Evidence - 31 Palanca vs Fred Wilson & Co (1918) Doctrine: that a written agreement shall be presumed to contain all the

terms, nevertheless "does not exclude other evidence of the circumstances under which the agreement was made, or to which it relates, or to explain an intrinsic ambiguity." Facts: Song Fo & Co (Song Fo), through its manager, Palanca, purchased a distilling apparatus from Wilson & Co (Wilson). Song Fo sued Wilson for damages for breach of contract since the machine could not produce the amount of alcohol stipulated in the contract (according to Song Fo, the agreement was supposedly for the production 6,000 liters, but the machine turned out to produce only 480). The defense of Wilson is that the agreement was for the TREATMENT of 6,000 liters and not the PRODUCTION of 6,000 liters. (So the issue is, with regard to the 6,000 liters: did the parties intend to mean 6,000 liters as the input or the output) Issue/s: WON Wilson is liable for breach of contract. NO. The agreement was merely for the TREATMENT (not production) of 6,000 liters. Held/Ratio: There is an issue with regard to the first clause of the contract of sale of the apparatus (note that the contract is in Spanish). The SC in this case resolved the issue from 2 directions: 1. By taking up the meaning of the words themselves. 2. By evidence of the circumstances under which the agreement was made. (TOPICAL) Section 285 of the Code of Civil Procedure provides that a written agreement shall be presumed to contain all the terms, nevertheless "does not exclude other evidence of the circumstances under which the agreement was made, or to which it relates, or to explain an intrinsic ambiguity." Wilson and Co. in their offer to Song Fo, while mentioning capacity, only did so in express connection with the name and description of the machine as illustrated in the catalogue. They furnished Song Fo and Co. with plans and specifications of the distilling apparatus; and these describe a capacity of 6,000 liters of jus (ferment). Wilson and Co.'s order to manufacturer, while mentioning a capacity of 6,000 liters per day, does so again in connection with the description in the maker's catalogue. And, finally, it was stated during the trial, and it has not been denied, that a machine capable of producing 6,000 liters of rectified alcohol every 24 hours from nipa ferment would cost between P35,000 and P40,000. We are accordingly constrained to hold that the proper construction of clause 1 of the contract, in question in connection with the conduct of the parties and surrounding circumstances, is that Wilson and Co. were to furnish Song Fo and CO. a distilling apparatus, as described on page 30 of the maker's catalogue, capable of receiving or treating 6,000 liters every 24 hours of work and of producing alcohol of a grade 96-97 Gay Lussac.

Digested by: Cari Mangalindan (A2015)