Art. 1167.

If a person obliged to do something fails to do

it, the same shall be executed at his cost.

(2) Whether the court may compel the defendant to execute the
contract of partnership between the parties

WOODHOUSE VS. HALILI

(3) What will be the amount of damages to be paid to the

plaintiff?

Facts: The Plaintiff entered into an agreement with the defendant

for the establishment of a partnership for bottling and distribution
of Mission soft drinks. Before the partnership was actually
established the defendant required the plaintiff to secure an
exclusive franchise for the said venture. In behalf of the said
partnership and upon obtaining the said exclusive franchise the
defendant stipulated to pay the plaintiff 30% of the profits. The
plaintiff sought to obtain the said exclusive franchise but was only
given a temporary one, subject only to 30 days. The parties then
proceeded with the signing of the agreement. The partnership
was still not initiated, only the agreement to work with each
other, with the plaintiff as manager and the defendant as
financer, was established.

Together the two parties went to the US to formally sign the

contract of franchise with Mission Dry Corporation. The
defendant then found out about the temporary franchise right
given to the plaintiff, different from the exclusive franchise rights
they stipulated in their contract.

When the operations of the business began he was paid P 2,000

and was allowed the use of a car. But in the next month, the pay
was decreased to P 1,000 and the car was withdrawn from him.

The plaintiff demanded the execution of the partnership, but the

defendant excused himself, saying that there was no hurry to do
so. The Court of First Instance ordered the defendant to render an
accounting of the profits and to pay the plaintiff 15% of such
amount. It also held that execution of the contract of partnership
cannot be enforced upon the defendant and that fraud as alleged
by the defendant was also not proved. Hence the present action.

Issues:

(1) Whether the representation of the plaintiff in saying that he

had exclusive franchise rights rather than the actual temporary
right he possessed invalidated the contract

Held: The Decision of the Court of First Instance is affirmed with

modification.

Fraud was undoubtedly employed by the plaintiff to secure the

consent of the defendant to enter into the contract with him by
representing himself as holder of exclusive franchise rights when
in fact he only holds a temporary franchise right good for 30 days.
The fraud employed was not such as to render the contract null
and void but only such as to hold the plaintiff liable for damages.
Such fraud is merely incidental (dolo incidental) and not the
causal fraud (dolo causante) that is detrimental to a contract. It
does not invalidate the contract since fraud was only employed to
secure the 30% stipulated share from the partnership.

The parties cannot be compelled to enter into a contract of

partnership. The law recognizes the liberty of an individual to do
or not to do an act. The action falls within Acto Personalisimo (a
very personal act) which courts may not compel compliance.

The 15% that the Trial court ordered the defendant to pay the
plaintiff is deemed to be the appropriate and reasonable. Such
amount was the spontaneous reaction of the defendant upon
knowledge of the misrepresentation of the plaintiff and amounts
to the virtual modification of their contract.