinity)

 

 

 

 

 

 

(1)  No marriage may be effected between lineal relatives by consanguinity, nor between collateral relatives by consanguinity up to and  including  the  third  degree  of  relationship.

 

 

(2)    Paragraph (1) shall apply notwithstanding the termination of relationship  pursuant  to  the  provisions  of  Article  1013  (Dissolution of  full  adoption)  or  1029  (Effect  of  dissolution  of  simple  adoption).

 

 

  1. (Prohibition  of  marriage  between  relatives  by  affinity)

 

 

(1)      No marriage may be effected between lineal relatives by affinity. The   same   shall   apply   notwithstanding   the   termination   of   affinity pursuant to the provisions of Article 938(Extinguishment of affinity),

1013 (Dissolution of full adoption) or 1029 (Effect of dissolution of simple  adoption).

 

 

(2)      No   marriage   may   be   effected   between   collateral   relatives   by affinity up to and including the third degree of relationship. The same shall apply notwithstanding the termination of affinity pursuant to the provisions of Article 938(Extinguishment of affinity); provided that where  either  husband  or  wife  has  died,  the  surviving  spouse  may  marry a person who was a collateral relative by affinity up to and including the  third  degree  of  relationship.

 

 

  1. (Marriage  of  minor)

 

 

(1)      If  one  of  the  parties  wishing  to  marry  is  a  minor,  the  consent of  his  or  her  parents  or  guardian  must  be  obtained.

 

 

(2)      If one of the parents does not consent, the consent of the other parent  shall  be  sufficient.

 

 

(3)     If the parents or guardian unreasonably refuse consent, the minor wishing to marry may apply to the court for adjudication in place of consent.

 

 

 

 

  1. (Marriage  of  person  under  general  guardianship)

 

 

A  person  under  general  guardianship  may  marry  if  he  or  she  has  the minimum  capacity  required  to  effect  a  marriage.  In  such  a  case  the consent  of  the  general  guardian  is  not  required.

 

 

  1. (Notification  and  registration  of  marriage)

 

(1)      A  marriage  shall  come  into  effect  by  virtue  of  notification, public  notice,  conclusion  of  the  marriage  contract  in  the  presence  of the  family  registration  official  and  marriage  registration.

 

 

(2)      The notification, public notice, conclusion of marriage contract and registration described in paragraph (1) shall be effected in accordance with the procedures prescribed by the [Status Registration Order].

 

 

  1. (Acceptance  of  notification  of  marriage)

 

A notification of marriage may be accepted only after confirming that there    is    no    infringement    of    Articles    945(Marriageable    age)    to

951(Marriage  of  person  under  general  guardianship)  inclusive.

 

 

  1. (Formalities     of     marriage     between     Cambodians     outside

Cambodia)

 

 

(1)       Cambodians   abroad   wishing   to   marry   may   effect   notification, public notice and conclusion of the contract of marriage in the presence of a Cambodian Ambassador, Minister or Consul accredited to that country, and  register  the  marriage.

 

 

(2)      The  public  notice  described  in  paragraph  (1)  shall  be  effected by posting a notice at the Cambodian diplomatic establishment in the relevant  country.

 

 

Sub-section  II  Nu                                 ity  and  Annu ment  of  Marriage

 

 

  1. (Nullity  of  marriage)

 

 

 

 

A  marriage  shall  be  treated  as  void  only  in  the  following  cases:

 

  1. a) Where there  is  no  intention  to  marry  common  to  the  parties on account of mistake as to the identity of the other party, coercion  or  other  cause;
  2. b) Where the parties do not effect notification, public notice, conclusion of the contract of marriage or registration thereof; provided  that  a  slight  procedural  defect  alone shall  not  preclude  validity  of  the  

 

 

  1. (Annulment  of  marriage)

 

 

Annulment  of  a  marriage  shall  be  effected  in  accordance  with  Articles

 

957(Annulment of unlawful marriage), etc.) to 960(Annulment of marriage based  on  fraud  or  duress).

 

 

  1. (Annulment  of  unlawful  marriage)

 

(1)      Either party to a marriage, their parents or a public prosecutor may apply to the court for annulment of a marriage effected in contravention of Articles 945(Marriageable age) to 949(Prohibition of marriage between relatives by affinity); provided that a public prosecutor  may  not  make  such  an  application  after  the  death  of  one  of the  parties.

 

 

(2)      The   spouse   or   former   spouse   of   the  party   may   also   apply   for annulment    of    a    marriage    effected    in    contravention    of    Articles

946(Prohibition of bigamy) or 947(Period of prohibition of remarriage).

 

 

  1. (Extinguishment of      right      to      annul      marriage      under marriageable  age)

 

 

(1)   No application may be made to annul a marriage effected in contravention of Article 945(Marriageable age) once the under-age party attains  the  marriageable  age.

 

 

(2)     An under-age party to a marriage may apply for annulment of the marriage during the period of 3 months following his or her attainment of the marriageable age, except where he or she has ratified the marriage

 

 

 

 

after  attaining  the  marriageable  age.

 

 

  1. (Annulment  of   marriage   within   period   of   prohibition   of re-marriage)

 

 

Upon the lapse of 120 days from the day of dissolution or annulment of the previous marriage, or where the woman has become pregnant after her remarriage, no application may be made for annulment of a marriage effected  in  breach  of  the  provisions  of  Article  947(Period  of prohibition  of  remarriage).

 

 

  1. (Annulment  of  marriage  based  on  fraud  or  duress)

 

 

(1)       A  person  who  has  been  induced  by  fraud  or  duress  to  effect  a marriage  may  apply  to  the  court  for  annulment  of  such  marriage.

 

 

(2)   The right of annulment described in paragraph (1) shall be extinguished  if  3  months  have  elapsed  since  the  party  discovered  the fraud or became free of the duress, or if the party has ratified the marriage.

 

 

  1. (Effect  of  annulment  of  marriage)

 

 

(1)      The  annulment  of  a  marriage  shall  have  no  retroactive  effect.

 

 

(2)      If  a  party  who  was  unaware  at  the  time  of  the  marriage  of  the existence of a ground for its annulment has acquired property as a result of the marriage, he or she shall return such property to the extent that he  or  she  currently  benefits  thereby.

 

 

(3)      A party who was aware at the time of the marriage of the existence of a ground for its annulment shall return the whole of the benefit that such  party  has  obtained  as  a  result  of  the  marriage,  and  shall furthermore  be  liable  to  compensate  the  other  party  for  any  damage  if the  other  party  acted  bona  fide.

 

 

(4)      The  provisions  of  Article  985(Presumption  of  paternity)  shall apply  mutatis  mutandis  to  any  child  born  to  the  parties  to  a  marriage

 

 

 

 

that  is  to  be  annulled.

 

 

(5)    If  a  marriage  that  ought  to  be  annulled  is  dissolved,  the provisions of Article 977(Division of property) shall apply mutatis mutandis.

 

 

Section   II  Va  idity  of  Marriage

 

 

  1. (Surname  of  a  married  couple)

 

 

A married couple may use the surname of the husband or the wife, or their respective surnames prior to the marriage, in accordance with their agreement  at  the  time  of  the  marriage.

 

 

  1. (Obligation of     cohabitation,      cooperation      and     mutual assistance)

 

 

The husband and wife shall cohabitate, cooperate and assist each other.

 

 

  1. (Freedom to  choose  occupation  and  to  participate  in  social activities)

 

 

The husband and wife shall be free to choose their occupation and to participate  independently  in  political,  cultural  and  social activities.

 

 

  1. (Fictional  attainment  of  majority  upon  marriage)

 

 

In  the  application  of  this  Code,  a  minor  who  marries  shall  be  deemed to  have  attained  his  or  her  majority  by  so  doing.

 

 

Section   III  The Matrimonia                                     Property  System

 

 

Sub-section  I  The  Contractua                                     Property  System

 

 

  1. (Matrimonial property     contract     and    statutory     property system)

 

 

(1)      Prior  to  or  after  their  marriage,  a  husband  and  wife  may  enter

 

 

 

 

into  a  contract  governing  their  property  relationship;  provided  that such contract may not contravene the provisions governing the right to demand  support  and  the  legally  secured  portions.

 

 

(2)      Unless  the  husband  and  wife  have  entered  into  a  contract  with regard  to  their  property,  their  property  relations  shall  be  governed by  the  provisions  of  Sub-section  II  (The  Statutory  Property  System).

 

  1. (Required  formalities   and   conditions   for   perfection   of matrimonial  property  contract)

 

 

(1)      A  matrimonial  property  contract  shall  be  concluded  in  writing.

 

 

(2)      Where the husband and wife conclude a contract that differs from the statutory property system, such contract cannot be held up against third  parties  unless  it  is  registered.

 

 

Sub-section  II  The  Statutory  Property  System

 

 

  1. (Allocation  of  expenses  of  marriage)

 

 

Husband and wife shall share the expenses of married life, taking into account  their  property,  income  and  all  other  circumstances.

 

 

  1. (Separate  property)

 

 

The types of property listed below shall be treated as separate property belonging  to  one  of  the  spouses  alone:

  1. a) Property held  by  a  spouse  from  before  the  marriage;

 

  1. b) Property acquired  by  a  spouse  during  the  marriage  by  gift, succession,  or  testamentary  gift;
  2. c) Property obtained  as  the  consideration  for  disposing  of property  described  in  items  (a)  or  (b)  

 

 

  1. (Common  property)

 

 

Common property means any and all property acquired during the marriage by  one  or  both  spouses,  other  than  property  described  in  items  (b)  or (c)  of  Article  969(Separate  property).

 

 

 

 

 

 

  1. (Management  and  use  of  property)

 

 

(1)      Husband and wife shall have equal rights to use, enjoy the benefit from  and  manage  the  common  property,  and  each  of  them  shall  have  the right  to  use,  enjoy  the  benefit  from  and  manage  their  own  property.

 

 

(2)      Husband and wife shall have the right to use the common property to  the  extent  necessary  for  their  daily  life.

 

 

(3)     Husband and wife shall jointly manage the common property. Either spouse  may  demand  that  the  other  spouse  take  any  measures  required  in order  to  secure,  maintain  and  preserve  the  common  property.

 

 

(4)    If no agreement concerning the management or use of the common property is reached upon consultation between the spouses or if consultation cannot be held between the spouses, either spouse may seek adjudication  by  the  court  concerning  such  management  or  use.

 

 

  1. (Joint  liability  for  obligations)

 

 

Husband and wife shall be jointly liable for the following obligations: a)  Expenses  for  the  maintenance  of  the  cohabitation  of  the husband  and  the  wife  and  expenses  for  the  care  of  children

such  as  educational  and  medical  expenses;

 

  1. b) Obligations and other liabilities agreed in writing by both spouses with an obligee during the marriage and obligations and other liabilities assumed by one of the spouses with the written consent of the other spouse during the marriage; and
  2. c) Expenses for  the  management  and  maintenance  of  the  common

 

 

  1. (Disposition  of  common  property)

 

 

(1)      The  common  property  may  not  be  sold  or  otherwise  disposed  of without   the   consent   of   both   the   spouses;   provided   that   with   the permission  of  the  court,  one  spouse  may  sell  or  otherwise  dispose  of

 

 

 

 

common property in circumstances where this is unavoidable for the preservation  of  matrimonial  cohabitation  and  livelihood.

 

 

(2)     If one of the spouses sells or otherwise disposes of an immovable property that is the family residence without the consent of the other spouse,  the  non-consenting  spouse  may  file  a  suit  of  [nullity]  up  to two  years  after  becoming  aware  of  such  disposition.

 

 

  1. (Spouses'  right  of  residence)

 

(1)      A spouse may reside in the separate property of the other spouse if  such  property  has  been  provided  as  the  matrimonial  residence.

 

 

(2)       In cases described in paragraph (1), even if the separate property of one spouse that has been provided as the matrimonial residence is disposed  of  without  the  consent  of  the  other  spouse,  and  even  if  the right   of   residence   of   such   other   spouse   in   said   property   is   not registered,  such  right  of  residence  may  be  held  up  against  the  third party           who   has   acquired   the   conditions   for   perfection   after   the establishment  of  said  right  of  residence.

 

 

Section   IV  Divorce

 

 

Sub-section  I  Grounds  of  Divorce

 

 

  1. (Grounds  of  divorce)

 

 

(1)     Husband or wife can bring a suit for divorce only in the following cases:

  1. a) If the  other  spouse  has  committed  an  act  of  infidelity;

 

  1. b) If he  or  she  has  been  deserted  without  good  reason  by  the other  spouse;
  2. c) If it has been unknown for a year or more whether the other spouse is  alive  or  dead;
  3. d) If the  other  spouse  has  been  living  apart  contrary  to  the spirit  of  marriage  for  one  year  or  more  continuously;  or
  4. e) If the  matrimonial  relationship  has  otherwise  broken  down

 

 

 

 

and  there  is  no  prospect  of  reconciliation.

 

 

(2)      Even  in  cases  falling  under  paragraph  (1),  the  court,  taking account of all the circumstances, may dismiss [with prejudice] a demand for  divorce  if  divorce  would  cause  extreme  hardship  or  anguish  to  the other  spouse  or  the  children.

 

 

(3)      Even where the grounds described in item (d) or (e) of paragraph (1) exist, the court may in its discretion dismiss [with prejudice] a demand for divorce if it finds that the demand is in bad faith because the demandant has seriously neglected to cooperate with and assist the other  spouse.

 

 

  1. (Divorce  by  agreement)

 

 

Where  both  parties  to  a  marriage  have  agreed  to  divorce,  they  may petition the court for divorce; provided that the court may only grant a  divorce  after  confirming  that  the  parties  really  desire  to  dissolve the  matrimonial  relationship  by  divorce.

 

 

  1. (Division  of  property)

 

 

(1)      In   case   of   divorce,   the   property   shall   be   divided   fairly   in accordance  with  the  agreement  of  the  parties  to  the  marriage.

 

 

(2)       If the spouses are unable to agree upon consultation, the property shall  be  divided  in  accordance  with  the  following  provisions:

  1. a) Each  spouse   shall   retain   property   held   from   before   the marriage and property acquired during the marriage by succession,  gift  [inter  vivos]  or  testamentary  
  2. b) Eachspouse shall have the right to receive one half of the

 

common property in addition to his or her separate property; provided that where there are special circumstances and also an application is filed by one of the parties, the court may divide the common property [otherwise] taking into account all the circumstances, including, without limitation, the contribution of each spouse to the acquisition, maintenance

 

 

 

 

and increase of property, the period of the marriage, the living standard during the marriage, the age, mental and physical condition of each spouse, their occupations, income and  earning  capacity,  the  welfare  of  any  children,  etc.

 

 

(3)      House work shall be deemed to have the same value as work outside the  house.

 

 

  1. (Divorce  and  surname)

 

 

A  wife  or  husband  who  has  changed  her  or  his  surname  on  account  of marriage may again use the original surname or may use the surname that was  being  used  at  the  time  of  the  divorce.

 

 

Sub-section  II  Divorce Procedures

 

 

  1. (Suit  for  divorce)

 

 

(1)      A suit for divorce shall be filed at the court having jurisdiction in accordance with Article 10 (Special jurisdiction in cases involving divorce,  parent-child  relationships)  of  the  Code  of  Civil  Procedure.

 

 

(2)     Either party to a marriage may file a petition for divorce at the commune  or  sangkat  council  for  the  domicile  or  location  of  residence as  prescribed  in  paragraphs  (1)  or  (3)  of  Article  10  (Special jurisdiction  in  cases  involving  divorce,  parent-child  relationships) of the Code of Civil Procedure. In such a case the commune or sangkat council may attempt conciliation during the period of 15 days following its receipt of the petition. If the conciliation is unsuccessful, the commune or sangkat council shall forward the complaint to the court immediately  as  if  a  suit  has  been  filed.

 

 

  1. (Provisional  disposition)

 

 

Where this is necessary, a court which has accepted a suit for divorce, either upon petition of a party or ex officio, may make an order for provisional  disposition  relating  to  separation,  custody  of  children,

 

 

 

 

maintenance or management of property, support of a spouse, sharing of expenses  of  marriage,  expenses  of  education  of  children,  etc.

 

 

  1. (Attempt  to  compromise  by  court)

 

 

(1)      Even where one of the parties is strongly demanding divorce, the court may recommend and attempt to persuade the parties to reach a compromise.

 

 

(2)      If no agreement to compromise is reached, the court shall try the suit  for  divorce  and  render  a  judgment.

 

 

Chapter Four PARENTS  AND CHILDREN

 

 

Section   I  Natura                                Parents-Chi  dren  Re  ationship

 

 

Sub-section  I  Genera                                                 Provisions

 

 

  1. (Obligation  to  notify  birth)

 

 

(1)      The father or mother of a child shall report the birth not later than  15  days  from  the  day  of  birth  to  the  commune  or  sangkat  office. If neither the father nor the mother can report the birth, an adult relative cohabiting with the child's father or mother shall promptly report  the  birth.

 

 

(2)      If   the   father   and   mother   neglect   to   fulfill   the   obligation described  in  paragraph  (1)  without  good  reason,  they  shall  be  subject to  a  fine  of  10,000  riels.

 

 

  1. (Method  of  calculation  of  age)

 

(1)      A  person's  age  shall  be  counted  from  the  date  of  birth.

 

 

(2)    The provisions of Article 332(Calculation of period by solar calendar) shall apply mutatis mutandis to the calculation of a person's age.

 

 

 

 

Sub-section  II  Determination  of  Natura             Parents-Chi   dren  Re ationship

 

 

  1. (Relationship  of  mother  and  child)

 

 

The  woman  who  gives  birth  to  a  child  is  the  child's  mother.

 

 

  1. (Presumption  of  paternity)

 

 

(1)       A child conceived by the wife during the marriage shall be presumed to  be  the  child  of  the  husband.

 

 

(2)       A child born 180 days or more after the day on which the marriage was  formed  or  born  not  later  than  300  days  after  the  day  on  which  the marriage  was  dissolved  or  annulled  shall  be  presumed  to  have  been conceived  during  the  marriage.

 

 

(3)      If a woman who has remarried contrary to the provisions of Article

 

947(Period of prohibition of remarriage) gives birth to a child and the father   of   the   child   cannot   be   determined   in   accordance   with   the provisions  of  paragraphs  (1)  and  (2),  the  child  shall  be  presumed  to a  child  of  the  later  marriage.

 

 

  1. (Denial  of  paternity)

 

 

In   cases   described   in   Article   985(Presumption   of   paternity),   the husband  or  the  child  may  deny  the  paternity.

 

 

  1. (Suit  of  denial  of  paternity  by  husband)

 

 

(1)      The husband shall exercise his right of denial of paternity under

 

Article  986(Denial  of  paternity)  by  suit  against  the  child.

 

 

(2)      The husband must file a suit of denial of paternity not later than

 

6  months  after  he  becomes  aware  of  the  birth  of  the  child.

 

 

(3)      If the husband is a person under general guardianship at the time of expiry of the period described in paragraph (2), the said period shall be calculated from the time of the adjudication terminating the general guardianship  as  set  forth  in  Article  27(Revocation  of  declaration  of

 

 

 

 

commencement  of  general  guardianship).

 

 

  1. (Suit  of  denial  of  paternity  by  child)

 

 

(1)      A  child  shall  exercise  the  right  of  denial  of  paternity  under

 

Article 986(Denial of paternity) by suit against the putative father.

 

 

(2)      In a case where a minor child exercises his or her right of denial of paternity and the child has neither mother exercising the parental power over said child nor guardian, the court shall appoint a special representative  for  the  child.

 

 

(3)      Upon  the  lapse  of  6  months  following  the  attaining  of  majority by the child, he or she may not exercise the right of denial of paternity.

 

 

(4)      If  the  child  is  a  person  under  general  guardianship  at  the  time of  expiry  of  the  period  described  in  paragraph  (3),  said  period  shall be calculated from the time of the adjudication terminating the general guardianship as set forth in Article 27(Revocation of declaration of commencement  of  general  guardianship).

 

 

  1. (Retroactive  effect  of  denial  of  paternity)

 

 

A  denial  of  paternity  shall  have  effect  retroactively  to  the  time  of the  birth  of  the  child.

 

 

Sub-section  III  Acknow  edgement

 

 

  1. (Voluntary  acknowledgement)

 

 

The father of a child may acknowledge the child, except where the child already  has  a  legal  father.

 

 

  1. (Capacity  to  acknowledge)

 

 

Even  if  the  father  is  a  minor  or  a  person  under  general  guardianship, the consent of his legal representative shall not be required for acknowledgement.

 

 

 

 

 

 

  1. (Acknowledgement  by  father)

 

 

(1)      The  father  may  acknowledge  a  minor  child.

 

 

(2)      A father may also acknowledge a child in the womb, with the consent of  the  mother.

 

 

  1. (Acknowledgement  of   child   who   attained   majority   and   of deceased  child)

 

 

(1)      A  father  may  only  acknowledge  a  child  who  attained  his  or  her majority  with  the  consent  of  such  child.

 

 

(2)      A father may acknowledge a deceased child only if such child has a lineal descendant or descendants; provided that if any of such descendants  are  adults,  their  consent  must  be  obtained.

 

 

(3)      Paragraph   (2)   of   Article   994(Formalities   of   acknowledgement)

 

shall apply mutatis mutandis to consents under paragraphs (1) and (2).

 

 

  1. (Formalities  of  acknowledgement)

 

 

(1)     Acknowledgements shall be made by means of filing with the family registration  official,  and  may  also  be  made  by  will.

 

 

(2)      The   mother's   consent   provided   in   paragraph   (2)   of   Article

 

992(Acknowledgement by father) may be effected by signature on the acknowledgement  form.

 

 

  1. (Notification  of  birth  and  effect  of  acknowledgement)

 

 

A  person  who  files  a  notification  of  birth  as  the  father,  allows  his name to be entered into the birth register as the father and himself affixes  his  signature  or  thumbprint  shall  be  deemed  to  have  effected an  acknowledgement  of  being  the  father  of  the  child.

 

 

  1. (Retroactivity  of  acknowledgement)

 

 

 

 

 

An acknowledgement shall have effect retroactively to the time of the birth;   provided   that   this   shall   not   prejudice   any   rights   already acquired  by  any  third  party.

 

 

  1. (Prohibition  of  revocation)

 

A father who has effected an acknowledgement cannot revoke such acknowledgement.

 

 

  1. (Suit  of  acknowledgement)

 

 

(1)      A child may file a suit of acknowledgement; provided that a child who has not consented to acknowledgement under paragraph (1) of Article

993(Acknowledgement  of  child  who  attained  majority  and  of  deceased child)  may  not  file  such  a  suit.

 

 

(2)   If a child is deceased, its lineal descendant may file the acknowledgement  suit.

 

 

(3)      The child or its lineal descendant must file the acknowledgement suit  not  later  than  1  year  after  becoming  aware  of  the  father.

 

 

(4)     If the child or its lineal descendant is a minor or a person under general  guardianship  at  the  time  of  becoming  aware  of  [the  identity] of the father, the period described in paragraph (3) shall be computed from the time of attaining majority or the time of the adjudication terminating    the    general    guardianship    as    set    forth    in    Article

27(Revocation of declaration of commencement of general guardianship), as  the  case  may  be.

 

 

(5)     If the child or its lineal descendant becomes aware of the father after the death of the father, an acknowledgement suit may be filed up to  1  year  following  the  date  of  death  of  the  father.

 

 

(6)     A suit described in paragraph (1) or (2) may be filed by the legal representative  of  the  child  or  lineal  descendant  in  place  thereof.

 

 

 

 

Sub-section  IV   Suit  Confirming  Absence  of  Parenthood

 

 

  1. (Suit  confirming  absence  of  parenthood)

 

(1)       In cases where a person is noted in the birth register as the father despite   there   being   no   presumption  of   paternity,  or   as   the   mother despite  the  fact  that  she  did  not  give  birth  to  the  child,  the  child may file a suit against such person seeking confirmation of the absence of  paternity  or  maternity,  as  the  case  may  be.

 

 

(2)      A person noted in the birth register as the father despite there being no presumption of paternity may file a suit seeking confirmation of  the  absence  of  paternity.

 

 

(3)      A  person  noted  in  the  birth  registry  as  the  mother  despite  the fact that she did not give birth to the child may file a suit seeking confirmation  of  the  absence  of  maternity.

 

 

(4)      A suit under paragraph (2) or (3) may not be filed in cases where legal paternity or maternity has arisen on account of intention or gross negligence on the part of the registered father or mother, or where 20 years  have  elapsed  since  the  day  of  the  birth  of  the  child  or  the  day on  which  an  acknowledgement  came  into  force.

 

 

(5)      If  the  child  is  a  minor,  the  parent  who  is  not  the  other  party to  the  suit  shall  represent  the  child.  If  there  is  no  such  parent,  if the  parent  cannot  represent  the  child,  or  if  the  suit  seeking confirmation  of  absence  of  parenthood  is  against  both  of  the  parents, the  court  shall  appoint  a  special  representative  for  the  child.

 

  1. (Retroactivity of     confirmation       of     non-existence      of parenthood)

 

 

A confirmation of non-existence of parenthood shall have effect retroactively to the time of the birth; provided that this shall not prejudice  any  rights  already  acquired  by  any  third  party.

 

 

 

 

Sub-section  V    Suit  Seeking  Confirmation  of  Maternity

 

 

  1. (Suit  by  child  seeking  confirmation  of  maternity)

 

 

(1)      A child may file a suit seeking confirmation of maternity against the  woman  who  gave  birth  to  said  child.

 

 

(2)     If the child is deceased, its lineal descendant may file the suit described  in  paragraph  (1).

 

 

(3)      The child or its lineal descendant can file a suit under paragraph (1) not later than 1 year after becoming aware of [the identity of] the mother.

 

 

(4)     If the child or its lineal descendant is a minor or a person under general guardianship at the time of becoming aware of [the identity of] the mother, the period described in paragraph (3) shall be computed from the  time  of  attaining  majority  or  the  time  of  the  adjudication terminating    the    general    guardianship    as    set    forth    in    Article

27(Revocation of declaration of commencement of general guardianship), as  the  case  may  be.

 

 

(5)      If   the   child   or   its   lineal   descendant   becomes   aware   of   [the identity of] the mother after the death of the mother, a suit described in paragraph (1) may be filed up to 1 year following the death of the mother.

 

 

(6)     A suit described in paragraph (1) or (2) may be filed by the legal representative  of  the  child  or  lineal  descendant  in  place  thereof.

 

 

  1. (Suit  by  mother  seeking  confirmation  of  maternity)

 

 

(1)       A mother may file a suit seeking confirmation of maternity against a  child  to  whom  she  gave  birth.

 

 

(2)      A  mother  may  also  bring  a  suit  under  paragraph  (1)  if  the  child is  deceased,  but  only  if  the  child  has  a  lineal  descendant.

 

 

 

 

 

 

(3)      A  mother  must  file  a  suit  under  paragraph  (1)  not  later  than  1 year  after  becoming  aware  of  [the  identity  of]  the  child.

 

 

(4)      If the mother has become aware of [the identity of] the child after the death of the child, she must file suit under paragraph (1) not later than  one  year  after  the  death  of  the  child.

 

 

(5)      If the mother is a person under general guardianship at the time of the expiry of the period described in paragraph (3) or (4), the said period shall be computed from the time of the adjudication terminating the general guardianship as set forth in Article 27(Revocation of declaration  of  commencement  of  general  guardianship).

 

 

(6)     If the child or lineal descendant who is the other party to a suit under paragraph (1) has attained majority, the mother may not file the suit without the consent of the child or lineal descendant, as the case may  be.

 

 

(7)      Even  where  it  has  been  proved  that  the  woman  gave  birth  to  the child, the court may dismiss [without prejudice] the mother's suit if confirmation  of  maternity  would  be  contrary  to  the  interests  of  the child  or  the  child's  lineal  descendant,  as  the  case  may  be.

 

 

  1. (Retroactivity  of  confirmation  of  maternity)

 

 

A confirmation of maternity shall have effect retroactively to the time of the birth; provided that this shall not prejudice any rights already acquired  by  any  third  party.

 

 

Section   II  Adoption

 

 

Sub-section  I  Fu                                                    Adoption

 

 

1004 .  (Formalities  of  establishment  of  full  adoption)

 

 

If the conditions provided in Article 1005(Joint adoption with spouse)

 

 

 

 

through 1009(Criteria for determination of establishment of full adoption)are  fulfilled,  a  court  may  on  petition  by  the  person(s)  who will become the adopter(s) establish a full adoption, whereby the relationship with the blood relatives on the natural parents' side terminates.

 

 

1005 .  (Joint  adoption  with  spouse)

 

 

(1)      In  order  to  become  an  adopter,  a  person  must  have  a  spouse.

 

 

(2)      One spouse may not become an adopter unless the other spouse also does so, provided that this shall not apply if one spouse becomes the adopter  of  a  natural  child  of  the  other  spouse.

 

 

1006 .  (Age  of  adopter)

 

 

An adopter must be not less than 25 years of age, and moreover not less than  20  years  older  than  the  adoptee.

 

 

1007 .  (Age  of  adoptee)

 

 

In  principle  the  adoptee  must  be  less  than  8  years  of  age.

 

 

1008 .  (Consent  of  parents)

 

 

In order to establish a full adoption, the consent of the natural parents or  guardian  of  a  minor  to  be  adopted  is  required.    However,  it  shall not apply to cases where the natural parents are unable to declare their intention or where on the part of the natural parents there is cruelty, abandonment in bad faith or other conditions that are extremely detrimental  to  the  person  to  be  adopted.

1009 .  (Criteria for determination of establishment of full adoption) Full  adoption  shall  be  established  where  it  is  extremely  difficult  or

inappropriate  for  the  natural  parent(s)  to  care  for  the  child  to  be adopted or where other special circumstance exist such that this is considered  especially  necessary  for  the  benefit  of  the  child.

 

 

 

 

 

 

1010 .  (Trial  period  of  care)

 

 

In considering whether to establish the full adoption, the court shall take   into   account   the   circumstances   of   the   prospective   adopter(s) having had the care and custody of the child to be adopted for a period of  not  less  than  6  months,  in  principle.

 

 

1011 .  (Termination  of  relationship  with  natural  parents)

 

 

The relationship between an adoptee and its natural parents and their blood relatives shall terminate upon full adoption, provided that this shall  not  apply  to  the  relationship  with  the  other  spouse  and  his  or her blood relatives prescribed in the provision of paragraph (2) of Article  1005(Joint  adoption  with  spouse).

 

 

1012 .  (Effect  of  full  adoption)

 

 

(1)      By  virtue  of  the  establishment  of  a  full  adoption,  the  adoptee shall   acquire   the   same   status   as   that   of   a   natural   child   of   the adopter(s) as of the date of the judgment becoming final and conclusive, and shall have the same rights and obligations as a natural child in relation  to  the  adopter(s).

 

(2)      The adoptee may use the surname of the adopter(s) or the child's own  surname  from  before  the  adoption.

 

(3)       An adoptee shall be subject to the parental power of the adopter(s), provided that where one spouse is becoming the adopter of a natural child of the other spouse, the adoptee shall be subject to the joint parental power  of  the  natural  parent  and  the  adopter.

 

 

1013 .  (Dissolution  of  full  adoption)

 

 

(1)       Upon petition by the adoptee, the natural parents or a prosecutor, the court may dissolve an adoption upon the occurrence of all events described below, where this is considered necessary for the benefit of the  adoptee:

  1. a) cruelty or abandonment in bad faith on the part of an adopter or other ground that is extremely detrimental to the adoptee;
  2. b) the natural  parents  being  able  to  carry  out  suitable  care

and  custody  of  the  child.

 

(2)     No adoption may be dissolved other than under the provisions of paragraph  (1).

 

 

 

 

  1. (Effect  of  dissolution  of  full  adoption)

 

 

As  of  the  date  of  the  dissolution  of  a  full  adoption,  the  child  shall have the same relationship with its natural parents and their blood relatives as the relationship that was terminated by the full adoption.

 

 

  1. (Registration  of  full  adoption  and  confidentiality)

 

 

Upon the establishment of a full adoption, a new birth certificate shall be prepared for the adoptee, provided that no reference to the adoption shall be made in any certified copy or abstract of the birth certificate.

 

 

  1. (Right  of  full  adoptee  to  know  antecedents)

 

 

A full adoptee who has attained majority may request the court that maintains records of the full adoption to disclose information relating thereto to the extent necessary, provided that this shall not apply if the objective of the request is improper. The court shall determine such matters as the mode of maintenance of records of full adoption and of requests  for  disclosure,  etc.

 

 

Sub-section  II  Simp  e  Adoption

 

 

  1. (Petition  for  simple  adoption)

 

 

(1)      A  person  aged  25  years  or  more,  together  with  the  person  to  be adopted, may file a petition to the court for establishment of a simple adoption, provided that the person to be adopted must not be an ascendant or  senior  of  the  adopter.

 

(2)      If the child being adopted is a minor, the parental power holder or guardian shall make the petition described in paragraph (1) in the capacity  of  legal  representative.

 

 

  1. (The  case  where  the  adopter  has  a  spouse)

 

 

If   a   person   with   a   spouse   wishes   to   adopt   a   minor,   the   petition prescribed in Article 1017(Petition for simple adoption) must be made together with the spouse, provided that this shall not apply if the child being  adopted  is  the  spouse's  child  or  the  spouse  is  incapable  of declaring  his  or  her  intention.

 

 

 

 

 

 

  1. (Consent  of  spouse)

 

 

If  a  person  with  a  spouse  makes  a  petition  for  simple  adoption,  the consent  of  such  spouse  must  be  obtained,  provided  that  this  shall  not apply if the petition under Article 1017(Petition for simple adoption) is made together with the spouse or the spouse is incapable of declaring his  or  her  intention.

 

 

  1. (Criteria  for  determining  establishment  of  simple  adoption)

 

(1)      The court may permit the establishment of an adoption only where it is able to confirm that the parties truly have the intention to form a  parent  and  child  relationship.

 

(2)      The court must not permit the establishment of an adoption if it finds that the adoption is being abused for heterosexual or homosexual marriage  or  any  other  unjust  purpose.

 

 

  1. (The  case  where  the  person  to  be  adopted  is  a  minor)

 

(1)       Where the person to be adopted is a minor, the court may only permit the establishment of an adoption if it finds that this is especially necessary  for  the  benefit  of  the  minor.

 

(2)      Where  the  person  to  be  adopted  is  a  minor  whose  natural  parents have divorced, the court must hear the opinion of the parent without parental  power  in  making  its  decision  under  paragraph  (1).

 

(3)      Where the minor has attained the age of 15 years, the court must obtain his or her consent in establishing the adoption. Even if the minor is less than 15 years old but can express his intention, the court must hear  the  minor's  opinion  in  making  its  decision  under  paragraph  (1).

 

 

  1. (Adoption  between  guardian  and  ward)

 

 

If a guardian of a minor petitions to adopt the minor under guardianship or a general guardian petitions to adopt the person under general guardianship, the court may permit the establishment of an adoption only in cases where care of the person in guardianship and management of the person's property is being carried out properly. The same shall apply after the duties of the guardian have come to an end, so long as the guardian's  accounts  of  his  management  have  not  been  completed.

 

 

 

 

  1. (Effect of  simple  adoption  on  relationship  of  natural  parents and  child)

 

(1)       Notwithstanding   the   establishment   of   a   simple   adoption,   the relationship between the adoptee and the natural parents shall continue, and the adoptee and the natural parents shall have the right to inherit from  each  other.

 

 

(2)     The adoptee and the natural parents shall have the right to claim support  from  the  other  and  the  obligation  to  support  the  other.

 

 

  1. (Effect  of  adoption  on  relationship  with  adopters,  etc.)

 

 

(1)    Provisions  of  paragraph  (1)  of  Article  1012(Effect  of  full adoption)  shall  apply  mutatis  mutandis  to  simple  adoptions.

 

 

(2)      The adoptee may use the surname of the adopters or the adoptee's own  surname  from  before  the  adoption.

 

 

(3)      If an adoptee is a minor, he shall be subject to the joint parental power of the adopters, provided that where one spouse is becoming the adopter of a natural child of the other spouse, the adoptee shall be subject  to  the  joint  parental  power  of  the  natural  parent  and  the adopter.

 

 

  1. (Dissolution  of  simple  adoption  by  agreement)

 

 

(1)      Where the parties to an adoption have both agreed to dissolve it, they  may  petition  the  court  for  dissolution.

 

 

(2)      Where  the  adoptee  is  a  minor,  the  petition  under  paragraph  (1) shall be made by the adopter(s) and the person who is to become the adoptee's legal representative after dissolution of the adoption, provided  that  if  the  adoptee  has  attained  the  age  of  15  years,  his  or her  consent  must  be  obtained.  If  the  adoptee  has  not  attained  the  age of 15 years but is capable of expressing his or her intention, the court must  hear  his  or  her  opinion.

 

 

 

 

 

 

(3)      In  cases  under  paragraph  (2),  if  the  adoptee's  natural  parents were divorced, they must through consultation determine which of  them is to be the person with parental power over the adoptee after the dissolution  of  the  adoption.

 

 

(4)       If the consultations under paragraph (3) do not lead to agreement, or if consultations cannot be held, the court shall determine the person who is to have parental power, taking into account the welfare of the child.

 

 

  1. (Dissolution  of  joint  adoption  of  minor  by  married  couple)

 

If the adopters are a married couple, in order to dissolve the adoption of   a   minor   the   husband   and   wife   must   together   make   the   petition prescribed in paragraph (1) of Article 1025(Dissolution of simple adoption  by  agreement),  provided  that  this  shall  not  apply  if  either the  husband  or  the  wife  is  unable  to  express  his  or  her  intention.

 

 

  1. (Determination  of  dissolution  of  simple  adoption)

 

 

If  a  petition  is  made  under  paragraph  (1)  of  Article  1025(Dissolution of  simple  adoption  by  agreement),  the  court  may  grant  the  dissolution of the adoption only after confirming that both parties truly wish to dissolve  the  relationship  of  adopter(s)  and  adoptee.

 

 

  1. (Grounds  for  dissolution)

 

 

(1)      A  party  to  an  adoption  may  file  a  suit  for  dissolution  only  in the  following  cases:

  1. a) being abandoned  with  malice  by  the  other  party;
  2. b) it being unclear for a year or more whether the other party is alive  or  dead;  or
  3. c) other significant ground making it difficult to continue the

 

 

(2)      So  long  as  the  adoptee  is  a  minor,  the  adopter(s)  may  not  file a  suit  under  paragraph  (1)  against  the  adoptee.

 

 

(3)      If  the  adoptee  is  a  minor,  the  provisions  of  paragraphs  (2)  to

 

 

 

 

(4) of Article 1025(Dissolution of simple adoption by agreement) shall apply mutatis mutandis to any suit filed by the adoptee against the adopter(s)  under  paragraph  (1).

 

 

  1. (Effect  of  dissolution  of  simple  adoption)

 

 

(1)      By  virtue  of  dissolution  of  a  simple  adoption,  the  whole  effect of  the  adoption  shall  terminate  for  the  future.

 

 

(2)      After  dissolution  of  an  adoption,  the  adoptee  may  restore  his surname to that before the adoption, or may use the name of the adopter.

 

 

  1. (Registration  of  simple  adoption  and  birth  certificate)

 

 

The establishment of a simple adoption shall be noted on the adopters' civil status book, and shall also be noted on the margin of the adoptee's original  birth  certificate.

 

 

Chapter Five PARENTAL    POWER

 

 

Section   I  Genera                                                  Provisions

 

 

  1. (Definition  of  parental  power)

 

 

A  parental  power  holder18   has  the  right  and  duty  to  effect  physical custody  of  the  child  and  management  of  the  child's  property.

 

 

  1. (Parental  power  over  adoptee)

 

 

The  adopter  shall  be  the  parental  power  holder  of  the  adoptee.

 

 

  1. (The  principle  of  joint  exercise)

 

 

During the marriage, the father and mother shall exercise the parental

 

 

 

18  In this English translation, a person with the parental power shall be referred to  as  "parental  power  holder".

 

 

 

 

power jointly; provided that if one of the parents is unable to exercise the  parental  power,  the  other  parent  shall  do  so.

 

 

Section   II  Determination  of  Parenta               Power  Ho  der  in  Case  of  Divorce  or

 

Acknow  edgement

 

 

  1. (Determination of parental power holder in case of divorce)

 

 

(1)      In the case of divorce between the father and mother, the father and  mother  shall  determine  upon  mutual  consultation  which  of  them  is to  become  the  parental  power  holder  of  the  child.

 

 

(2)      If  the  father  and  mother  divorce  before  the  birth  of  the  child, the mother shall become the parental power holder of the child when it is born; provided that after the birth of the child the father and mother may determine upon mutual consultation that the father shall be the parental  power  holder  of  the  child.

 

 

(3)      If  no  determination  under  paragraph  (1)  or  (2)  is  rendered  upon mutual consultation or if consultation cannot be held between the father and mother, the court shall determine which party is to be the parental power  holder,  taking  into  account  the  interests  of  the  child.

 

 

  1. (Relationship  between  acknowledgement  and  parental  power)

 

 

(1)      An  unmarried  mother  shall  become  the  parental  power  holder  of  a child  that  she  bears.

 

 

(2)     The father may exercise parental power over a child that he has acknowledged only where the father and mother has determined upon mutual consultation  that  the  father  become  a  parental  power  holder  of  the child.

 

 

(3)       Where no determination under paragraph (2) is rendered upon mutual consultation   or   where   consultation   cannot   be   held,   the   court   may determine  the  parental  power  holder  upon  application  by  the  father  or the  mother.

 

 

 

 

 

 

(4)   Where  the  father  and  mother  marry  after  the  father  has acknowledged  the  child,  the  father  and  mother  shall  exercise  jointly the  parental  power  over  the  child.

 

 

  1. (Change  of  parental  power  holder)

 

 

In  cases  described  in  Article  1034(Determination  of  parental  power holder in case of divorce) and Article 1035(Relationship between acknowledgement and parental power), the court may change the parental power holder where it finds this necessary in the interests of the child, upon application by a relative of the child up to the 4th degree of relationship.

 

 

  1. (Rights and obligations of parent who does not live with the child)

 

 

(1)       After divorce, the parent not having the parental power shall have the  right  to  meet  and  socialize  with  the  child,  and  furthermore  shall have  the  obligation  to  share  the  cost  of  care  of  the  child.

 

 

(2)      A father and mother intending to divorce shall consult and agree on  the  mode  of  meeting  and  socializing  with  the  child  and  the  sharing of  the  cost  of  care  of  the  child.

 

 

(3)      A  father  not  living  with  a  child  whom  he  has  acknowledged  may consult  with  and  agree  with  the  mother  concerning  the  mode  of  meeting and socializing with the child and the sharing of the costs of the care of  the  child.

 

 

(4)      Where  no  agreement  described  in  paragraph  (2)  or  (3)  is  reached or  where  consultation  cannot  be  held,  the  court,  upon  application  by the  father  or  mother,  shall  determine  the  mode  of  meeting  and socializing with the child and the sharing of the costs of care of the child.

 

 

(5)      The court, upon application by the father or mother, where it finds

 

 

 

 

this necessary, may alter the mode of meeting and socializing with the child  and  the  sharing  of  the  costs  of  care  of  the  child.

 

 

(6)      In  making  its  adjudications  under  paragraphs  (4)  and  (5),  the court shall give priority to the interests of the child when determining the mode of meeting and socializing with the child, and shall take into account   the   living   environment  of   the   father   and   mother   and   their economic circumstances when determining the sharing of costs of the care of  the  child.

 

 

(7)      If  the  father  or  mother  are  unable  to  confer  with  each  other  or to apply to the court, a relative of the child up to the 4th degree of relationship  may  make  an  application  under  paragraph  (4)  or  (5).

 

 

  1. (Right  to  demand  report  of  condition  of  child)

 

 

(1)     A parent not having the parental power may demand a report of the condition  of  the  child  from  the  parental  power  holder.

 

 

(2)       The contents and frequency of the report under paragraph (1) shall be  agreed  by  the  father  and  mother  upon  mutual  consultation;  provided that if no such agreement is reached or if consultation cannot be held, the court, upon application by the father or the mother, may make adjudication  in  place  of  such  agreement.

 

 

(3)      A relative of the child up to the 4th degree of relationship may demand a report of the condition of the child from the parental power holder.

 

  1. (Obligation to consult on important matters relating to the child)

 

 

The parental power holder shall consult with the parent not having the parental power concerning the matters listed below relating to the child, except  in  urgent  cases:

  1. a) Education beyond  compulsory  education;

 

  1. b) Changing the  location  of  residence  of  the  child  to  another

 

 

 

 

province;

 

  1. c) The child's  occupation  or  business;

 

  1. d) Medical treatment  affecting  the  child's  life;

 

  1. e) Disposition of  significant  property  of  the  child;  and

 

  1. f) Other important matters relating to care of and property of the

 

 

Section   III  Rights  and Ob  igations  of  the  Parenta                       Power  Ho  der

 

 

  1. (Education  of  the  child)

 

 

The parental power holder shall have the right and obligation to educate the  child.

 

 

  1. (Location  of  residence  of  the  child)

 

The  child  shall  reside  in  the  location  of  residence  designated  by  the parental  power  holder.

 

 

  1. (Discipline  of  child)

 

 

The  parental  power  holder  may  personally  discipline  the  child  to  the extent  necessary.

 

 

  1. (Permission  to  carry  on  occupation  or  business)

 

 

(1)       A  child  may  not  carry  on  any  occupation  without  the  permission of  the  parental  power  holder.

 

 

(2)       In cases falling under paragraph (2) of Article 20(Minor permitted to  conduct  business),  the  parental  power  holder  may  rescind  or  limit the  permission  under  paragraph  (1).

 

 

  1. (Demand  to  hand  over  child)

 

(1)       The  parental  power  holder  may  demand  hand-over  of  the  child  by a  third  party  who  illegally  refuses  to  hand  over  the  child.

 

 

(2)      The  parental  power  holder  may  demand  that  the  parent  not  having

 

 

 

 

the  parental  power  hand  over  the  child.

 

 

Section   IV  Suspension and Divestment  of  Authority  of  Parenta           Power  Ho  der

 

 

  1. (Order for suspension or divestment of authority of parental power holder)

 

 

If a father or mother exercising parental power abuses his or her rights or neglects his or her obligations, the court, upon application by a relative  of  the  child  up  to  the  4th  degree  of  relationship,  a  commune or  sangkat  head,  the  head  of  a  public  child  welfare  institution  or  a public   prosecutor,   may   order   the   suspension   or   divestment   of   the authority  of  the  parental  power  holder.

  1. (Cancellation of suspension or divestment of parental power) If  the   ground   provided   in   Article   1045(Order   for   suspension   or

divestment of authority of parental power holder) has disappeared, the court, upon application by the person who was subject to the order for suspension  or  divestment  or  his  or  her  relative  up  to  the  4th  degree of  relationship,  may  cancel  the  said  order.

 

 

  1. (Resignation  and  resumption  of  parental  power  holder)

 

 

(1)     With the permission of the court, a father or mother exercising parental power over a child may resign as the parental power holder where there  are  unavoidable  grounds.

 

 

(2)    With the permission of the court, if the grounds described in paragraph  (1)  cease  to  operate,  the  father  or  mother  who  has  resigned may  resume  the  parental  power.

 

 

  1. (Change  of  parental  power  holder)

 

 

(1)       Where  only  one  of  the  parents  is  the  parental  power  holder  and there is no longer any parental power holder on account of the suspension, divestment or resignation of such person as parental power holder, the court  may  designate  either  the  mother  or  the  father  who  is  not  the parental  power  holder  as  the  parental  power  holder.

 

 

 

 

 

 

(2)      A relative of the child up to the 4th degree of relationship may seek  an  order  under  paragraph  (1)  where  this  is  necessary.

 

 

(3)      If the child no longer has a parental power holder on account of the death of the parent who was appointed as the parental power holder by agreement upon divorce, the father or mother who was not designated as  the  parental  power  holder  shall  become  the  parental  power  holder.

 

 

  1. (Commencement  of  guardianship  of  minor)

 

If a child ceases to have any parental power holder by virtue of Article

 

1045(Order for suspension or divestment of authority of parental power holder) or paragraph (1) of Article 1047(Resignation and resumption of parental power holder) and moreover there is no change of parental power holder by virtue of Article 1048(Change of parental power holder), the court shall issue a  declaration of commencement of minor  guardianship in  respect  of  the  child.

 

 

Section   V    Authority  of  Management  of  Chi  d's  Property

 

 

  1. (Property  management  and  representation)

 

 

The parental power holder shall have the right and duty to manage the child's property and to represent the child in any act relating to the property;  provided  that  the  consent  of  the  child  shall  be  obtained  to the  creation  of  any  obligation  having  as  its  subject  matter  action  on the  part  of  the  child.

 

  1. (Act committed  by  one  parental  power  holder  in  the  names  of both  parental  power  holders)

 

 

(1)      Where one of the parents who are exercising joint parental power over a child performs an act in place of the child despite this being against the wishes of the other parent but in the names of both parents, the  validity  of  such  act  shall  not  thereby  be  impaired,  except  where the  other  party  to  such  act  acted  mala  fide.

 

 

 

 

(2)      Paragraph  (1)  shall  apply  in  the  same  manner  to  the  case  where one of parents exercising joint parental power has consented to an act by the child despite this being against the wishes of the other parent.

 

 

  1. (Duty  of  care  in  management  of  property)

 

 

A parental power holder shall manage the child's property with the care of  a  prudent  manager.

 

 

  1. (Account  of  management  of  property)

 

 

A parental power holder shall render an account of his or her management of  the  child's  property  without  delay  after  the  child  attains  his  or her  majority;  provided  that  the  expenses  of  the  care  of  the  child  and the management of the property, on the one hand, and the profits arising from the child' property on the other hand, shall be deemed to have been set  off  against  each  other.

 

 

  1. (Exception)

 

 

If a third person who gratuitously transfers property to a child has declared a contrary intention, the proviso to Article 1053(Account of management  of  property)  shall  not  apply  to  such  property.

 

 

  1. (Management  of  property  granted  by  third  party)

 

(1)      If a third person who gratuitously transfers property to a child has  declared  the  intention  not  to  allow  the  child's  mother  and  father or  either  of  them  exercising  parental  power  to  manage  such  property, the  property  shall  be  excluded  from  the  scope  of  the  property  managed by  the  child's  father  and/or  mother,  as  the  case  may  be.

 

 

(2)      Upon application by the child, a relative of the child up to the

 

4th degree of relationship or a public prosecutor, the court may appoint a manager of any property described in paragraph (1) not managed by the parental  power  holder(s)  and  in  respect  of  which  the  third  party  has not  appointed  a  manager.

 

 

 

 

(3)      Even  in  a  case  where  the  third  party  has  appointed  a  property manager, paragraph (2) shall apply if the third party fails to appoint a new manager where the authority of the first-mentioned manager has become extinguished or it has become necessary to replace said manager.

 

 

(4)      The provisions of Articles 37(Appointment of administrator by the court) to 40(Authority of administrator) inclusive shall apply mutatis mutandis  to  cases  described  in  paragraphs  (2)  and  (3).

 

  1. (Mutatis  mutandis   application   of   provisions   relating   to mandate)

 

 

The provisions of Articles 647(Duties of mandatary in emergency after termination  of  mandate)  and  648(Conditions  for  perfection  of termination of mandate) shall apply mutatis mutandis to cases where a parental power holder manages the property of a child and to cases described   in   Article   1055(Management   of   property   granted   by   third party).

 

  1. (Extinctive prescription of claims between parent and child relating to  property  management)

 

 

(1)     Any claims arising between a parental power holder and his or her child in connection with the manegement of the property shall be extinguished by prescription unless they are exercised within 3 years following the extinguishment of the parent's authority to manage the property.

 

 

(2)      If  the  authority  to  manage  property  is  extinguished  while  the child is still a minor and the child has no legal representative at that time, the prescription period prescribed in paragraph (1) shall be computed from when the child attains his or her majority or when a succeeding legal representative for the child assumes office [whichever occurs  first].

 

 

Section   VI  Suspension and Divestment  of  Authority  to  Manage  Property

 

 

  1. (Order for  suspension  or  divestment  of  authority  to  manage property)

 

 

 

 

 

 

If a parental power holder imperils the property of the child by improper management  thereof,  the  court,  upon  application  by  a  relative  of  the child up to the 4th degree of relationship, a commune or sangkat head, public child welfare institution head or public prosecutor, may order the  suspension  or  divestment  of  the  property  management  authority  of such  parental  power  holder.

 

 

  1. (Cancellation  of  order  relating  to  property  management)

 

 

If the ground of disqualification provided in Article 1058(Order for suspension  or  divestment  of  authority  to  manage  property)  has  ceased to  be  operative,  the  court,  upon  application  by  the  person  who  was subject to the order for suspension or divestment of authority to manage property, or by his or her relative up to the 4th degree of relationship, may  cancel  the  said  order.

 

 

  1. (Resignation  and  resumption  of  property  management)

 

 

(1)      With  the  permission  of  the  court,  a  parental  power  holder  may resign  his  or  her  authority  to  manage  the  property  of  the  child  where there  are  unavoidable  grounds.

 

 

(2)    With the permission of the court, if the grounds described in paragraph   (1)   cease   to   operate,   the   parental   power   holder   who   has resigned  may  resume  his  or  her  authority  to  manage  property.

 

 

  1. (No  property  manager)

 

 

If by virtue of Article 1058(Order for suspension or divestment of authority     to     manage     property)     or     paragraph     (1)     of     Article

1060(Resignation and resumption of property management) there is no longer anyone managing the child's property, the court shall by adjudication  appoint  a  special  representative  for  the  child.

 

  1. (Conflict  of   interest   between   parental   power   holder   and child)

 

 

 

 

(1)     In respect of acts where the interests of a parental power holder conflict with those of the child, the parental power holder shall apply to  the  court  for  the  appointment  of  a  special  representative  for  the child.

 

 

(2)      If  the  parental  power  holder  exercises  parental  power  over  two or more children, and the interests of one of the children conflict with those  of  the  other  or  others  in  respect  of  certain  acts,  the  parental power holder shall apply to the court for appointment of a special representative  for  certain  of  the  children.

 

 

Section   VII   Mutatis  Mutandis  App  ication  of  This  Chapter

 

 

  1. (Substituted  exercise  of  parental  power)

 

 

The parental power holder of an unmarried minor who has a child shall exercise parental power over such child in place of the minor. In such a case this Chapter Five shall apply mutatis mutandis to the substituted exercise  of  parental  power.

 

 

Chapter Six GUARDIANSHIP

 

 

Section   I  Guardianship  of  Minors

 

 

Sub-section  I  Commencement  of  Guardianship  of  Minor

  1. (Grounds for  commencement  of  guardianship  of  minor) Guardianship of a minor shall commence at such time as there is no person

who  exercises  the  parental  power  over  the  minor.

 

 

 

Sub-section  II  Guardian  of  Minor

 

 

  1. (Designation of  guardian  of  minor,  appointment  by  court, appointment  criteria)

 

 

(1)     The person who last exercises the parental power over a minor may designate  a  guardian  of  such  minor  by  will.

 

 

(2)      If  there  is  no  person  to  be  appointed  as  a  guardian  of  a  minor

 

 

 

 

under  paragraph  (1),  the  court  may  appoint  such  guardian,  upon application by a relative of the minor up to the 4th degree of relationship, the head of the commune or sangkat in which the minor's permanent residence is located, the head of a public child welfare institution or a public prosecutor. The same shall apply if [the former guardian  has  ceased  to  serve,  and]  there  exists  no  guardian.

 

 

(3)    In appointing a guardian for a minor, the mental and physical condition of the minor, the state of the lifestyle and property of the minor,   the   occupation  and   career   of   the   proposed   guardian   and   any conflict  of  interest  with  the  minor,  the  opinion  of  the  minor  and  all other  circumstances  shall  be  taken  into  account.

 

 

  1. (Obligation  to  demand  appointment  of  guardian  for  minor)

 

 

If a guardian of a minor appointed under Article 1049(Commencement of guardianship of minor) has ceased to serve, the court shall promptly appoint  a  new  guardian.

 

 

  1. (Number of   guardians    of    minor,    appointment     of    general guardian  for  minor)

 

 

(1)      A  minor  shall  not  have  more  than  one  guardian;  provided  that  a general guardian may be additionally appointed for a minor who remains in   a   habitual   condition   of   lacking   the   ability   to   recognize   and understand the legal consequences of his or her actions due to mental illness or disability, and with respect to whom the commencement of general guardianship is declared pursuant to Article 24(Declaration of commencement  of  general  guardianship).

 

 

(2)     The provisions of this Code regarding general guardianship shall apply mutatis mutandis to general guardianship over a minor, except for paragraph  (1)  of  Article  1117(More  than  one  general  guardian).

 

 

  1. (Resignation  of  guardian  of  minor)

 

 

A guardian of a minor may resign the office for good reason, with the permission  of  the  court.

 

 

 

 

 

 

  1. (Obligation  to  demand  appointment  of  guardian  for  minor)

 

 

If  a  guardian  of  a  minor  resigns,  the  court  shall  promptly  appoint  a new  guardian.

 

 

  1. (Dismissal  of  guardian  of  minor)

 

 

Upon application by the guardian's supervisor, a relative up to the 4th degree of relationship of the minor, the head of the commune or sangkat in which the minor's permanent residence is located, the head of a public child  welfare  institution  or  a  public  prosecutor,  or  ex  officio,  the court may dismiss a guardian of a minor who commits an wrongful act or other  act  rendering  him  or  her  unfit  for  the  office  of  guardian.

 

 

  1. (Grounds  for  disqualification  as  guardian  of  minor)

 

 

None  of  the  persons  described  below  may  become  a  guardian  of  a  minor: a) A minor or person under general guardianship or curatorship; b)          A legal representative, curator or supervisor of either of

the  foregoing  who  has  been  dismissed  by  a  court:

 

  1. c) A bankrupt;  or

 

  1. d) A person  whose  whereabouts  are  

 

 

 

Sub-section  III  Supervisor  of  Guardian  of  Minor

 

 

  1. (Supervisor of  designated  guardian  of  minor,  supervisor  of appointed  guardian  of  minor)

 

 

(1)      A parental power holder who has the right to designate a guardian of  a  minor  may  designate  a  supervisor  of  the  guardian  by  will.

 

 

(2)    Where  there  is  no  supervisor  of  guardian  designated  under paragraph  (1),  upon  application  by  the  guardian,  a  relative  up  to  the

4th  degree  of  relationship  of  the  minor,  the  head  of  the  commune  or sangkat  in  which  the  minor's  permanent  residence  is  located,  the  head of a public child welfare institution or a public prosecutor, or ex officio, the court may appoint a supervisor of the guardian if it finds

 

 

 

 

this  necessary.  The  same  shall  apply  if  [the  former  supervisor  has ceased  to  serve,  and]  there  exists  no  supervisor.

 

 

  1. (Grounds  for  disqualification  of  supervisor)

 

 

Neither the spouse nor a relative up to the 4th degree of relationship of  a  guardian  of  a  minor  may  become  a  supervisor  of  the  guardian.

 

 

  1. (Duties  of  supervisor)

 

 

The duties of a supervisor of a guardian of a minor shall be as follows: a)            To  supervise  the  performance  of  duties  by  the  guardian; b)     To  apply  to  the  court  without  delay  for  the  appointment  of

a new guardian if [the former guardian has ceased to serve, and]  there  exists  no  guardian;

  1. c) In case of emergency, to take the necessary measures for care of the  minor  and  management  of  the  property  of  the  minor;
  2. d) To represent the minor in respect of any act which involves a conflict  of  interest  between  the  guardian  and  the  

 

 

  1. (Mutatis  mutandis  application  of  provisions)

 

 

The  provisions  of  paragraph  (3)  of  Articles  1065(Designation  of guardian   of   minor,   appointment   by   court,   appointment   criteria),

1068(Resignation of guardian of minor), 1070(Dismissal of guardian of minor), 1071(Grounds for disqualification as guardian of minor), paragraph (2) of 1084(Estimates of outlays, expenses of guardianship),

1085(Remuneration    of    guardian),    1090(Guardian's    duty    of    care),

 

1097(Emergency obligations of guardian after termination of guardianship) and 1098(Condition for perfection of termination of guardianship) shall apply mutatis mutandis to a supervisor of a guardian of  a  minor.

 

 

Sub-section  IV   Duties  of  Guardian  of  Minor

 

 

  1. (Rights  and  obligations  of  guardian)

 

(1)      A guardian of a minor shall have the same rights and obligations

 

 

 

 

as a parental power holder in respect of matters provided in this Book Seven,  Chapter  Five  (Parental  Power),  Section  III  (Rights  and Obligations of the parental power holder); provided that in order to change the method of education and location of residence determined by the  parental  power  holder,  to  discipline  the  minor,  permit  him  or  her to engage in business, cancel such permission, or limit such engagement in business, if there is a supervisor of a guardian, the consent of such supervisor  must  be  obtained.

 

 

(2)      In  respect  of  matters  provided  in  Article  1039(Obligation  to consult on important matters relating to the child), if there is a supervisor  of  a  guardian,  the  guardian  shall  consult  with  said supervisor,  except  in  cases  of  urgency.

 

 

  1. (Property  management  and  representation)

 

(1)    The guardian of a minor shall manage the minor's property and represent  the  minor  in  any  act  affecting  the  minor's  property.

 

 

(2)  The  proviso  to  Article  1050(Property  management  and representation) shall apply mutatis mutandis to cases described in paragraph  (1).

 

 

  1. (Survey  of  property  and  preparation  of  inventory)

 

 

(1)       Upon assuming office a guardian of a minor shall promptly commence a survey of the minor's property and within 3 months shall complete such survey   and   prepare   an   inventory;  provided   that   said   period   may   be extended  by  the  court.

 

 

(2)      If there is a supervisor of the guardian, the survey and inventory of  the  property  shall  have  no  effect  unless  conducted  in  the  presence of  said  supervisor.

 

 

  1. (Authority  prior  to  preparation  of  inventory)

 

 

Until the completion of the inventory, a guardian shall have authority to effect only acts of urgent necessity; provided that this restriction

 

 

 

 

cannot  be  set  up  against  a  bona  fide  third  party.

 

 

  1. (Reporting of claims or obligations by the guardian against or towards  the  minor)

 

 

(1)      Where there is a supervisor of the guardian, if the guardian holds any claim against, or bears any obligation in favor of the minor, the guardian  shall  report  such  claim  and/or  obligation  to  the  supervisor prior  to  commencing  the  survey  of  the  property.

 

 

(2)      If  the  guardian  is  aware  of  holding  any  claim  against  the  minor but  does  not  report  it,  such  claim  shall  be  forfeited.

 

 

  1. (Application mutatis mutandis to cases where minor acquires
[general  estate])

 

 

The provisions of Articles 1078(Survey of property and preparation of inventory),   1079(Authority   prior   to   preparation   of   inventory)   and

1080(Reporting  of  claims  or  obligations  by  the  guardian  against  or towards the minor) shall apply mutatis mutandis to cases where the minor has acquired universal property after the guardian has assumed office.

 

 

  1. (Permission  for  property  management)

 

 

The permission of the court shall be required in cases where a guardian of a minor sells, leases, terminates the lease, establishes a hypothec or  dispose  of  in  another  manner  equivalent  to  the  foregoing,  in  place of the minor, an immovable property provided for the residence of the minor.

 

 

  1. (Acts involving conflict of interests of guardian and minor)

 

 

The provisions of Article 1062(Conflict of interest between parental power holder and child) shall apply mutatis mutandis to guardians of minors; provided that this shall not apply where the guardian has a supervisor.

 

 

  1. (Estimates  of  outlays,  expenses  of  guardianship)

 

 

 

 

(1)      Upon  assuming  office,  a  guardian  of  a  minor  shall  estimate  the amount  of  money  to  be  expended  annually  for  the  care  of  the  minor  and the  management  of  the  minor's  property.

 

 

(2)      The expenses required for the performance by the guardian of his or her duties under the guardianship shall be defrayed from the minor's property.

 

 

  1. (Remuneration  of  guardian)

 

 

The court may allow reasonable remuneration to the guardian of a minor out  of  the  minor's  property,  taking  account  of  the  financial  capacity of  the  guardian  and  the  minor  and  other  circumstances.

 

 

  1. (Supervision  of  duties  of  guardian)

 

 

(1)      The supervisor of a guardian or the court may at any time demand that the guardian of a minor provide a report of the conduct of his or her duties or the inventory of the property, and may also inspect the condition  of  the  minor  and/or  the  property.

 

 

(2)    Upon application by the supervisor of a guardian of a minor, a relative  of  the  minor  up  to  the  4th  degree  of  relationship,  the  chief of the commune or sangkat in which the minor's permanent residence is located, the head of a public child welfare institution or a public prosecutor, or ex officio, the court may order the guardian to take necessary  action  relating  to  the  care  of  the  minor,  the  management  of the  minor's  property  or  otherwise  relating  to  the  guardianship.

 

  1. (Limitations on  right  of  representation  and  right  to  grant consent)

 

 

If the guardian of a minor has a supervisor, the permission of the supervisor  must  be  obtained  in  order  to  conduct  business  or  to  do  any of the acts listed in Article 30(Right to rescind act) in place of the minor, or in order to consent to the doing of any of the foregoing acts by the minor; provided that this shall not apply to the receipt of principal.

 

 

 

 

 

 

  1. (Effect  of  breach  of  Article  1087)

 

 

(1)     Any act done or consented to by a guardian of minor in breach of Article 1087(Limitations on right of representation and right to grant consent) may be rescinded by the minor or the guardian. In such a case, the provisions of Article 32(Right to demand) shall apply mutatis mutandis.

 

 

(2)       The provisions of paragraph (1) shall not preclude the application of the provisions of Article  355(Voidable act) together with Articles

357(Method  of  rescission  or  ratification)  to  360(Extinctive prescription  of  right  of  rescission)  inclusive.

 

 

  1. (Acquisition  of  property,  etc.  from  minor)

 

 

(1)      If the guardian of a minor acquires the minor's property or rights of  a  third  party  against  the  minor,  the  minor  may  rescind  such acquisition.  In  such  a  case,  the  provisions  of  Article  32(Right  to demand)  shall  apply  mutatis  mutandis.

 

 

(2)       The provisions of paragraph (1) shall not preclude the application of the provisions of Article  355(Voidable act) together with Articles

357(Method  of  rescission  or  ratification)  to  360(Extinctive prescription  of  right  of  rescission)  inclusive.

 

 

  1. (Guardian's  duty  of  care)

 

 

(1)    The guardian of a minor is obligated to perform the duties of guardianship  with  the  care  of  a  good  manager.

 

 

(2)      If  the  guardian  breaches  the  obligation  described  in  paragraph (1) and thereby causes loss to the minor, the minor may demand that the guardian  compensate  him  or  her  for  such  loss.

 

 

  1. (Management  of  property  granted  by  third  party  to  minor)

 

 

(1)      If a third person who gratuitously transfers property to a minor

 

 

 

 

has declared the intention not to allow the minor's guardian to manage such property, the property shall be excluded from the scope of the property  managed  by  the  guardian.

 

 

(2)      Upon  application  by  the  supervisor,  a  relative  of  the  minor  up to the 4th degree of relationship, the chief of the commune or sangkat in which the minor's permanent residence is located, the head of a public child welfare institution or a public prosecutor, the court may appoint a manager of any property described in paragraph (1) not managed by the guardian and in respect of which the third party has not appointed a manager.

 

 

(3)      Even  in  a  case  where  the  third  party  has  appointed  a  property manager, paragraph (2) shall apply if the third party fails to appoint a new manager where the authority of the first-mentioned manager has become extinguished or it has become necessary to replace said manager.

 

 

(4)      The provisions of Articles 37(Appointment of administrator by the court) to 40(Authority of administrator) inclusive shall apply mutatis mutandis  to  cases  described  in  paragraphs  (2)  and  (3).

 

 

Sub-section  V    Re ease  of  Minor  from  Guardianship

 

  1. (Conditions  for  release  of  minor  from  guardianship)

 

(1)      If a minor has reached the age of 16 and is living independently, the  court,  upon  petition  by  the  minor,  may  declare  the  minor  released from   guardianship,   if   it   finds   that   this   is   consistent   with   the interests of the minor. In such a case, the court shall hear the opinion of  the  guardian,  and  of  the  supervisor  if  there  is  one.

 

 

(2)     A minor who marries shall be released from guardianship, without declaration  by  the  court.

 

 

(3)       In case described in paragraph (2), even if the parties afterwards divorce, the validity of the release from guardianship shall not be extinguished.

 

 

 

 

 

 

  1. (Effect  of  release  from  guardianship)

 

 

A minor released from guardianship shall have the same capacity to act as  that  of  an  adult.

 

 

  1. (Account of property management and presence of supervisor)

 

 

(1)      When  the  duties  of  a  guardian  of  a  minor  have  terminated,  the guardian or his or her successor shall render an account of property management within 3 months following the date of termination; provided that  this  period  may  be  extended  by  the  court.

 

 

(2)     If there is a supervisor of the guardian of a minor, the account described in paragraph (1) shall be prepared in the presence of such supervisor.

 

 

  1. (Rescission  of  contract  between  guardian  and  minor)

 

 

(1)      A minor who has entered into a contract with his or her guardian or  the  successor  of  the  guardian  after  attaining  majority  but  before the completion of the accounts of the guardianship may rescind such contract.  The  same  shall  apply  to  any  unilateral  act  effected  by  the minor  vis-a-vis  the  guardian  or  the  successor  of  the  guardian.

 

 

(2)    The  provisions  of  Article  355(Voidable  act)  together  with Articles 357(Method of rescission or ratification) to 360(Extinctive prescription of right of rescission) inclusive shall apply mutatis mutandis  to  cases  described  in  paragraph  (1).

 

 

  1. (Obligation  to  pay  interest  between  guardian  and  minor)

 

(1)      Any  money  required  to  be  returned  by  a  minor  to  the  guardian  or by the guardian to a minor shall bear interest as from the time of completion  of  the  accounts  of  the  guardianship.

 

 

(2)      If  a  guardian  of  a  minor  has  spent  the  minor's  money  on  his  or her  own  behalf,  such  amount  shall  bear  interest  as  from  the  time  of

 

 

 

 

spending, and if the minor suffers any loss thereby, the guardian shall be  liable  to  compensate  the  minor  for  such  loss.

 

  1. (Emergency  obligations   of   guardian   after   termination   of guardianship)

 

 

In cases of emergency after the termination of a guardianship, the guardian or his or her successor shall take the necessary measures until such  time  as  the  minor,  his  or  her  successor  or  legal  representative is  able  to  attend  to  the  minor's  business.

 

 

  1. (Condition  for  perfection  of  termination  of  guardianship)

 

 

Regardless of whether a ground of termination arises on the side of the minor  or  on  that  of  the  guardian,  it  can  be  held  up  against  the  other party only if it has been notified to the other party or the other party is  aware  of  it.

 

 

  1. (Extinctive prescription of claims relating to guardianship)

 

 

(1)     The provisions of Article 1057(Extinctive prescription of claims between parent and child relating to property management) shall apply mutatis  mutandis  to  claims  arising  in  relation  to  the  guardianship between  a  guardian  of  a  minor  or  a  supervisor  on  the  one  hand  and  the minor  on  the  other  hand.

 

 

(2)      In   the   event   that   an   act   is   rescinded   pursuant   to   Article

 

1095(Rescission of contract between guardian and minor), prescription under  paragraph  (1)  shall  run  from  the  time  of  the  rescission.

 

 

Sub-section  VI   Mutatis  Mutandis  App  ication  to  Chi  d  of  Minor

 

  1. (Substituted  exercise  of  parental  power  held  by  minor)

 

(1)      The  guardian  of  a  minor  shall  exercise  the  parental  power  over a  child  of  that  minor,  in  place  of  the  minor.

 

 

(2)    The  provisions  of  Articles  1076(Rights  and  obligations  of guardian)   to   1099(Extinctive   prescription   of   claims   relating   to

 

 

 

 

guardianship) inclusive shall apply mutatis mutandis to cases described in  paragraph  (1).

 

 

Section   II  Genera                                               Guardianship

 

 

Sub-section  I  Commencement  of  Genera                                  Guardianship

 

  1. (Commencement  of  general  guardianship)

 

General    guardianship    shall    commence    in    accordance    with    Article

 

24(Declaration  of  commencement  of  general  guardianship).

 

 

 

Sub-section  II  Genera                                                Guardian

 

 

  1. (Appointment  of  general  guardian)

 

 

(1)    At the time it makes a declaration of commencement of general guardianship,  the  court  shall  ex  officio  appoint  a  general  guardian.

 

 

(2)       If  [the  former  general  guardian  has  ceased  to  serve,  and]  there exists no general guardian, the court shall appoint a general guardian upon application by the guardian's supervisor, the person under general guardianship, the spouse of the person under general guardianship, any relative  up  to  the  fourth  degree  of  relationship  of  the  person  under general guardianship, the chief of the commune or sangkat in which the permanent residence of the person under general guardianship is located, a  public  prosecutor  or  other  interested  person,  or  ex  officio.

 

 

(3)     Even where a general guardian has been appointed, the court may appoint an additional general guardian upon application by any person listed  in  paragraph  (2)  or  by  the  general  guardian,  or  ex  officio,  if it  finds  this  necessary.

 

 

(4)    In  appointing  a  general  guardian,  the  mental  and  physical condition of the person under general guardianship, the state of the lifestyle and property of the person under general guardianship, the occupation and career of the proposed general guardian and any conflict of interest with the person under general guardianship, the opinion of

 

 

 

 

the person under general guardianship and all other circumstances shall be taken into account. If the proposed general guardian is a juristic person,  the  type  and  contents  of  its  business  and  any  conflict  of interest between the person under general guardianship and the juristic person  and/or  its  representatives  shall  be  taken  into  account.

 

 

(5)     The court may, when it appoints a general guardian for a minor, appoint  the  parental  power  holder  or  the  guardian  for  minor  as  the general   guardian.   When   the   court   appoints   a   person   other   than   the parental power holder or the guardian for minor as the general guardian, the  court  must  designate  the  allocation  of  duties  among  the  parental power  holder  or  the  guardian  for  minor  and  the  general  guardian.

 

 

  1. (Resignation  of  general  guardian)

 

A  general  guardian  may  resign  the  office  for  good  reason,  with  the permission  of  the  court.

 

 

  1. (Obligation  to  demand  appointment  of  general  guardian)

 

If  a  general  guardian  resigns,  the  court  shall  promptly  appoint  a  new general  guardian.

 

 

  1. (Dismissal  of  general  guardian)

 

 

Upon application by the general guardian's supervisor, the person under general     guardianship,          the     spouse  of              the    person     under         general guardianship,  a  relative  of  the  person  under  general  guardianship  up to  the  4th  degree  of  relationship,  the  head  of  the  commune  or  sangkat in           which                         the    permanent             residence         of       the     person        under   general guardianship is located, a public prosecutor or other interested person, or  ex  officio,  the  court  may  dismiss  a  general  guardian  who  commits  a wrongful act or other act rendering him or her unfit for the office of general  guardian.

 

 

  1. (Grounds  for  disqualification  as  general  guardian)

 

None  of  the  persons  described  below  may  become  a  general  guardian:

 

  1. a) A minor or person under general guardianship or curatorship;

 

 

 

 

  1. b) A legal representative, curator or supervisor of either of the foregoing  who  has  been  dismissed  by  a  court:
  2. c) A bankrupt;  or

 

  1. d) A person  whose  whereabouts  are  

 

 

 

Sub-section  III  Supervisor  of  Genera                                   Guardian

 

 

  1. (Supervisor of  general  guardian)

 

Upon  application  by  the  general  guardian,  the         person  under  general guardianship,  the  spouse  of  the  person  under  general  guardianship,  a relative of the person under general guardianship up to the 4th degree of   relationship,   the   head   of   the   commune   or   sangkat   in   which   the permanent residence of the person under general guardianship is located, a public prosecutor or other interested person, or ex officio, the court may appoint a supervisor of a general guardian if the court finds this necessary.  The  same  shall  apply  if  [the  former  supervisor  has  ceased to  serve,  and]  there  exists  no  supervisor.

 

 

  1. (Grounds  for   disqualification   as   supervisor   of   general guardian)

 

 

Neither the spouse nor a relative up to the 4th degree of relationship of a general guardian may become a supervisor of the general guardian.

 

 

  1. (Duties of  supervisor  of  general  guardian)

 

 

The  duties  of  a  supervisor  of  a  general  guardian  shall  be  as  follows:

 

  1. a) To  supervise   the   performance   of   duties   by   the   general guardian;
  2. b) To apply  to  the  court  without  delay  for  the  appointment  of a new general guardian if [the former general guardian has ceased  to  serve,  and]  there  exists  no  general  guardian;
  3. c) In case  of  emergency,  to  take  the  necessary  measures  for management  of  the  livelihood,  health  care  and  property  of the  person  under  general  guardianship;
  4. d) To  represent   the   person   under   general   guardianship   in respect of any act which involves a conflict of interest between   the   general   guardian   or   the   general   guardian's

 

 

 

 

representative  and  the  person  under  general  guardianship.

 

 

  1. (Provisions  to  apply  mutatis  mutandis)

 

The provisions of paragraph (4) of Article 1102(Appointment of general guardian),   Article   1103(Resignation   of   general   guardian),   Article

1105(Dismissal of general guardian), Article 1106(Grounds for disqualification as general guardian), Article 1117(More than one general guardian), Article 1118(Permission for property management), paragraph (2) of Article 1120(Estimates of outlays, expenses of general guardianship), Article 1121(Remuneration of general guardian), Article

1126(Guardian's  obligation  of  care),  Article  1130(Emergency obligations of guardian after termination of general guardianship) and Article 1131(Condition for perfection of termination of general guardianship)   shall   apply   mutatis   mutandis   to   the   supervisor   of   a general  guardian.

 

 

Sub-section  IV   Duties  of  Genera                                        Guardian

 

 

  1. (Property  management  and  representation)

 

(1)       The general guardian shall manage the property of the person under general  guardianship     and     represent     the     person     under     general guardianship  in  any  act  affecting  the  property  of  the  person  under general  guardianship.

 

 

(2)    The provision of the second sentence of Article 1050(Property management and representation) shall apply mutatis mutandis to cases described  in  paragraph  (1).

 

 

  1. (Survey  of  property  and  preparation  of  inventory)

 

(1)      Upon  assuming  office  a  general  guardian  shall  promptly  commence a survey of the property of the person under general guardianship and within 3 months shall complete such survey and prepare an inventory; provided  that  said  period  may  be  extended  by  the  court.

 

 

(2)      If there is a supervisor of the general guardian, the survey and

 

 

 

 

inventory of the property shall have no effect unless conducted in the presence  of  said  supervisor.

 

 

  1. (Authority  prior  to  preparation  of  inventory)

 

 

Until the completion of the inventory, a general guardian shall have authority to effect only acts of urgent necessity; provided that this restriction  cannot  be  set  up  against  a  bona  fide  third  party.

 

 

  1. (Reporting of claims or obligations by the general guardian against or  in  favor  of  the  person  under  general  guardianship)

 

(1)       Where there is a supervisor of the general guardian, if the general guardian  holds  any  claim  against,  or  bears  any  obligation  in  favor  of the   person   under   general   guardianship,   the   general   guardian   shall report    such   claim   and/or   obligation   to   the   supervisor   prior   to commencing  the  survey  of  the  property.

 

 

(2)     If the general guardian is aware of holding any claim against the person  under  general  guardianship  but  does  not  report  it,  such  claim shall  be  forfeited.

 

 

  1. (Mutatis mutandis application to cases where the person under general guardianship  acquires  universal  property)

 

 

The provisions of Articles 1112(Survey of property and preparation of inventory),   1113(Authority   prior   to   preparation   of   inventory)   and

1114(Reporting of claims or obligations by the general guardian against or   in   favor   of   the   person   under   general   guardianship)  shall   apply mutatis mutandis  to cases where the person under general  guardianship has acquired universal property after the general guardian has assumed office.

 

  1. (Respect for wishes of the person under general guardianship, etc.)

 

 

(1)    When performing matters that concern the livelihood, medical treatment and care of and management of the property of the person under general  guardianship,  the  guardian  shall  respect  the  wishes  of  the person under general guardianship and shall take into account the mental

 

 

 

 

and physical condition and living conditions of the person under general guardianship.

 

 

(2)    The general guardian shall strive to provide the best possible medical care for the person under general guardianship, in accordance with the financial capacity of the general guardian and the person under general  guardianship  and  their  relationship.

 

 

  1. (More  than  one  general  guardian)

 

 

(1)       If there is more than one general guardian, the court may determine ex           officio    whether    the    general    guardians    should    exercise    their functions jointly or whether the functions should be divided among the general  guardians.

 

 

(2)      The  court  may  ex  officio  cancel  a  determination  under  paragraph

 

(1).

 

 

(3)      If  there  is  more  than  one  general  guardian,  it  shall  suffice  if a  third  party  declares  his  or  her  intention  to  one  of  them.

 

 

  1. (Permission  for  property  management)

 

 

The permission of the court shall be required in cases where a general guardian  sells,  leases,  terminates  the  lease,  establishes  a  hypothec or  dispose  of  in  another  manner  equivalent  to  the  foregoing,  in  place of  the  person  under  general  guardianship,  an  immovable  property provided  for  the  residence  of  the  person  under  general  guardianship.

 

  1. (Acts involving conflict of interests of general guardian and the person  under  general  guardianship)

 

 

The provisions of Article 1062(Conflict of interest between parental power  holder  and  child)  shall  apply  mutatis  mutandis  to  general guardians; provided that this shall not apply where the general guardian has  a  supervisor.

 

 

  1. (Estimates  of  outlays,  expenses  of  general  guardianship)

 

 

 

 

 

(1)       Upon assuming office, a general guardian shall estimate the amount of money to be expended annually for the livelihood, medical treatment and care of and management of the property of the person under general guardianship.

 

 

(2)      The expenses required for the performance by the general guardian of  his  or  her  duties  under  the  general  guardianship  shall  be  defrayed from  the  property  of  the  person  under  general  guardianship.

 

 

  1. (Remuneration  of  general  guardian)

 

 

The court may allow reasonable remuneration to the general guardian out of the property of the person under general guardianship, taking account of the financial capacity of the guardian and the person under general guardianship  and  other  circumstances.

 

 

  1. (Supervision  of  duties  of  general  guardian)

 

(1)      The  supervisor  of  the  general  guardian  or  the  court  may  at  any time  demand  that  the  general  guardian  provide  a  report  of  the  conduct of  his  or  her  duties  or  the  inventory  of  the  property,  and  may  also inspect   the   living   conditions  and   health   care   of   the   person   under general  guardianship  and  the  management  of  the  property.

 

 

(2)      Upon  application  by  the  supervisor  of  a  general  guardian,  the person   under   general   guardianship,   the   spouse   of   the   person   under general  guardianship,  a  relative  of  the  person  under  general guardianship  up  to  the  4th  degree  of  relationship,  the  chief  of  the commune or sangkat in which the permanent residence of the person under general guardianship is located, a public prosecutor, or another interested  person,   or   ex   officio,   the   court   may   order   the   general guardian to take necessary action relating to the living conditions or medical care of the  person under general guardianship, the management of   property   of   the   person   under   general   guardianship   or   otherwise relating  to  the  general  guardianship.

 

 

  1. (Limitations  on  right  of  representation  and  right  to  grant

 

 

 

 

consent)

 

 

If   the   general   guardian   has   a   supervisor,   the   permission   of   the supervisor  must  be  obtained  in  order  to  conduct  business  or  to  do  any of the acts listed in Article 30(Right to rescind act) in place of the person under general guardianship, or in order to consent to the doing of any of the foregoing acts by the person under general guardianship; provided  that  this  shall  not  apply  to  the  receipt  of  principal.

 

 

  1. (Effect  of  breach  of  Article  1123)

 

 

(1)      Any  act  done  or  consented  to  by  a  general  guardian  in  breach  of Article 1123(Limitations on right of representation and right to grant consent)  may  be  rescinded  by  the  person  under  general  guardianship  or the general guardian. In such a case, the provisions of Article 32(Right to  demand)  shall  apply  mutatis  mutandis.

 

 

(2)       The provisions of paragraph (1) shall not preclude the application of the provisions of Article  355(Voidable act) together with Articles

357(Method  of  rescission  or  ratification)  to  360(Extinctive prescription  of  right  of  rescission)  inclusive.

 

  1. (Acquisition of property, etc. from the person under general guardianship)

 

 

(1)      If  the  general  guardian  acquires  property  of  the  person  under general guardianship or rights of a third party against the person under general guardianship, the person under general guardianship may rescind such  acquisition.  In  such  a  case,  the  provisions  of  Article  32(Right to  demand)  shall  apply  mutatis  mutandis.

 

 

(2)       The provisions of paragraph (1) shall not preclude the application of the provisions of Article  355(Voidable act) together with Articles

357(Method  of  rescission  or  ratification)  to  360(Extinctive prescription  of  right  of  rescission)  inclusive.

 

 

  1. (Guardian's  obligation  of  care)

 

 

 

 

(1)       The general guardian is obligated to perform the duties of general guardianship  with  the  care  of  a  good  manager.

 

 

(2)    If the general guardian breaches the obligation described in paragraph (1) and thereby causes loss to the person under general guardianship, the person under general guardianship may demand that the general  guardian  compensate  him  or  her  for  such  loss.

 

  1. (Management of property granted by third party to the person under general  guardianship)

 

 

(1)     If a third person who gratuitously transfers property to a person under general guardianship has declared the intention not to allow the general guardian of the person under general guardianship to manage such property, the property shall be excluded from the scope of the property managed  by  the  general  guardian.

 

 

(2)       Upon  application  by  the  supervisor,  the  person  under  general guardianship,  the  spouse  of  the  person  under  general  guardianship,  a relative of the person under general guardianship up to the 4th degree of  relationship,  the  chief  of  the  commune  or  sangkat  in  which  the permanent residence of the person under general guardianship is located, or a public prosecutor, the court may appoint a manager of any property described  in  paragraph  (1)  not  managed  by  the  general  guardian  and  in respect  of  which  the  third  party  has  not  appointed  a  manager.

 

 

(3)      Even  in  a  case  where  the  third  party  has  appointed  a  property manager, paragraph (2) shall apply if the third party fails to appoint a  new  manager  when  the  authority  of  the  first-mentioned  manager  has become extinguished or it has become necessary to replace said manager.

 

 

(4)      The provisions of Articles 37(Appointment of administrator by the court) to 40(Authority of administrator) inclusive shall apply mutatis mutandis  to  cases  described  in  paragraphs  (2)  and  (3).

 

 

Sub-section  V    Termination  of  Genera                                Guardianship

 

 

 

 

  1. (Account of property management and presence of supervisor)

 

 

(1)       When the duties of a general guardian have terminated, the general guardian or his or her successor shall render an account of property management within 3 months following the date of termination; provided that  this  period  may  be  extended  by  the  court.

 

 

(2)      If  the  general  guardian  has  a  supervisor,  the  account  described in paragraph (1) shall be prepared in the presence of such supervisor.

 

 

  1. (Obligation to  pay  interest  between  general  guardian  and person  under  general  guardianship)

 

 

(1)    Any money required to be returned by a person under general guardianship  to  the  general  guardian  or  by  the  general  guardian  to  a person under general guardianship shall bear interest as from the time of  completion  of  the  accounts  of  the  general  guardianship.

 

 

(2)     If a general guardian has spent money of a person under general guardianship on his or her own behalf, such amount shall bear interest as  from  the  time  of  spending,  and  if  the  person  under  general guardianship suffers any loss thereby, the general guardian shall be liable  to  compensate  the  person  under  general  guardianship  for  such loss.

 

  1. (Emergency  obligations   of   guardian   after   termination   of general  guardianship)

 

 

In cases of emergency after the termination of a general guardianship, the general guardian or his or her successor shall take the necessary measures until such time as the person under general guardianship, his or  her  successor  or  legal  representative  is  able  to  attend  to  the business  of  the  person  under  general  guardianship.

 

  1. (Condition for     perfection     of     termination     of     general guardianship)

 

 

Regardless of whether a ground of termination of a general guardianship arises on the side of the person under general guardianship or on that

 

 

 

 

of the general guardian, it can be held up against the other party only if it has been notified to the other party or the other party is aware of  it.

 

 

  1. (Extinctive prescription of claims relating to guardianship)

 

 

The  provisions  of  Article  1057(Extinctive  prescription  of  claims between parent and child relating to property management) shall apply mutatis  mutandis  to  claims  arising  in  relation  to  the  general guardianship between a general guardian or a supervisor on the one hand and  the  person  under  general  guardianship  on  the  other  hand.

 

 

Chapter Seven CURATORSHIP

 

 

  1. (Commencement  of  curatorship)

 

 

Curatorship  shall  commence  in  accordance  with  Article  28(Declaration of  commencement  of  curatorship).

 

 

  1. (Appointment  of  curator)

 

 

(1)      When it declares the commencement of curatorship, the court shall

 

ex  officio  appoint  a  curator.

 

 

(2)      The     provisions     of     paragraphs     (2)     to     (4)     of     Article

 

1102(Appointment of general guardian) and Articles 1103(Resignation of general guardian) to 1106(Grounds for disqualification as general guardian)  inclusive  shall  apply  mutatis  mutandis  to  curator.

 

 

(3)     Where there is a conflict of interest between the curator or the representative of the curator and the person under curatorship, the curator shall apply to the court for the appointment of a temporary curator,  except  where  there  is  a  supervisor  of  the  curator.

 

 

(4)      Paragraph   (3)   shall   also   apply   to   the   case   where   there   is   a conflict of interest among a number of persons under a signle curator.

 

 

  1. (Supervisor  of  curator)

 

 

 

 

 

 

(1)      Upon  application  by  the  curator,  the  person  under  curatorship, the  spouse  of  the  person  under  curatorship,  a  relative  up  to  the  4th degree  of  relationship  of  the  person  under  curatorship,  the  chief  of the  commune  or  sangkat  in  which  the  permanent  residence  of  the  person under curatorship is located, a public prosecutor or other interested person, or ex officio, the court, where it finds this necessary, may appoint a supervisor of the curator. The same shall apply if [the former supervisor  has  ceased  to  serve,  and]  there  exists  no  supervisor.

 

 

(2)    The provisions of paragraph (4) of Article 1102(Appointment of general guardian), Article 1103(Resignation of general guardian), Article 1105(Dismissal of general guardian), Article 1106(Grounds for disqualification as general guardian), Article 1108(Grounds for disqualification as supervisor of general guardian), Article 1117(More than one general guardian), paragraph (2) of Article 1120(Estimates of outlays,       expenses       of       general       guardianship)       and       Article

1121(Remuneration of general guardian) shall apply mutatis mutandis to supervisors  of  curators.

 

 

(3)      If  any  act  involves  a  conflict  of  interest  between  the  curator or the representative of the curator and the person under curatorship, the supervisor may consent to the doing of such act by the person under curatorship.

 

 

(4)      Paragraph (3) shall also apply to the case of conflict of interest among  a  number  of  persons  under  a  single  curator.

 

 

  1. (Duties  of  curator)

 

(1)      The  curator  has  the  authority  to  grant  consent  to  the  doing  by the person under curatorship of the acts listed in Article 30(Right to rescind act), or to rescind any of such act effected by the person under curatorship  without  the  consent  of  the  curator.

 

 

(2)      In  effecting  his  or  her  duties  under  paragraph  (1),  the  curator shall respect the wishes of the person under curatorship and take into

 

 

 

 

account  the  mental  and  physical  condition  and  the  state  of  livelihood of  the  person  under  curatorship.

 

 

(3)     The provisions of Article 1117(More than one general guardian), paragraph (2) of Article 1120(Estimates of outlays, expenses of general guardianship), Article 1121(Remuneration of general guardian)) and Article 1122(Supervision of duties of general guardian) shall apply mutatis  mutandis  to  the  duties  of  curators.

 

 

(4)     The provisions of Article 1057(Extinctive prescription of claims between parent and child relating to property management) shall apply mutatis   mutandis   to   claims   arising   in   relation   to   the   curatorship between the curator or the supervisor of the curator and the person under curatorship.

 

 

Chapter Eight SUPPORT

 

 

 

  1. (Scope  and  order  of  persons  obliged  to  provide  support)

 

(1)      Relatives  shall  be  obliged  to  provide  support  in  the  scope  and order  described  below:

  1. a) Cohabiting relatives;

 

  1. b) Lineal relatives  by  consanguinity;

 

  1. c)

 

 

(2)    If there are special circumstances, the court may impose an obligation of support on relatives up to the 3rd degree of relationship other than persons described in paragraph (1). The same shall apply to support between the surviving spouse and the relatives of the deceased spouse  in  cases  where  a  marriage  is  dissolved  by  reason  of  the  death of  one  of  the  spouses.

 

 

(3)    If circumstances change after the rendering of an adjudication described  in  paragraph  (2),  the  court  may  cancel  such  adjudication.

 

  1. (Confirmation of  who  should  actually  provide  and  receive support)

 

 

 

 

 

 

(1)      If there are two are more persons obliged to provide support, such persons shall agree, upon mutual consultation, as to which one or more of  them  shall  actually  provide  support.

 

 

(2)    If no agreement described in paragraph (1) is reached or if consultation  cannot  be  held  between  them,  the  court  shall  determine which  person  or  persons  subject  to  an  obligation  to  provide  support should actually provide the support, taking into account the financial capacity, age, mental and physical condition of said persons, the relationship  of  the  parties  and  all  other  circumstances.

 

 

(3)      If there are two or more persons entitled to receive support and the financial capacity of the person or persons obliged to provided support is insufficient to support all of the persons entitled, the provisions  of  paragraphs  (1)  and  (2)  shall  apply  to  the  determination of  who  should  actually  receive  support.

 

 

  1. (Extent  and  mode  of  support)

 

 

If no agreement is reached or consultation cannot be held between the relevant  parties  concerning  the  extent  or  mode  of  support,  the  court shall  determine  these  matters,  taking  into  account  the  necessity  for such support in the life of the person or persons entitled to support, the  financial  capacity  of  the  person  or  persons  obliged  to  provide support  and  all  other  circumstances.

 

 

  1. (Variation  and  cancellation  of  support  arrangement)

 

 

(1)    If circumstances change after an agreement is concluded or an adjudication rendered concerning which party or parties are to provide or receive support or the extent or mode of support, the relevant parties may  agree  to  vary  the  support  relationship.

 

 

(2)    If no agreement described in paragraph (1) is reached or if consultation cannot be held between the relevant parties, the relevant parties  may  apply  to  the  court  for  cancellation  or  variation  of  the

 

 

 

 

previous  agreement  or  adjudication.

 

 

(3)      The     provisions     of     paragraphs     (2)     and     (3)     of     Article

 

1138(Confirmation of who should actually provide and receive support) shall  apply  mutatis  mutandis  to  orders  by  the  court  for  cancellation or  variation  under  paragraph  (2)  of  this  Article.

 

 

  1. (Prohibition  on  disposing  of  right  to  demand  support)

 

 

The  right  to  receive  support  shall  be  an  exclusive  and  personal  right of the person requiring support, and may not be made the subject of an assignment, gift, creation of security or any other transaction whatsoever  with  any  third  party.

 

 

BOOK EIGHT  "SUCCESSION"

 

 

Chapter One GENERAL PROVISIONS

 

 

Section   I  Opening  of  Succession

 

 

  1. (Cause  of  opening  of  succession)

 

 

(1)      Succession  shall  open  upon  the  death  of  the  decedent.

 

 

(2)      Succession shall be carried out in accordance with the provisions of law or the wishes of the decedent. Succession in accordance with the provisions  of  law  shall  be  called  "statutory  succession",  and succession in accordance with the wishes of the decedent "testamentary succession".

 

 

  1. (Place  of  succession)

 

 

Succession shall open at the permanent residence of the decedent at the time  of  death.

 

 

 

 

Section   II  Effect of  Succession

 

 

  1. (Succession  to  the  succession  property19)

 

 

(1)      As  of  the  commencement  of  the  succession,  a  successor  succeeds to all of the rights and obligations pertaining to the property of the decedent,  except  such  as  were  entirely  personal  to  the  decedent.

 

 

(2)      If   there   is   a   person   who   should   succeed   to   the   ownership   of ceremonial implements, graves and movable ancestral heirlooms, such as a  person  who  was  designated  by  the  decedent  to  preside  over  the  rites for the ancestors, such person shall succeed to the said ownership. If there is no such designation by the decedent, the person who by custom should succeed to the ownership of those items such as the one who should preside over the rites for the ancestors shall succeed to the said ownership. If no such custom is apparent, the court shall determine the successor  to  the  said  ownership.

 

 

  1. (Succession  to  the  property  rights  by  multiple  successors)

 

 

(1)      If  there  is  more  than  one  successor,  each  co-successor  shall succeed to the rights and obligations of the decedent in proportion to their  share  in  the  succession;  provided  that  rights  and  obligations which of their nature cannot be partitioned shall be succeeded to unpartioned.

 

 

(2)    The  co-successor  shall  be  the  co-owners  of  the  succession property.

 

 

Section   III  Qua  ification  for  succession

 

 

  1. (Persons  qualified  for  succession,  etc.)

 

 

19  In  this  translation,  the  term  of  "succession  property"  refer  to  any  part  or  the whole  of  the  property  rights,  including  both  positive  and  negative  assets,  that belong  to  the  decedent  at  the  time  of  the  commencement  of  the  succession.                                                                                                                                                                                  The translator avoided to use the term of "estate" because under the provisions of this Code  property  passes  directly  to  the  successors  and  there  is  no  intermediate "estate",  as  seems  to  be  the  case  in  Anglo-American  jurisdictions.

 

 

 

 

 

 

(1)       Only   persons   who   are   alive   at   the   time   of   commencement   of succession   and   also   do   not   fall   under   any   provision   of   Articles

1147(Persons        disqualified        for        succession,        etc.)        through

 

1149(Disinheritance  by  will)  shall  be  qualified  for  succession.

 

 

(2)      Notwithstanding the provisions of paragraph (1), paragraphs (2)

 

and  (3)  of  Article  9(Fetus)  shall  apply  to  any  fetus.

 

 

  1. (Persons  disqualified  for  succession,  etc.)

 

 

The   persons   described   below   cannot   become   successors   or   acquire property  under  a  will:

  1. a) Any person  who  has  been  sentenced  to  punishment,  whether being   involved     directly     or     indirectly,     for     having intentionally caused or attempted to cause the death of the decedent or of any person who has prior or equal rank in the succession;
  2. b) Any person who, knowing that the decedent has been murdered, fails to  lodge  an  accusation  or  complaint;  excepting, however,   cases   where   such   person   lacks   the   capacity   to discern right from wrong, or where the murderer is the spouse or  lineal  relative  by  consanguity  of  such  person;
  3. c) Any person who has by fraud or duress, prevented the decedent from making, revoking or altering a will relating to the succession;
  4. d) Any person who has by fraud or duress, induced the decedent to make, revoke or alter a will relating to the succession;
  5. e) Any person who has forged, altered, destroyed or concealed a will  of  the  decedent  relating  to  the  

 

 

  1. (Disinheritance  of  successor)

 

 

(1)      If a presumptive successor with a legally secured portion engages in  any  of  the  following  conduct,  the  decedent  may  apply  to  the  court for  the  disinheritance  of  such  presumptive  successor.    The  intention

 

 

 

 

to  disinherit  may  also  be  declared  by  will:

 

  1. a) Being cruel  to  the  decedent;

 

  1. b) Treating the  decedent  with  great  contempt;

 

  1. c) Failing to care for the decedent when the decedent was sick, despite being  able  to  do  so;
  2. d) Being  found   guilty   of   a   crime   that   is   subject   to   life imprisonment;
  3. e) Engaging in  other  egregious  

 

 

(2)      A presumptive successor against whom disinheritance is sought may contest the existence of the grounds of disinheritance [at the trial] before  the  court  described  in  paragraph  (1).

 

 

  1. (Disinheritance  by  will)

 

 

If the decedent has made a will described in Article 1148(Disinheritance of successor), the executor of the will shall apply to the court for disinheritance without delay after the will comes into effect. In such a case the disinheritance shall have effect retrospectively to the time of  death  of  the  decedent.

 

 

  1. (Possession by   disqualified     successor,    etc.    of    succession property)

 

 

If a person disqualified from succession or from acquiring property by will under Article 1147(Persons disqualified for succession, etc.) or who has been disinherited under Article 1148(Disinheritance of successor) or Article 1149(Disinheritance by will) possesses any of the succession  property,  such  person  shall  be  deemed  to  be  a  possessor  in bad  faith  as  from  the  time  of  the  commencement  of  the  succession.

 

 

  1. (Revocation  of  disinheritance)

 

 

The decedent may apply to the court at any time for revocation of disinheritance   of   a   presumed   successor.   The   provisions   of   Article

1149(Disinheritance    by    will)    shall    apply    mutatis    mutandis    to    a

 

 

 

 

revocation  of  disinheritance.

 

 

  1. (Case  where  the  successor,  etc.  is  an  alien)

 

 

(1)      If  the  successor  or  person  acquiring  property  under  a  will  does not hold Cambodian nationality, such person shall be unable to succeed to  land  nor  to  acquire  land  by  testamentary  gift.

 

 

(2)     &