San Beda College of Law

54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ 4. Provides public convenience.

CARRIAGE
A contract whereby a person, natural or PRIVATE CARRIER
juridical, obligates to transport persons, One which, without being engaged in the
goods, or both, from one place to another, by business of carrying as a public employment,
land, air or water, for a price or undertakes to deliver goods or passengers for
compensation. compensation. (Home Insurance Co. vs.
Classifications: American Steamship Agency, 23 SCRA 24)
1. Common or Private
2. Goods or Passengers TESTS WHETHER CARRIER IS COMMON
3. For a fee (for hire) or Gratuitous OR PRIVATE:
4. Land, Water/maritime, or Air The SC in First Philippine Industrial
5. Domestic/inter-island/coastwise or Corporation vs. CA (1995) reiterated the
International/foreign following tests:
It is a relationship which is imbued with the 1. It must be engaged in the business
public interest. of carrying goods for others as a
public employment and must hold
COMMON CARRIER itself out as ready to engage in the
Persons, corporations, firms or associations transportation of goods generally as
engaged in the business of carrying or a business and not as a casual
transporting passengers or goods or both, by occupation;
land, water, or air, for compensation, offering 2. It must undertake to carry goods of
their services to the public (Art. 1732, Civil the kind to which its business in
Code). confined;
Art. 1732 of the New Civil Code avoids any 3. It must undertake to carry by the
distinction between one whose principal method by which his business is
business activity is the carrying of persons or conducted and over its established
goods or both and one who does such roads; and
carrying only as an ancillary activity 4. The transportation must be for hire.
(sideline). It also avoids a distinction In National Steel Corp. vs. CA (1997) the SC
between a person or enterprise offering held that the true test of a common carrier is
transportation service on a regular or the carriage of goods or passengers provided
scheduled basis and one offering such service it has space for all who opt to avail
on an occasional, episodic or unscheduled themselves of its transportation for a fee.
basis.
Neither does the law distinguish between
a carrier offering its services to the general COMMON CARRIER PRIVATE
public that is the general community or CARRIER
population and one who offers services or 1. As to availability
solicits business only from a narrow segment Holds himself out for Contracts with
of the general population. all people particular individuals
A person or entity is a common carrier indiscriminately or groups only
even if he did not secure a Certificate of 2. As to required diligence
Public Convenience (De Guzman vs. CA, 168 Extraordinary Ordinary diligence is
SCRA 612). diligence is required required
It makes no distinction as to the means of 3. As to regulation
transporting, as long as it is by land, water or
Subject to State Not subject to State
air. It does not provide that the regulation regulation
transportation should be by motor vehicle.
4. Stipulation limiting liability
(First Philippine Industrial Corporation vs. CA)
One is a common carrier even if he has no Parties may not agree Parties may limit the
on limiting the carriers liability,
fixed and publicly known route, maintains no
carriers liability provided it is not
terminals, and issues no tickets (Asia
except when provided contrary to law,
Lighterage Shipping, Inc. vs. CA).
by law morals or good
Characteristics:
customs
1. Undertakes to carry for all people
5. Exempting circumstance
indifferently and thus is liable for
refusal without sufficient reason Prove extraordinary caso fortuito, Art.
(Lastimoso vs. Doliente, October 20, diligence and Art. 1174 NCC
1961); 1733, NCC
2. Cannot lawfully decline to accept a 6.Presumption of negligence
particular class of goods for carriage There is a No presumption of
to the prejudice of the traffic in these presumption of fault fault or negligence
goods; or negligence
3. No monopoly is favored (Batangas 7.Governing law
Trans. vs. Orlanes, 52 PHIL 455);

COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
55
MEMORY AID IN COMMERCIAL LAW

Law on common Law on obligations ticket, unless the attempt be with

carriers and contracts
GOVERNING LAWS
A. Domestic/inter-island/coastwise
Applicable to Land, Water, and Air
transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379,
573-734, 580, 806-845) - suppletory
B. International/foreign/overseas
(Foreign country to Philippines)
Applicable to Water/maritime and Air
transportation
The law of the country of destination
generally applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods
by Sea Act (COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT OF EXTRAORDINARY
DILIGENCE
Rendition of service with the greatest skill
and utmost foresight. (Davao Stevedore Co. v.
Fernandez)
Rationale:
1. From the nature of the business and
for reasons of public policy (Art.
1733)
2. Relationship of trust
3. Business is impressed with a special
public duty
4. Possession of the goods
5. Preciousness of human life
A common carrier is not an absolute insurer
of all risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754);
and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
A person who has entered into a contract of
carriage, express or implied, with the carrier.
They are entitled to extraordinary diligence
from the common carrier.
The following are not considered
passengers, and are entitled to ordinary
diligence only:
a. One who has not yet boarded any
part of a vehicle regardless of
whether or not he has purchased a
ticket;
b. One who remains on a carrier for an
unreasonable length of time after he
has been afforded every safe
opportunity to alight;
c. One who has boarded by fraud,
stealth, or deceit;
d. One who attempts to board a
moving vehicle, although he has a
the knowledge and consent of the
carrier;
e. One who has boarded a wrong
vehicle, has been properly informed
of such fact, and on alighting, is
injured by the carrier;
f. Invited guests and accommodation
passengers. (Lara vs. Valencia)
g. One who rides any part of the
vehicle which is unsuitable or
dangerous or which he knows is not
designed or intended for passengers.
DEFENSES OF A COMMON CARRIER IN
THE CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during or
after the occurrence of the disaster (Art.
1739)
c. Carrier has not negligently incurred
in delay in transporting the goods (Art.
1740)
Fire is not considered a natural disaster or
calamity as it arises almost invariably from
some act of man. (Eastern Shipping Lines Inc.
vs. IAC)
Mechanical defects are not force majeure if
the same was discoverable by regular and
adequate inspections. (Notes and Cases on
the Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.120-
122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during or
after the act causing the loss,
deterioration or destruction of the goods
(Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute
defense
b. Contributory: partial defense. (Art.
1741)
4. CHARACTER OF THE GOODS OR DEFECTS
IN THE PACKING OR IN THE CONTAINER
Even if the damage should be caused by the
inherent defect/character of the goods, the
common carrier must exercise due diligence
to forestall or lessen the loss. (Art. 1742)
The carrier which, knowing the fact of
improper packing of the goods upon ordinary
observation, still accepts the goods
notwithstanding such condition, is not
relieved of liability or loss or injury resulting
therefrom. (Southern Lines, Inc. v. CA, 4 SCRA
258)
5. ORDER OR ACT OF PUBLIC AUTHORITY

COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
56
Said public authority must have the power
to issue the order (Art. 1743). Consequently,
where the officer acts without legal process,
the common carrier will be held liable.
(Ganzon v. CA 161 SCRA 646)
Diligence in the selection and supervision
of employees under Article 2180 of the Civil
Code cannot be interposed as a defense by
the common carrier because the liability of
the carriers arises from the breach of the
contract of carriage. The defense under said
articles is applicable to negligence in quasi-
delicts under Art. 2176. (Del Prado v. Manila
Electric Co., 52 Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS DUE
TO ACTS OF ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
CARRIAGE OF GOODS
Parties
1. Common carrier
2. Shipper
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or
deterioration of the goods
Duration of liability
From the time the goods are unconditionally
placed in the possession of, and received by the
carrier for transportation until the same are
delivered actually or constructively by the
carrier to the consignee or to the person who
has the right to receive them. (Art. 1736)
It remains in full force and effect even when
they are temporarily unloaded or stored in
transit unless the shipper or owner has made
use of the right of stoppage in transitu. (Art.
1737)
It continues to be operative even during the
time the goods are stored in a warehouse of the
carrier at the place of destination until the
consignee has bee advised of the arrival of the
goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose
of them. (Art. 1738)
Delivery of goods to the custom authorities is
not delivery to the consignee. (Lu Do v.
Binamira, 101 Phil 120)
COMMERCIAL LAW COMMITTEE
CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
MEMORY AID IN COMMERCIAL LAW
FOR ACTS OF
FOR ACTS OF ITS OTHER
EMPLOYEES PASSENGERS OR
STRANGERS
Required diligence and defense
Extraordinary Ordinary diligence
diligence
Nature of liability
Tort; however, Not absolute; limited
The employee must by Art. 1763
be on duty at the
time of the act.
(Maranan v. Perez)
The carrier is liable when its personnel
allowed a passenger to drive the vehicle
causing it to collide with another vehicle
resulting to the injuries suffered by the other
passengers. (MRR vs. Ballesteros, 16 SCRA
641)
CARRIAGE OF PASSENGERS
1. Common carrier
2. Passenger
Death or injury to the passengers
The duty of a common carrier to provide safety
to its passengers so obligates it not only during
the course of the trip, but for so long as the
passengers are within its premises and where
they ought to be in pursuance to the contract
of carriage. (LRTA v. Navidad, [2003])
All persons who remain on the premises within
a reasonable time after leaving the conveyance
are to be deemed passengers, and what is a
reasonable time or a reasonable delay within
this rule is to be determined from all the
circumstances, and includes a reasonable time
to see after his baggage and prepare for his
departure. (La Mallorca v. CA, 17 SCRA 739 ;
Abiotiz Shipping Corporation v. CA, 179 SCRA
95)
It is the duty of common carriers of
passengers to stop their conveyances a
reasonable length of time in order to afford
passengers an opportunity to enter, and they
are liable for injuries suffered from the sudden
starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to
persons boarding the cars as well as to those
alighting therefrom (Dangwa Trans Co., Inc. vs.
CA 202 SCRA 574).
 San Beda College of Law
57
MEMORY AID IN COMMERCIAL LAW

Presumption of negligence

Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how goods were Reason: The contract between the passenger
damaged in transit is a matter peculiarly within and the carrier imposes on the latter the duty
the knowledge of the carrier and its employees. to transport the passenger safely; hence the
(Mirasol v. Dollar, 53 PHIL 124) burden of explaining should fall on the carrier.
Mere proof of delivery of goods to a carrier in
good order and the subsequent arrival of the
same goods at the place of destination in bad
order makes for a prima facie case against the
carrier. (Coastwise Lighterage Corp. v. CA, 245
SCRA 796)
Defenses

1. Ordinary circumstance: Exercise of 1. Exercise of extraordinary diligence

extraordinary diligence (Art. 1735) (Art. 1756)
2. Special circumstances: 2. Caso fortuito
a. Flood, storm, earthquake, lighting,
or other natural disaster or
calamity (plus force majeure)
b. Act of the public enemy in war,
whether international or civil
c. Act or omission of the shipper or
the owner of goods
d. The character of the goods or
defects in the packing or in the
containers
e. Order or act of competent public
authority (Art. 1734)
Valid stipulations

1. Reduction of degree of diligence to ordinary Stipulation limiting liability when a passenger is

diligence, provided it be: carried gratuitously, but not for willful acts or
a) In writing, signed by the shipper or gross negligence. (Art. 1758)
owner;
b) Supported by a valuable consideration
other than the service rendered by the
carriers; and
c) Reasonable, just and not contrary to
public policy. (Art. 1744)
2. Fixed amount of liability: A contract fixing the
sum to be recovered by the owner or shipper for
the loss, destruction or deterioration of the
goods, if it is reasonable and just under the
circumstances and has been fairly and freely
agreed upon. (Art. 1750)
3. Limited liability for delay: An agreement
limiting the common carriers liability for delay
on account of strikes or riots (Art. 1748)
4. Stipulation limiting liability to the value of the
goods appearing in the bill of lading, unless the
shipper or owner declares a greater value. (Art.
1749)

The diligence required in the carriage of the

goods may be reduced by only one degree, from
extraordinary to ordinary diligence or diligence
of a good father of a family. (Art. 1744, Art.
1745, no. 4)

Void stipulations

1. That the goods are transported at the risk Dispensing with or lessening the extraordinary
of the owner or shipper; responsibility of a common carrier for the
2. That carrier will not be liable for any loss, safety of passengers imposed by law by
destruction or deterioration of the goods; stipulation, by posting of notices, by

COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
58
MEMORY AID IN COMMERCIAL LAW

3. That the carrier need not observe any statements on tickets or otherwise. (Art. 1757)
diligence in the custody of the goods;
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a
family over the movable transported;
5. That the carrier shall not be responsible for
the acts or omissions of his or its employees;
6. That the carriers liability for acts
committed by thieves or robbers who do not
act with grave or irresistible threat, violence or
force is dispensed with or diminished;
7. That the carrier is not responsible for the
loss, destruction or deterioration of the goods
on account of the defective condition of the
car, vehicle, ship or other equipment used in
the contract of carriage. (Art. 1745)

COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
RULES ON PASSENGERS BAGGAGE Macondray &
IN THE CUSTODY OF IN THE CUSTODY Company Inc.)
THE PASSENGERS OF THE COMMON
(HAND-CARRIED) CARRIER However, the carrier cannot limit its liability
(CHECKED-IN) for injury to, or loss of, goods shipped where
Legal nature of the baggage such injury or loss was caused by its own
Necessary deposit Considered as negligence.
goods (Shewaram vs. PAL, 17 SCRA 606)
Required diligence by the common
carrier SPECIAL RULES ON LIABILITES OF
Diligence of a Extraordinary AIRLINE CARRIERS
depositary (ordinary diligence 1. In case of flight diversion due to bad
diligence) weather or other circumstances beyond the
Applicable rules pilots control, the relation between the
Arts. 1998 and 2000- Arts. 1733-1753 carrier and the passenger continues until the
2003 latter has been landed at the port of
destination and has left the carriers
CONCURRING CAUSES OF ACTION premises. The carrier should necessarily
ARISING FROM THE NEGLIGENT ACT OF exercise extraordinary diligence in
THE COMMON CARRIER safeguarding the comfort, convenience and
1. Culpa contractual (breach of contract) safety of its stranded passengers until they
Only the carrier is primarily liable and not have reached their final destination.
the driver, because there is no privity (Philippine Airlines vs. CA, 226 SCRA 423)
between the driver and the passenger. 2. Even where overbooking of passengers is
Basis: Art.1759, NCC. allowed as a commercial practice, the airline
No defense of due diligence in the selection company would still be guilty of bad faith and
and supervision of employees. still be liable for damages if it did not properly
inform passenger that it could breach the
2. Culpa aquiliana (quasi-delict) contract of carriage even if they were
The carrier and driver are solidarily liable as confirmed passengers. (Zalamea vs. CA, 228
joint tortfeasors. SCRA 23)
Basis: Art. 2180, NCC. 3. An open-dated ticket constitutes a
Defense of due diligence in the selection complete contract between the carrier and
passenger. Hence, the airline company is
and supervision of employees is available.
liable if it refused to confirm a passengers
Exception: maritime tort resulting in collision.
flight reservation. (Singson vs. CA, 282 SCRA
(See notes on Collision)
149)
4. An airline company which issued a
3. Culpa criminal (criminal negligence)
confirmed ticket to a passenger covering
The driver is primarily liable. The carrier is
successive trips on different airlines can be
subsidiarily liable only if the driver is
held liable for damages occasioned by
convicted and declared insolvent.
bumping off by one of the successive
Basis: Art. 100, RPC.
airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290)
In case of injury to a passenger due to the 5. An airline ticket providing that carriage by
negligence of the driver of the bus on which successive air carriers is to be regarded as a
he is riding and of the driver of another single operation is to make the issuing
vehicle, the drivers as well as the owners of carrier liable for the tortuous conduct of the
the two vehicles are jointly and severally other carrier. A printed provision in the ticket
liable for damages. It makes no difference limiting liability only to its own conduct is not
that the liability of the bus driver and owner enough to rebut that liability. (KLM Royal
springs from contract while that of the owner Dutch Airlines vs. CA, 65 SCRA 237)
and driver of the other vehicle arises from
quasi-delict. (Fabre vs. CA) II. CODE OF COMMERCE
LIMITATIONS AS TO CARRIERS LIABILITY
INVALID AS BEING VALID & A. OVERLAND TRANSPORTATION
CONTRARY TO ENFORCEABLE (Arts. 349-379)
PUBLIC POLICY
1. One exempting the 1. One limiting the Applicability
carrier from any and liability of the carrier 1. Domestic land and water/maritime
all liability for loss or to an agreed transportation. (Pandect of Commercial Law
damage occasioned by valuation, unless the and Jurisprudence, Justice Jose Vitug, 1997
its own negligence. shipper declares a ed.)
2. An unqualified higher value and 2. Domestic Air Transportation. (Commercial
limitation of liability to pays a higher rate of Law Review, Cesar Villanueva, 2004 ed.)
an agreed valuation. freight
(H.E. Heacock IMPORTANT CONCEPTS:
Company vs. 1. Bill of lading
2. Obligations of the carrier
 3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of
goods and agreement to transport them to a
specific place to a person named or to his
order.
Rules:
1. It is not indispensable for the creation of a
contract of carriage. (Compania Maritima vs.
Insurance Company of North America, 12
SCRA 213)
2. Ambiguity is construed against the carrier,
the contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor
and carrier, becomes bound by all the
stipulations contained therein by making a
claim for loss on the basis of said bill of
lading. (Sea-Land Services Inc. vs. IAC)
4. The right of a party to recover for loss of
shipment consigned to him under a bill of
lading drawn up only by and between the
shipper and the carrier, springs from either a
relation of agency between him and the
shipper, or his status as stranger in whose
favor some stipulation is made in said
contract, and who becomes a party thereto
when he demands fulfillment of that
stipulation. (Art. 1311 (2), (Mendoza vs. PAL
Inc.)
5. Acceptance of the bill of lading without
dissent raises the presumption that all the
terms therein where brought to the
knowledge of the shipper and agreed to by
him and, in the absence of fraud or mistake;
he is estopped from thereafter denying that
he assented to such terms. (Notes and Cases
on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
p.261)
Kinds:
1. On board - issued when the goods
have been actually placed aboard the
ship with very reasonable expectation
that the shipment is as good as on its
way.
2. Received - one in which it is stated that
the goods have been received for
shipment with or without specifying
the vessel by which the goods are to
be shipped.
3. Negotiable - one in which it is stated
that the goods referred to therein will
be delivered to the bearer or to the
order of any person named therein.
4. Non-negotiable - One in which it is
stated that the goods referred to
therein will be delivered to a specified
person.
5. Clean One which does not indicate
any defect in the goods.
6. Foul One which contains a notation
thereon indicating that the goods
covered by it are in bad condition.
7. Spent One which covers goods that
already have been delivered by the
carrier without a surrender of a signed
copy of the bill.
8. Through One issued by the carrier
who is obliged to use the facilities of
other carriers as well as his own
facilities for the purpose of
transporting the goods from the city of
the seller to the city of the buyer,
which bill of lading is honored by the
second and other interested carriers
who do not issue their own bills.
9. Custody One wherein the goods are
already received by the carrier but the
vessel indicated therein has not yet
arrived in the port.
10. Port One which is issued by the
carrier to whom the goods have been
delivered, and the vessel indicated in
the bill of lading by which the goods
are to be shipped is already in the port
where the goods are held for shipment.
Functions:
1. Best evidence of the existence of the
contract of carriage of cargo (Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver goods
as stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of
goods.
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such
goods is reasonable and necessary. (Fisher vs.
Yangco Steamship Co. 31 Phil 1).
Instances when the carrier may validly
refuse to accept the goods include the ff:
1.) Goods sought to be transported are
dangerous objects, or substances including
dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger
like flood, capture by enemies and the like
7.) Goods like livestock will be exposed to
disease
8.) Strike
9.) Failure to tender goods on time. (Notes
and Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p.68)
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted
upon by the shipper, provided its objections
are stated in the bill of lading.
However, when a common carrier accepts
cargo for shipment for valuable consideration,
it takes the risk of delivering it in good The filing of notice of claim is a condition
condition as when it was loaded. (PAL vs. CA) precedent for recovery.
Shorter period may be stipulated by the
B. Duty to deliver the goods parties because it merely affects the
Not only to transport the goods safely but to shippers remedy and does not affect the
the person indicated in the bill of lading. The liability of the carrier. (PHILAMGEN vs.
goods should be delivered to the consignee or Sweetlines, Inc.)
any other person to whom the bill of lading Prescriptive Period
was validly transferred or negotiated. Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription
Time of delivery apply.
Stipulated in No stipulation If despite the notice of claim, the carrier
Contract/Bill of refuses to pay, action must be filed in court.
Lading 1. No bill of lading was issued:
1. Carrier is bound to 1. Within a within 6 years
fulfill the contract reasonable time. 2. Bill of lading was issued:
and is liable for any 2. Carrier is bound to within 10 years.
delay; no matter forward them in the ARTICLE 366 COGSA Sec.3 (6)
from what cause it 1st shipment of the Applicability
may have arisen. same or similar 1. Domestic/inter- 1. International/
goods which he may island/coastwise overseas/foreign
make to the point of transportation (from foreign
delivery. (ART. 358 2. Land, water, air country to Phils.)
Code of Commerce) transportation Note: subject to the
3. Carriage of goods rule on Paramount
Effects of delay Clause
a. Merely suspends and generally does not 2. Water/maritime
terminate the contract of carriage transportation
b. Carrier remains duty bound to exercise 3. Carriage of goods
extraordinary diligence Notice of damage
c. Natural disaster shall not free the carrier 1. Condition 1. Not a condition
from responsibility (Art.1740) precedent precedent
d. If delay is without just cause, the 2. 24-hour period for 2. 3-day period for
contract limiting the common carriers liability claiming latent claiming latent
cannot be availed of in case of loss or damage damage
deterioration of the goods (Art.1747) Prescriptive period
None provided; Civil One year from the
RIGHT OF CONSIGNEE TO ABANDON Code applies. date of delivery
GOODS (delivered but
Instances: damaged goods), or
1. Partial non-delivery, where the goods are date when the
useless without the others (Art. 363); vessel left port or
2. Goods are rendered useless for sale or from the date of
consumption for the purposes for which they delivery to the
are properly destined (Art. 365); and arrastre (non-
3. In case of delay through the fault of the delivery or loss).
carrier (Art. 371).

NOTICE OF DAMAGE (ART. 366) COMBINED CARRIER AGREEMENT (ART.

Requisites for applicability: 373)
1. Domestic/inter-island/coastwise GENERAL RULE: In case of a contract of
transportation transportation of several legs, each carrier is
2. Land/water/air transportation responsible for its particular leg in the
3. Carriage of goods contract.
4. Goods shipped are damaged EXCEPTION: A combined carrier agreement
Rules: where a carrier makes itself liable assuming
a. Patent damage: shipper must file a claim the obligations and acquiring as well the
against the carrier immediately upon rights and causes of action of those which
delivery (it may be oral or written) preceded it.
b. Latent damage: shipper should file a claim
against the carrier within 24 hours from
delivery.
Note: These rules does not apply to
misdelivery of goods. (Roldan vs. Lim Ponzo)
Purpose of notice: To inform the carrier that
the shipment has been damaged, and it is
charged with liability therefore, and to give it
an opportunity to make an investigation and
fix responsibility while the matter is fresh.
 2. M vessel, which stands as the guaranty for their
A settlement. (Aboitiz Shipping Corp. vs.
R General Accident Fire and Life Assurance
I Corp. 217 SCRA 359).
T
I MERCHANT VESSEL
M Vessel engaged in maritime commerce,
E whether foreign or otherwise. (Bar Review
C Materials in Commercial Law, Jorge Miravite,
O 2002 ed.)
M Constitutes property which may be acquired
M and transferred by any of the means
E recognized by law. They shall continue to be
R considered as personal property. (Arts. 573,
C 585)
E They are susceptible to maritime liens such
(Arts. 573-869) as for the repair, equipping and provisioning
of the vessel in the preparation of a voyage,
IMPORTANT CONCEPTS: as well as mortgage liabilities, in satisfaction
1. Merchant vessel of which a vessel may be validly arrested and
2. Maritime lien and Preference of sold. (Ship Mortgage Decree of 1978)
Credit
3. Doctrine of limited liability MARITIME LIEN
4. Causes of revocation of voyage It constitutes a present right of property in
5. Participants in maritime commerce the ship, a jus in re, to be afterward enforced
6. Charter party in admiralty by process in rem. (PNB vs. CA,
7. Loans on bottomry and respondentia 337 SCRA 381)
8. Accidents in maritime commerce If the maritime lien arose prior to the
recording of a preferred mortgage, it shall
MARITIME/ADMIRALTY LAW have priority over the said mortgage lien.
It is the system of laws which particularly (PNB vs. CA, 337 SCRA 381)
relates to the affairs and business of the sea,
to ships, their crews and navigation, and to
maritime conveyance of persons and ORDER OF PREFERENCE IN CASE OF SALE
property. (Notes and Cases on the Law on OF VESSEL
Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254) R.A. 6106 P.D. 1521
Effectivity date
Maritime laws apply only to maritime trade 1969 1978
and sea voyages. (Pandect of Commercial Applicability
Law and Jurisprudence, Justice Jose Vitug, Overseas shipping Both domestic and
1997 ed.) only overseas shipping
Kind of sale
Arrastre service is not maritime in Judicial Judicial and
character. It refers to a contract for the extrajudicial
unloading of goods from a vessel. (ICTSI vs. Order of Preference
Prudential Guarantee, 320 SCRA 244) A preferred The preferred
mortgage shall have mortgage lien shall
CHARACTERISTICS OF MARITIME priority over all have priority over all
TRANSACTION claims against the claims against the
1. Real - similar to transactions over real vessel, except the vessel, except the
property with respect to effectivity against following following
third persons which is done through preferences in the preferences in the
registration. (Rubiso vs. Rivera, 37 Phil. 72). order stated: order stated:
The evidence of real nature is shown by: 1) 1. Judicial costs of 1. Expenses and
the limitation of the liability of the agents to the proceedings; fees allowed and
the actual value of the vessel and the freight 2. Taxes due the costs taxed by the
money; and 2) the right to retain the cargo Philippine court and taxes due
and embargo and detention of the vessel Government; to the Government;
(Luzon Stevedoring Corp v. CA, 156 SCRA 3. Salaries and 2. Crews wages;
169); wages of the 3. General average;
2. Hypothecary - the liability of the owner of Captain and Crew of 4. Salvage, including
the value of the vessel is limited to the vessel the vessel during its contract salvage;
itself (Doctrine of Limited Liability). last voyage; 5. Maritime liens
4. General average arising prior in time
The real and hypothecary nature of or salvage including to the recording of
maritime law simply means that the liability contract salvage, the preferred
of the carrier in connection with losses related bottomry loans, and mortgage;
to maritime contracts is confined to the indemnity due 6. Damages arising
shippers for the out of tort; and 1. In case of civil liability from indemnities to
value of goods 7. Preferred third persons (Art. 587);
transported but mortgage registered 2. In case of leakage of at least of the
which were not prior in time. contents of a cargo containing liquids (Art.
delivered to the 687); and
consignee; 3. In case of constructive loss of the vessel
5. Costs of repair (Sec. 138, Insurance Code).
and equipment of
the vessel, and RIGHT OF ABANDONMENT
provisioning of food,
supplies and fuel SHIPOWNER OR CONSIGNEE
during its last SHIP AGENT
voyage; and What may be abandoned
6. Preferred Vessel Goods shipped
mortgages Instances
registered prior in 1. In case of civil 1. Partial non-
time. liability from delivery, where the
indemnities to third goods are useless
Effect of sale: All pre-existing claims in the persons (Art. 587); without the others
vessel are terminated. They will then be 2. Sec. 138, (Art. 363);
satisfied from the proceeds of the sale subject Insurance Code; 2. Goods are
to the order of preference. 3. In case of leakage rendered useless for
of at least of the sale or consumption
DOCTRINE OF LIMITED LIABILITY contents of a cargo for the purposes for
(HYPOTHECARY RULE) containing liquids which they are
Cases where applicable: (Art. 687) properly destined
1. Art. 587 civil liability for (Art. 365); and
indemnities to third persons 3. In case of delay
2. Art. 590 indemnities from negligent through the fault of
acts of the captain (not the the carrier (Art.
shipowner or ship agent) 371).
3. Art. 837 collision Effects
4. Art. 643 liability for wages of the 1. Transfer of 1. Transfer of
captain and the crew and for ownership of the ownership on the
advances made by the ship agent if vessel from the goods from the
the vessel is lost by shipwreck or shipowner to the shipper to the
capture shippers or insurer. carrier.
2. In case of (2), the 2. Carrier should
GENERAL RULE: The liability of shipowner insurer must pay the pay the shipper the
and ship agent is limited to the amount of insured as if there market value of the
interest in said vessel such that where vessel was actual total loss goods at the point of
is entirely lost, the obligation is extinguished. of the vessel. destination.
(Luzon Stevedoring v. Escano, 156 SCRA 169)
The interest extends to: 1) the vessel itself; 2) CAUSES OF REVOCATION OF VOYAGE
equipments; 3) freightage; and 4) insurance 1. War or interdiction of commerce;
proceeds. (Chua v. IAC, 166 SCRA 183) 2. Blockade;
EXCEPTIONS: 3. Prohibition to receive cargo at
1. Claims under Workmens Compensation destination;
(Abueg vs. San Diego 77 Phil 730); 4. Embargo;
2. Injury or damage due to shipowner or to 5. Inability of the vessel to navigate. (Art.
the concurring negligence of the 640)
shipowner and the captain;
3. The vessel is insured (Vasquez vs. CA 138 Terms:
SCRA 553). 1. Interdiction of commerce A
4. Expenses for repair on vessel completed governmental prohibition of commercial
before loss; intercourse intended to bring about an
5. In case there is no total loss and the entire cessation for the time being of all
vessel is not abandoned; trade whatever.
6. Collision between two negligent vessels; 2. Blockade A sort of circumvallation of a
place by which all foreign connection and
Abandonment of the vessel is necessary to correspondence is, as far as human
limit the liability of the shipowner. The only power can effect it, to be cut off.
instance were abandonment is dispensed with 3. Embargo A proclamation or order of a
is when the vessel is entirely lost (Luzon state, usually issued in time of war or
Stevedoring vs. CA 156 SCRA 169). threatened hostilities, prohibiting the
departure of ships or goods from some or
RIGHT OF SHIPOWNER OR SHIP AGENT all the ports of such state until further
TO ABANDON VESSEL order.
Instances:
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control and
management of the vessel and the
consequent right to direct her navigation and
receive freight earned and paid, while his
possession continues.
Ship agent (naviero)
Person entrusted with provisioning and
representing the vessel in the port in which it
may be found; also includes the shipowner.
Not a mere agent under civil law; he is
solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject
to Art.609;
3. Contract in the name of the owners with
respect to repairs, details of equipment,
armament, provisions of food and fuel,
and freight of the vessel, and all that
relate to the requirements of navigation;
4. Order a new voyage, make a new charter
or insure the vessel after obtaining
authorization from the shipowner or if
granted in certificate of appointment.
Civil Liabilities of the Shipowner And
Ship Agent
1. All contracts of the captain, whether
authorized or not, to repair, equip and
provision the vessel; (Art. 586)
2. Loss and damage to the goods loaded on
the vessel without prejudice to their right
to free themselves from liability by
abandoning the vessel to the creditors.
(Art. 587)
Duty of Ship Agent to Discharge the
Captain and Members of the Crew
If the seamen contract is not for a definite
period or voyage, he may discharge them at
his discretion. (Art. 603)
If for a definite period, he may not discharge
them until after the fulfillment of their
contracts, except on the following grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to
its cargo through malice or manifest or
proven negligence. (Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are
particularly used in accordance with the size
of the vessel governed and the scope of
transportation, i.e., large and overseas, and
small and coastwise, respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of
the country under whose flag he
navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required
physical and mental examinations
required for licensing him as such.
(Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship
agent;
2. Command the crew and direct the
vessel to its port of destination;
3. Impose correctional punishment on
those who, while on board vessel,
fail to comply with his orders or are
wanting in discipline;
4. Make contracts for the charter of
vessel in the absence of ship agent.
5. Supply, equip, and provision the
vessel; and
6. Order repair of vessel to enable it to
continue its voyage. (Art. 610)
Sources of funds to comply with the inherent
powers of the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art.
611)
Duties:
1. Bring on board the proper certificate
and documents and a copy of the
Code of Commerce;
2. Keep a Log Book, Accounting Book
and Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and
unloading of the cargo;
5. Be on deck while leaving or entering
the port;
6. Protest arrivals under stress and in
case of shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of
wreck;
9. Hold in custody properties left by
deceased passengers and crew
members;
10. Comply with the requirements of
customs, health, etc. at the port of
arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or
leaving a port. (Art. 612)
A ships captain must be accorded a
reasonable measure of discretionary authority
to decide what the safety of the ship and of
its crew and cargo specifically requires on a
stipulated ocean voyage (Inter-Orient
Maritime Enterprises Inc. vs. CA).

No liability for the following:
1. Damages caused to the vessel or to
the cargo by force majeure;
2. Obligations contracted for the repair,
equipment, and provisioning of the
vessel unless he has expressly
bound himself personally or has
signed a bill of exchange or
promissory note in his name. (Art.
620)
Solidary Liabilities of the Ship
Agent/Shipowner for Acts Done by the
Captain towards Passengers and
Cargoes
1. Damages to vessel and to cargo due
to lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of
marine regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following
circumstances:
1. If, before beginning voyage, captain
attempts to change it, or a naval war
with the power to which the vessel was
destined occurs;
2. If a disease breaks out and be officially
declared an epidemic in the port of
destination;
3. If the vessel should change owner or
captain. (Art. 647)
Sailing Mate/First Mate
Second chief of the vessel who takes the
place of the captain in case of absence,
sickness, or death and shall assume all of his
duties, powers and responsibilities. (Art. 627)
Duties:
1. Provide himself with maps and
charts with astronomical tables
necessary for the discharge of his
duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on
consultation with the captain and the
officers of the boat, following the
decision of the captain in case of
disagreement;
4. Responsible for all the damages
caused to the vessel and the cargo
by reason of his negligence. (Arts.
628 - 631)
Second Mate
Takes command of the vessel in case of the
inability or disqualification of the captain and
the sailing mate, assuming in such case their
powers and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of the
vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment
of the vessel, if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority
except in matters referring to the motor
apparatus. When two or more are hired, one
of them shall be the chief engineer.
Duties:
1. In charge of the motor apparatus,
spare parts, and other instruments
pertaining to the engines;
2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine
without authority of the captain;
4. Inform the captain of any damage to
the motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining
the engine. (Art. 632)
Crew
The aggregate of seamen who man a ship,
or the ships company.
Hired by the ship agent, where he is present
and in his absence, the captain hires them,
preferring Filipinos, and in their absence, he
may take in foreigners, but not exceeding 1/5
of the crew. (Art. 634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman
While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of
discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment
as follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if death
occurs on voyage out; and full, if on
voyage in
c. if by shares - none, if before
departure; full, if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full 3. Contract of transportation of
payment; passengers on sea voyages
4. if captured due to carelessness - wages 4. Loan on bottomry
up to the date of the capture. (Art. 645) 5. Loan on respondentia
6. Marine insurance
Complement of the Vessel
All persons on board, from the captain to the CHARTER PARTY
cabin boy, necessary for the management, A contract by virtue of which the owner or
maneuvers, and service, thus including the agent binds himself to transport merchandise
crew, the sailing mates, engineers, stokers or persons for a fixed price.
and other employees on board not having A contract by which an entire ship, or some
specific designations. principal part thereof is let/leased by the
Does not include the passengers or the owner to another person for a specified time
persons whom the vessel is transporting. or use. (Planters Products, Inc. vs. CA, 226
SCRA 476)
D. SUPERCARGOES
Persons who discharges administrative Parties:
duties assigned to him by ship agent or 1. Ship owner or ship agent
shippers, keeping an account and record of 2. Charterer
transaction as required in the accounting Classes:
book of the captain. (Art. 649) 1. Bareboat or demise The charterer
provides crew, food and fuel. The charterer is
E. PILOT liable as if he were the owner, except when
A person duly qualified, and licensed, to the cause arises from the unworthiness of the
conduct a vessel into or out of ports, or in vessel. The shipowner leases to the charterer
certain waters. the whole vessel, transferring to the latter the
The term generally connotes a person taken entire command, possession and consequent
on board at a particular place for the purpose control over the vessels navigation, including
of conducting a ship through a river, road or the master and the crew, who thereby
channel, or from a port. become the charters servants. It transforms
Master pro hac vice for the time being in the a common carrier into a private carrier.
command and navigation of the ship. The charterer becomes the owner of
While in exercising his functions a pilot is in the vessel pro hac vice, just for that one
sole command of the ship and supersedes the particular purpose only. Because the
master for the time being in the command charterer is treated as owner pro hac
and navigation of the ship, the master does vice, the charterer assumes the
not surrender his vessel to the pilot and the customary rights and liabilities of the
pilot is not the master. There are occasions shipowner to third persons and is held
when the master may and should interfere liable for the expense of the voyage and
and even displace the pilot, as when the pilot the wages of the seamen.
is obviously incompetent or intoxicated (Far 2. Contract of Affreightment A contract
Eastern Shipping Company vs. CA). whereby the owner of the vessel leases part
Compulsory Pilotage States possessing or all of its space to haul goods for others.
harbors have enacted laws or promulgated The shipowner retains the possession,
rules requiring vessels approaching their command and navigation of the ship, the
ports to take on board pilots licensed under charterer merely having use of the space
the local laws. (Notes and Cases on the Law in the vessel in return for his payment of
on Transportation and Public Utilities, Aquino, the charter hired.
T. & Hernando, R.P. 2004 ed. p. 518) Kinds:
a. Time charter vessel is chartered for
Liablity of Pilot a fixed period of time or duration of
GENERAL RULE: On compulsory pilotage voyage.
grounds, the Harbor Pilot is responsible for b. Voyage or trip charter the vessel is
damage to a vessel or to life or property due leased for one or series of voyages
to his negligence. usually for purposes of transporting
EXCEPT: goods for charterer.
1. Accident caused by force majeure or
natural calamity provided the pilot exercised LEASE CHARTER PARTY
prudence and extra diligence to prevent or If for a definite Charterer may
minimize damages. period, lessee cannot rescind charter party
2. Countermand or overrule by the master of give up the lease by by paying half of the
the vessel in which case the registered owner paying a portion of freightage agreed
of the vessel is liable. (Sec.11, Art.III PPA the amount agreed upon.
Admin Order 03-85) upon.
If the leased property The new owner is not
SPECIAL CONTRACTS OF MARITIME is sold to one who compelled to respect
COMMERCE knows of the the charter party so
1. Charter party existence of the long as he can load
2. Bill of lading lease, the new owner the vessel with his
must respect the own cargo. (Art. 689)
lease. Jason clause Clause paramount
Civil law concept Commercial law or paramount
concept clause
A stipulation in a A clause in a charter
charter party that in party providing that
case of a maritime the COGSA shall
CHARTER PARTY BILL OF LADING accident for which apply, even though
An entire or complete More like a private the shipowner is not the transportation is
contract. receipt which the responsible by law, domestic, subject to
captain gives to contract or the extent that any
accredit goods otherwise, the cargo term of the bill of
received from shippers, consignees lading is repugnant to
persons or owners shall the COGSA or
Consensual contract Real contract contribute with the applicable law, then
shipowner in general to the extent thereof
BAREBOAT OR CONTRACT OF average. (Pandect of the provision of the
DEMISE CHARTER AFFREIGHTMENT Commercial Law and bill of lading is void.
(TIME OR VOYAGE Jurisprudence, Justice (Pandect of
CHARTER) Jose Vitug, 1997 ed.) Commercial Law and
Jurisprudence, Justice
Charterer becomes Owner remains liable
Jose Vitug, 1997 ed.)
liable to others as carrier and must
caused by its answer for any
negligence breach of duty
Charterer regarded Charterer is not
as owner pro hac regarded as owner.
vice for the voyage
Rights and Obligations of Parties
Owner of vessel The vessel owner
relinquishes retains possession,
SHIPOWNER OR CHARTERER
possession, command and
SHIP AGENT
command and navigation of the ship
1. If the vessel is 1. To pay the
navigation to
chartered wholly, not agreed charter price;
charterer
to accept cargo from 2. To pay
Common carrier is Common carrier is
others; freightage on
converted to private not converted to a
2. To observe unboarded cargo;
carrier. private carrier.
represented capacity; 3. To pay losses to
3. To unload cargo others for loading
clandestinely placed uncontracted cargo
PERSONS WHO MAY MAKE A CHARTER 4. To substitute and illicit cargo;
1. Owner or owners of the vessel, another vessel if load 4. To wait if the
either in whole or in majority part, is less than 3/5 of vessel needs repair;
who have legal control and capacity; 5. To pay expenses
possession of the vessel 5. To leave the port for deviation. (Arts.
2. Charterer may subcharter entire if the charterer does 679-687)
vessel to 3rd person only if not not bring the cargo
prohibited in original charter. within the lay days
(Art.679) and extra lay days
3. Ship agent if authorized by the allowed;
owner/s or given such power in the 6. To place in a
certificate of appointment. (Art.598) vessel in a condition
4. Captain in the absence of the ship to navigate;
agent or consignee and only if he 7. to bring cargo to
acts in accordance with the nearest neutral port
instructions of the agent or owner in case of war or
and protects the latters interests. blockade. (Arts. 669-
(Art.609) 678)

REQUISITES OF A VALID CHARTER PARTY

1. Consent of the contracting parties Rescission of a Charter Party
2. Existing vessel which should be
At At Fortuitous
placed at the disposition of the
charterers shipowner causes
shipper
request s request (Art. 690)
3. Freight
(Art 688) (Art. 689)
4. Compliance with Art. 652 of the
Code of Commerce
1. By 1. If the extra 1. War or
abandoning lay days interdiction
Clauses Which May Be Included In a
the charter terminate of commerce;
Charter Party
and paying without the 2. Blockade;
half of the cargo being 3. Prohibition LOAN ON BOTTOMRY AND
freightage; placed to receive RESPONDENTIA
2. Error in alongside the cargo; A real, unilateral, aleatory contract, by
tonnage or vessel; 4. Embargo; virtue of which one person lends to another a
flag; 2. Sale by and certain amount of money or goods on things
3. Failure to the owner of 5. Inability of exposed to maritime risks, which amount,
place the the vessel the vessel to with its earnings, is to be returned if the
vessel at the before navigate. things are safely transported, and which is
charterers loading by lost if the latter are lost.
disposal; the
4. Return of charterer;
the vessel LOAN ON LOAN ON
due to BOTTOMRY RESPONDENTIA
pirates, Definition
enemies or Loan made by Loan taken on
bad weather; shipowner or ship security of the cargo
5. Arrival at a agent guaranteed laden on a vessel,
port for by vessel itself and and repayable upon
repairs. repayable upon safe arrival of cargo
arrival of vessel at at destination. (Art.
Terms: destination. (Art. 719)
1. Primage - bonus to be paid to the captain 719)
after the successful voyage.
2. Demurrage the sum fixed in the charter Who may contract
party as a remuneration to the owner of Shipowner or ship Only the owner of
the ship for the detention of his vessel agent. Outside of the cargo.
beyond the number of days allowed by the residence of the
the charter party for loading or unloading owners - the
or for sailing. captain.
3. Deadfreight the amount paid by or Common elements:
recoverable from a charterer of a ship for 1. Exposure of security to marine peril;
the portion of the ships capacity the 2. Obligation of the debtor conditioned
latter contracted for but failed to occupy. only upon safe arrival of the security at
4. Lay Days - days allowed to charter the point of destination.
parties for loading and unloading the
cargo. Forms:
5. Extra Lay Days days which follow after 1. Public instrument
the lay days have elapsed. 2. Policy signed by the contracting parties
and the broker taking part therein
USUAL FORMS OF CONSUMMATING 3. Private instrument (Art. 720)
CONTRACTS Contents:
1. C.I.F. cost, insurance and freight; 1. Kind, name and registry of the vessel;
2. F.O.B. - free on board; 2. Name, surname and domicile of the
3. F.A.S. - free alongside ship; and captain;
4. C. & F. - cost and freight. 3. Names, surnames and domiciles of the
borrower and the lender;
TRANSSHIPMENT OF GOODS 4. Amount of the loan and the premium
The act of taking cargo out of one ship and stipulated;
loading it in another, or the transfer of goods 5. Time for repayment;
from the vessel stipulated in the contract of 6. Goods pledged to secure repayment;
affreightment to another vessel before the 7. Voyage during which the risk is run
place of destination named in the contract (Art.721)
has been reached, or the transfer for further
transportation from one ship or conveyance
to another.
It is not dependent on the ownership of the BOTTOMRY/ ORDINARY LOAN
transporting ships or in the change of RESPONDENTIA (MUTUUM)
carriers, but rather on the fact of actual
physical transfer of cargo from one vessel to Not subject to Usury Subject to Usury
another. Law Law
If done without legal excuse, however Liability of the Not subject to any
competent and safe the vessel into which the borrower is contingency
transfer is made, is a violation of contract and contingent on the (absolute liability)
infringement of right of shipper and subjects safe arrival of the
carrier to liability if freight is lost event by vessel or cargo at
cause otherwise excepted. (Magellan destination
Manufacturing vs. CA, 201 SCRA 102)
The last lender is a The first lender is a
preferred creditor preferred creditor
WHEN LOAN ON BOTTOMRY OR Note: If a vessel is hypothecated by bottomry
RESPONDENTIA REGARDED AS SIMPLE only the excess is insurable, since a loan on
LOAN bottomry partakes of the nature likewise of an
1. Lender loaned an amount larger than insurance coverage to the extent of the loan
the value of the object due to accommodation. The same rule would apply
fraudulent means employed by the to the hypothecation of the cargo by
borrower. (ART.726) respondentia. (Pandect of Commercial Law
2. Full amount of the loan is not used and Jurisprudence, Justice Jose Vitug, 1997
for the cargo or given on the goods if ed.)
all of them could not have been
loaded, the balance will be ACCIDENTS IN MARITIME COMMERCE
considered a simple loan. (ART.727) 1. Averages
3. If the effects on which the money is 2. Arrival Under Stress
taken is not subjected to any risk. 3. Collision
(ART.729) 4. Shipwreck

Note: Under existing laws, the parties to a AVERAGE

loan, whether ordinary or maritime, may An extraordinary or accidental expense
agree on any rate of interest. (CB Circular incurred during the voyage in order to
905) preserve the cargo, vessel or both, and all
damages or deterioration suffered by the
vessel from departure to the port of
MARINE INSURANCE LOAN ON destination, and to the cargo from the port of
BOTTOMRY OR loading to the port of consignment. (Art. 806)
RESPONDENTIA The person whose property has been saved
Indemnity is paid after Indemnity is paid must contribute to reimburse the damage
the loss has occurred in advance by caused or expense incurred if the situation
way of a loan constitutes general average.
In case of loss of the In case of loss of Classes:
vessel due to a risk the vessel due to 1. Particular or Simple Average
insured against, the a marine peril, 2. Gross or General Average
obligation of the insurer the obligation of Where both vessel and cargo are saved, it
becomes absolute the borrower to is general average; where only the vessel or
pay is only the cargo is saved, it is particular
extinguished average.
Consensual contract Real contract Expenses incurred to refloat a vessel,
which accidentally ran aground, in order to
Hypothecary Nature of Bottomry/ continue its voyage, do not constitute general
Respondentia average. Not only is there absence of a
GENERAL RULE: The obligation of the marine peril, common safety factor, and
borrower to pay the loan is extinguished if the deliberateness. It is the safety of the
goods given as security are absolutely lost by property, and not the voyage, which
reason of an accident of the sea, during the constitutes the true foundation of general
voyage designated, and if it is proven that the average. (A. Magsaysay, Inc. vs. Agan,
goods were on board. G.R.No. L-6393, Jan. 31, 1955)
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of PARTICULAR OR GROSS OR
the captain; SIMPLE GENERAL
3. Loss due to the fault or malice of the Definition
borrower; Damages or expenses Damages or
4. The vessel was engaged in contraband; caused to the vessel expenses
and or cargo that did not deliberately caused
5. The cargo loaded on the vessel be inure to the common in order to save the
different in from that agreed upon. benefit, and borne by vessel, its cargo or
respective owners. both from real and
Concurrence of Marine Insurance and (Art. 809) known risk. (Art.
Loan on Bottomry/Respondentia 811)
1. The insurable interest of the owner Requisites
of a ship hypothecated by bottomry 1. common
is only the excess of the value over danger;
the amount secured by bottomry. 2. deliberate
(Sec. 101, Insurance Code) sacrifice;
2. The value of what may be saved in 3. success;
case of shipwreck shall be divided 4. proper
between the lender and the insurer formalities and
in proportion to the interest of each legal steps.
one. (Art. 735)
 Liability
The owner of the All the persons Jettisoned goods are not res nullius nor
goods which gave having an interest in deemed abandoned within the meaning of
rise to the expense or the vessel and the civil law so as to be the object of occupation
suffered the damage cargo therein at the by salvage. (Pandect of Commercial Law and
shall bear this time of the Jurisprudence, Justice Jose Vitug, 1997 ed.)
average. (Art. 810) occurrence of the In order that the jettisoned goods may be
average shall included in the gross or general average, the
contribute to satisfy existence of the cargo on board should be
this average. (Art. proven by means of the bill of lading. (Art.
812) 816)
The insurers
(Art.859) and York-Antwerp (Y-A) Rules on Determining
lenders on bottomry Liability for Averages With Regard To
and respondentia Deck Cargo
shall likewise 1. Deck cargo is allowed only in
contribute. domestic/coastwise/inter-island shipping, and
(Art.732). is prohibited in international/overseas/foreign
Number of interests involved shipping.
Only one interest Several interests 2. If deck cargo is loaded with the consent
involved involved of the shipper on overseas trade, it must
Share in the damage or expense always contribute to general average, but
100% share In proportion to the should the same be jettisoned, it would not
value of the owners be entitled to reimbursement because there
property saved is violation of the Y-A Rules.
Right to recover 3. If deck cargo is loaded with the consent
No reimbursement There may be of the shipper on coastwise shipping, it must
reimbursement always contribute to general average and if
Kinds (not exclusive) jettisoned would be entitled to
reimbursement.
Art. 809 Art. 811
Reason: In domestic shipping, voyages are
Procedure for recovery
usually short and the seas are generally not
1. Assembly and
rough. In overseas shipping, the vessel is
deliberation
exposed for many days to perils of the sea.
2. Resolution of the
captain
3. Entry of the DOMESTIC INTERNATIONAL
resolution in the Deck cargo is allowed Deck cargo is not
logbook allowed
4. Detailed minutes With shippers consent
5. Delivery of the General average Particular average
minutes to the Without shippers consent
maritime judicial Captain is liable Captain is liable
authority of the first
port, within 24 hours ARRIVAL UNDER STRESS (ARRIBADA)
from arrival, The arrival of a vessel at the nearest and
6. Ratification by most convenient port instead of the port of
captain under oath. destination, if during the voyage the vessel
(Arts. 813-814) cannot continue the trip to the port of
destination.
GOODS NOT COVERED BY GENERAL
AVERAGE EVEN IF SACRIFICED When When Who bears
1. Goods carried on deck. (ART.855) lawful unlawful expenses:
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2)) The inability 1. Lack of The
3. Fuel for the vessel if there is more to continue provisions shipowner or
than sufficient fuel for the voyage. voyage is due to ship agent is
(Rule IX, York-Antwerp Rule) due to lack negligence to liable in case
of provisions, carry of unlawful
Jettison well-founded according to arrival under
Act of throwing cargo overboard in order to fear of usage and stress. But
lighten the vessel. seizure, customs; they shall not
Order of goods to be cast overboard: privateers, 2. Risk of be liable for
1. Those which are on the deck, pirates, or enemy not the damages
preferring the heaviest one with the accidents of well known or caused by
least utility and value; the sea manifest reason of a
2. Those which are below the upper disabling it 3. Defect of lawful arrival.
deck, beginning with the one with to navigate. vessel due to (Art. 821)
greatest weight and smallest value. (Art. 819) improper
(Art. 815)
 repair; and
4. Malice,
negligence,
lack of
foresight or
skill of
captain. (Art.
820)
It is the duty of the captain to continue the
voyage without delay after the cause of the
arrival under stress has ceased failing in such
duty renders him liable. However, in case the
cause has been risk of enemies, there must
first be an assembly before departure. (Art.
825)
Steps:
1. Captain should determine during the
voyage if there is well founded fear
of seizure, privateers and other valid
grounds;
2. Captain shall assemble the officers
and summon the persons interested
in the cargo who may attend the
meeting but without a right to vote;
3. The officers shall determine and
agree if there is well-founded reason
after examining the circumstances.
The captain shall have the deciding
vote;
4. The agreement shall be drafted and
the proper minutes shall be signed
and entered in the log book;
5. Objections and protests shall
likewise be entered in the minutes.
COLLISION
Impact of two vessels both of which are
moving.
Allision
Impact between a moving vessel and a
stationary one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a
port, the farther one must allow the
nearer to enter first; if they collide, the
fault is presumed to be imputable to the
one who arrived later, unless it can be
proved that there was no fault on its part.
2. When two vessels meet, the smaller
should give the right of way to the larger
one.
3. A vessel leaving port should leave the
way clear for another which may be
entering the same port.
4. The vessel which leaves later is
presumed to have collided against one
which has left earlier.
5. There is a presumption against the vessel
which sets sail in the night.
6. There is a presumption against the vessel
with spread sails which collides with
another which is at anchor and cannot
move, even when the crew of the latter
has received word to lift anchor, when
there was not sufficient time to do so or
there was fear of a greater damage or
other legitimate reason.
7. There is a presumption against an
improperly moored vessel.
8. There is a presumption against a vessel
which has no buoys to indicate the
location of its anchors to prevent damage
to vessels which may approach it.
9. Vessels must have proper look-outs or
persons trained as such and who have no
other duty aside therefrom. (Smith Bell v.
CA)
Nautical Rules as to Sailing Vessel and
Steamship
1. Where a steamship and a sailing vessel
are approaching each other from
opposite directions, or on intersecting
lines, the steamship from the moment
the sailing vessel is seen, shall watch
with the highest diligence her course and
movements so as to be able to adopt
such timely means of precaution as will
necessarily prevent the two boats from
coming in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of Vessels
1. First zone all time up to the moment
when risk of collision begins.
No rule is as yet applicable for none is
necessary.
2. Second zone time between moment
when risk of collision begins and moment it
becomes a practical certainty.
It is in this period where conduct of the
vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
unless a departure therefrom becomes
necessary to avoid imminent danger.
3. Third zone time when collision is certain
and time of impact.
An error in this zone would no longer be
legally consequential.
Error in Extremis - sudden movement made
by a faultless vessel during the third zone of
collision with another vessel which is at fault
during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall
on said faultless vessel. (Urrutia and Co. v.
Baco River Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused to
innocent vessel as well as damages suffered
by the owners of cargo of both vessels. (Art.
826)
2. Both vessels at fault
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
828)
 Doctrine of Inscrutable Fault In case
of collision where it cannot be
determined which between the two
vessels was at fault, both vessels bear
their respective damage, but both should
be solidarily liable for damage to the
cargo of both vessels.
4. Third vessel at fault
The third vessel will be liable for losses and
damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art.
830)
The doctrine of res ipsa loquitur applies in
case a moving vessel strikes a stationary
object, such as a bridge post, dock, or
navigational aid. (Far Eastern Shipping v. CA,
Luzon Stevedoring vs. CA)
Even if the cause of action against the
common carrier is based on quasi-delict, the
defense of due diligence in the selection and
supervision of employees is unavailing in case
of a maritime tort resulting in collision. It is
not a civil tort governed by the Civil Code but
a maritime one governed by Arts. 826-839 of
the Code of Commerce. (Manila Steamship vs.
Insa Abdulhaman)
Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code
of Commerce. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
T. & Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to
recovery of damages arising from collisions
and other maritime accidents.
It is a written statement made under oath by
the captain of a vessel after the occurrence of
an accident or disaster in which the vessel or
cargo is lost or damaged, with respect to the
circumstances attending such occurrence, for
the purpose of recovering losses and
damages.
Excuses for not filing protest: 1) where the
interested person is not on board the vessel;
and 2) on collision time, need not be
protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a
hurricane or when the captain
believes that the cargo has suffered
damages or averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time
the collision took place.
Before whom made: competent authority at
the point of collision or at the first port of
arrival, if in the Philippines and to the
Philippine consul, if the collision took place
abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a
consequence of its grounding, or running
against an object in sea or on the coast. It
occurs when the vessel sustains injuries due
to a marine peril rendering her incapable of
navigation.
If the wreck was due to malice, negligence
or lack of skill of the captain, the owner of the
vessel may demand indemnity from said
captain. (Art. 841)
The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a
vessel.
Applicability: Overseas trade only.
(Commercial Law Review, C. Villanueva, 2004
ed.)
Significance: When a person brings in
cargo from abroad, he cannot unload and
deliver the cargo by himself. The unloading
must be done by the arrastre operator, which
will then deliver the cargo to the importer.
(Commercial Law Review, C. Villanueva, 2004
ed.)
Nature of business: It is a public utility,
discharging functions which are heavily
invested with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad)
2. Similar to a common carrier (Northern
Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may
be held liable, the consignee must prove that
the damage was due to the negligence and
while the goods are in the custody of the
arrastre operator. (Hartford Fire Insurance v.
E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse
or pier to the holds of the vessel. (Chief of
Staff vs. CIR)
As understood in the port business, the term
consists of the handling of cargo from the
hold of the ship to the dock, in case of pier-
side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp. vs.
Lazaro)
The loading on the ship of outgoing cargo
is also part of stevedoring work. (Ibid.)
CONTAINERIZATION/ SAID-TO-
CONTAIN/ SHIPPERS LOAD AND
COUNT SYSTEM
System whereby the shipper loads his
cargoes in a specially designed container,
seals the container and delivers it to the
carrier for transportation. The carrier does not
participate in the counting of the
merchandise for loading into the container,
the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs,
ICTSI v. Prudential Guarantee)
The matter of quantity, description and
conditions of the cargo inside the container is
the sole responsibility of the shipper, unless
there is stipulation to the contrary. (US Lines
vs. Comm. Of Customs, Reyma Brokerage v.
Phil. Home Assurance)
Note: In order to attribute to the carrier any
damage to the shipment that may be found,
inspection of the goods should be done at
pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA
ACT/COGSA (C.A. No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from
foreign port to Philippine port).
It can be applied in domestic sea
transportation if agreed upon by the parties.
(Clause paramount or paramount clause)
IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set
at $500 per package or customary freight unit
unless the nature and value of such goods is
declared by the shipper. This is deemed
incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC,
150 SCRA 463)
Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a
claim with the carrier immediately upon
delivery
b. Latent damage: shipper should file a
claim with the carrier within three days
from delivery.
Note: The filing of a notice of claim is not a
condition precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo
should be brought within one year after:
a. Delivery of the goods (delivered but
damaged goods); or
b. The date when the goods should
have been delivered (non-delivery).
(Sec. 3[6])
Loss or Damage as applied to the COGSA
contemplates a situation where no delivery at
all was made by the shipper of the goods
because the same had perished, gone out of
commerce, or disappeared in such a way that
their existence is unknown or they cannot be
recovered. Thus, it is inapplicable in case of
misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising
from delay or late delivery (Mitsui O.S.K. Lines
Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
The one-year prescriptive period is
suspended by:
1. The express agreement of the
parties (Universal Shipping Lines,
Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court until it
is dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
The one-year period shall run from delivery
of the last package and is not suspended by
extrajudicial demand. (Dole Phils.,Inc. vs.
Maritime Co.,148 SCRA 118)
The one-year period shall run from delivery
to the arrastre operator and not to the
consignee. (Union Carbide Phils, Inc. vs.
Manila Railroad Co.,SCRA 359)
The insurer exercising its right of
subrogation is bound by the one-year
prescriptive period. However, it does not
apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins. Co.
vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE: To protect the emerging air
transportation industry and to secure the
uniformity of recovery by the passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
The WC shall also apply to fortuitous
transportation by aircraft performed by an air
transportation enterprise.
International transportation - any
transportation in which the place of departure
and the place of destination are situated
either:
1. Within the territories of two High
Contracting Parties regardless of whether
or not there be a break in the
transportation or transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed
stopping place within a territory subject
to the sovereignty, mandate or authority
of another power, even though that
power is not a party to the Convention.
(round trip, Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to be
one undivided transportation, if it has been
regarded by the parties as a single operation,
whether it has been agreed upon under the
form of a single contract or of a series of
contracts, and it shall not lose its
international character merely because one
contract or a series of contracts is to be
performed entirely within a territory subject
to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party.
(Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the
Convention are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSENGER BAGGAGE AIR
TICKET CHECK WAYBILL
Passenger Checked-in Goods to be
baggage shipped
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of
embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place during the
transportation by air; (Art. 18) and
Transportation by air The period during
which the baggage or goods are in the charge
of the carrier, whether in an airport or on
board an aircraft, or, in case of a landing
outside an airport, in any place whatsoever.
It includes any transportation by land or
water outside an airport if such takes place in
the performance of a contract for
transportation by air, for the purpose of
loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC
by removing the provision that if the airline
took all necessary steps to avoid the damage,
it could exculpate itself completely (Art.
20(1)). (Alitalia vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended
by Guatemala Protocol, 1971; Alitalia vs.
IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
greater than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
greater than actual value.
An agreement relieving the carrier from
liability or fixing a lower limit is null and void.
(Art. 23)
Carrier is not entitled to the foregoing limit
if the damage is caused by willful misconduct
or default on its part. (Art. 25)
Thus, the WC does not operate as an
exclusive enumeration of the instances of an
absolute limit of the extent of liability. It does
not preclude the application of the Civil Code
and other pertinent local laws. It does not
regulate or exclude liability for other breaches
of contract by the carrier, or misconduct of its
employees, or for some particular or
exceptional type of damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as
regards the limitation on the carriers liability,
there being a simple loss of baggage without
any improper conduct on the part of the
officials or employees of the airline or other
special injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as not
restrictive of the carriers liability, where
there was satisfactory evidence of malice or
bad faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES
1. Notice of claim
A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from
receipt of baggage/goods
The complaint is a condition precedent.
Without the complaint, the action is barred
except in case of fraud on the part of the
carrier. (Art. 26)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)
 In United Airlines vs. Uy the two-year
prescriptive period was not applied where the
airline employed delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against
the carrier in which the accident or delay
occurred.
EXCEPTION: Agreement or contract whereby
the first carrier assumed liability for the whole
journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an
action against the first carrier and
the carrier in which the damage
occurred
b. Passenger or consignee can file an
action against the last carrier and
the carrier in which the damage
occurred.
These carriers are jointly and severally
liable. (Art. 30)
A contract of international carriage by air,
although performed by different carriers
under a series of airline tickets constitutes a
single operation. Members of the
International Air Transportation Association
(IATA) are under a general pool partnership
agreement wherein they act as agent of each
other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide
and at the same time provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world.
(American Airlines vs. CA)
Under a general pool partnership
agreement, the ticket-issuing airline is the
principal in a contract of carriage while the
endorsee-airline is the agent. The obligation
of the former remained and did not cease
even when the breach occurred not on its
own flight but on that of another airline which
had undertaken to carry the passengers to
one of their destinations. (China Airlines vs.
Chiok)
JURISDICTION
At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of
business;
c. Court where it has a place of business
through which the contract has been
made; or
d. Court of the place of destination. (Art.
28(1))
NOTE: It is the passengers ultimate
destination not an agreed stopping place
that determines the country where suit is to
be filed.
The forum of action provided in Art. 28(1)
is a matter of jurisdiction rather than of
venue. (Santos III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the owner
of a ship or goods, by his own labor,
preserving the goods or the ship which the
owner or those entrusted with the care of
them have either abandoned in distress at
sea, or are unable to protect or secure.x
2. Compensation allowed to persons by
whose voluntary assistance a ship at sea or
her cargo or both have been saved in whole
or in part from impending sea peril, or such
property recovered from actual peril or loss,
as in cases of shipwreck, derelict or
recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed to
marine peril (not perils of the ship);
3. Services rendered voluntarily
(neither an existing duty nor out of a
pre-existing contract);
4. Services are successful, total or
partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea,
and there sink and remain under water;
3. Floatsam or Flotsam goods which float
upon the sea when cast overboard;
4. Ligan or Lagan goods cast into the sea
tied to a buoy, so that they may be found
again by the owners (p.173, Judge Diaz).
Persons who have no right to a reward
for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite
of opposition of the Captain or his
representative;
3. In accordance with Sec. 3 of the Salvage
Law, a person who fails to deliver a salvaged
vessel or cargo to the Collector of Customs.
Derelict a ship or her cargo which is
abandoned and deserted at sea by those who
are in charge of it, without any hope of
recovering it, or without any intention of
returning to it.
The intention of those in charge must be
ascertained. If those in charge left with the
intention of returning, or of procuring
assistance, the property is not derelict, but if
they quitted the property with the intention of
finally leaving it, it is derelict and a change of
their intention and an attempt to return will
not change its nature (Erlanger & Galinger vs.
Swedish East Asiatic Co. Ltd.).
If it is clear that the intention to return is
slight, the salvage which was done thereafter
is considered valid. (Notes and Cases on the
Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p. 616)
CONTRACT OF TOWAGE
 A contract whereby one vessel, usually public services;
motorized, pulls another, whether loaded or 4. To prevent ruinous competition.
not with merchandise, from one place to
another, for a compensation. It is a contract AUTHORITY TO OPERATE PUBLIC
for services rather than a contract of carriage. SERVICES
GENERAL RULE: No public service shall
operate without having been issued a
SALVAGE TOWAGE certificate of public convenience or a
certificate of public convenience and
Governed by special Governed by Civil
necessity.
law (Act No. 2616) Code on contract of
EXCEPTIONS:
lease
1. Warehouses;
Requires success, Success is not 2. Animal drawn vehicles and bancas
otherwise no required moved by oar or sail;
payment 3. Airships, except for the fixing of
Must be done with Only the consent of maximum rates for fare and freight;
the consent of the the tugboat owner 4. Radio companies, except for rates
captain/crewmen is needed fixing;
Vessel must be Vessel need not be 5. Public services owned or operated by
involved in an involved in an the government, except as to rates
accident accident fixing;
6. Ice plants; and
Fees distributed Fees belong to the 7. Public markets.
among crewmen tugboat owner
PUBLIC SERVICE
RULES ON SALVAGE REWARD A person who owns, operates, manages or
1. The reward is fixed by the RTC judge in controls in the Philippines for hire or
the absence of agreement or where the compensation, with general or limited
latter is excessive. (Sec. 9) clientele, whether permanent, occasional or
2. The reward should constitute a sufficient accidental, and done for general business
compensation for the outlay and effort of purposes, any common carrier or public
the salvors and should be liberal enough utility, ice plants, power and water supplies,
to offer an inducement to others to communication and similar public services.
render services in similar emergencies in (Sec. 13b, CA 146)
the future. A casual or incidental service devoid of
3. If sold (no claim being made within 3 public character and interest is not brought
months from publication), the proceeds, within the category. The question depends on
after deducting expenses and the such factors as the extent of services,
salvage claim, shall go to the owner; if whether such person or company has held
the latter does not claim it within 3 years, himself or itself out as ready to serve the
50% of the said proceeds shall go to the public or a portion of the public generally.
salvors, who shall divide it equitably, and (Luzon Stevedoring vs. PSC)
the other half to the government. (Secs.
11-12) NOTE: The Public Service Commission
4. If a vessel is the salvor, the reward shall created under the Public Service Law has
be distributed as follows: already been abolished under P.D. No. 1 and
a. 50% to the shipowner; other issuances. It has been replaced by the
b. 25% to the captain; and following government agencies: LTO; LTFRB;
ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
MIA.
c. 25% to the officers and crew in
proportion to their salaries. (Sec. 13)
CERTIFICATE OF CERTIFICATE OF
Taking passengers from a sinking ship, PUBLIC PUBLIC
without rendering any service in rescuing the CONVENIENCE CONVENIENCE
vessel, is not a salvage service, being a duty (CPC) AND NECESSITY
of humanity and not for reward. (CPCN)

VI. PUBLIC SERVICE ACT

(C.A. No. 146)

PURPOSES:
1. To secure adequate, sustained
service for the public at the least
possible cost;
2. To protect the public against
unreasonable charges and poor,
inefficient service;
3. To protect and secure investments in
 An authorization An authorization meters and all expenses of
issued by the issued by the measuring investigation;
appropriate appropriate appliances; 4. Valuation of
government agency government agency 5. Issuance of properties of public
for the operation of for the operation of orders requiring utilities;
public services for public service for establishment or 5. Examination
which no franchise, which a prior maintenance of and test of
either municipal or franchise is required extension of measuring
legislative, is by law; e.g. facilities; appliances;
required by law, telephone and other 6. Revocation, or 6. Grant of special
e.g., common services. modification of CPC permits to make
carriers. or CPCN; extra or special trips
7. Suspension of in territories
CPC or CPCN, specified in the
except when it is certificate;
A CPC or a CPCN constitutes neither a
necessary to avoid 7. Uniform
franchise nor a contract, confers no property
serious and accounting system
right, and is a mere license or a privilege. The
irreparable damage and furnishing of
holder of said certificate does not acquire a
or inconvenience annual reports;
property right in the route covered thereby.
to the public or 8. Compelling
Nor does it confer upon the holder any
private interest, in compliance with the
proprietary right or interest or franchise in the
which case, a laws and
public highways. Revocation of this certificate
suspension not regulations.
deprives him of no vested right. New and
more than 30 days
additional burdens, alteration of the
may be ordered,
certificate, or even revocation or annulment
prior to the
thereof is reserved to the State. (Luque vs.
hearing. (Soriano v.
Villegas, 30 SCRA 408)
Medina, 164 SCRA
36)
It is a property and has a considerable
value and can be the subject of sale or
attachment. (Cogeo-Cubao Operators and UNLAWFUL ACTS OF PUBLIC UTILITY
Drivers Assn. vs. CA, 207 SCRA 343, COMPANIES
Raymundo vs. Luneta Motor Co.) 1. Engagement in public service business
without first securing the proper
REQUREMENTS FOR GRANTING CPC OR certificate;
CPCN 2. Providing or maintaining unsafe,
1. Applicant must be a citizen of the improper or inadequate service as
Philippines or a corporation or entity 60% determined by the proper authority;
of the capital of which is owned by such 3. Committing any act of unreasonable and
citizens; unjust preferential treatment to any
2. Applicant must prove public necessity; particular person, corporation or entity as
3. Applicant must prove that the operation determined by the proper authority;
of the public service proposed and the 4. Refusing or neglecting to carry public
authorization to do business will promote mail upon request. (Secs. 18 and 19)
the public interest on a proper and
suitable manner; ACTS REQUIRING PRIOR APPROVAL
4. Applicant must have sufficient financial 1. Establish and maintain individual or joint
capability to undertake the proposed rates;
services and meeting the responsibilities 2. Establish and operate new units;
incident to its operation. 3. Issue free tickets;
4. Issue any stock or stock certificates
representing an increase of capital;
5. Capitalize any franchise in excess of the
POWERS POWERS
amount actually paid to the Government;
REQUIRING EXERCISABLE
6. Sell, alienate, mortgage or lease
PRIOR NOTICE WITHOUT PRIOR
property, certificates or franchise.
AND HEARING NOTICE AND
HEARING
Under Sec. 20(g) of C.A. No. 146, the sale,
etc. may be negotiated and completed before
1. Issuance of 1. Investigation the approval by the proper authority. Its
CPC or CPCN; any matter approval is not a condition precedent to the
2. Fixing of rates, concerning public validity of the contract. The approval is
tolls, and charges; service; necessary only to protect public interest.
3. Setting up of 2. Requiring
standards and operators to furnish PRIOR OPERATOR/OLD OPERATOR RULE
classifications; safe, adequate, and The rule allowing an existing franchised
4. Establishment proper service; operator to invoke a preferential right within
of rules to secure 3. Requiring public the authorized territory as long as he renders
accuracy of all services to pay satisfactory and economical service.
 The policy is not to issue a certificate to a
second operator to cover the same field and
in competition with a first operator who is
rendering sufficient, adequate and
satisfactory service. The prior operator must
first be given an opportunity to improve its
service, if inadequate or deficient.
Purpose: To prevent ruinous and wasteful
competition in order that the interests of the
public would be conserved and preserved.
It subordinates the prior applicant rule
which gives the first applicant priority only if
things and circumstances are equal.
Where the operator either fails or neglects
to make the improvement or effect the
increase in services, especially when given
the opportunity, new operators should be
given the chance to give the services needed
by the public.
PRIOR APPLICANT RULE
Presupposes a situation when two interested
persons apply for a certificate to operate a
public utility in the same community over
which no person has as yet granted any
certificate. If it turns out, after the hearing,
that the circumstances between the two
applicants are more or less equal, then the
applicant who applied ahead of the other, will
be granted the certificate.
RATE-FIXING POWER
The rate to be fixed must be just, founded
upon conditions which are fair and reasonable
to both the owner and the public.
A rate is just and reasonable if it conforms to
the following requirements:
1. One which yields to the carrier a fair
return upon the value of the property
employed in performing the service;
and
2. One which is fair to the public for the
service rendered.
inexistent under Art. 1409, Civil Code.
Effects:
1. The transfer, sale, lease or assignment of
the privilege granted is valid between the
contracting parties but not upon the
public or third persons. (Gelisan vs.
Alday, 154 SCRA 388)
2. The registered owner is primarily liable
for all the consequences flowing from the
operations of the carrier.
The public has the right to assume
that the registered owner is the actual or
lawful owner thereof. It would be very
difficult and often impossible, as a
practical matter, for the public to enforce
their rights of action that they may have
for injuries inflicted by the vehicle if they
should be required to prove who the
actual owner is. (Benedicto vs. IAC, 187
SCRA 547)
3. The thrust of the law in enjoining the
kabit system is to identify the person
upon whom responsibility may be fixed
with the end in view of protecting the
riding public (Lim vs. CA 373 SCRA 394).
4. The registered owner cannot recover
from the actual owner and the latter
cannot obtain transfer of the vehicle to
himself, both being in pari delicto. (Teja
Marketing vs. IAC)
5. For the better protection of the public,
both the registered owner and the actual
owner are jointly and severally liable with
the driver. (Zamboanga Transportation
Co. vs. CA)

REGISTERED OWNER RULE

The registered owner of a certificate of
public convenience is liable to the public for
the injuries or damages suffered by third
persons caused by the operation of said
vehicle, even though the same had been
transferred to a third person.
The registered owner is not allowed to
escape responsibility by proving that a third
person is the actual and real owner Reason: It
would be easy for him, by collusion with
others or otherwise, to transfer the
responsibility to an indefinite person, or to
one who possesses no property with which to
respond financially for the damage or injury
done. (Erezo, et al. vs. Jepte 102 Phil 103).

KABIT SYSTEM
A system whereby a person who has been
granted a certificate of public convenience
allows other persons who own motor vehicles
to operate under such license, for a fee or
percentage of such earnings. It is void and