1. Sanchez vs.

Rigos

FACTS:
Nicolas Sanchez and Severina Rigos executed an instrument entitled "Option to
Purchase” whereby Mrs. Rigos agreed, promised and committed to sell to Sanchez a parcel of
land within 2 years with the understanding that the said option shall be deemed terminated
and elapsed if Sanchez shall fail to exercise his right to buy the property within the stipulated
period. Mrs. Rigos rejected several payments made by Sanchez. He then deposited the said
amounts to the CFI of Nueva Ecija and instituted an action for specific performance and
damages.
Sanchez alleged that Mrs. Rigos agreed and committed to sell, and that he agreed and
committed to buy. Thus, the promise contained in the contract is reciprocally demandable
pursuant to the first paragraph of Article 1479.
On the other hand, Mrs. Rigos alleged that the contract between them is a unilateral
promise to sell, and the same being unsupported by any valuable consideration, by force of the
New Civil Code, is null and void.
CFI ruled in favor of Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned
by him and to execute a deed of reconveyance in his favor.

ISSUE:
WON the “offer of option” is binding upon Mrs. Rigos

RULING:
Yes. The document drawn between Mrs. Rigos and Sanchez does not require Sanchez to
purchase the property. It is not a contract to buy and sell. Therefore, the controlling provision is
the 2nd paragraph of Art. 1479. Under Article 1479 paragraph 2, an accepted unilateral promise
can only have a binding effect if supported by a consideration which means that the option can
still be withdrawn, even if accepted, if the same is not supported by any consideration. In this
case, Mrs. Rigos committed to sell the property to Sanchez but the document does not state
that the promise or undertaking is supported by consideration distinct from the price
stipulated. It can therefore be withdrawn notwithstanding the acceptance of it by Sanchez.
However, the Court, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, saw no
distinction between Articles 1324 and 1479 of the Civil Code.
Article 1324 – When the offerer has allowed the offeree a certain period to accept, the
offer may be withdrawn any time before acceptance by communicating such withdrawal,
except when the option is founded upon consideration as something paid or promised.
Since there may be no valid contract without a cause or consideration, the promisor is
not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal,
his accepted promise partakes, however, of the nature of an offer to sell which, if accepted,
results in a perfected contract of sale.
CFI decision affirmed.
2. Woodhouse vs. Halili

FACTS:
Plaintiff Woodhouse entered into a written agreement with defendant Halili stating
among others that: 1) that they shall organize a partnership for the bottling and distribution of
Mission soft drinks, plaintiff to act as industrial partner or manager, and the defendant as a
capitalist, furnishing the capital necessary therefore; 2) that plaintiff was to secure the Mission
Soft Drinks franchise for and in behalf of the proposed partnership and 3) that the plaintiff was
to receive 30 per cent of the net profits of the business.
Prior to entering into this agreement, plaintiff had informed the Mission Dry
Corporation of Los Angeles, California, that he had interested a prominent financier (defendant
herein) in the business, 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, plaintiff was given “a thirty days option on
exclusive bottling and distribution rights for the Philippines”. The contract was finally signed by
plaintiff.
When the bottling plant was already in operation, plaintiff demanded of defendant that
the partnership papers be executed. Defendant Halili gave excuses and would not execute said
agreement, thus the complaint by the plaintiff.
Plaintiff prays for: 1) the execution of the contract of partnership; 2) accounting of
profits, and 3) share thereof of 30 percent with 4) damages in the amount of P200,000. The
Defendant on the other hand claims that: 1) the defendant’s consent to the agreement, was
secured by the representation of plaintiff that he was the owner, or was about to become
owner of an exclusive bottling franchise, which representation was false, and that plaintiff did
not secure the franchise but was given to defendant himself 2) that defendant did not fail to
carry out his undertakings, but that it was plaintiff who failed and 3) that plaintiff agreed to
contribute to the exclusive franchise to the partnership, but plaintiff failed to do so with a 4)
counterclaim for P200,00 as damages.
The CFI ruling: 1) accounting of profits and to pay plaintiff 15 % of the profits and that
the 2) execution of contract cannot be enforced upon parties. Lastly, the 3) fraud wasn’t
proved. Both appealed from this decision.

ISSUE:
WON false representation, if it existed, annuls the agreement to form the partnership

RULING:
There was fraud but it does not annul the agreement to form partnership. In
consequence, Article 1270 of the Spanish Civil Code distinguishes two kinds of (civil) fraud, the
causal fraud, which may be ground for the annulment of a contract, and the incidental deceit,
which only renders the party who employs it liable for damages. The Supreme Court has held
that 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.
 The record abounds with circumstances indicative of 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. If plaintiff 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.
On the other hand, this supposed ownership of an exclusive franchise was actually the
consideration or price plaintiff gave in exchange for the share of 30 percent granted him in the
net profits of the partnership business. Defendant agreed to give plaintiff 30 percent share in
the net profits because he (plaintiff) was transferring his exclusive franchise to the partnership.
In other words, 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. This is the dolo incidente defined in article 1270 of the Spanish Civil Code, because it
was used to get the other party's consent to a big share in the profits, an incidental matter in
the agreement.
SC finds no merit in the claim of plaintiff that the partnership was already a fait
accompli from the time of the operation of the plant, as it is evident from the very language of
the agreement that the parties intended that the execution of the agreement to form a
partnership was to be carried out at a later date. The defendant may not be compelled against
his will to carry out the agreement nor execute the partnership papers. 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.
Judgement appealed from is affirmed.