San Beda College of Law

54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGE Steamship Agency, 23 SCRA 24)

 A contract whereby a person, natural or juridical,
obligates to transport persons, goods, or both, from  TESTS WHETHER CARRIER IS COMMON OR
one place to another, by land, air or water, for a PRIVATE:
price or compensation.  The SC in First Philippine Industrial Corporation
 Classifications: vs. CA (1995) reiterated the following tests:
1. Common or Private 1. It must be engaged in the business of
2. Goods or Passengers carrying goods for others as a public
3. For a fee (for hire) or Gratuitous employment and must hold itself out as
4. Land, Water/maritime, or Air ready to engage in the transportation of
5. Domestic/inter-island/coastwise or goods generally as a business and not as
International/foreign a casual occupation;
 It is a relationship which is imbued with the 2. It must undertake to carry goods of the
public interest. kind to which its business in confined;
3. It must undertake to carry by the method
COMMON CARRIER by which his business is conducted and
 Persons, corporations, firms or associations over its established roads; and
engaged in the business of carrying or transporting 4. The transportation must be for hire.
passengers or goods or both, by land, water, or air,  In National Steel Corp. vs. CA (1997) the SC held
for compensation, offering their services to the that the true test of a common carrier is the
public (Art. 1732, Civil Code). carriage of goods or passengers provided it has
 Art. 1732 of the New Civil Code avoids any space for all who opt to avail themselves of its
distinction between one whose principal business transportation for a fee.
activity is the carrying of persons or goods or both
and one who does such carrying only as an ancillary
activity (sideline). It also avoids a distinction COMMON CARRIER PRIVATE
between a person or enterprise offering CARRIER
transportation service on a regular or scheduled 1. As to availability
basis and one offering such service on an
Holds himself out for all Contracts with particular
occasional, episodic or unscheduled basis. people indiscriminately individuals or groups
Neither does the law distinguish between a
only
carrier offering its services to the general public that
2. As to required diligence
is the general community or population and one
Extraordinary diligence is Ordinary diligence is
who offers services or solicits business only from a
required required
narrow segment of the general population.
A person or entity is a common carrier even if 3. As to regulation
he did not secure a Certificate of Public Convenience Subject to State Not subject to State
(De Guzman vs. CA, 168 SCRA 612). regulation regulation
 It makes no distinction as to the means of 4. Stipulation limiting liability
transporting, as long as it is by land, water or air. It Parties may not agree on Parties may limit the
does not provide that the transportation should be limiting the carrier’s carrier’s liability,
by motor vehicle. (First Philippine Industrial liability except when provided it is not
Corporation vs. CA) provided by law contrary to law, morals
 One is a common carrier even if he has no fixed or good customs
and publicly known route, maintains no terminals, 5. Exempting circumstance
and issues no tickets (Asia Lighterage Shipping, Inc. Prove extraordinary caso fortuito, Art. 1174
vs. CA). diligence and Art. 1733, NCC
 Characteristics: NCC
1. Undertakes to carry for all people indifferently 6.Presumption of negligence
and thus is liable for refusal without
There is a presumption No presumption of fault
sufficient reason (Lastimoso vs. Doliente,
of fault or negligence or negligence
October 20, 1961);
2. Cannot lawfully decline to accept a particular 7.Governing law
class of goods for carriage to the prejudice Law on common carriers Law on obligations and
of the traffic in these goods; contracts
3. No monopoly is favored (Batangas Trans.
vs. Orlanes, 52 PHIL 455); GOVERNING LAWS
4. Provides public convenience. A. Domestic/inter-island/coastwise
 Applicable to Land, Water, and Air transportation
PRIVATE CARRIER 1. Civil Code - primary
 One which, without being engaged in the 2. Code of Commerce (Arts. 349, 379, 573-
business of carrying as a public employment, 734, 580, 806-845) - suppletory
undertakes to deliver goods or passengers for
compensation. (Home Insurance Co. vs. American B. International/foreign/overseas (Foreign

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S 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
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 ticket, unless
the attempt be with 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
COMMERCIAL LAW COMMITTEE
 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S 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
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
 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
FOR ACTS OF OTHER
FOR ACTS OF ITS PASSENGERS OR
EMPLOYEES STRANGERS
 San Beda College of Law
56
MEMORY AID IN COMMERCIAL LAW

Required diligence and defense Perez)

Extraordinary diligence Ordinary diligence
Nature of liability  The carrier is liable when its personnel
Tort; however, Not absolute; limited allowed a passenger to drive the vehicle
The employee must be by Art. 1763 causing it to collide with another vehicle
on duty at the time of resulting to the injuries suffered by the other
the act. (Maranan v. passengers. (MRR vs. Ballesteros, 16 SCRA
641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or deterioration of Death or injury to the passengers
the goods
Duration of liability

From the time the goods are unconditionally placed in The duty of a common carrier to provide safety to its
the possession of, and received by the carrier for passengers so obligates it not only during the course
transportation until the same are delivered actually orof the trip, but for so long as the passengers are
constructively by the carrier to the consignee or to the
within its premises and where they ought to be in
person who has the right to receive them. (Art. 1736) pursuance to the contract of carriage. (LRTA v.
 It remains in full force and effect even when they Navidad, [2003])
 All persons who remain on the premises within a
are temporarily unloaded or stored in transit unless the
shipper or owner has made use of the right of reasonable time after leaving the conveyance are to
stoppage in transitu. (Art. 1737) be deemed passengers, and what is a reasonable time
 It continues to be operative even during the time or a reasonable delay within this rule is to be
the goods are stored in a warehouse of the carrier at determined from all the circumstances, and includes a
the place of destination until the consignee has bee reasonable time to see after his baggage and prepare
advised of the arrival of the goods and has had for his departure. (La Mallorca v. CA, 17 SCRA 739 ;
reasonable opportunity thereafter to remove them or Abiotiz Shipping Corporation v. CA, 179 SCRA 95)
otherwise dispose of them. (Art. 1738)  It is the duty of common carriers of passengers to
 Delivery of goods to the custom authorities is not stop their conveyances a reasonable length of time in
delivery to the consignee. (Lu Do v. Binamira, 101 Philorder to afford passengers an opportunity to enter,
120) 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).
Presumption of negligence

Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how goods were damaged in Reason: The contract between the passenger and the
transit is a matter peculiarly within the knowledge of carrier imposes on the latter the duty to transport the
the carrier and its employees. (Mirasol v. Dollar, 53 passenger safely; hence the burden of explaining
PHIL 124) 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)

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S 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
57
MEMORY AID IN COMMERCIAL LAW

Defenses

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

extraordinary diligence (Art. 1735) 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 gross
a) In writing, signed by the shipper or owner; negligence. (Art. 1758)
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 carrier’s 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 of the
owner or shipper; Dispensing with or lessening the extraordinary
2. That carrier will not be liable for any loss, responsibility of a common carrier for the safety of
destruction or deterioration of the goods; passengers imposed by law by stipulation, by posting
3. That the carrier need not observe any diligence of notices, by statements on tickets or otherwise. (Art.
in the custody of the goods; 1757)
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 carrier’s 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

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S 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

other equipment used in the contract of carriage.

(Art. 1745)

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S 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 injury to, or loss of, goods shipped where such
injury or loss was caused by its own negligence.
IN THE CUSTODY OF IN THE CUSTODY
(Shewaram vs. PAL, 17 SCRA 606)
THE PASSENGERS OF THE COMMON
(HAND-CARRIED) CARRIER
SPECIAL RULES ON LIABILITES OF AIRLINE
(CHECKED-IN)
CARRIERS
Legal nature of the baggage
1. In case of flight diversion due to bad weather or
Necessary deposit Considered as “goods”
other circumstances beyond the pilot’s control, the
Required diligence by the common carrier
relation between the carrier and the passenger
Diligence of a depositary Extraordinary diligence continues until the latter has been landed at the
(ordinary diligence) port of destination and has left the carrier’s
Applicable rules premises. The carrier should necessarily exercise
Arts. 1998 and 2000-2003 Arts. 1733-1753 extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers
CONCURRING CAUSES OF ACTION ARISING until they have reached their final destination.
FROM THE NEGLIGENT ACT OF THE COMMON (Philippine Airlines vs. CA, 226 SCRA 423)
CARRIER 2. Even where overbooking of passengers is allowed
1. Culpa contractual (breach of contract) as a commercial practice, the airline company would
 Only the carrier is primarily liable and not the still be guilty of bad faith and still be liable for
driver, because there is no privity between the damages if it did not properly inform passenger that
driver and the passenger. it could breach the contract of carriage even if they
 Basis: Art.1759, NCC. were confirmed passengers. (Zalamea vs. CA, 228
 No defense of due diligence in the selection and SCRA 23)
supervision of employees. 3. An open-dated ticket constitutes a complete
contract between the carrier and passenger. Hence,
2. Culpa aquiliana (quasi-delict) the airline company is liable if it refused to confirm a
 The carrier and driver are solidarily liable as joint passenger’s flight reservation. (Singson vs. CA, 282
tortfeasors. SCRA 149)
 Basis: Art. 2180, NCC. 4. An airline company which issued a confirmed
 Defense of due diligence in the selection and ticket to a passenger covering successive trips on
supervision of employees is available. Exception: different airlines can be held liable for damages
maritime tort resulting in collision. (See notes on occasioned by “bumping off” by one of the
Collision) successive airlines. (Lufthansa German Airlines vs.
CA, 238 SCRA 290)
3. Culpa criminal (criminal negligence) 5. An airline ticket providing that carriage by
 The driver is primarily liable. The carrier is successive air carriers is to be regarded as a “single
subsidiarily liable only if the driver is convicted and operation” is to make the issuing carrier liable for
declared insolvent. the tortuous conduct of the other carrier. A printed
 Basis: Art. 100, RPC. provision in the ticket limiting liability only to its own
conduct is not enough to rebut that liability. (KLM
 In case of injury to a passenger due to the Royal Dutch Airlines vs. CA, 65 SCRA 237)
negligence of the driver of the bus on which he is
riding and of the driver of another vehicle, the II. CODE OF COMMERCE
drivers as well as the owners of the two vehicles are
jointly and severally liable for damages. It makes
no difference that the liability of the bus driver and
A. OVERLAND TRANSPORTATION
(Arts. 349-379)
owner springs from contract while that of the owner
and driver of the other vehicle arises from quasi-
Applicability
delict. (Fabre vs. CA)
1. Domestic land and water/maritime transportation.
LIMITATIONS AS TO CARRIER’S LIABILITY
(Pandect of Commercial Law and Jurisprudence,
Justice Jose Vitug, 1997 ed.)
INVALID AS BEING VALID & 2. Domestic Air Transportation. (Commercial Law
CONTRARY TO PUBLIC ENFORCEABLE
Review, Cesar Villanueva, 2004 ed.)
POLICY
1. One exempting the 1. One limiting the IMPORTANT CONCEPTS:
carrier from any and all liability of the carrier to 1. Bill of lading
liability for loss or an agreed valuation, 2. Obligations of the carrier
damage occasioned by its unless the shipper 3. Right of abandonment
own negligence. declares a higher value 4. Notice of damage
2. An unqualified and pays a higher rate 5. Combined carrier agreement
limitation of liability to an of freight
agreed valuation. (H.E. Heacock BILL OF LADING
Company vs.  The written acknowledgment of receipt of goods
Macondray & Company and agreement to transport them to a specific place
Inc.) to a person named or to his order.
 Rules:
 However, the carrier cannot limit its liability for 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 condition as when it was
loaded. (PAL vs. CA)
B. Duty to deliver the goods
 Not only to transport the goods safely but to the
person indicated in the bill of lading. The goods
should be delivered to the consignee or any other
person to whom the bill of lading was validly
transferred or negotiated.
Time of delivery
Stipulated in No stipulation
Contract/Bill of
Lading
1. Carrier is bound to 1. Within a reasonable
fulfill the contract and is time.
liable for any delay; no 2. Carrier is bound to
matter from what cause forward them in the 1st island/coastwise overseas/foreign (from
it may have arisen. shipment of the same or transportation foreign country to
similar goods which he 2. Land, water, air Phils.)
may make to the point transportation Note: subject to the
of delivery. (ART. 358 3. Carriage of goods rule on Paramount
Code of Commerce) Clause
2. Water/maritime
Effects of delay transportation
a. Merely suspends and generally does not 3. Carriage of goods
terminate the contract of carriage Notice of damage
b. Carrier remains duty bound to exercise 1. Condition precedent 1. Not a condition
extraordinary diligence 2. 24-hour period for precedent
c. Natural disaster shall not free the carrier from claiming latent damage 2. 3-day period for
responsibility (Art.1740) claiming latent damage
d. If delay is without just cause, the contract Prescriptive period
limiting the common carrier’s liability cannot be None provided; Civil One year from the date
availed of in case of loss or deterioration of the Code applies. of delivery (delivered
goods (Art.1747) but damaged goods),
or date when the vessel
RIGHT OF CONSIGNEE TO ABANDON GOODS left port or from the
 Instances: date of delivery to the
1. Partial non-delivery, where the goods are arrastre (non-delivery
useless without the others (Art. 363); or loss).
2. Goods are rendered useless for sale or
consumption for the purposes for which they are COMBINED CARRIER AGREEMENT (ART. 373)
properly destined (Art. 365); and GENERAL RULE: In case of a contract of
3. In case of delay through the fault of the carrier transportation of several legs, each carrier is
(Art. 371). responsible for its particular leg in the contract.
EXCEPTION: A combined carrier agreement where
NOTICE OF DAMAGE (ART. 366) a carrier makes itself liable assuming the obligations
 Requisites for applicability: and acquiring as well the rights and causes of action
1. Domestic/inter-island/coastwise transportation of those which preceded it.
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged B. MARITIME COMMERCE
 Rules: (Arts. 573-869)
a. Patent damage: shipper must file a claim against
the carrier immediately upon delivery (it may be IMPORTANT CONCEPTS:
oral or written) 1. Merchant vessel
b. Latent damage: shipper should file a claim 2. Maritime lien and Preference of Credit
against the carrier within 24 hours from 3. Doctrine of limited liability
delivery. 4. Causes of revocation of voyage
Note: These rules does not apply to misdelivery of 5. Participants in maritime commerce
goods. (Roldan vs. Lim Ponzo) 6. Charter party
Purpose of notice: To inform the carrier that the 7. Loans on bottomry and respondentia
shipment has been damaged, and it is charged with 8. Accidents in maritime commerce
liability therefore, and to give it an opportunity to
make an investigation and fix responsibility while MARITIME/ADMIRALTY LAW
the matter is fresh.  It is the system of laws which particularly relates
 The filing of notice of claim is a condition to the affairs and business of the sea, to ships, their
precedent for recovery. crews and navigation, and to maritime conveyance
 Shorter period may be stipulated by the parties of persons and property. (Notes and Cases on the
because it merely affects the shipper’s remedy and Law on Transportation and Public Utilities, Aquino &
does not affect the liability of the carrier. Hernando, citing Francisco, p.254)
(PHILAMGEN vs. Sweetlines, Inc.)
Prescriptive Period  Maritime laws apply only to maritime trade and
 Not provided by Article 366. Thus, in such sea voyages. (Pandect of Commercial Law and
absence, Civil Code rules on prescription apply. Jurisprudence, Justice Jose Vitug, 1997 ed.)
 If despite the notice of claim, the carrier refuses
to pay, action must be filed in court.  Arrastre service is not maritime in character. It
1. No bill of lading was issued: refers to a contract for the unloading of goods from
within 6 years a vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA
2. Bill of lading was issued: within 244)
10 years.
ARTICLE 366 COGSA Sec.3 (6) CHARACTERISTICS OF MARITIME
TRANSACTION
Applicability
1. Domestic/inter- 1. International/
1. Real - similar to transactions over real property 2. Taxes due the by the court and taxes
with respect to effectivity against third persons Philippine Government; due to the Government;
which is done through registration. (Rubiso vs. 3. Salaries and wages 2. Crew’s wages;
Rivera, 37 Phil. 72). The evidence of real nature is of the Captain and 3. General average;
shown by: 1) the limitation of the liability of the Crew of the vessel 4. Salvage, including
agents to the actual value of the vessel and the during its last voyage; contract salvage;
freight money; and 2) the right to retain the cargo 4. General average or 5. Maritime liens arising
and embargo and detention of the vessel (Luzon salvage including prior in time to the
Stevedoring Corp v. CA, 156 SCRA 169); contract salvage, recording of the
2. Hypothecary - the liability of the owner of the bottomry loans, and preferred mortgage;
value of the vessel is limited to the vessel itself indemnity due shippers 6. Damages arising out
(Doctrine of Limited Liability). for the value of goods of tort; and
transported but which 7. Preferred mortgage
 The real and hypothecary nature of maritime law were not delivered to registered prior in time.
simply means that the liability of the carrier in the consignee;
connection with losses related to maritime contracts 5. Costs of repair and
is confined to the vessel, which stands as the equipment of the
guaranty for their settlement. (Aboitiz Shipping vessel, and provisioning
Corp. vs. General Accident Fire and Life Assurance of food, supplies and
Corp. 217 SCRA 359). fuel during its last
voyage; and
MERCHANT VESSEL 6. Preferred mortgages
 Vessel engaged in maritime commerce, whether registered prior in time.
foreign or otherwise. (Bar Review Materials in
Commercial Law, Jorge Miravite, 2002 ed.)
 Effect of sale: All pre-existing claims in the vessel
 Constitutes property which may be acquired and
are terminated. They will then be satisfied from the
transferred by any of the means recognized by law.
They shall continue to be considered as personal proceeds of the sale subject to the order of
preference.
property. (Arts. 573, 585)
 They are susceptible to maritime liens such as for
DOCTRINE OF LIMITED LIABILITY
the repair, equipping and provisioning of the vessel
(HYPOTHECARY RULE)
in the preparation of a voyage, as well as mortgage
 Cases where applicable:
liabilities, in satisfaction of which a vessel may be
1. Art. 587 – civil liability for indemnities to
validly arrested and sold. (Ship Mortgage Decree of
1978) third persons
2. Art. 590 – indemnities from negligent acts
MARITIME LIEN of the captain (not the shipowner or ship
agent)
 It constitutes a present right of property in the
3. Art. 837 – collision
ship, a jus in re, to be afterward enforced in
4. Art. 643 – liability for wages of the
admiralty by process in rem. (PNB vs. CA, 337 SCRA
captain and the crew and for advances
381)
made by the ship agent if the vessel is
 If the maritime lien arose prior to the recording
lost by shipwreck or capture
of a preferred mortgage, it shall have priority over
the said mortgage lien. (PNB vs. CA, 337 SCRA 381)
GENERAL RULE: The liability of shipowner and
ship agent is limited to the amount of interest in
ORDER OF PREFERENCE IN CASE OF said vessel such that where vessel is entirely lost,
SALE OF VESSEL the obligation is extinguished. (Luzon Stevedoring v.
Escano, 156 SCRA 169) The interest extends to: 1)
the vessel itself; 2) equipments; 3) freightage; and
R.A. 6106 P.D. 1521
4) insurance proceeds. (Chua v. IAC, 166 SCRA
Effectivity date
183)
1969 1978
EXCEPTIONS:
Applicability 1. Claims under Workmen’s Compensation (Abueg
Overseas shipping only Both domestic and vs. San Diego 77 Phil 730);
overseas shipping 2. Injury or damage due to shipowner or to the
Kind of sale concurring negligence of the shipowner and
Judicial Judicial and the captain;
extrajudicial 3. The vessel is insured (Vasquez vs. CA 138
Order of Preference SCRA 553).
A preferred mortgage The preferred mortgage 4. Expenses for repair on vessel completed before
shall have priority over lien shall have priority loss;
all claims against the over all claims against 5. In case there is no total loss and the vessel is
vessel, except the the vessel, except the not abandoned;
following preferences in following preferences in 6. Collision between two negligent vessels;
the order stated: the order stated:
1. Judicial costs of the 1. Expenses and fees  Abandonment of the vessel is necessary to limit
proceedings; allowed and costs taxed the liability of the shipowner. The only instance
were abandonment is dispensed with is when the
vessel is entirely lost (Luzon Stevedoring vs. CA 156
SCRA 169).
RIGHT OF SHIPOWNER OR SHIP AGENT TO
ABANDON VESSEL
 Instances:
1. In case of civil liability from indemnities to third
persons (Art. 587);
2. In case of leakage of at least ¾ of the contents
of a cargo containing liquids (Art. 687); and
3. In case of constructive loss of the vessel (Sec.
138, Insurance Code).
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.

RIGHT OF ABANDONMENT Ship agent (naviero)

SHIPOWNER OR SHIP CONSIGNEE
AGENT
What may be abandoned
Vessel Goods shipped
Instances
1. In case of civil liability 1. Partial non-delivery,
from indemnities to third where the goods are
persons (Art. 587); useless without the
2. Sec. 138, Insurance others (Art. 363);
Code; 2. Goods are rendered
3. In case of leakage of useless for sale or
at least ¾ of the consumption for the
contents of a cargo purposes for which they
containing liquids (Art. are properly destined
687) (Art. 365); and
3. In case of delay
through the fault of the
carrier (Art. 371).
Effects
1. Transfer of ownership 1. Transfer
of the vessel from the ownership on the goods
shipowner to the from the shipper to the
shippers or insurer. carrier.
2. In case of (2), the 2. Carrier should pay
insurer must pay the the shipper the market
insured as if there was value of the goods at
actual total loss of the the point of destination.
vessel.
CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640)
Terms:
1. Interdiction of commerce – A governmental
prohibition of commercial intercourse intended
to bring about an entire cessation for the time
being of all trade whatever.
2. Blockade – A sort of circumvallation of a place
by which all foreign connection and
correspondence is, as far as human power can
effect it, to be cut off.
3. Embargo – A proclamation or order of a state,
usually issued in time of war or threatened
hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state
until further order.
 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
of 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 ship’s 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
ship’s 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 Seaman’s 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 seaman’s 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 payment;
4. if captured due to carelessness - wages up to
the date of the capture. (Art. 645)
Complement of the Vessel
 All persons on board, from the captain to the
cabin boy, necessary for the management,
maneuvers, and service, thus including the crew,
the sailing mates, engineers, stokers and other
employees on board not having specific
designations.
 Does not include the passengers or the persons
whom the vessel is transporting.
D. SUPERCARGOES
 Persons who discharges administrative duties
assigned to him by ship agent or shippers, keeping
an account and record of transaction as required in
the accounting book of the captain. (Art. 649)
E. PILOT
 A person duly qualified, and licensed, to conduct
a vessel into or out of ports, or in certain waters.
 The term generally connotes a person taken on
board at a particular place for the purpose of
conducting a ship through a river, road or channel,
or from a port.
 Master pro hac vice for the time being in the
command and navigation of the ship.
 While in exercising his functions a pilot is in sole
command of the ship and supersedes the master for
the time being in the command and navigation of
the ship, the master does not surrender his vessel
to the pilot and the pilot is not the master. There
are occasions when the master may and should
interfere and even displace the pilot, as when the
pilot is obviously incompetent or intoxicated (Far
Eastern Shipping Company vs. CA).
 Compulsory Pilotage – States possessing harbors
have enacted laws or promulgated rules requiring
vessels approaching their ports to take on board
pilots licensed under the local laws. (Notes and
Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.
518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage grounds,
the Harbor Pilot is responsible for damage to a
vessel or to life or property due to his negligence.
EXCEPT:
1. Accident caused by force majeure or natural
calamity provided the pilot exercised prudence and
extra diligence to prevent or minimize damages.
2. Countermand or overrule by the master of the
vessel in which case the registered owner of the
vessel is liable. (Sec.11, Art.III PPA Admin Order 03-
85)
SPECIAL CONTRACTS OF MARITIME
COMMERCE
1. Charter party
2. Bill of lading
3. Contract of transportation of passengers
on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
CHARTER PARTY
 A contract by virtue of which the owner or agent
binds himself to transport merchandise or persons
for a fixed price.
 A contract by which an entire ship, or some
principal part thereof is let/leased by the owner to
another person for a specified time or use. (Planters
Products, Inc. vs. CA, 226 SCRA 476)
 Parties:
 1. Ship owner or ship agent liable to others caused carrier and must answer
2. Charterer by its negligence for any breach of duty
 Classes: Charterer regarded as Charterer is not
1. Bareboat or demise – The charterer provides owner pro hac vice for regarded as owner.
crew, food and fuel. The charterer is liable as if he the voyage
were the owner, except when the cause arises from Owner of vessel The vessel owner retains
the unworthiness of the vessel. The shipowner relinquishes possession, possession, command
leases to the charterer the whole vessel, command and and navigation of the
transferring to the latter the entire command, navigation to charterer ship
possession and consequent control over the vessel’s
navigation, including the master and the crew, who
thereby become the charter’s servants. It Common carrier is Common carrier is not
transforms a common carrier into a private carrier. converted to private converted to a private
 The charterer becomes the owner of the carrier. carrier.
vessel pro hac vice, just for that one particular
purpose only. Because the charterer is treated
as owner pro hac vice, the charterer assumes
the customary rights and liabilities of the PERSONS WHO MAY MAKE A CHARTER
shipowner to third persons and is held liable 1. Owner or owners of the vessel, either in
for the expense of the voyage and the wages whole or in majority part, who have legal
of the seamen. control and possession of the vessel
2. Contract of Affreightment – A contract whereby 2. Charterer may subcharter entire vessel to
the owner of the vessel leases part or all of its 3rd person only if not prohibited in original
space to haul goods for others. charter. (Art.679)
 The shipowner retains the possession, 3. Ship agent if authorized by the owner/s or
command and navigation of the ship, the given such power in the certificate of
charterer merely having use of the space in the appointment. (Art.598)
vessel in return for his payment of the charter 4. Captain in the absence of the ship agent
hired. or consignee and only if he acts in
 Kinds: accordance with the instructions of the
a. Time charter – vessel is chartered for a agent or owner and protects the latter’s
fixed period of time or duration of voyage. interests. (Art.609)
b. Voyage or trip charter – the vessel is
leased for one or series of voyages REQUISITES OF A VALID CHARTER PARTY
usually for purposes of transporting goods 1. Consent of the contracting parties
for charterer. 2. Existing vessel which should be placed at
the disposition of the shipper
LEASE CHARTER PARTY 3. Freight
If for a definite period, Charterer may rescind 4. Compliance with Art. 652 of the Code of
lessee cannot give up charter party by paying Commerce
the lease by paying a half of the freightage
portion of the amount agreed upon.
agreed upon.
If the leased property is The new owner is not
sold to one who knows compelled to respect the Clauses Which May Be Included In a Charter
of the existence of the charter party so long as Party
lease, the new owner he can load the vessel
must respect the lease. with his own cargo. (Art. Jason clause Clause paramount or
689) paramount clause
Civil law concept Commercial law concept

CHARTER PARTY BILL OF LADING

An entire or complete More like a private
contract. receipt which the
captain gives to accredit
goods received from
persons
Consensual contract Real contract

BAREBOAT OR CONTRACT OF
DEMISE CHARTER AFFREIGHTMENT
(TIME OR VOYAGE
CHARTER)
Charterer becomes Owner remains liable as
A stipulation in a charter A clause in a charter 3. Failure to 2. Sale by the and
party that in case of a party providing that the place the owner of the 5. Inability of
maritime accident for COGSA shall apply, even vessel at the vessel before the vessel to
which the shipowner is though the charterer’s loading by the navigate.
not responsible by law, transportation is disposal; charterer;
contract or otherwise, domestic, subject to the 4. Return of
the cargo shippers, extent that any term of the vessel due
consignees or owners the bill of lading is to pirates,
shall contribute with the repugnant to the COGSA enemies or bad
shipowner in general or applicable law, then weather;
average. (Pandect of to the extent thereof the 5. Arrival at a
Commercial Law and provision of the bill of port for
Jurisprudence, Justice lading is void. (Pandect repairs.
Jose Vitug, 1997 ed.) of Commercial Law and
Jurisprudence, Justice Terms:
Jose Vitug, 1997 ed.) 1. Primage - bonus to be paid to the captain after
the successful voyage.
2. Demurrage – the sum fixed in the charter party
as a remuneration to the owner of the ship for
the detention of his vessel beyond the number
of days allowed by the charter party for loading
or unloading or for sailing.
Rights and Obligations of Parties 3. Deadfreight – the amount paid by or
recoverable from a charterer of a ship for the
SHIPOWNER OR CHARTERER portion of the ship’s capacity the latter
SHIP AGENT contracted for but failed to occupy.
1. If the vessel is 1. To pay the agreed 4. Lay Days - days allowed to charter parties for
chartered wholly, not to charter price; loading and unloading the cargo.
accept cargo from 2. To pay freightage 5. Extra Lay Days – days which follow after the
others; on unboarded cargo; lay days have elapsed.
2. To observe 3. To pay losses to
represented capacity; others for loading USUAL FORMS OF CONSUMMATING
3. To unload cargo uncontracted cargo and CONTRACTS
clandestinely placed illicit cargo; 1. C.I.F. – cost, insurance and freight;
4. To substitute 4. To wait if the 2. F.O.B. - free on board;
another vessel if load is vessel needs repair; 3. F.A.S. - free alongside ship; and
less than 3/5 of 5. To pay expenses 4. C. & F. - cost and freight.
capacity; for deviation. (Arts.
5. To leave the port if 679-687) TRANSSHIPMENT OF GOODS
the charterer does not  The act of taking cargo out of one ship and
bring the cargo within loading it in another, or the transfer of goods from
the lay days and extra the vessel stipulated in the contract of affreightment
lay days allowed; to another vessel before the place of destination
6. To place in a vessel named in the contract has been reached, or the
in a condition to transfer for further transportation from one ship or
navigate; conveyance to another.
7. to bring cargo to  It is not dependent on the ownership of the
nearest neutral port in transporting ships or in the change of carriers, but
case of war or blockade. rather on the fact of actual physical transfer of
(Arts. 669-678) cargo from one vessel to another.
 If done without legal excuse, however competent
and safe the vessel into which the transfer is made,
is a violation of contract and infringement of right of
Rescission of a Charter Party
shipper and subjects carrier to liability if freight is
At At Fortuitous
lost event by cause otherwise excepted. (Magellan
charterer’s shipowner’s causes
Manufacturing vs. CA, 201 SCRA 102)
request request (Art. 690)
(Art 688) (Art. 689)
LOAN ON BOTTOMRY AND RESPONDENTIA
 A real, unilateral, aleatory contract, by virtue of
1. By 1. If the extra 1. War or which one person lends to another a certain amount
abandoning lay days interdiction of of money or goods on things exposed to maritime
the charter and terminate commerce; risks, which amount, with its earnings, is to be
paying half of without the 2. Blockade; returned if the things are safely transported, and
the freightage; cargo being 3. Prohibition which is lost if the latter are lost.
2. Error in placed to receive
tonnage or alongside the cargo;
flag; vessel; 4. Embargo;
LOAN ON LOAN ON
 BOTTOMRY RESPONDENTIA
Definition Note: Under existing laws, the parties to a loan,
Loan made by Loan taken on security whether ordinary or maritime, may agree on any
shipowner or ship of the cargo laden on a rate of interest. (CB Circular 905)
agent guaranteed by vessel, and repayable
vessel itself and upon safe arrival of
repayable upon arrival cargo at destination. MARINE INSURANCE LOAN ON
of vessel at (Art. 719) BOTTOMRY OR
destination. (Art. 719) RESPONDENTIA
Indemnity is paid after the Indemnity is paid in
loss has occurred advance by way of
Who may contract
a loan
Shipowner or ship Only the owner of the
In case of loss of the vessel In case of loss of
agent. Outside of the cargo.
due to a risk insured the vessel due to a
residence of the
against, the obligation of marine peril, the
owners - the captain.
the insurer becomes obligation of the
Common elements: absolute borrower to pay is
1. Exposure of security to marine peril; extinguished
2. Obligation of the debtor conditioned only Consensual contract Real contract
upon safe arrival of the security at the point
of destination. Hypothecary Nature of Bottomry/
Forms: Respondentia
1. Public instrument GENERAL RULE: The obligation of the borrower to
2. Policy signed by the contracting parties and pay the loan is extinguished if the goods given as
the broker taking part therein security are absolutely lost by reason of an accident
3. Private instrument (Art. 720) of the sea, during the voyage designated, and if it is
Contents: proven that the goods were on board.
1. Kind, name and registry of the vessel; EXCEPTIONS:
2. Name, surname and domicile of the captain; 1. Loss due to inherent defect;
3. Names, surnames and domiciles of the 2. Loss due to the barratry on the part of the
borrower and the lender; captain;
4. Amount of the loan and the premium 3. Loss due to the fault or malice of the borrower;
stipulated; 4. The vessel was engaged in contraband; and
5. Time for repayment; 5. The cargo loaded on the vessel be different in
6. Goods pledged to secure repayment; from that agreed upon.
7. Voyage during which the risk is run (Art.721)
Concurrence of Marine Insurance and Loan on
Bottomry/Respondentia
1. The insurable interest of the owner of a
BOTTOMRY/ ORDINARY LOAN
ship hypothecated by bottomry is only the
RESPONDENTIA (MUTUUM)
excess of the value over the amount
Not subject to Usury Subject to Usury Law secured by bottomry. (Sec. 101,
Law Insurance Code)
2. The value of what may be saved in case
Liability of the Not subject to any of shipwreck shall be divided between the
borrower is contingent contingency (absolute lender and the insurer in proportion to the
on the safe arrival of liability) interest of each one. (Art. 735)
the vessel or cargo at
destination Note: If a vessel is hypothecated by bottomry only
the excess is insurable, since a loan on bottomry
The last lender is a The first lender is a partakes of the nature likewise of an insurance
preferred creditor preferred creditor coverage to the extent of the loan accommodation.
The same rule would apply to the hypothecation of
the cargo by respondentia. (Pandect of Commercial
WHEN LOAN ON BOTTOMRY OR Law and Jurisprudence, Justice Jose Vitug, 1997
RESPONDENTIA REGARDED AS SIMPLE LOAN ed.)
1. Lender loaned an amount larger than the
value of the object due to fraudulent ACCIDENTS IN MARITIME COMMERCE
means employed by the borrower. 1. Averages
(ART.726) 2. Arrival Under Stress
2. Full amount of the loan is not used for the 3. Collision
cargo or given on the goods if all of them 4. Shipwreck
could not have been loaded, the balance
will be considered a simple loan. AVERAGE
(ART.727)  An extraordinary or accidental expense incurred
3. If the effects on which the money is taken during the voyage in order to preserve the cargo,
is not subjected to any risk. (ART.729) vessel or both, and all damages or deterioration
suffered by the vessel from departure to the port of Procedure for recovery
destination, and to the cargo from the port of 1. Assembly and
loading to the port of consignment. (Art. 806) deliberation
 The person whose property has been saved must 2. Resolution of the
contribute to reimburse the damage caused or captain
expense incurred if the situation constitutes general 3. Entry of the
average. resolution in the
 Classes: logbook
1. Particular or Simple Average 4. Detailed minutes
2. Gross or General Average 5. Delivery of the
 Where both vessel and cargo are saved, it is minutes to the maritime
general average; where only the vessel or only the judicial authority of the
cargo is saved, it is particular average. first port, within 24
 Expenses incurred to refloat a vessel, which hours from arrival,
accidentally ran aground, in order to continue its 6. Ratification by
voyage, do not constitute general average. Not only captain under oath.
is there absence of a marine peril, common safety (Arts. 813-814)
factor, and deliberateness. It is the safety of the
property, and not the voyage, which constitutes the GOODS NOT COVERED BY GENERAL AVERAGE
true foundation of general average. (A. Magsaysay, EVEN IF SACRIFICED
Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955) 1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2))
PARTICULAR OR GROSS OR GENERAL 3. Fuel for the vessel if there is more than
SIMPLE sufficient fuel for the voyage. (Rule IX,
Definition York-Antwerp Rule)
Damages or expenses Damages or expenses
caused to the vessel or deliberately caused in Jettison
cargo that did not inure order to save the  Act of throwing cargo overboard in order to
to the common benefit, vessel, its cargo or both lighten the vessel.
and borne by respective from real and known  Order of goods to be cast overboard:
owners. (Art. 809) risk. (Art. 811) 1. Those which are on the deck, preferring
Requisites the heaviest one with the least utility and
1. common danger; value;
2. deliberate 2. Those which are below the upper deck,
sacrifice; beginning with the one with greatest
3. success; weight and smallest value. (Art. 815)
4. proper formalities
and legal steps.  Jettisoned goods are not res nullius nor deemed
Liability “abandoned” within the meaning of civil law so as to
The owner of the goods All the persons having be the object of occupation by salvage. (Pandect of
which gave rise to the an interest in the vessel Commercial Law and Jurisprudence, Justice Jose
expense or suffered the and the cargo therein Vitug, 1997 ed.)
damage shall bear this at the time of the  In order that the jettisoned goods may be
average. (Art. 810) occurrence of the included in the gross or general average, the
average shall contribute existence of the cargo on board should be proven
to satisfy this average. by means of the bill of lading. (Art. 816)
(Art. 812)
 The insurers York-Antwerp (Y-A) Rules on Determining
(Art.859) and lenders Liability for Averages With Regard To Deck
on bottomry and Cargo
respondentia shall 1. Deck cargo is allowed only in
likewise contribute. domestic/coastwise/inter-island shipping, and is
(Art.732). prohibited in international/overseas/foreign
Number of interests involved shipping.
Only one interest Several interests 2. If deck cargo is loaded with the consent of the
involved involved shipper on overseas trade, it must always contribute
Share in the damage or expense to general average, but should the same be
jettisoned, it would not be entitled to
100% share In proportion to the
reimbursement because there is violation of the Y-A
value of the owner’s
Rules.
property saved
3. If deck cargo is loaded with the consent of the
Right to recover
shipper on coastwise shipping, it must always
No reimbursement There may be
contribute to general average and if jettisoned
reimbursement
would be entitled to reimbursement.
Kinds (not exclusive)
 Reason: In domestic shipping, voyages are
Art. 809 Art. 811
usually short and the seas are generally not
rough. In overseas shipping, the vessel is  Impact of two vessels both of which are moving.
exposed for many days to perils of the sea.
Allision
 Impact between a moving vessel and a stationary
DOMESTIC INTERNATIONAL
one.
Deck cargo is allowed Deck cargo is not
allowed Nautical Rules to Determine Negligence
With shipper’s consent 1. When two vessels are about to enter a port,
General average Particular average the farther one must allow the nearer to enter
Without shipper’s consent first; if they collide, the fault is presumed to be
Captain is liable Captain is liable imputable to the one who arrived later, unless
it can be proved that there was no fault on its
ARRIVAL UNDER STRESS (ARRIBADA) part.
 The arrival of a vessel at the nearest and most 2. When two vessels meet, the smaller should
convenient port instead of the port of destination, if give the right of way to the larger one.
during the voyage the vessel cannot continue the 3. A vessel leaving port should leave the way
trip to the port of destination. clear for another which may be entering the
same port.
When lawful When Who bears 4. The vessel which leaves later is presumed to
unlawful expenses: have collided against one which has left earlier.
5. There is a presumption against the vessel
The inability to 1. Lack of The shipowner which sets sail in the night.
continue provisions due or ship agent is 6. There is a presumption against the vessel with
voyage is due to negligence to liable in case of spread sails which collides with another which
to lack of carry according unlawful arrival is at anchor and cannot move, even when the
provisions, to usage and under stress. crew of the latter has received word to lift
well-founded customs; But they shall anchor, when there was not sufficient time to
fear of seizure, 2. Risk of not be liable do so or there was fear of a greater damage or
privateers, enemy not well for the other legitimate reason.
pirates, or known or damages 7. There is a presumption against an improperly
accidents of manifest caused by moored vessel.
the sea 3. Defect of reason of a 8. There is a presumption against a vessel which
disabling it to vessel due to lawful arrival. has no buoys to indicate the location of its
navigate. (Art. improper (Art. 821) anchors to prevent damage to vessels which
819) repair; and may approach it.
4. Malice, 9. Vessels must have “proper look-outs” or
negligence, lack persons trained as such and who have no
of foresight or other duty aside therefrom. (Smith Bell v. CA)
skill of captain.
(Art. 820) Nautical Rules as to Sailing Vessel and
Steamship
 It is the duty of the captain to continue the 1. Where a steamship and a sailing vessel are
voyage without delay after the cause of the arrival approaching each other from opposite
under stress has ceased failing in such duty renders directions, or on intersecting lines, the
him liable. However, in case the cause has been risk steamship from the moment the sailing vessel
of enemies, there must first be an assembly before is seen, shall watch with the highest diligence
departure. (Art. 825) her course and movements so as to be able to
 Steps: adopt such timely means of precaution as will
1. Captain should determine during the necessarily prevent the two boats from coming
voyage if there is well founded fear of in contact.
seizure, privateers and other valid 2. The sailing vessel is required to keep her
grounds; course unless the circumstances require
2. Captain shall assemble the officers and otherwise.
summon the persons interested in the
cargo who may attend the meeting but Zones of Time in the Collision of Vessels
without a right to vote; 1. First zone – all time up to the moment when risk
3. The officers shall determine and agree if of collision begins.
there is well-founded reason after  No rule is as yet applicable for none is necessary.
examining the circumstances. The 2. Second zone – time between moment when risk
captain shall have the deciding vote; of collision begins and moment it becomes a
4. The agreement shall be drafted and the practical certainty.
proper minutes shall be signed and  It is in this period where conduct of the vessels is
entered in the log book; primordial. It is in this zone that vessels must
5. Objections and protests shall likewise be strictly observe nautical rules, unless a departure
entered in the minutes. therefrom becomes necessary to avoid imminent
danger.
COLLISION 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”/
“SHIPPER’S 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 carrier’s liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIER’S 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 WAYBILL
TICKET CHECK
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 carrier’s 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
carrier’s 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 passenger’s “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.
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
motorized, pulls another, whether loaded or not
with merchandise, from one place to another, for a
compensation. It is a contract for services rather without having been issued a certificate of public
than a contract of carriage. convenience or a certificate of public convenience
and necessity.
EXCEPTIONS:
SALVAGE TOWAGE 1. Warehouses;
2. Animal drawn vehicles and bancas moved
Governed by special Governed by Civil Code
by oar or sail;
law (Act No. 2616) on contract of lease
3. Airships, except for the fixing of maximum
rates for fare and freight;
Requires success, Success is not required 4. Radio companies, except for rates fixing;
otherwise no payment 5. Public services owned or operated by the
government, except as to rates fixing;
Must be done with the Only the consent of the 6. Ice plants; and
consent of the tugboat owner is 7. Public markets.
captain/crewmen needed
Vessel must be Vessel need not be PUBLIC SERVICE
involved in an accident involved in an accident  A person who owns, operates, manages or
controls in the Philippines for hire or compensation,
Fees distributed Fees belong to the with general or limited clientele, whether
among crewmen tugboat owner permanent, occasional or accidental, and done for
general business purposes, any common carrier or
public utility, ice plants, power and water supplies,
RULES ON SALVAGE REWARD
communication and similar public services. (Sec.
1. The reward is fixed by the RTC judge in the
13b, CA 146)
absence of agreement or where the latter is
 A casual or incidental service devoid of public
excessive. (Sec. 9)
character and interest is not brought within the
2. The reward should constitute a sufficient
category. The question depends on such factors as
compensation for the outlay and effort of the
the extent of services, whether such person or
salvors and should be liberal enough to offer
company has held himself or itself out as ready to
an inducement to others to render services in
serve the public or a portion of the public generally.
similar emergencies in the future.
(Luzon Stevedoring vs. PSC)
3. If sold (no claim being made within 3 months
from publication), the proceeds, after
NOTE: The Public Service Commission created
deducting expenses and the salvage claim,
under the Public Service Law has already been
shall go to the owner; if the latter does not
abolished under P.D. No. 1 and other issuances. It
claim it within 3 years, 50% of the said
has been replaced by the following government
proceeds shall go to the salvors, who shall
agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB;
divide it equitably, and the other half to the
NWRC; CAB; and MIA.
government. (Secs. 11-12)
4. If a vessel is the salvor, the reward shall be
distributed as follows:
CERTIFICATE OF CERTIFICATE OF
a. 50% to the shipowner;
PUBLIC PUBLIC
b. 25% to the captain; and
CONVENIENCE CONVENIENCE AND
(CPC) NECESSITY (CPCN)
c. 25% to the officers and crew in
proportion to their salaries. (Sec. 13)
An authorization An authorization
 Taking passengers from a sinking ship, without issued by the issued by the
rendering any service in rescuing the vessel, is not a appropriate appropriate
salvage service, being a duty of humanity and not government agency for government agency for
for reward. the operation of public the operation of public
services for which no service for which a
VI. PUBLIC SERVICE ACT franchise, either prior franchise is
(C.A. No. 146) municipal or required by law; e.g.
legislative, is required telephone and other
PURPOSES: by law, e.g., common services.
1. To secure adequate, sustained service for carriers.
the public at the least possible cost;
2. To protect the public against
unreasonable charges and poor,
 A CPC or a CPCN constitutes neither a franchise
inefficient service;
nor a contract, confers no property right, and is a
3. To protect and secure investments in
mere license or a privilege. The holder of said
public services;
certificate does not acquire a property right in the
4. To prevent ruinous competition.
route covered thereby. Nor does it confer upon the
holder any proprietary right or interest or franchise
AUTHORITY TO OPERATE PUBLIC SERVICES
in the public highways. Revocation of this certificate
GENERAL RULE: No public service shall operate
deprives him of no vested right. New and additional
burdens, alteration of the certificate, or even
revocation or annulment thereof is reserved to the
State. (Luque vs. Villegas, 30 SCRA 408)
 It is a “property” and has a considerable value
and can be the subject of sale or attachment.
(Cogeo-Cubao Operators and Drivers Assn. vs. CA,
207 SCRA 343, Raymundo vs. Luneta Motor Co.)
REQUREMENTS FOR GRANTING CPC OR CPCN
1. Applicant must be a citizen of the Philippines or
a corporation or entity 60% of the capital of
which is owned by such citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation of the
public service proposed and the authorization
to do business will promote the public interest
on a proper and suitable manner;
4. Applicant must have sufficient financial
capability to undertake the proposed services
and meeting the responsibilities incident to its
operation.
UNLAWFUL ACTS OF PUBLIC UTILITY
COMPANIES
1. Engagement in public service business without
first securing the proper certificate;
2. Providing or maintaining unsafe, improper or
inadequate service as determined by the
proper authority;
3. Committing any act of unreasonable and unjust
preferential treatment to any particular person,
corporation or entity as determined by the
proper authority;
4. Refusing or neglecting to carry public mail
upon request. (Secs. 18 and 19)
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates
representing an increase of capital;
5. Capitalize any franchise in excess of the
amount actually paid to the Government;
6. Sell, alienate, mortgage or lease property,
certificates or franchise.

POWERS POWERS  Under Sec. 20(g) of C.A. No. 146, the sale, etc.
REQUIRING PRIOR EXERCISABLE may be negotiated and completed before the
NOTICE AND WITHOUT PRIOR approval by the proper authority. Its approval is not
HEARING NOTICE AND a condition precedent to the validity of the contract.
HEARING The approval is necessary only to protect public
interest.
1. Issuance of CPC 1. Investigation any
or CPCN; matter concerning PRIOR OPERATOR/OLD OPERATOR RULE
2. Fixing of rates, public service;  The rule allowing an existing franchised operator
tolls, and charges; 2. Requiring to invoke a preferential right within the authorized
3. Setting up of operators to furnish territory as long as he renders satisfactory and
standards and safe, adequate, and economical service.
classifications; proper service;  The policy is not to issue a certificate to a second
4. Establishment of 3. Requiring public operator to cover the same field and in competition
rules to secure services to pay with a first operator who is rendering sufficient,
accuracy of all meters expenses of adequate and satisfactory service. The prior
and all measuring investigation; operator must first be given an opportunity to
appliances; 4. Valuation of improve its service, if inadequate or deficient.
5. Issuance of properties of public  Purpose: To prevent ruinous and wasteful
orders requiring utilities; competition in order that the interests of the public
establishment or 5. Examination and would be conserved and preserved.
maintenance of test of measuring
extension of facilities; appliances;  It subordinates the prior applicant rule which
6. Revocation, or 6. Grant of special gives the first applicant priority only if things and
modification of CPC or permits to make extra circumstances are equal.
CPCN; or special trips in
7. Suspension of CPC territories specified in  Where the operator either fails or neglects to
or CPCN, except when the certificate; make the improvement or effect the increase in
it is necessary to 7. Uniform services, especially when given the opportunity, new
avoid serious and accounting system and operators should be given the chance to give the
irreparable damage or furnishing of annual services needed by the public.
inconvenience to the reports;
public or private 8. Compelling PRIOR APPLICANT RULE
interest, in which compliance with the  Presupposes a situation when two interested
case, a suspension laws and regulations. persons apply for a certificate to operate a public
not more than 30 utility in the same community over which no person
days may be ordered, has as yet granted any certificate. If it turns out,
prior to the hearing. after the hearing, that the circumstances between
(Soriano v. Medina, the two applicants are more or less equal, then the
164 SCRA 36) 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.
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 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)