Second part of French legal analysis of payment in crypto-currencies – An usefull alternative method of payment 1/2.
Hope you will enjoy the reading.
II. OPTIONAL PAYMENT IN CRYPTO-ASSET FORM OF A BOND DENOMINATED IN EURO
In order to extinguish a debt denominated in euro, the transmission of crypto-asset units must be consented to by the creditor of a monetary obligation. The debtor may then be discharged by the payment of the units deemed to be equivalent. Depending on whether such consent is given before or at the time of payment, the fate of the transactions may be different. The transmission of tokens, of whatever kind, may produce the effects of payment in order to extinguish a monetary obligation, provided that this means of payment is consented to by the creditor, either originally, by an optional obligation (A.), or at the time of payment, by a dation (B.).
A. « AB INITIO » CONSENT TO ENCRYPTED PAYMENTS
Where the creditor's consent to a monetary obligation to be satisfied by the payment of the countervalue of Crypto-asset units at the stage of formation of the contract is given, the mechanism is that of an optional obligation, implying a need to dwell on its nature (1.) and then to determine its regime (2.).
1. An optional obligation
Definition - An optional obligation is a form of plural obligation which has as its object a performance of a specific nature but from which the debtor may be discharged by performing another, also specific, performance[1]. The optional obligation is extinguished if the initial performance cannot be performed because of force majeure[2]. The debtor has the option of freeing himself by substituting for the performance due in principle, "the principal performance", another performance, "the optional performance"[3]. It therefore differs from the alternative obligation since it comprises only one performance, unlike the alternative obligation which comprises several performances. In other words, if each of the performances is considered to be a normal means of performance, the obligation is alternative; if only one is considered to be a normal means of performance but another may exceptionally be performed by the debtor in place of the first, the obligation is optional[4].
Usual applications - There are few applications that appear in case law. One finds the seller of a railway concession accepting that the buyer pays the purchase price in cash and that he is optionally released by the delivery of bonds previously issued by the seller[5], or in a more commercial context, the transferor of securities taking the commitment to remain in the company for 2 years[6]. However, the optional obligation seems to be the legal mechanism used by a seller when it states that it accepts Crypto-asset payments for the purchase of its products or services. It is therefore highly likely, in view of the fluctuating price of Crypto-assets, that a dispute will arise and that it will help to flesh out the case law on the optional obligation.
Nature of the optional obligation - The legal analysis of the optional obligation is difficult, since it depends on the conception of the relationship between the payment and the subject matter of the obligation[7]. Some consider that payment is not attached to the performance due, whereas the change concerns only the payment and not the obligation (only one performance is due but the debtor has the option to change it for payment). On the other hand, others consider that what is paid must always correspond to what was due, resulting in a change in the subject-matter of the obligation which is effected by a unilateral promise to change the performance forming the subject-matter of the obligation, the option of which is always given to the debtor[8]. The qualification of the optional obligation depends solely on the initial performance and not on the qualification of the substitute performance which can be provided instead. The change in performance therefore has no impact on the classification of the initial obligation[9], in the same way as a payment dation that does not change the monetary nature of the obligation initially due. The proximity in terms of nature and function between monetary crypto-assets and currencies seems to lean towards the second conception.
Distinction with dation - An optional obligation is similar to a dation in payment, which implies an agreement to modify the object. With the optional obligation, there is a unilateral promise to change the performance due and the subsequent exercise of the option. The object of the obligation is determined ab initio, but the creditor accepts that the debtor is discharged by performing an optional performance[10]. In fact, the creditor can 'only require performance 'in obligatione' when the debtor has, for his part, the choice of performing either in obligatione or in facultate solutionis'[11]. Therefore, what distinguishes the optional obligation from the dation in payment is the moment of consent to be satisfied by another means of payment: if a seller declares that he accepts payment in Crypto-asset for his euro-denominated products, then he will grant an optional obligation to his debtors concerning the method of payment. If nothing is indicated and a customer wishes to purchase a product denominated in euros, the creditor, by accepting at the time of payment, consents to a dation.
2. Operation of the optional obligation
Existence of the option - The optional obligation requires a consensual stipulation: it exists by the will of the parties[12]. For the option to exist, it is necessary that the performance initially due and the substitute performance be determined, possible[13] and lawful[14]. If the initial performance is not likely to be the subject of an obligation, it may be cancelled, bringing with it the optional obligation[15]. This power of substitution belongs only to the debtor who exercises this option by a unilateral act within the meaning of the first paragraph of Article 1308. Thus, the creditor of an optional obligation can continue the performance in kind of the only performance due by the debtor[16], whereas the creditor of an alternative obligation cannot continue performance in kind until the debtor has exercised his power and has chosen the performance which will form the subject-matter of his obligation[17].
Optional obligation regime - The debtor owes only the initial benefit. The creditor may require the debtor to pay this benefit and not the substitute benefit[18]. On the other hand, the debtor may substitute the performance initially due with another performance which he performs[19]. This substitution is effected by a unilateral act of will on the part of the debtor which is subject to the conditions of validity of ordinary law[20]. In practice, merchants who accept Crypto-assets as payment pay the price of their products or services in euro. In the event of non-payment, the trader may demand the forced performance of the monetary obligation of which he is a creditor, which will result in the payment of a sum in euros[21], without being able to demand the payment of the Crypto-asset. Indeed, even the judgment given between the creditor and the debtor can only order the debtor to pay the initial performance (unless the debtor fulfils his optional obligation before the judgment is given, offering satisfaction to the creditor and removing his interest in bringing proceedings[22]).
Effect of the main obligation - If the main object of an optional obligation is lost, the obligation disappears completely, even if the optional benefit remains[23]. The solution is the same in the case of impossibility to perform the initial performance, even if the substitute performance can be performed[24]. For example, a company grants a loan to a student in training, providing for the absence of repayment in the event of the conclusion of a contract of employment is an optional obligation, although it is considered as a condition precedent[25]. The judicial liquidation of the lender having rendered the suspensive condition deficient, the lender could not demand repayment of the loan. However, it had been argued that this was in fact an optional obligation, since the borrower consented to a promise of a contract of employment in return for which the lender undertook to remit its debt to it, and the borrower could evade its promise of a contract of employment by repaying its loan[26]. The solution would have been the same, but the mechanism retained by the Court of Appeal did not seem to be the most adequate. If the impossibility of performance affects the replacement benefit that is optionally due, the obligation becomes pure and simple and remains with this qualification[27]. By comparison, if one of the benefits of an alternative obligation is impossible to perform, the obligation remains as an obligation pure and simple with respect to the benefit that remains enforceable[28].
Thus the optional obligation, in the case of a payment in encrypted form, is a greater source of security for the creditor than the alternative obligation.
B. THE "AD MOMENTUM" CONSENT TO PAYMENT IN CRYPTO-ASSET MODE
Where the creditor consents to be satisfied by the transmission of Crypto-asset units instead of the euro at the time of payment, this is no longer an alternative obligation, but a novation by change of purpose, which is, in the case of a monetary obligation, a dation in payment.
The notion of dation in payment - Dation in payment is a method of extinguishing an obligation by payment from the debtor. Indeed, "the creditor may agree to receive in payment something other than what is due to him"[29]. There is a dation in payment when it is given to the creditor, something other than the object of the debt itself[30]. It is therefore an abnormal mode of payment, the creditor being indirectly satisfied since he does not obtain the thing provided for in the contract, but something deemed equivalent by the parties.
An agreed method of payment - The creditor's agreement makes the provision a legal act, subject to the conditions of validity and proof of ordinary law[31]. It must be made at the time of payment by the creditor, and this consent may be simply implied[32]. A waiver of payment may be annulled for lack of consent or, in the absence of a claim to be extinguished, for lack of purpose[33]. As with payment, the dation may be made by a third party[34] and releases the guarantor (even if the creditor is evicted from the thing given in payment) [35]. As an abnormal means of payment, it is subject to Paulian action and falls under the nullity of the suspicious period[36]. Where a preferential right is granted over the object of the transfer, the holder is entitled to exercise his right, the transfer being assimilated to a transfer for valuable consideration[37]. Rescission for injury shall apply and the debtor shall owe the creditor the same guarantees as a seller. If the creditor is evicted[38], the debt is deemed not to be extinguished[39].
The necessary ownership of the object transferred in payment - The transfer in payment presupposes that the debtor of the monetary obligation is the owner of the things he transfers in payment[40]. If he is not, the owner and the creditor may request the nullity of the payment within 5 years from the date of the transfer or from his knowledge[41]. The true owner has the right of action to claim[42], but the rule of Article 2276 of the Civil Code may be invoked against him[43].
The transfer of ownership of the given thing - It is important to know when the transfer of ownership takes place legally[44]. As with any act of transfer of ownership, the transfer of ownership of the thing given in dation takes place, necessarily upon consent to the dation[45], except for things of kind[46]. These rules are the transposition to the dation of the provisions of article 1196 of the Civil Code[47], which provide that the transfer of ownership takes place at the time of the exchange of consents[48], or in a deferred manner when "the nature of things" so requires[49]. Here the qualification of Crypto-assets becomes essential again. In the case of a simple commodity, the moment will be from the time of consent to dation, whereas the units will always be registered in the debtor's account[50]. On the other hand, if they were recognised as currency, their transfers would be conditional on the real tradition of payment units[51], which seems more appropriate to the payment function of Crypto-assets, since the transfer from one account to another is forgery-proof. Moreover, this is what emerges from the recognition of electronic recording devices allowing "the transfer of ownership of mini-vouchers results from the recording of the transfer"[52] within them. It is certainly in the nature of things, since cryptomoney organisations wish to be a forgery-proof digital currency, that the most appropriate regime for their transfer is that of money, regardless of whether they are recognised as such.
Effect on the price change obligation - There is nothing to prevent the creditor from receiving in payment an asset whose value is greater than the amount of the claim. The question is then whether, as a result of such a remittance, the creditor agrees to consider himself or herself a debtor to the person remitting the property in payment of an amount equal to the difference between the amount of the claim and the value of the property. In such a case, the person who handed over the property by way of a payment shall enjoy a seller's lien for the difference[53]. This preference must be granted by the creditor even if the property assigned has a value greater than the claim[54].. An object whose value is less than the original obligation is not relevant to the satisfaction of the creditor, since he consents to it. Consequently, a trader who agrees to receive units of Crypto-assets, if he takes the risk of seeing the units lose value without being able to obtain full satisfaction, will remain the owner of the surplus value of the reverse scenario in the absence of any forecast to the contrary.
All my posts are linked each other, so if you don't understand everything or you want to learn more about crypto-currencies in France please check the links below :
French Legal Aspects of Cryptocurrencies - Introduction 1/2 ;The Impossible Monetary Recognition of Crypto-assets in French Law - The Example of Complementary Local Currencies (CLC) 1/2 ;
The BlockChain, A Method of Issuing Dematerialized Securities 1/2;
French Legal Regulation of Crypto-assets Financing Mechanisms (or DeFi) - Lending and Borrowing;
[1] Art. 1308, al. 1er, C. civ.
[2] Art. 1308, al. 2, C. civ.
[3] M. Mignot, « Art. 1306 à 1308, Fasc. unique : Régime général de l’obligation ; Modalités de l'obligation ; Pluralité d'objets », JurisClasseur Civil Code (Maj, 21 mai 2017), par. 79.
[4] Idem, par. 86.
[5] CA Douai, 2e ch., 21 mars 1891 : DP 1892, 2, p. 549.
[6] Since the latter had the option of leaving it, he would then lose the last maturity date of the price: the bond is implicitly considered optional (CA Versailles, 3rd ch., Jan. 12, 1996: Bull. Joly Sociétés 1996, p. 377, para. 129, note J.-C. HALLOUIN.
[7] M. Mignot, « La nature juridique du paiement », in « Le paiement », (dir.) M. Mignot et J. Lasserre-Capdeville, éd. L'Harmattan, 2014, p. 9.
[8] M. Mignot, « Art. 1306 à 1308, Fasc. unique : Régime général de l’obligation ; Modalités de l'obligation ; Pluralité d'objets », JurisClasseur Civil Code (Maj, 21 mai 2017), par. 80.
[9] M. Mignot, « Art. 1306 à 1308, Fasc. unique : Régime général de l’obligation ; Modalités de l'obligation ; Pluralité d'objets », JurisClasseur Civil Code (Maj, 21 mai 2017), par. 84.
[10] F. Bicheron, « La dation en paiement », préf. M. Grimaldi, éd. Panthéon-Assas, 2006, p. 234.
[11] Idem, p. 236.
[12] Art. 1102, al. 1er, C. civ.
[13] Art. 1163, al. 2, C. civ.
[14] Art. 1162, C. civ.
[15] Art. 1178, al. 1er, C. civ.
[16] Art. 1221, 1222, C. civ.
[17] M. Mignot, « Art. 1306 à 1308, Fasc. unique : Régime général de l’obligation ; Modalités de l'obligation ; Pluralité d'objets », JurisClasseur Civil Code (Maj, 21 mai 2017), par. 86.
[18] Art. 1344, C. civ.
[19] M. Mignot, « Art. 1306 à 1308, Fasc. unique : Régime général de l’obligation ; Modalités de l'obligation ; Pluralité d'objets », JurisClasseur Civil Code (Maj, 21 mai 2017), par. 87.
[20] Art. 1100-1, al. 2, 1128, C. civ.
[21] G. Marain, « Le bitcoin à l'épreuve de la monnaie », Dalloz revues, AJ contrat 2017, p. 522.
[22] CA Douai, 2e ch., 21 mars 1891 : DP 1892, 2, p. 549.
[23] M. Mignot, « Art. 1306 à 1308, Fasc. unique : Régime général de l’obligation ; Modalités de l'obligation ; Pluralité d'objets », JurisClasseur Civil Code (Maj, 21 mai 2017), par. 88.
[24] Art. 1308, al. 2, C. civ.
[25] CA Paris, 15ème ch. A, 7 mars 1989, « Ferrari c/Schneider Jumont Ral » : JCP G 1989, II, 21318, note B. Petit.
[26] En ce sens : B. Petit, JurisClasseur Périodique Général 1989, II, 21318.
[27] G. Ripert et J. Boulanger, « Traité de droit civil d'après le traité de M. Planiol », t. II, éd. LGDJ, 1957, par. 1312.
[28] Art. 1307-3 et 1307-4, C. civ.
[29] Art. 1342-4, al. 2, C. civ.
[30] Ass. Plén., 22 avr. 1974, n° 71-13.450, Bull. : Recueil Dalloz 1974, p. 613, note Derrida.
[31] Art. 1128 et suiv., C. civ.
[32] Civ. 1ere, 13 juin 1979, n° 78-12.030, Bull. civ. I, n°178 ; Civ. 1ere, 21 nov. 1995 n° 93-16.554, NP.
[33] P. Simler, « Synthèse 670. Extinction des obligations par paiement », JurisClasseur Civil Code (Maj, 15 déc. 2017), par. 30.
[34] Civ. 3ème, 5 avr. 1968, Bull. civ. III, n°161.
[35] Art. 2315, C. civ.
[36] Art. L632-1, 4°, C. comm.
[37] Civ. 3ème, 4 avr. 1968, Bull. civ. III, n°148 sur un droit de préemption.
[38] Civ. 3ème, 4 juill. 1968, Bull. civ. III, n°324.
[39] P. Simler, « Synthèse 670. Extinction des obligations par paiement », JurisClasseur Civil Code (Maj, 15 déc. 2017), par. 30.
[40] Art. 1238 ancien, al. 1er, C. civ.
[41] Ordinary law limitation period, reduced from 30 to 5 years by Law No. 2008-561 of 17 June 2008.
[42] P. Simler, « Synthèse 670. Extinction des obligations par paiement », JurisClasseur Civil Code, (Maj, 15 déc. 2017), par. 22.
[43] Former art. 2279, C. civ.
[44] F. Bouttier, « V° Dation en paiement : Fasc. 10 : Dation en paiement », JurisClasseur Notarial Formulaire (Maj, 26 sept. 2016), par. 12.
[45] Civ. 1ere, 27 janv. 1993, n° 91-12.115, Bull. Civ. I, n°39, p.25.
[46] In the presence of such a thing, the transfer presupposes an act of individualization of the goods: Civ. Com. 11 May 2010, No. 09-12.102, NP.
[47] Or the provisions of art. 1583 of the Civil Code, this time relating to the sale, but also tolerating conventional exceptions such as reservation of ownership clauses.
[48] Art. 1196, al 1er, C. civ.
[49] Art. 1196, al. 2, C. civ.
[50] G. Marain, « Le bitcoin à l'épreuve de la monnaie », Dalloz revues, AJ contrat 2017, p. 522.
[51] T. Le Gueut, « Le paiement de l'obligation monétaire en droit privé interne », préf. H. Synvet, éd. LGDJ, 2016, p. 265.
[52] Art. L223-13, C. mon. fin.
[53] F. Bouttier, « V° Dation en paiement : Fasc. 10 : Dation en paiement », JurisClasseur Notarial Formulaire (Maj, 26 sept. 2016), par. 15.
[54] Civ. 3ème, 13 avr. 2005, n° 04-10.774, NP.