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WOODHOUSE v HALILI

Plaintiff entered into a written agreement with defendant to organize a partnership for the bottling
and distribution of Mission soft drinks. According to this written agreement, the plaintiff to act as
industrial partner or manager, and the defendant as a capitalist, furnishing the capital necessary
therefore. The plaintiff was to secure the Mission Soft Drinks franchise for and in behalf of the
proposed partnership. The plaintiff was also to receive 30 per cent of the net profits of the business
Plaintiff had informed the defendant that he had already secured an exclusive franchise to bottle and
distribute Mission Dry products in the Philippines. He was given a 30-day option on exclusive
bottling and distribution rights for the Philippines.
Plaintiff and defendant went to the US and entered Mission Dry Corporation into a franchise
agreement.
Plaintiff asked the defendant to execute the contract of partnership (30% share, damages of
P200,000). Defendant refused, stating that plaintiffs representation that he had secured an exclusive
franchise was false, that plaintiff represented that he had the franchise when, at the time of the
execution, it had already expired. Defendant claims his consent to the contract was vitiated by fraud
and is therefore void.

Issues
1. W/N plaintiff falsely represented to the defendant that he had an exclusive franchise? Yes
2. W/N defendants false representation amounts to fraud that will vitiate the contract? No
3. W/N contract can be executed? No

Rationale
1. That plaintiff did make the representation can also be easily gleaned from his own letters and
his own testimony. California he learned that plaintiff did not have the exclusive franchise,
was to reduce, as he himself testified, plaintiff's participation in the net profits to one half of
that agreed upon. He could not have had such a feeling had not plaintiff actually made him
believe that he (plaintiff) was the exclusive grantee of the franchise. The defendant was made
to believe, and he actually believed, that plaintiff had the exclusive franchise. Defendant
would not perhaps have gone to California and incurred expenses for the trip, unless he
believed that plaintiff did have that exclusive privilege
2. 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. In order that fraud may
vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente),
inducement to the making of the contract

It is only incidental deceit. It does not vitiate the contract.


By pretending that he had the exclusive franchise and promising to transfer it to defendant,
he obtained the consent of the latter to give him (plaintiff) a big slice in the net profits, The
plaintiff only used the false representation to get from defendant the 30% of the net profits,
which is only an incidental matter in the agreement.
3. The defendant may not be compelled against his will to carry out the agreement nor execute
the partnership papers. Under the Spanish Civil Code, the defendant has an obligation to do,
not to give. The law recognizes the individual's freedom or liberty to do an act he has
promised to do, or not to do it, as he pleases. It is called a very personal act (acto personalismo),
of which courts may not compel compliance.

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