Woodhouse vs. Halili

Doctrine: Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud,
which may be a ground for

the annulment of a contract, and the incidental deceit, which only renders the party who employs it liable for damages. This Court
had held that in order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo
causante), inducement to the making of the contract.
Facts: On November 29, 1947, the plaintiff entered on a written agreement, Exhibit A, with the defendant, the most important
provisions of which are (1) that they shall organize a partnership for the bottling and distribution of Mision soft drinks, plaintiff to act
as industrial partner or manager, and the defendant as a capitalist, furnishing the capital necessary therefor; (2) that the defendant
was to decide matters of general policy regarding the business, while the plaintiff was to attend to the operation and development of
the bottling plant; (3) that the plaintiff was to secure the Mission Soft Drinks franchise for and in behalf of the proposed partnership;
and (4) that the plaintiff was to receive 30 per cent of the net profits of the business.
Prior to the agreement, plaintiff had informed the Mission Dry Corporation that he had interested a prominent financier who was
willing to invest in the bottling and distribution of the said beverages, and requested, in order that he may close the deal with him,
that the right to bottle and distribute be granted him for a limited time under the condition that it will finally be transferred to the
corporation. Pursuant to this request, plaintiff was given thirty days option on exclusive bottling and distribution rights.
Plaintiff prayed for the execution of the contract of partnership; accounting of profits and share thereof of 30 percent with damages.
The Defendant on the other hand claims that the defendant’s consent to the agreement, was secured by false representation of
plaintiff that he was the owner, or was about to become owner of an exclusive bottling franchise. Further, he contended that plaintiff
did not secure the franchise but was given to defendant himself. He also filed a counterclaim for damages.
Issue: Whether defendant had falsely represented that he had an exclusive franchise to bottle Mission beverages. (YES)
Whether this false representation or fraud, if it existed, annuls the agreement to form the partnership. (NO)
Held: Yes. The plaintiff on this appeal argues, that plaintiff only undertook in the agreement "to secure the Mission Dry franchise for
and in behalf of the proposed partnership." Also, the final agreement contains in its third paragraph the following:
. . . and the manager is ready and willing to allow the capitalists to use the exclusive franchise . . .
and in paragraph 11 it also expressly states:
1. In the event of the dissolution or termination of the partnership, . . . the franchise from Mission Dry Corporation shall be
reassigned to the manager.
These statements confirm the conclusion that defendant believed, or was made to believe, that plaintiff was the grantee of an
exclusive franchise. Thus it is that it was also agreed upon that the franchise was to be transferred to the name of the partnership,
and that, upon its dissolution or termination, the same shall be reassigned to the plaintiff.
However, this is not the kind of fraud that annuls the agreement to form the partnership.
Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud, which may be a ground for the
annulment of a contract, and the incidental deceit, which only renders the party who employs it liable for damages. This Court had
held that in order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo causante),
inducement to the making of the contract.
The record abounds with circumstances indicative that the fact that the principal consideration, the main cause that induced
defendant to enter into the partnership agreement with plaintiff, was the ability of plaintiff to get the exclusive franchise to bottle and
distribute for the defendant or for the partnership. The original draft prepared by defendant's counsel was to the effect that plaintiff
obligated himself to secure a franchise for the defendant. Correction appears in this same original draft, but the change is made not
as to the said obligation but as to the grantee. In the corrected draft the word "capitalist"(grantee) is changed to "partnership." The
contract in its final form retains the substituted term "partnership." The defendant was, therefore, led to the belief that plaintiff had
the exclusive franchise, but that the same was to be secured for or transferred to the partnership. The plaintiff no longer had the
exclusive franchise, or the option thereto, at the time the contract was perfected. But while he had already lost his option thereto
(when the contract was entered into), the principal obligation that he assumed or undertook was to secure said franchise for the
partnership, as the bottler and distributor for the Mission Dry Corporation. We declare, therefore, that if he was guilty of a false
representation, this was not the causal consideration, or the principal inducement, that led plaintiff to enter into the partnership
agreement.

Woodhouse vs. Halili

Uploaded by

Copyright:

Available Formats

Woodhouse vs. Halili

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Woodhouse vs. Halili

Uploaded by

Copyright:

Available Formats

Doctrine: Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the causal fraud,

which may be a ground for

and in paragraph 11 it also expressly states:

You might also like