Article 1744 to 1753

Agreement Limiting Liability

As to diligence required

A stipulation between the common carrier and the shipper or owner limiting
the liability of the former for the loss or destruction, or deterioration of the
goods to a degree less than extra-ordinary diligence shall be valid, provided it
be:
(1)

In writing, signed by the shipper or owner;

(2)

Supported by a valuable consideration other than the service rendered

by the CC; and

(3)

Reasonable, just and not contrary to public policy. (Art. 1744)

Any of the following or similar stipulations shall be considered unreasonable,

unjust and contrary to public policy:
(1)

That the goods are transported at the risk of the owner or shipper;

(2)

That the common carrier will not be liable for any loss, destruction or
deterioration of the goods;

(3)

That the common carrier need not observe any diligence in the
custody of the goods;

(4)

That the common carrier shall exercise a degree of diligence less than
that of a good father of a family, or of a man of ordinary prudence in
the vigilance over the movable transported;

(5)

That the common carrier shall not be responsible for the acts or
omissions of his or its employees;

(6)

That the common carrier's liability for acts committed by thieves, or of

robbers who do not act with grave or irresistible threat, violence or
force, is dispensed with or diminished;

(7)

That the common carrier is not responsible for the loss, destruction, or
deterioration of goods on account of the defective condition of the car,
vehicle, ship, airplane or other equipment used in the contract of
carriage. (Art. 1745)

The fact that the common carrier has no competitor along the line or route, or
a part thereof, to which the contract refers shall be taken into consideration
of the question of whether or not a stipulation limiting the common carrier's
liability is reasonable, just and in accordance with public policy. (Art. 1751)

As to amount liability

A stipulation that the common carrier's liability is limited to the value of the
goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding. (Art. 1749)

A contract fixing the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the goods is valid, if it is reasonable
and just under the circumstances, and has been fairly and freely agreed
upon. (Art. 1750)

Ysmael vs Barreto, 51 Phil 90

The validity of stipulations limiting the carrier's liability is to be determined by

their reasonableness and their conformity to the sound public policy. It
cannot lawfully stipulate for exemption from liability unless such exemption is
just and reasonable and unless the contract is freely and fairly made. No
contractual limitation is reasonable which is subversive of public policy. A
common carrier cannot limit its liability for injury or loss where such is caused
by its own negligence, unskillfulness or carelessness of its employees. The
rule rests on public policy. The shipper and common carrier are not on equal
terms; the shipper is entirely at the mercy of the common carrier unless
protected by the law. Such contracts are wanting in the element of voluntary
assent.

Heacock vs Macondray, 42 Phil 205

Three kinds of stipulations have often been made in a bill of lading.

First, one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence.

Second, one providing for an unqualified limitation of such liability to an agree

valuation.

Third, one limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and pays a higher rate of freight.

The first and second stipulations are invalid as contrary to public policy. The
third is valid and enforceable.

A stipulation in the bill of lading limiting the liability of the CC to a specified

amount unless the shipper declares a higher value and pays a higher freight
is valid and enforceable. If a common carrier gives to a shipper the choice of
2 rates, the lower of them conditioned upon his agreeing to a stipulated

valuation of his property in case of loss, even by the carrier's negligence, if

the shipper makes the choice understandingly and freely, and names his
valuation, he cannot thereafter recover more than the value which he thus
places upon his property.
Shewaram vs PAL, 17 SCRA 606

Two requisites must be fulfilled in order that the liability of PAL be limited
according to the stipulations behind the ticket stub : (1) the contract is just
and reasonable under the circumstances; and (2) it has been fairly and freely
agreed upon. (Art. 1750)

The fact that the conditions are printed at the back of the ticket stub in
letters so small that they are hard to read would not warrant the presumption
that plaintiff was aware of those conditions such that he had "fairly and freely
agreed" to those conditions. PAL has admitted that passengers do not sign
the ticket. Also the carrier cannot limit his liability for injury or loss of goods
shipped when such injury or loss was caused by its own negligence. (Arts.
1734, 1735)

Ong Yiu vs CA, 91 SCRA 223

PAL incurred delay in the delivery of petitioner's luggage. However, there was
no bad faith. The liability of PAL was limited to the stipulations printed on the
back of the ticket.

While the passenger had not signed the plane ticket, he is nevertheless
bound by the provision thereof; such provisions have been held to be part of
the contract of carriage and valid and binding upon the passenger regardless
of the latter's lack of knowledge or assent to the regulation. It is what is
known as a contract of adhesion wherein one party imposes a ready made
form of contract on the other; it is not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he
gives his consent. A contract limiting liability upon an agree valuation does
not offend against the policy of the law forbidding one from contracting
against his own negligence.

Considering that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P 100.00. Besides,
passengers are advised not to place valuable items inside their baggage.
Also, there is nothing in the evidence to show the actual value of the goods
allegedly lost by petitioner.

PAN AM vs IAC, 164 SCRA 268

Pan Am cited Ong Yiu vs CA. Such case is squarely applicable in this case.
The ruling in Shewaram vs PAL is inapplicable since it was premised on the
fact that the conditions printed at the back of the ticket were so small and
hard to read.

The SC reversed the CA ruling awarding respondent damages for lost profits.
The rule laid down in Mendoza vs PAL provides that before damages can be
awarded for loss of profits on account of delay or failure of delivery, it must
have appeared that the common carrier had notice at the time of delivery to
him of the particular circumstances attending the shipment, and which
probably would lead to such special loss if he defaulted. In the absence of a
showing that Pan Am's attention was called to the special circumstances
requiring prompt delivery of the luggage, it cannot be held liable for the
cancellation of respondent's contracts as it could not have foreseen such an
eventuality when it accepted the luggage for transit.

Pan Am vs Rapadas, 209 SCRA 67

There is no dispute that there was a notice appearing on page 2 of the ticket
stating that the Warsaw Convention governs in case of death or injury to a
passenger or of loss, damage or destruction to a passenger's luggage. Such
notice should be sufficient notice showing the applicability of the Warsaw
limitations. The passenger, upon contracting with the airline and receiving
the plane ticket, was expected to be vigilant insofar as his luggage is
concerned. If the passenger fails to adduce evidence to overcome the
stipulations, he cannot avoid the application of the liability limitations.

While contracts of adhesion are not entirely prohibited, neither is blind

reliance on them encouraged. In the face of facts showing they should be
ignored because of their basically one- sided nature, the Court does not
hesitate to rule out blind adherence to their terms. The SC is not saying that
passengers are always bound to the stipulated amounts printed on a ticket,
found in a contract of adhesion, or printed elsewhere but referred to in
handouts or forms. The Court simply recognizes that the reasons behind
stipulations on liability limitations arise from the difficulty, if not impossibility,
of establishing with a clear preponderance of evidence the contents of a lost
suitcase. Unless the contents are declared, it will always be the word of a
passenger against that of the airline. If the loss of life or property is caused
by the gross negligence or arbitrary acts of the airline or the contents of the
lost luggage are proved by satisfactory evidence other than the self-serving
declarations of one party, the Court will not hesitate to disregard the fine
print in a contract of adhesion. Otherwise, the Court is constrained to rule
that we have to enforce the contract as it is the only reasonable basis to
arrive at a just award.

Kinds of stipulation limiting liability

The following stipulations are often made in a bill of lading bill of lading:
1.

stipulation exempting the common carrier from any and all liability for
loss or damage occasioned by its own negligence VOID

2.

stipulation providing for an unqualified limitation of such liability to an

agreed stipulation VOID

3.

stipulation limiting the liability of the common carrier to an agreed

valuation unless the shipper declares a higher value and pays a higher
rate of freight -- VALID and ENFORCEABLE

When stipulation limiting liability valid

The shipper or owner and the CC may stipulate to limit the liability of the CC
for the loss, destruction or deterioration of goods to a degree less than extraordinary diligence :
1.

the stipulation must be in writing and signed by both parties;

2.

the stipulation must be supported by valuable consideration other than

the service rendered by the common carrier;

3.

the stipulation must be reasonable, just and not contrary to public

policy. (Art. 1744)

This applies only when the CC is acting as such but not when it acts as a
private carrier [in Home Insurance vs American Steamship Co., the SC held
that the Civil Code provisions on CC should not be applied where the common
carrier is not acting as such but as a private carrier; such policy has no force
where the public at large is not involved]

The parties may stipulate that the diligence to be exercised by the common
carrier be less than extra-ordinary diligence, provided that the requirements
under Article 1744 are complied with. However, the parties cannot reduce
the diligence to less than that of a good father of a family. Art. 1745 provides
for 7 stipulations which shall be considered unreasonable, unjust and contrary
to public policy.

Construction of stipulations limiting common carrier's liability

An exemption in general words not expressly relating to negligence, even

though the words are wide enough to include loss by negligence or default of
common carrier's servants, must be construed as limiting the liability of the
common carrier as assurer, and not as relieving him from the duty of
exercising reasonable skill and care.

Effect of lack of competitor to common carrier

The lack of competition of the common carrier shall be considered in determining

WON a stipulation limiting common carrier's liability is reasonable, just and in
consonance with public policy. (Art. 1751)
Effect of delay in transportation, etc
The common carrier cannot avail of the contract limiting his liability in these cases:
(1)

where the common carrier delays the transportation of the goods;

(2)

where the common carrier changes the stipulated or usual route [in
both cases, the delay or change of route must be without just cause]
(Art. 1747)

Presumption as to negligence in case of limited liability

The presumption continues even when there is an agreement limiting the liability of
the common carrier in the vigilance of the goods. This presumption is disputable or
rebuttable by evidence that the common carrier exercised extra-ordinary diligence.
(Art. 1752)

Applicable Law in foreign trade

The law of the country to which the goods are to be transported shall govern
the liability of the common carrier for their loss, destruction or deterioration.
(Art. 1753)

The Civil Code governs the liability of the common carrier in case of loss,
damage or deterioration. Under 1766, in all matters not regulated by the
Civil Code, the rights and obligations of the common carier shall be governed
by the Code of Commerce and by special laws which are suppletory to the
provisions of the Civil Code.

Rules on Passenger Baggage

Common carriers are bound to observe extraordinary diligence in the

vigilance over the goods of the passengers transported by them.

The rules concerning the responsibility of hotelkeepers shall be applicable to

common carriers.

The deposit of effects made by passengers in common carriers shall be

regarded as necessary. The common carrier shall be responsible for them as
depositaries, provided that notice was given to them, or to their employees,
of the effects brought by the passengers and that, on the part of the latter,
they take the precautions which said common carriers or their employees
advised relative to the care and vigilance of their effects.

The act of a thief or robber, who has entered the common carrier is not
deemed force majeure, unless it is done with the use of arms or through
irresistible force.

The common carrier is not liable for compensation if the loss is due to the
acts of the passenger, or if the loss arises from the character of the things
brought into the common carrier.

The common carrier cannot free himself from responsibility by posting notices
to the effect that he is not liable for the articles brought by the passenger.
Any stipulation between the common carrier and the passenger where the
responsibility of the former is suppressed or diminished shall be void.

Classes of baggage of passengers

The law makes a distinction between

(1)

baggage in the custody of the passengers or their employees; and

(2)

baggage not in such custody but in that of the common carrier.

Liability for baggage in custody of passenger

The baggage of passengers in their personal custody or in that of their EEs

while being transported shall be regarded as necessary deposits. The
common carrier shall be responsible for such baggage as depositaries,
provided that
(1)

notice was given to them or to their EEs, of the baggage brought by

their passengers, and that

(2)

the passengers take the precautions which said CCs advised relative to
the care and vigilance of their baggage.

Responsibility for acts of employees, thieves

A common carrier is responsible as a depositary for the loss of or injury to the

baggage in the personal custody of passengers, caused by the common
carrier's servants or employees but not those caused by force majeure.

The act of a thief or robber, who has entered the common carrier's vehicle is
not deemed force majeure, unless it is done with the use of arms or through
irresistible force.

The common carrier is not liable if the loss of the baggage in the personal
custody of the passenger is due to the acts of the passengers, his family,
servants or visitors, OR if the loss arises from the character of the baggage.

Stipulations limiting liability

A common carrier cannot free himself from responsibility by posting notices

to the effect that he is not liable for the baggage brought by the passengers.
Any stipulation diminishing the responsibility required under 1998 to 2001
shall be void.

Liability for baggage not in custody of passenger

This refers to baggage delivered to the custody of the common carrier and
received by him, to be carried in the same manner as other goods being
transported by him. As the common carrier has custody of such baggage and
are carried like any other goods, the provisions on carriage of goods shall
apply (extraordinary diligence in the vigilance over the goods).

The moment the effects of a passenger are unconditionally placed in the

possession of and received by a carrier for conveyance, the law immediately
imposes on the common carrier extraordinary responsibility for the loss
thereof which lasts until the actual or constructive delivery of the effects to
the passenger as the person who has the right to receive them (presumption
of negligence exists but may be rebutted by proof of exercise of extraordinary
diligence or causes under 1734).

A common carrier is liable for the loss of baggage although not declared and
the charges not paid, if it accepted them for transportation