UP Law BGC Eve 2024 Cadwallader vs Smith, Bell
OBLICON Mutual restitution 1907 Tracey
SUMMARY DOCTRINE
Pacific consigned 581 cedar piles to Henry (Smith). Under their Upon annulment the parties should
agreement, Henry (Smith) is to receive a commission of ½ of excess be restored to their original position
of selling price over 15$ plus 5% of the selling price after storage by mutual restitution.
costs. Henry (Smith) represented that demand for the product is low
so it negotiated for a lower price with Pacific. They agreed at 12$ per
pile. It appears that Henry (Smith) was able to sell the products at an
average of 19$ a piece. Court held that Henry’s misrepresentation is
sufficient to annul the contract and the parties should be restored to
their original position by mutual restitution. Henry (Smith) is
however entitled to commission on the 213 piles already sold by it.
FACTS
In May 1902, the Pacific Export Lumber Company of Portland shipped 581 cedar piles to Henry W.
Peabody & Company, at Manila, on the sale of which (before storage costs) the consignees were to receive
a commission of one half of whatever sum was obtained over $15 for each pile and 5 per cent of the price
of the piles sold after storage.
After the arrival of the steamer on August 2, Peabody and Company wrote the agent of the Pacific
Company at Shanghai that for lack of a demand the piles would have to be sold at considerably less than
$15 apiece.
o The company's agent directed them to make the best possible offer for the piles, in response to
which on August 5 they telegraphed him an offer of $12 apiece.
It afterwards appeared that on July 9 Peabody & Company had entered into negotiations with the Insular
Purchasing Agent for the sale for the piles at $20 a piece, resulting of August 4 in the sale to the
Government of two hundred and thirteen (213) piles at $19 each. More of them were afterwards sold to
the Government at the same figure and the remainder to other parties at carrying prices.
o Thus it is clear that at the time when the agents were buying from their principal these piles at $12
apiece on the strength of their representation that no better price was obtainable, they had already
sold a substantial part of them at $19.
Smith, Bell & Company, were associated with Smith, Bell & Company, were associated with the
defendants.
RATIO
WON the misrepresentation as to the condition of the market is a ground to annul the contract?
YES
It is plaint that in concealing from their principal the negotiations with the Government, resulting in a sale of
the piles at 19 a piece and in misrepresenting the condition of the market, the agents committed a breach of
duty from which they should benefit. The contract of sale to themselves thereby induced was founded on their
fraud and was subject to annulment by the aggrieved party. (Civil Code, articles 1265 and 1269.) Upon
annulment the parties should be restored to their original position by mutual restitution.
(Article 1303 and 1306.) Therefore the defendants are not entitled to retain their commission realized upon the
piles included under the contract so annulled.
In respect of the 213 piles, which at the time of the making of this contract on August 5 they had already sold
under the original agency, their commission should be allowed.
FALLO
Let the judgment of the Court of First Instance be modified accordingly, without costs to either party.
