BILL OF LADING

DEFINITION

• A written acknowledgment, signed by the master

of a vessel or other authorized agent of the carrier,
that he has received the described goods from the
shipper, to be transported on the expressed terms
to the described place of destination, and to be
delivered there to the designated consignee or
parties. [70 Am Jur 2d 924]
 CONCEPT
• A bill of lading, like a passage ticket, is not necessary for the perfection
of a contract of carriage.

• Art. 354, Code of Commerce: In the absence of a bill of lading,

disputes shall be determined by the legal proofs which the parties may
present in support of their respective claims, according to the general
provisions established in this Code for commercial transaction.

• Note: If involving common carrier, disputes without BL is governed by

the Civil Code. In respect to electronic commerce, it is governed by
R.A. 8792 of the Electronic Commerce Act.
 KINDS
• Negotiable or Non-negotiable Bill of Lading

• Clean Bill of Lading or Foul Bill of Lading

• On-board Bill or Received-For-Shipment Bill of Lading

• Spent Bill of Lading

• Through Bill of Lading

• Custody Bill of Lading

• Port Bill of Lading

 NEGOTIABLE OR NON-
NEGOTIABLE BILL OF LADING

• When delivered to the Order or to bear,

negotiable.

• Otherwise, non-negotiable.
 CLEAN BILL OF LADING OR
FOUL BILL OF LADING

• When it does not contain any notation indicating

any defect in the goods – Clean BL

• Otherwise, it is Foul BL
ON-BOARD BILL OR RECEIVED-
FOR-SHIPMENT BILL OF LADING
• On-board BL is one in which it is stated that the
goods have been received on board the vessel
which is to carry the goods

• Received for shipment BL is one 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.
 CUSTODY BILL OF LADING

• One which states that the goods are already

received by the carrier but the vessel indicated
therein has not yet arrived at port.
 PORT BILL OF LADING

• One which state that the vessel indicated in the BL

that will transport the goods is already in the port.
 NATURE OF BILL OF LADING
• It operates both as:

• A receipt for the goods shipped; and

• A contract to transport and deliver the goods as stipulated therein. Being

a contract, it is the law between the parties who are bound by its terms
and conditions sol longs as they are not contrary to law, morals, good
customs, public order and public policy.

• A third characteristic may be added - It is also a document of title (which

makes it a symbol of the goods) [Lorenzo Shipping Corp. V. Chubb and
Sons, Inc., GR 147724, 8 June 2004].
 EFFICACY OF BL
• Upon delivery to and acceptance by the shipper.

• It is presumed that the stipulations of the BL were known to the shipper, in the absence
of fraud, concealment or improper conduct, and he generally bound by his acceptance
whether he reads the bill or not.

• A shipper who receives a BL without objection after an opportunity to inspect it, and
permits the carrier to act on it by proceeding with the shipment is presumed to have
accepted it as correct and assented to its terms.

• A BL accepted without dissent raises the presumption that all the terms therein were
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.
 AS A CONTRACT OF
ADHESION
• BLs, like tickets constitute a class of contracts of adhesion.

• Construed liberally in favor of the passenger or shipper.

• But, they are not ENTIRELY prohibited.

• One who adheres to the contract is in reality free to reject it entirely.

• If he adheres, he gives his consent.

• Receipt of the BL or ticket is tantamount to adherence to the

stipulation embodied therein.
 QUA CHEE GAN V. LAW UNION AND
ROCK INSURANCE CO.,
25 SCRA 70 [1968]
• Held: The courts cannot ignore that nowadays, monopolies, cartels and
concentration of capital endowed with overwhelm economic power,
manage to impose upon parties dealing with them cunningly prepared
‘agreements’ that the weaker party may not change one with his
participation in the ‘agreement’ being reduced to the alternative ‘to take
it or leave it’, labelled since Raymond Sleilles ‘contracts of
adherence’ (contracts d’ adhesion) in contrast (of which policies of
insurance and international bill of lading are prime examples) obviously
cap for greater strictness and vigilance on the part of the court with
view to protecting the weaker party from abuses and imposition, and
prevent their becoming traps of the unwary.
 RULE ON PROTECTION OF
THE DISADVANTAGED
• Art. 24, NCC: In all contractual property or other
relations, when one of the parties is at the
disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age
and other handicap, the courts must be vigilant for
his protection.
 SERVANDO, ET AL. V. PHIL. STEAM
NAVIGATION CO.,
G.R. NO. L-36481-2 OCTOBER 23, 1982
• While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is
nevertheless bound by the provisions thereof.

• Such provisions have been held to be a part of the contract of carriage, and valid
and binding upon the passenger regardless of the latter's lack of knowledge or assent
to the regulation.

• It is what is known as a contract of 'adhesion', in regards which it has been said that
contracts of adhesion wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited.

• The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent.
 MAGELLAN MANUFACTURING
MARKETING CORP. V. CA,
G.R. 95529, AUG. 22, 1991

• Issue 1: On the argument that there could have

been no agreement in the transshipment even if
the BL contained such since the same is prohibited
in the Letter of Credit, and that, therefore, it had
no intention to allow transshipment of the subject
cargo, it was:
 HELD:
• As between such stilted thesis of petitioner and the contents of the bill of lading
evidencing the intention of the parties, it is irremissible that the latter must prevail.

• The terms of the contract as embodied in the bill of lading are clear and thus obviates
the need for any interpretation. The intention of the parties which is the carriage of
the cargo under the terms specified thereunder and the wordings of the bill of lading
do not contradict each other.

• The terms of the contract being conclusive upon the parties and judging from the
contemporaneous and subsequent actuations of petitioner, to wit: personally receiving
and signing the bill of lading and paying the freight charges, there is no doubt that
petitioner must necessarily be charged with full knowledge and unqualified acceptance
of the terms of the bill of lading and that it intended to be bound thereby.
• Issue No. 2: Can a consignee refuse a bill of lading on the ground that there
was overshipment of goods than the quantity covered by the letter of credit?

• Held: In a letter of credit, there are three distinct and independent contracts:
(1) the contract of sale between the buyer and the seller; (2) the contract of
the buyer with the issuing bank; and (3) the letter of credit proper in which
the bank promises to pay the seller pursuant to the terms and conditions
stated therein.

• It is clearly settled in law that the three contracts which make up the letter of
credit arrangement are to be maintained in a state of perpetual separation.

• A transaction involving the purchase of goods may also require, apart from a
letter of credit, a contract of transportation specially when the seller and the
buyer are not in the same locale or country, and the goods purchased have
to be transported to the latter.
• Hence, the contract of carriage, as stipulated in the bill of lading
must be treated independently of the contract of sale between the
seller and the buyer, and the contract for the issuance of a letter of
credit between the buyer and the issuing bank.

• Any discrepancy between the amount of goods described in the

commercial invoice in the contract of sale and the amount allowed
in the letter of credit will not affect the validity and enforceability of
the contract of carriage as embodied in the bill of lading.

• As a bank cannot be expected to look beyond the documents

presented to it by the seller pursuant to the letter of credit, neither
can the carrier be expected to go beyond the representations of
the shipper in the bill of lading and to verify their accuracy vis-à-vis
the commercial invoice and the letter of credit.
• Having no actual knowledge of the kind, quantity,
or condition of the contents of the container, the
carrier issues the corresponding bill of lading
based on the declaration of the shipper, and the
bill of lading simply states the contents of the
container either as advised by the shipper or
prefaced by the phrase “said to contain”.

• The matter of quantity, description and conditions

of the cargo inside the container is the sole
responsibility of the shipper.
 PAROLE EVIDENCE RULE
• Sec. 9, Rule 130, Rules of Court: When the terms
of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon
and there can be, between the parties and their
successors in interest, no evidence of such terms
other than the contents of the written agreement.

• BL is covered by the parole evidence rule.

 EVERETT STEAMSHIP V. CA,
287 SCRA 496
• A stipulation printed in BL limiting common carrier’s liability for loss or
destruction of a cargo to a certain sum, unless shipper or owner
declare a greater value is sanctioned by law, particularly Arts. 1749 and
1750 of the Civil Code, provided such stipulation must be reasonable
and just under the circumstances and has been freely and fairly
agreed upon.

• The printing of such limiting stipulation in a small print on the BL does

not make the BL invalid nor can it be argued that the stipulation has
not been fairly and freely agreed upon as to be binding on the carrier.
• At most, the situation only calls for a greater vigilance on the
part of courts when dealing with such contracts of adhesion
in that said contracts must be carefully scrutinized in order to
shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants.

• In this case, since the shipper is engaged in trading business, it

cannot be said to be ignorant of the business transactions it
entered into involving the shipment of its goods to its
customers.

• The shipper could have known, or should know the

stipulations in the BL and there it should have declared a
higher valuation of the goods shipped.
VALENZUELA HARDWOOD V. CA,
274 SCRA 642
• A stipulation in a charter party that the owners shall not be
responsible for loss, split, short-landing, breakages and any kind of
damage to the cargo, is NOT VOID as being contrary to public
policy, when it is clear from the arrangement that the carrier merely
acted as private carrier under the terms of the charter party.

• In a contract of private carriage, the parties may validly stipulate the

responsibility for the cargo rests solely on the charterer, exempting
the shipowner from liability for loss of or damage to the cargo
caused even by the negligence of the ship captain.
 EXCEPTIONS TO PAROLE
EVIDENCE RULE
However, a party may present evidence to modify, explain or add to the terms of the
written agreement if he puts in issue in his pleading:

a) An intrinsic ambiguity, mistake or imperfection in the written agreement;

b) The failure of the written agreement to express the true intent and agreement
of the parties thereto;

c) The validity of the written agreement; or

d) The existence of other terms agreed to by the parties or their successors in

interest after the execution of the written agreement.

The term “agreement” includes wills.

 SUBSTANTIVE PROVISIONS
• Art. 353, Code of Commerce: The legal evidence of the contract between the shipper and
the carrier shall be the bills of lading, by the contents of which the disputes which may arise
regarding their execution and performance shall be decided, no exceptions being admissible
other the those of falsity and material error in the drafting.

• After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, unless in
the same act the claim which the parties may wish to reserve be reduced to writing, with
the exception of that provided for in Article 366

• In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed
by the carrier, because of its loss or of any other cause, he must give the latter a receipt for
the goods delivered, this receipt producing the same effects as the return of the bill of lading.
• Art. 709, Code of Commerce: A bill of lading drawn up in
accordance with the provisions of this title shall be proof as
between all those interested in the cargo and between the
latter and the insurers, proof to the contrary being reserved
for the latter.

• Art. 710, Code of Commerce: If the bills of lading are

contradictory, and no change or erasure can be observed in
any of them, those possessed by the shipper or consignee
signed by the captain shall be proof against the captain or ship
agent in favor of the consignee or shipper; and those
possessed by the captain or ship agent signed by the shipper
shall be proof against the shipper or consignee in favor of the
captain or ship agent.
• Sec. 3[4] & [5], COGSA, C.A. No. 65:

• [4] Such a bill of lading shall be prima facie evidence of the

receipt by the carrier of the goods as therein described in
accordance with paragraphs 3(a), (b), and (c), of this section.

• [5] The shipper shall be deemed to have guaranteed to the

carrier the accuracy at the time of the shipment of the marks,
number, quantity, and weight, as furnished by him; and the
shipper shall indemnify the carrier against all loss, damages,
and expenses arising or resulting from inaccuracies in such
particulars. The right of the carrier to such indemnity shall in
no way limit his responsibility and liability under the contract
of carriage to any person other than the shipper.
MATTERS TO BE ENTERED IN A
BL OR AIRWAY BILL
For BL (Art. 706, Code of Commerce):

• Name, registry and tonnage of the vessel

• Name of captain and his domicile [not anymore applicable as of present]

• Port of loading and unloading

• Name of shipper

• Name of consignee

• Quantity, quality, number of packages and marks of the merchandise; and

• Freight and primage

For Airwaybill (Art. 3[1], Warsaw Convention on Air Transport:

• Place and date of issue

• Place of departure and destination;

• Agreed stopping places, provided the carrier may reserve the

right to alter the stopping places in case of necessity, and that if
he exercises that right, the alteration shall not have the effect
of depriving the transportation of its international character;

• Name and address of the carrier or carriers; and

• Statement that the transportation is subject to the rules

relating to liability in this convention.
KINDS OF STIPULATIONS IN A
BILL OF LADING
• First kind: One exempting the carrier from any and all liability for
loss or damage occasioned by its own negligence – VOID;

• Second kind: One providing for an unqualified limitation of such

liability to an agreed valuation – VOID; and

• Third kind: One limiting the liability of the carrier to an agreed

valuation unless the shipper declares a higher value and pays a
higher rate of freight –VALID.

• [H.E. Heacock Co. v. Macondray & Co., G.R. 16598l, Oct. 3, 1991]
LIABILITY OF CARRIER UNDER
COGSA
• If goods are to be shipped from a foreign port to the a
Philippine, COGSA is applicable suppletorily to the Civil
Code.

• Liability of the carrier is US$500 per package, in the absence

of a shipper’s declaration of a higher value in the BL.

• The above condition is deemed part of the BL even if not

expressly stated.
• If no value is state – Maximum: US$500.

• If value is stated – Rule on Qualified Liability.

Qualified Liability Rule:

• A carrier may fix a maximum liability in the event

the shipper does not declare any value or a value
up to a certain amount. Should shipper declare a
higher value, and willing to pay higher freightage,
the carrier shall accordingly be liable for greater
damage.
 PACKAGE
• If goods are shipped in cartons – Each carton is
considered a package even if they are stored in
container vans.

• If what ordinarily considered as packages are shipped in

a container supplied by the carrier and the number of
such unit is disclosed in the BL – Each of those units
(not the container) constitutes the package referred to
in COGSA.
WARSAW CONVENTION ON
AIR TRANSPORT
• Liability to passenger – P250,000 francs (passenger & carrier
may agree to a higher limit of liability

• Liability to baggage and cargo – P250 francs per kg (unless the

passenger or consignor has made, at the time when the
package was handed over to the carrier, a special declaration of
interest in delivery at destination and has paid a supplementary
sum not exceeding the declared sum, unless he proves that
sum is greater than the actual value to the consignor at
delivery.
• In case of loss, damage or delay of part of registered baggage or cargo,
or of any object contained in the waybill – The weight shall be taken
into consideration in determining the amount and carrier’s liability is
limited to the TOTAL WEIGHT OF THE PACKAGE/S

• However, when the loss, damage or delay of a part of the registered

baggage or cargo, or of an object contained therein, affects the value
of other packages covered by the same baggage check of the same
airway bill, the TOTAL WIEHT OF SUCH PACKAGE/S shall also be
taken into consideration in determining the limit of liability.

• Liability to hand carried items – 5,000 francs per passenger

• The above limitations are without prejudice to the local court’s award
in accordance to its own law, in addition, the whole or part of the
court cost and other expenses of litigation incurred by plaintiff.
• Not applicable if the amount of damages awarded,
excluding court costs and other expenses of
litigation, does not exceed the sum which the carrier
has offered in writing to plaintiff within 6 months
from the date of occurrence causing the damage or
before commencement of the action, if that is later.

• If damage is caused by willful misconduct or by such

default on the part of the carrier: Carrier cannot
invoke the provisions in Warsaw Convention on
limited liability.
 HAGUE PROTOCOL AMENDMENT TO
WARSAW CONVENTION ON AIR
TRANSPORT
• Removed the provision that exculpates the airline completely if it
took all necessary steps to avoid the damage.

• The protocol declares that the stated limits of liability are not
applicable ‘if it is proved that the damage resulted from an act or
omission of the carrier, its servants or agents, done with intent to
cause damage or recklessly and with knowledge that damage would
probably result.

• Note: Montreal Agreement of 1966 allows a passenger to recover

unlimited damages upon proof of willful misconduct.
PAL V. CA, 255 SCRA 48 ON THE
PERIOD PROVIDED IN WAY BILL
• Where the failure to file the formal claim within the prescriptive
period contemplated in the air waybill was largely due to the
fault of carrier’s representatives, the condition was deemed
fulfilled considering the collective action of the carrier’s
personnel in tossing around the claim and leaving it unresolved
for an indefinite period of time, which was tantamount to
‘voluntarily preventing its fulfillment’, and therefore the filing of
the baggage freight claim constituted substantial compliance
with the requirement of the filing of a formal claim.
 SHIPMENT TERMS
• SERVE THE FOLLOWING FUNCTIONS:

A. They determine the point at which the risk of loss

passes from seller to buyer;

B. They determine what performance by the seller

amounts to a tender which will put the buyer, if he
thereafter refuses to accept delivery, in breach; and

C. They are used for quoting the price.

 SHIPMENT TERMS
• F.O.B. (Free on Board) - the risk passes to the buyer at the F.O.B. Point.

• F.O.B. Point of Destination - means the seller still assumes the risk until the goods
reach the point of destination.

• F.A.S. (Free Alongside Ship) - a variant of F.O.B. and is used for carriage by water.

• F.A.S Vessel - means that the seller relinquishes the risk the moment the goods are
delivered alongside the vessel.

• C.I.F. (Cost, Insurance, Freight) - indicates that the price quoted by the seller includes the
invoice price plus insurance and freight.

• C & F (Cost and Freight) - where the buyer decides to take his own insurance over the
cargo. The risk of the seller is the same as in C.I.F.
 F.A.S. VESSEL V. F.O.B. VESSEL

• F.A.S. Vessel - the seller is under no obligation to see to

the loading and all that is required is delivery to the
wharf.

• F.O.B Vessel - the seller must see to it that the goods are
loaded and his responsibility does not cease until the
loading is complete. Only an “On Board” bill of lading
signifies the completion of the loading of the goods.
ACTIONS AND DAMAGES IN
CASE OF BREACH
 DISTINCTIONS
POINT OF
CULPA CONTRACTUAL CULPA-AQUILIANA
DISTINCTION

Source of Obligation Contract Quasi-Delict

None there being no Solidarily liable with the

Liability of Employee
privity of contract Employer
Due diligence in the selection Due diligence in selection and
Availability of Defense and supervision of employee supervision of employee a
is not a defense defense under Article 2180.

In what Capacity Liable As a Contracting Party As An Employer

 CONCURRENT CAUSES OF
ACTION
• The same act that breaches the contract may also be a tort.

• The cause of action of a passenger or shipper against a common carrier can be culpa
contractual or culpa aquiliana while the basis of liability on the part of the driver is
either culpa delictual or culpa aquiliana.

• The direct and primary liability of drivers based on quasi-delict and delict equally applies
to the captain, officers and crew of the vessel or the captain and other personnel of the
air carrier in proper cases where they committed the negligent act or omission.

• The shipowner or the operator, as employer, may be held primarily liable under Article
2180 of the NCC or subsidiarily liable under the Revised Penal Code. These liabilities
are in the nature of vicarious liability because the negligence of the employee is
imputed to the employer-operator.
 CONCURRENCE WITH THIRD
PERSONS
• If negligence of 3rd person concurs with the breach (where passenger injured because
the carrier collided with another vehicle), liability of the 3rd person and/or his employer
may be based on quasi-delict. Driver alone may be held criminally liable and civil liability
may be imposed on him based on delict. In the latter case, employer is subsidiarily liable.

• If injury due to negligence of the 2 drivers, the drivers and the owners of the 2 vehicles
are jointly and severally liable for damages. If the owner and driver of the other vehicle
are not impleaded, carrier may implead them by filing a 3rd party complaint. (Francisco
Viluan v. The Court of Appeals, et.al., GR Nos. 21477-81, 29 April 1966)

• In case, negligence of carrier’s driver and a 3rd person concurs, liability of the parties,
carrier and his driver, third person is - joint and several. (MMTC v. CA, 223 SCRA 521)
 ALTERNATIVE CAUSES OF
ACTION
• Permissible for plaintiff to allege in the Complaint
alternative causes of action and join as many
parties as may be liable on such causes of acton
so long as the plaintiff does not
recover twice for the same injury.(Fabre
v. Court of Appeals, GR No. 111127, 26 July 1996)
PRESCRIPTIVE PERIODS IN
CLAIMS
FILING OF CLAIM IN OVERLAND TRANSPORTATION
AND INTER-ISLAND COMMERCE
(ART. 366, CODE OF COMMERCE)

If goods arrived in damaged condition:

• Apparent – Must file a claim immediately (oral or

written) (at the time of receipt)

• Not apparent – Must file a claim within 24 hours

from deliver
 FILING OF ACTION IN OVERLAND
TRANSPO AND INTER-ISLAND TRADE
Period to file action if claim is filed but CARRIER REFUSES TO PAY:

• 6 years – if no BL

• 10 years – if there is BL

• Note: Filing of the claim under Art. 366, CoC is CONDITION

PRECEDENT for recovery. If no claim is filed, there will be no
recovery, even if an action therefor is meritorious since the claim
is part of the cause of action
 FILING OF CLAIMS IN
OVERSEAS TRADE

• If damage is APPARENT – CLAIM SHOULD BE

FILED IMMEDIATELY.

• If damage is NOT APPARENT – CLAIM SHOULD

BE FILED WITHIN 3 DAYS.
 FILING OF ACTION IN
OVERSEAS TRADE
• 1 year from the time vessel departs from port without making delivery; or

• 1 year from the date the damaged cargo is delivered to arrastre.

• Note: the 1 year period applies also to collision cases but shall start not
from the date of the collision but when the goods should have been
delivered, had the cargoes been saved.

• If mis-delivered: 10 years; If claim is based on delay: 10 years.

• Note: Filing of claim is NOT A CONDITION PRECEDENT in the filing of

action.
RIZAL SURETY V. MACONDRAY,
22 SCRA 902
• Facts: A vessel arrived in Manila on Oct. 25. It left Manila on
Oct. 31. The BL showed that the cargo was aboard the vessel,
but it was never delivered. The shipper brought an action
against the carrier for non-delivery.

• Held: Since there was no tally sheet AND NO DELIVERY, the

1- year prescriptive period for filing the action should be
counted from the LAST DAY ON WHICH THE CARRIER
HAD AN OPPORTUNITY TO MAKE THE DELIVERY, i.e. Oct.
31 when the vessel departed from port.
UNION CARBIDE V. MANILA RAILROD,
77 SCRA 359

• In the case when the vessel docked at the pier,

where the cargo has been unloaded and delivered
to the arrastre, the 1-year period begins to run
from the date of delivery to the arrastre operator.
ANG V. AMERICAN SS AGENCIES,
19 SCRA 631

• Where there was delivery to the wrong person,

the prescriptive period is (10) years because there
is a violation of contract, and COGSA does not
apply to mis-delivery.
US INSURANCE V. CIA. MARITIMA,
21 SCRA 998
• FACTS: Cargo was loaded in New York for Davao City. Since most of
the cargo was for Manila, the carrier unloaded all the cargo, including
that for Davao City, in Manila and did not make a trip to Davao.
Instead, the goods for Davao were transshipped on an inter-island
vessel. The cargo arrived in a damaged condition.

• HELD: The 1-year period provided in COGSA shall still apply since the
contract of carriage is from New York to Davao. The inter-island vessel
from Manila to Davao is considered merely a connecting vessel and
the transshipment did not constitute a separate contract of carriage.
 CASES
• The insurer of the goods is also bound by the 1-year
prescriptive period under the Carriage of Goods by Sea
Act. (Filipino Merchants Ins. Co. v. Alejandro, 145 SCRA
42)

• The written extrajudicial demand by creditor DOES

NOT TOLL the running of the 1-year prescriptive period
under COGSA since an action must be filed within the
period. (Dole Philippines v. Maritime Co., 148 SCRA 118)
 MITSUI O.S.K. LINES V. CA,
287 SCRA 366
• FACTS: Carrier undertook loading. However, while in Taiwan, goods were not transshipped immediately, with
the result that goods arrived in France late during the ‘off-season’. Consignee paid only half of the value of
the goods and balance was charged against loss sustained due to late arrival. Shipper now seeks to recover
unpaid balance from the carrier which opposes the same since the loss or damage to goods shipped under
Sec. 3(6) of the Carriage of the Goods by Sea Act has been barred by the lapse of 1-year period.

• HELD: Indeed, what is in issue here is not the liability of carrier of its handling of goods as provided under
Sec. 3(6) of COGSA, but its liability under its contract of carriage with shipper as covered by the laws of
more general application.

• Since the concept of ‘loss or damage’ involves he deterioration of goods DUE TO DELAY in their
transportation, the claims of shipper DO NOT CONSTITUTE LOSS OR DAMAGE within the meaning of
COGSA which requires the suit to be brought within 1-year from the time the cause of action accrued.

• The 1-year prescriptive period under COGSA is inapplicable. What is applicable is Art. 1144 of the Civil
Code providing for a 10-year prescriptive period.
 MAYER STEEL PIPE CORP. V. CA,
274 SCRA 432
• FACTS: The shipper has insured the merchandise against all risks with South Sea Surety. During the
voyage, the merchandise were damaged. Insurer opposed claim on the ground, inter alia, that it was
filed more than one (1) year from discovery of the damage to the merchandise and therefore
barred by the provisions under COGSA.

• HELD: The provision applies only to carrier’s liability which is extinguished if no suit is brought within
one year.

• The liability of the insurer is not extinguished because the insurer’s liability is based not on the
contract of carriage but on the contract of insurance.

• COGSA governs relationship between carrier and shipper, the consignee and/or the insurer on the
other hand and defines the obligations of the carrier under the contract of carriage.

• It does not, however, affect the relationship between shipper and insurer which is governed by
Insurance Code.
 DAMAGES

• The pecuniary compensation, recompense, or

satisfaction for an injury sustained; or

• The pecuniary consequences which the law

imposes for the breach of some duty or violation
of some rights.
 RECOVERABLE DAMAGES
• Actual Damages (dano emergente)

• Unrealized Profits (lucro cesante)

• Moral Damages

• Nominal Damage

• Temperate or Moderate Damages

• Liquidated Damages

• Exemplary or Corrective Damages

• Other damages
 ACTUAL & COMPENSATORY
DAMAGES
• Art. 2205, NCC: Damages may be recovered:

(1) For loss or impairment of earning capacity in cases of

temporary or permanent personal injury;

(2) For injury to the plaintiff ’s business standing or

commercial credit.

• Amount of damages in case of death: P100,000 per

passenger for overland; P200,000 for marine transportation.
LOSS OF EARNING CAPACITY
UNDER ART. 2206

Formula:

• Net Earning Capacity = Life Expectancy [2/3

x 80 – age at death] x Gross Annual Income
less Necessary Living Expenses [fixed at
50% of the gross income in the absence of proof]
 MORAL DAMAGES
(ART. 2219, CIVIL CODE), INCLUDE:
• Physical suffering,

• Mental anguish,

• Fright,

• Serious anxiety,

• Besmirched reputation,

• Wounded feelings,

• Moral shock,

• Social humiliation, and

• Similar injury
 PRINCIPLES INVOLVING
AWARD OF MORAL DAMAGES
• As a general rule, no moral damages may be awarded where the breach of
contract is NOT MALICIOUS.

• Moral damages may be awarded if the contractual negligence is considered

gross negligence.

• Though incapable for pecuniary estimation, moral damages may be recovered

if they are the proximate result of the defendant’s wrongful act or omission.

• The award of moral damages is designed to compensate the claimant for

actual injury and is not meant to enrich the complainant at the expense of the
defendant.
 CASES WHEN MORAL DAMAGES MAY
BE AWARDED (ARTS. 2219 & 2220, NCC)
• Criminal offense resulting in physical injuries;

• Quasi-delicts causing physical injuries

• Seduction, abduction, rape, or other lascivious acts

• Adultery or concubinage

• Illegal or arbitrary detention or arrest

• Illegal search

• Libel, slander or any other form of defamation

• Malicious prosecution

• Acts mentioned in Art. 309 [disrespect to the dead, or wrongful interference with a funeral]

• Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 [on human relations]
• In culpa contractual, moral damages may be awarded:

• Where the mishap resulted in the death of the

passenger. (Art. 1764 in relation to Art. 2206)

• When the carrier was guilty of fraud or bad faith, even

if death did not result. (Art. 2220; Sabena Belgian World
Airlines v. CA, 171 SCRA 620)

• Note: If the cause of action is culpa aquiliana where the

passenger suffered physical injuries, there is no more
need to prove that the carrier acted fraudulent or in
bad faith (Art. 2210[2], Civil Code)
 FACTORS TO CONSIDER:
AMOUNT TO BE RECOVERED
• The extent of humiliation;

• The extent of pain and suffering;

• Official, political, social and financial standing of the

offended party and the business and financial position of
the offender; and

• Age of claimant (Zamboanga Trans Co., Inc. v. Court of

Appeals, 30 SCRA 717)
 IMPORTANT NCC
PROVISIONS TO READ:
• Article 2201

• Article 2205

• Article 2206

• Article 2208

• Articles 2219, 2220, 2221, 2222, 2223, 2224, and 2225

• Articles 2232, 2233, 2234, and 2235

 LOPEZ V. PAN AM,
16 SCRA 431 (1966)
• FACTS: VP Lopez with his wife, daughter and son-in-law
had tickets for 1st class bound for SF. When they arrived in
Tokyo, the plane’s crew found out that the 1st class tickets
had been oversold, and Lopez and his family were
compelled to take the economy seats.

• When the plane arrived at SF, Filipino official and the

Filipino community with a band waited for Lopez to appear
from the 1st class section. It caused him humiliation.
 HELD:
• Pan-Am should have informed Lopez of the possible
downgrading to prevent his humiliation

• The court award Lopez P300,000 in moral damages

and P150,000 in attorney’s fees.

• The substantial amount of damages was awarded in

view of the importance of the person of the
passenger
 ZULUETA V. PAN-AM (1972)
• Facts: Zulueta was a passenger on a Pan-Am flight with his wife
and children from SG to Manila. On stopover at Wake Island, the
passengers were told that the plane would leave in 30 minutes.
After 30 mins. Zulueta failed to show up, the crew had to look for
him. When he was found, the plane captain called him ‘a brown
monkey. Bitter exchanged followed. The captain then order the
crew to unload Zulueta’s baggage and he was left behind.

• Held: Zulueta is entitled to moral damages of P500,000 and

Attorney’s fees of P50,000
 ON ARRASTRE
• Formal claim against arrastre:

- Within 30 days from date of final entry with the Bureau of Customs supported by
invoices and other shipping documents. (A condition precedent)

• Action on claim by arrastre: 60 days from receipt. (A condition precedent)

• If claim is refused: Action to be filed within 1 years.

• If claim is not acted upon: The 1 year period begins to run from the date of the expiry
of the 60-day period.

• Qualified liability of arrastre: P2,000 per package unless higher value is declared.

• NATURE OF LIABILITY OF ARRASTRE & CARRIER: Solidary

 BURDEN OF PROOF IN
ARRASTRE CLAIMS
• In a claim for loss filed by a consignee, the burden of proof to
show compliance with the obligation to deliver the goods to
the appropriate party devolves upon the arrastre operator.

• The reason is because the safekeeping of the goods rest

within its knowledge. Hence, it must prove that the losses
were not due to its negligence or that of its employee. [ICTSI
v. Prudential Guarantee & Assurance Co., Inc., 320 SCRA
244]
 ‘SHIPPER’S LOAD & COUNT’
SHIPMENT
• When consigned goods are shipped under ‘shipper’s load and count’, the shipper is solely
responsible for the container’s load as the carrier would then be oblivious of the contents of
the shipment.

• Protection against pilferage of the shipment are then the consignee’s lookout.

• The arrastre operator is, like any ordinary depositary, duty-bound to take good care of the
goods received from the vessel and to turn the same over to the party entitled to their
possession, subject to such qualification as may have validly been imposed in the contract
between the parties.

• The arrastre operator is not required to verify the contents of the container received and to
compare them with those declared by the shipper because the cargo was at the shipper’s load
and count, and is expected to deliver to the consignee only the container received from the
carrier.
 METRO PORT SERVICES V. IAC,
213 SCRA 103 (1992)
• Held: A provision limiting the liability of arrastre operator through the imposition
of a requirement that a formal claim must be made within 30 days from filing of
entry is complied with when the consignee filed a provisional claim within the
30-day period.

• As of that date, the arrastre operator was given reasonable opportunity to

check the validity of the claim while the facts were still fresh in the minds of the
person who took part in the transaction and while pertinent documents were
still available.

• It did not matter that the provisional claim was for the whole amount of the
invoice. It is sufficient as long as the name of the carrying vessel, its date of arrival
and BL are attached.
PART II
Maritime Law
 TOPICS
• General Concepts
• Vessels
• Ship Mortgage and Maritime Liens
• Parties
• Charter Parties
• Loans and Bottomry and Respondentia
• Averages
• Collisions
• Arrival Under Stress and Shipwrecks
• Salvage
• Carriage of Goods by Sea
 GENERAL CONCEPTS
MARITIME LAW -

• The system of laws which particularly relates to the affairs and business of the sea, to ships, their crews and navigation, and
to marine conveyance of persons and property.

• A corpus of rules, concepts, and legal practices governing certain centrally important concerns of the business of carrying
goods and passengers by water.

• Includes:

A. Book III, Code of Commerce (Maritime Commerce)

B. Act No. 2616 (The Salvage Law)

C. C.A. No. 65 (Carriage of Goods by Sea Act)

D. P.D. 1521 (Ship Mortgage Decree of 1978)

E. R.A. 9295 (The Domestic Shipping Act of 2004)

F. Other special laws relating to maritime commerce

ORDER OF PRIORITY OF LAWS
(ADMIRALTY JURISDICTION)
1. Transportation from abroad to a Philippine port
A.Civil Code
B. Code of Commerce
C.Carriage of Goods by Sea Act (COGSA)
2. Inter-island Maritime Transportation
A.Civil Code
B. Code of Commerce
3. Philippine port to abroad
A.Law of Country of Destination
 UN AGENCIES IN MARITIME
LAW
• International Maritime Organization (IMO) – established the
Technical Regulation of Shipping.

• United Nations Conference on Trade and Development

(UNCTAD) – established the Economic Regulations of Shipping.

• International Labor Organization (ILO) – established the

International Merchant Labor Regulations Standards.

• UN Conferences – Established UNCLOS (1982), Geneva

Conventions on the Law of the Sea (1958/1960)
 REAL AND HYPOTHECARY
NATURE OF MARITIME LAW
• That which distinguishes the maritime from the civil law
and even from the mercantile law in general is the REAL
AND HYPOTHECARY nature of the former, and the
many securities of a real nature that maritime customs
from time immemorial, the laws, the codes, and the later
jurisprudence, have provided for the protection of the
various and conflicting interest which are ventured and
risked in maritime expeditions. [Phil. Shipping Co. v.
Vergara, G.R. No. 16000, June 1, 1906]
 CONFLICTING INTERESTS VENTURED
AND RISKED IN MARITIME EXPEDITION
(SET FORTH IN TREATISE OF MADIRAGA)
• Interest of the vessel and of the agent;

• Interest of the owners of the cargo and consignees;

• Interest of those who salvage the ship;

• Interest of those who make loans upon the cargo;

• Interest of the sailors and members of the crew as to their wages;

• Interest of a constructor as to repairs made to the vessel

 MEANING OF REAL AND
HYPOTHECARY NATURE
• The liability of the carrier in connection with losses related to
maritime contracts is confined to the vessel, which is hypothecated
for such obligations or which stands as the guaranty for their
settlement.

• The shipowner’s or agent’s liability is merely co-extensive with his

interest in the vessel such that a total loss thereof results in its
extinction. The total destruction of the vessel extinguishes maritime
liens because there is no longer any res to which it can attach.

• NO VESSEL, NO LIABILITY RULE.

 SUMMARY OF THE NATURE
OF MARINE TRANSACTIONS
• REAL – A vessel is essentially a personal property because it is
movable. But the Supreme Court characterized maritime
transactions as having a real nature insofar as these transactions
are similar to transactions over real property with respect to
effectivity against third persons which are effected through
registration. Registration of vessels now lodged at MARINA.

• HYPOTHECARY – The liability of the owner of the vessels is

limited to the vessel itself. If he vessel sinks, generally the liability of
the owner is extinguished, although he may have other properties
 EVIDENCE OF REAL NATURE
OF MARITIME LAW
• Limitation of the liability of the agents to the actual
value of the vessel and the freight money; and

• Right to retain the cargo and the embargo and

detention of vessel even in cases where the
ordinary civil law would not allow more than a
personal action against the debtor or person liable.
[Luzon Stevodoring v. CA, 156 SCRA 169]
 ABOITIZ SHIPPING V. GENERAL
ACCIDENT FIRE INS., 217 SCRA 359
• Held:

• The rights of vessel owner or agent under the Limited

Liability Rule are akin to those of the rights of shareholders
to limited liability under our Corporation Law.

• In both insolvency of a corporation and the sinking of a

vessel, the claimants or creditors are limited in their
recovery to the remaining value of accessible assets.
 RELEVANT PROVISIONS ON
LIMITED LIABILITY RULE
• Art. 587, CoC: The ship agent shall also be civilly liable for the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt
himself therefrom by abandoning the vessel with all her equipment and the freight it may have earned during the
voyage.
• Art. 590: The co-owners of the vessel shall be civilly liable in the proportion of their contribution to the common
fund for the results of the acts of the captain, referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part of the
vessel belonging to him
• Art. 643 (Ibid): If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rights shall be
extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship agent to recover
the advances made.
• If a portion of the vessel or of the cargo, or both, should be saved, the crew engaged on wages, including the
captain shall retain their rights on the salvage, so far as they go, on the remainder of the vessel as well as on the
amount of freightage of the cargo saved;
• But sailors who are engaged on shares shall not have any right whatsoever on the salvage of the hull, but only on
the portion of the freightage saved. If they should have worked to recover the remainder of the shipwrecked
vessel they shall be given from the amount of the salvage an award in proportion of the efforts made and to the
risks encountered in order to accomplish the salvage.
• Art. 837 (Ibid): The civil liability incurred by the shipowners in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all her appurtenances and freight.
• Notes: Art. 837 applies to collision cases only.
 COVERAGE OF THE RULE
• Article 837 applies the principle of limited liability in cases
of collision while Articles 587 and 590 embody the
universal principle of limited liability in all cases.
However, it was explained in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance
Corporation Ltd., that taken together with related articles,
Articles 837, 587 and 590 cover only:
(1) liability to third persons,
(2) acts of the captain, and
(3) collisions.
 EXCEPTIONS
• Where the injury or death to a passenger is due either to the fault of the
ship owner OR to the CONCURRING NEGLIGENCE OF THE SHIP
OWNER AND THE CAPTAIN.

• Where the vessel is insured.

• In workmen’s compensation claims.

• Where vessel is partially lost.

• Liability on repairs made PRIOR to the loss of the vessel.

• Foreclosure of mortgage on the ship.

 SHIPOWNER’S FAULT

• The well-entrenched rule in our jurisprudence is

that a ship owner may be held liable for injuries to
passengers notwithstanding the exclusively real
and hypothecary nature of Maritime Law, if fault
can be attributed to the ship owner. [Negros
Navigation v. CA, 281 SCRA 534]
 CONCURRENT NEGLIGENCE
OF SHIPOWNER & CAPTAIN
• Although the ship agent is liable for the negligent act of
the captain in the care of goods loaded on the vessel, this
liability can be limited through abandonment of the vessel,
its equipment and freightage as provided in Art. 387.

• Nonetheless, there are exceptional circumstances

wherein the ship agent could still be held answerable
despite the abandonment as where loss or injury was due
to fault of SHIPOWNER AND CAPTAIN.
 PARTIAL LOSS

• In the event the vessel is not entirely lost, the

hypothecary nature of the maritime transaction
under Art. 837 of the Code of Commerce will not
apply, UNLESS the shipowner or agent abandons
the vessel. [Luzon Stevedoring v. CA, 156 SCRA
169]
 REPAIRS ON VESSEL

• The limited liability rule in maritime law does not

apply in case where the liability was for repairs on
the vessel that was completed before her loss.
[Government of P.I. v. Insular Maritime Co.. 45 Phil.
805]
 LOSS COVERED BY
INSURANCE
• Where vessel at fault sinks but is insured, the
insurance takes the place of such vessel.

• The liability subsists but only to the extent of the

insurance proceeds.

• The excess is still subject to the hypothecary rule.

[Pedro Vazquez v. CA, 138 SCRA 553]
 ABANDONMENT OF VESSEL
• Abandonment of the vessel, its appurtenances and freightage is an
indispensable requirement before the shipowner can enjoy the
benefits of the limited liability principle.

• In case of collision, abandonment of the vessel is necessary in order

to limit the liability of the shipowner or the agent to the value of
the vessel, its appurtenances and freightage earned in the voyage.

• Only instance abandonment is dispensed with is when the vessel

was entirely lost. [Phil. Shipping Co. v. Garcia, 6 Phil. 281]
 PROTEST
• A written statement by the master of a vessel or any
authorized officer, attested by a proper officer or a notary, to
the effect that damages has been suffered by the ship.
• Protest is required under the Code of Commerce in the
following cases:
1. Arrival under stress
2. Shipwrecked
3. Gone through a hurricane or the captain believes that the
cargo has suffered damage or average
4. Maritime collisions
 ADMIRALTY JURISDICTION
• Amount of demand or claim determines jurisdiction.
• Section 19 (3) of BP 129 (as amended by R.A. No. 7691) otherwise
known as the Judiciary Reorganization Act of 1980 which took effect
on 14 August 1981 provides that the Regional Trial Court has
jurisdiction “(3) In all actions in admiralty and maritime jurisdiction
where the demand or claim exceeds Three hundred thousand pesos
(P300,000.00) or, in Metro Manila, where such demand or claim
exceeds Four Hundred Thousand Pesos (P400,000.00).”
• Otherwise, Metropolitan Trial Court, Municipal Trial Court,
Municipal Circuit Trial Court, as the case may be.
• The proceeding is in rem.
• Substantive law is found in Article 580 of the Code of Commerce
• Procedural law is found in Article 584 of the Code of Commerce.
 SHIP OR VESSEL

• Ship or Vessel - means any kind, class or type of

craft or artificial contrivance capable of floating in
water, designed to be used, or capable of being
used, as a means of floating in water transport in
the domestic trade for the carriage of passengers
or cargo, or both, utilizing its own motive power or
that of another. [R.A. 9295]
 IMPORTANCE OF THE
DEFINITION
• The word ‘vessel’ (Spanish: buque or nave) was not intended to
include all ships, craft or floating structures of every kind without
limitation, and the provisions of that section should not be held to
include minor craft engaged only in river and bay traffic.

• The word ‘nave’, which is used inter-changeably with ‘buque’ means

a “SHIP, A VESSEL WITH DECKS AND SAILS. A deck is not a
feature of the smallest types of watercraft.

• Such type of watercraft is not contemplated in Art. 835 requiring

protest in case of collision. [Lopez v.Dureolo, 52 Phil. 229]
• It is therefore clear that a passenger on a boat like the Jison, in
the case before us, is not required to make protest as a condition
precedent to his right of action for the injury suffered by him in
the collision described in the complaint. Art. 835 does not apply.

• Nevertheless, under Article 836, it is provided that want of

protest cannot prejudice a person not in a condition to make
known his wisher.

• An individual who has suffered a compound fracture of the femur

and received other physical injuries sufficient to keep him in a
hospital for many months, cannot be supposed to have been in a
condition to make protest within 24-hours of such occurrence.
 PRESCRIPTIVE PERIOD ON
VESSELS
• Acquisitive prescription: Good faith – 3 years; bad
faith – 10 years. Prescription doesn’t run in favor
the captain since he holds the position that of a
trustee. [Art. 573]

• Right of pre-emption and legal redemption

available to co-owners to be exercised within 30-
days from sale of the vessel. [Art. 575]
 RULES ON CO-OWNERSHIP
OF VESSEL
• Co-ownership of vessel gives rise to a partnership ipso jure. No agreement
is needed before a partnership is created. {Note: This is one instance of a
partnership coming into existence by mere operation of law. Another
instance when there is commingling of similar good of fungible nature.}

• Majority may perform acts of administration but acts of ownership require

the concurrence of all the co-owners.

• Majority is determined in accordance to the following: 1 vote given to the

co-owner who contributed the least capital, 2 votes to the one who gave
double, et sequitur.
 PECULIAR NATURE OF
VESSELS
• Vessels are considered personal property under civil law.
Similarly under the common law, vessels are personal
property although referred to as a peculiar kind of
personal property.

• Since the term personal property includes vessels, they

are subject to mortgage agreeably to the provisions of
the Chattel Mortgage Law (Act No. 1508, Sec. 2).
(Philippine Refining Co. v. Jarque, GR 41506, 25 Mar. 1935)
• The only difference between a chattel mortgage of a
vessel and of other personalty is that it is not now
necessary for a chattel mortgage of a vessel to be
noted in the register of deeds, but it is essential that a
record of documents affecting title to a vessel be
entered in the record of the Collector of Customs
(now with MARINA by virtue of M.C. 90) at the port
of entry (now at the port of registry, in case of
coastwise vessel).

• Otherwise, a mortgage on a vessel is generally like

other chattel mortgages as to its requisites and validity.
 MORTGAGE OF SHIP (PD
1521)
• Sec. 3. Mortgage of Vessel of Domestic Ownership; records –
(a) No mortgage is valid in respect to such vessel against any
person other than the mortgagor, his heir or assign, and a
person with actual notice thereof unless recorded with the
PCG (now MARINA)
• Sec. 4. Preferred Mortgages: Mortgage is preferred based on
the date of recording if:
- It is recorded with PCG (MARINA)
- An affidavit in good faith is filed together with the record of
mortgage.
- No waiver of preferred status.
 SUIT IN ADMIRALTY (SEC. 10,
PD 1521)
• Preferred mortgage constitutes as a lien upon the vessel. In
case of default, the mortgage lien may be enforced by SUIT IN
REMAINING ADMIRALTY, wherein the vessel itself may be
made a party defendant and be arrested in accordance with
Sec. 11.
• Original jurisdiction: CFI (now depending on the amount of
the claim)
• Requirement of notice by publication and actual notice to:
- the master or other ranking officer, or caretaker of the vessel;
and
- Any person who has recorded a notice of claim of an un-
discharged lien upon the vessel.
 ARREST OF VESSELS (SEC. 11,
PD 1521)
• Upon filing of petition for judicial foreclosure of a Preferred Ship Mortgage
or immediately thereafter,

• Applicant may apply ex-parte for an order for the arrest of the mortgaged
vessel.

• Judge to immediately issue arrest order, if it is made to appear by affidavit of

the applicant, or of some other person who personally know the facts that a
default in the mortgage has occurred and that applicant files a bond
executed to the adverse party in an amount to be fixed by the judge, not
exceeding the applicant’s claim, conditioned that the latter will pay all the
costs which may be adjudged to the adverse part and all damages sustained.
 PROCEDURE IN DISCHARGE
OF ARREST (SEC. 12, PD 1521)

• File counter-bond in an amount double of the

claim; or

• Apply for order on the ground of improper or

irregular issuance of order.
EXTRAJUDICIAL FORECLOSURE
OF VESSEL (SEC. 14, PD 1521)
• Applicable provisions in Chattel Mortgage Law govern.

• For purpose of taking possession of the vessel, the foreclosing

creditor to secure from RTC Judge of the province where the
vessel may be our or where the creditor or debtor resides,
an order for the arrest or seizure of the vessel.

• Upon issuance of the order, the sheriff to immediately take

possession of the vessel for the purpose of foreclosure and
sale.
 FOREIGN SHIP MORTGAGE
(SEC. 15, PD 1521)
• Preferred mortgage in foreign ship includes those
duly recorded by virtue of Sec. 4 (supra) and:

• Preferred mortgage lien in foreign ship is

subordinate to maritime liens for repairs, supplies
towage, use of drydock or marine railway, or other
necessaries performed or supplied in the
Philippines.
 HOW PROCEEDS OF SALE
DISPOSED (SEC. 17, PD 1521)
• Preferred mortgaged lien takes priority over all claims against
the vessel. Exceptions:
1. Expenses and fees allowed and costs taxed by the court and
taxes due to the government.
2. Crew’s wages.
3. General average.
4. Salvage, including contract salvage.
5. Maritime liens arising prior in time to the recording of the
preferred mortgage.
6. Damages arising out of tort.
7. Preferred mortgaged registered prior in time.
 SUIT IN PERSONAM IN
ADMIRALTY (SEC. 18, PD 1521)
• Allows the creditor to bring suit in personam in
admiralty against the mortgagor for the amount of
the outstanding mortgage indebtedness even if
secured by the vessel.

• If the debt is also secured by other realty or

personalty, the creditor may proceed upon the
same.
 MARITIME LIEN
• In general terms, maritime lien is a privileged claim on a vessel for some service rendered to it
to facilitate its use in navigation.

• A special property right in a ship given to a creditor by law as security for a debt or claim
subsisting from the moment the debt arises with right to have the ship sold and debt paid out
of the proceeds.

• In the Philippines, it is akin to a mortgage lien in that in spite of the transfer of ownership, the
lien is not extinguished. It is inseparable from the vessel and until discharged, it follows the
vessel.

• The expression action in rem is, in its narrow application, used only with reference to certain
proceedings in courts of admiralty wherein the property alone is treated as responsible for
the claim or obligation upon which the proceedings are based. Thus, it subsists notwithstanding
the subsequent transfer of the vessel.
 MARITIME LIEN FOR
NECESSARIES (SEC. 21, PD 1521)
• Repairs, supplies, towage, use of dry-dock or marine railway,
or other necessaries were furnished to the vessel.

• The work is done on orders of the ship owner or person

authorized by the owner.

• Such credit must be alleged or proved that it was given to

the vessel.

• Enforceable by suit in rem.

 MARINA M.C. 100 (GUIDELINES ON
ANNOTATION/CANCELLATION OF
MORTGAGE)
• Documentary requirements:

• Letter of Intent & Duly accomplished application form;

• Duly notarized mortgage contract;

• Proof of payment of documentary stamp tax with the BIR; and

• Original copy of CO and CVR.

• Note: The annotation of mortgage to be reflected at the back of the

CVR and CO.
 REPUBLIC ACT 9295
THE DOMESTIC SHIPPING
DEVELOPMENT ACT OF 2004
 STATE POLICIES ON SHIPPING
(SEC. 2)
• (a) promote Filipino ownership of vessels operated under Philippine flag;
• (b) attract private capital to invest in the shipping industry by creating a healthy and
competitive investment and operating environment;
• (c) provide necessary assistance and incentives for the continued growth of the
Philippine domestic merchant marine fleet;
• (d) encourage the improvement and upgrading of the existing domestic merchant
marine fleet and Filipino crew to meet international standard;
• (e) ensure the continued viability of domestic shipping operations; and
• (f) encourage the development of a viable shipbuilding and ship repair industry to
support the expansion and modernization of the Philippine domestic merchant marine
fleet and its strict adherence to safety standards which will ensure the seaworthiness of
all sea-borne structures.
 IMPORTANT TERMS
• Domestic Shipping - means the transport of passengers or cargo,
or both, by ships duly registered and licensed under Philippine
law to engage in trade and commerce between Philippine ports
and within Philippine territorial or internal waters, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or incidental, with or without fixed routes,
and done for contractual or commercial purposes.

• Domestic Trade - means the sale, barter or exchange of goods,

materials or products within the Philippines.
• Domestic Ship Operator" or "Domestic Ship Owner" - means a citizen of the
Philippines, or a commercial partnership wholly owned by Filipinos, or a corporation
at least sixty percent (60%) of the capital of which is owned by Filipinos, which is duly
authorized by the Maritime Industry Authority (MARINA) to engage in the business
or domestic shipping.

• Shipper - means any person, partnership or corporation who shall procure for itself
the services of a domestic ship operator for the carriage of its cargo in the domestic
trade upon payment of proper compensation.

• Certificate of Public Convenience - means the license or authority issued by MARINA

to a domestic ship operator to engage in domestic shipping.

• Cargo Handling Equipments - means any machinery gear or equipment used by the
ship operator or a duly authorized and licensed port operator to service or handle
cargo, on board the vessel, at the pier, or in the terminal or container yard such as, but
not limited to, cranes, forklifts, top lift, stacker, tractor heads, containers, pallet boards,
and the like, including all spare parts, replacement parts, appurtenances, accessories,
articles, supplies, and material thereof.
• Shipbuilding - means the design, construction, launching
and outfitting of all types of ships and watercraft;

• Ship repair - means the overhaul, refurbishment,

renovating, improvement, or alternation of the hull,
machineries, equipment, outfits and components of all
types of ships;

• Shipyard - means the shipbuilding or repair facilities

which have the capability to lift vessels above the
waterline in order to effect ship work vessels,
appendages, structure, machinery and equipment.
 INVESTMENT INCENTIVES TO
DOMESTIC SHIPPING INDUSTRY (SEC. 4)
• (a) Exemption from value-added tax on the importation and local
purchase of passenger and/or cargo vessels of one hundred fifty
(150) tons and above, including engine and spare parts of said vessels.

• Vessels to be imported must comply with the age limit requirement,

at the time of acquisition counted from the date of the vessel’s
original commissioning, as follows: 1) For passenger and/or cargo
vessels, the age limit is fifteen (15) years old, 2) For tankers, the age
limit is ten (10) years old, and 3) For high-speed passenger craft, the
age limit is five (5) years old;
• (b) Exemption from value-added tax on the importation of
life-saving equipment, safety and rescue equipment and
communication and navigational safety equipment, steel
plates, and other metal plates including marine-grade
aluminum plates, used for transport operations.
CONDITIONS IN THE GRANT OF (a) & (b):
• Not manufactured domestically in sufficient quantity, of
comparable quality and at reasonable prices;
• Directly imported by a MARINA-registered domestic
shipping operator;
• Reasonably-needed and will be used exclusively by the
registered domestic shipping operators in its transport
operations;
• Approval of a MARINA was obtained prior to the
importation of said articles;
• Valid up to ten (10) years from effectivity.
DEREGULATION OF THE DOMESTIC
SHIPPING INDUSTRY (SEC. 8)
• Domestic ship operators authorized to establish their
own domestic shipping rates provided that effective
competition is fostered and public interest is served.

• MARINA shall monitor all shipping operations and

exercise regulatory intervention where it is
established, after due process that public interest
needs to be protected and safeguarded.
 SAFETY STANDARDS (SEC. 9)
• All vessels shall at all times be in seaworthy condition,
properly equipped with adequate life-saving, communication,
safety and other equipment, operated and maintained in
accordance with the standards set by MARINA, and
manned by duly licensed and competent vessel crew.

• The MARINA given the power to inspect vessels and all

equipment on board vessels to ensure compliance with
safety standards.
 JURISDICTION OF MARINA
(SEC. 10)
• Register vessels;

• Issue certificates of public convenience, or any extensions or amendments thereto, authorizing the
operation of all kinds, classes and types of vessels in domestic shipping: Provided, That no such
certificate shall be valid for a period of more than twenty-five (25) years;

• Modify, suspend or revoke at any time, upon notice and hearing, any certificate, license or
accreditation it may have issued to any domestic ship operator;

• Establish and prescribe routes, zones of areas of operations of domestic ship operators;

• Require any domestic ship operator to provide shipping services to any coastal area, island or
region in the country where such services are necessary for the development of the area, to
meet emergency sealift requirements, or when public interest so requires;

• Set safety standards for vessels in accordance with applicable conventions and regulations;
• Require all domestic ship operators to comply with operational and safety
standards for vessels set by applicable conventions and regulations, maintain its
vessels in safe and serviceable condition, meet the standards of safety of life at sea
and safe manning requirements, and furnish safe, adequate, efficient, reliable and
proper service at all times;

• Inspect all vessels to ensure and enforce compliance with safety standards and
other regulations;

• Ensure that all domestic ship operators shall have the financial capacity to provide
and sustain safe, reliable, efficient and economic passenger or cargo service, or
both;

• Determine the impact which any new service shall have to the locality it will serve;

• Adopt and enforce such rules and regulations which will ensure compliance by
every domestic ship operator with required safety standards and other rules and
regulations on vessels safety;
• Adopt such rules and regulations which ensure the reasonable stability of passengers and
freight rates and, if necessary, to intervene in order to protect public interest;

• Hear and adjudicate any compliant made in writing involving any violation of this law or the
rules and regulations of the Authority;

• Impose such fines and penalties on, including the revocation of licenses of, any domestic ship
operator who shall fail to maintain its vessels in safe and serviceable condition, or who shall
violate or fail to comply with safety regulations;

• Investigate any complaint made in writing against any domestic ship operator, or any shipper,
or any group of shippers regarding any matters involving violations of the provisions of this
Act;

• Upon notice and hearing, impose such fines, suspend or revoke certificates of public
convenience or other license issued, or otherwise penalize any ship operator, shipper or
group of shippers found violating the provisions of this Act; and

• Issue such rules and regulations necessary to implement the provisions of this Act: Provided,
That such rules and regulations cannot change or in any way amend or be contrary to the
intent and purposes of this Act.
PROHIBITED ACTS AND PRACTICES OF
DOMESTIC SHIP OPERATORS (SEC. 16)
❑Operate without a valid certificate of public convenience,
accreditation or other form of authority required by this Act;
❑Refuse to accept or carry any passenger or cargo without
just cause;
❑Fail to maintain its vessels in safe and serviceable condition,
or violate safety rules and regulations;
❑Fail to obtain or maintain adequate insurance coverage;
❑Fail to meet or maintain safe manning requirements; and
❑Such other acts which the MARINA shall determine, after
due notice and hearings, to be detrimental or prejudicial to
the safety, stability and integrity of domestic shipping.
CPC ISSUANCE (SEC. 2, RULE IV, IRR
OF R.A. 9295 ON DEREGULATION)
• Power of MARINA to issue CPC or any amendments/extensions/
renewals.

Requirements:

• Economic and beneficial effect which the proposed service shall

have to the port, province or region which it proposes to serve; and

• Financial capacity of the domestic shipowner/operator to provide

and sustain safe, reliable, adequate, efficient and economical service
in accordance with the standards set by government regulations.
AMENDMENT TO CPC (SEC. 3,
RULE IV, IRR)
• Permanent Addition or Deletion of a route/port/link; or,

• Permanent Addition/ Reduction/ Replacement of Ship/Fleet

or Change in Ship’s Name; or,

• Permanent Addition/ Reduction/ Replacement of Ship/Fleet

or Change in Ship’s Name; or,

• Change in name of the entity/corporation/partnership/

cooperative.
VALIDITY OF CPC (SEC. 5,
RULE IV, IRR)
Years of Operation Validity of CPC

More than 10 years 25 years

More than 5 years up to 10 years 15 years

5 years and below 10 years

QUALIFICATION REQUIREMENTS
(SEC. 6, RULE IV, IRR)

• Must be a MARINA-registered shipowner/operator per

MARINA MC 79/79-A or their subsequent amendments.
• Must be financially capable to provide and sustain safe,
reliable, adequate, efficient and economical service in
undertaking the proposed shipping service.
Formula on Financial Capability: Capitalization = (Equity –
fixed assets net of long-term liabilities) + total depreciation
• Must provide a service that has economic and beneficial
effect on the port, province or region it proposes to serve.
JURISDICTIONAL REQUIREMENTS
(SEC. 8, RULE IV, IRR)
• Affidavit of publication with the newspaper
clipping;

• Copy of the whole newspaper where the Order

was published;

• Photographs showing proof of the required

posting of Order.
 SAFETY STANDARDS (SEC. 1,
RULE VI, IRR)
• All ships shall, at all times, be in seaworthy condition as to
their hull and machinery

• Properly outfitted with adequate navigational aids and

equipment, firefighting, life-saving, communication, and other
safety appliances/equipment.

• Operated and maintained in accordance with prescribed

standards, and manned by duly licensed and competent ship
crew.
 RATES (SEC. 1, RULE VIII, IRR)

• Domestic shipowners/operators are authorized to

establish/fix their own domestic shipping rates,
passenger or cargo rates or both.

• Limitation: Effective competition is fostered and public

interest is served.

• Effectivity: 7 calendar days from the date of publication.

 CONDITIONS IN FIXING
RATES (SEC. 2, RULE VIII, IRR)
• Shipowners/operators with Entity/Company CPC to
submit under oath with the MARINA their Notice for
the adoption of initial/ subsequent upward or downward
adjustment of deregulated rates in a prescribed form.

• The notice shall indicate, among others, the name of

covered ship(s), authorized route(s)/link(s), rate(s) per
route/link and the grounds for the adjustment.
 PUBLICATION REQUIREMENT
ON ADJUSTED RATES
• The notice shall be published in any of the five (5) major
newspapers of national circulation, if the route(s)/area(s) of
operation to be served is national and/or inter-regional in scope.

• If the route(s)/area(s) to be served is local or intra-regional in

scope, publication in a newspaper of local circulation is sufficient.

• And, posting of the notice in in all conspicuous places at the

affected port(s), vessel(s), company premises, passenger
terminals and ticketing office(s).
 INSTANCES WARRANTING MARINA
INTERVENTION (SEC 4, RULE VIII, IRR)
• Monopoly of a route/link, lack of effective competition in a route/link,
and practices which constitute combinations in restraint of trade.

• Any complaint against the rates charged and/or services rendered

by the shipowners/operators provided sufficient basis/justification is
submitted.

• Any adverse findings/recommendations as a result of monitoring

activities undertaken by the MARINA.

• Other analogous instances.

 COMPULSORY INSURANCE
COVERAGE (SEC. 1, RULE IX, IRR)
• (1) Not less than Php 200,000.00 per manifested passenger;

• (2) Adequate insurance coverage for cargo, in an amount to be

computed in accordance with existing laws, rules and regulations,
and the total amount of such coverage shall be equivalent to the
total cargo capacity being offered by the vessel.

• (3) If a domestic shipowner/operator should offer both passenger

and cargo service, then the total insurance coverage shall be in the
total sum equivalent to that stipulated in paragraphs (1.1) and (1.2)
of this Section.
 AMOUNT OF INSURANCE IF
OPERATING MORE THAN 1 SHIP

• The amount equivalent to the total authorized

number of passengers, or total cargo capacity, or
both, of the largest operating ship.

• But must not exceed the value of such ship.

 PROHIBITED ACTS (SEC. 1,
RULE XII, IRR)
• Operating without a valid certificate of public convenience, accreditation or other form of
authority.
• Refusal to accept or carry any passenger or cargo without just cause, except for tramp
operations.
• Failure to maintain the vessels in safe and serviceable condition, or violation of the safety rules
and regulations.
• Failure to obtain or maintain adequate insurance coverage.
• Failure to meet or maintain safe manning requirements.
• Failure to submit the required Quarterly Report and an audited Annual Report of Operations
and Finances, attaching the copy of the Official Receipt (OR) of Quarterly and Monthly
Common Carriers Tax Payments to the Bureau of Internal Revenue.
• Other detrimental or prejudicial to the safety, stability and integrity of domestic shipping.
• Those prohibited acts defined in existing MARINA Circulars.
 POWERS OF MARINA (RULE
XIV, IRR)

• Power to Investigate

• Power to Hear and Adjudicate

• Power to Issue Summons

 RULES ON APPEALS TO MARINA
REGIONAL OFFICES’ CPC DECISIONS
(RULE XV, IRR)
• Order, ruling, decision or resolution rendered by
MARINA Regional Office relating to CPC application
• MR – 15 days from receipt;
• If denied, appeal to Administrator – 15 days from receipt.
• If denied by MARINA Administrator:
- ADMINISTRATIVE APPEAL to the MARINA Board
within 15 days from receipt; or
- Special Civil Action on Certiorari with CA within 30
days from receipt.
 ALL OTHER DECISIONS
• MR – 15 days from receipt;

• If denied, appeal to MARINA Administrator – 15

days from receipt.

• If denied by MARINA Administrator:

ADMINISTRATIVE APPEAL to the MARINA
Board within 15 days from receipt.
 PERFECTION OF APPEAL
• File a Notice of Appeal with the MARINA Administrator
and the concerned CO/MRO Director/OIC.

• Copy to be served upon the adverse party.

• Within 15 days from receipt of the appealed from

decision, etc.

• Payment of Docket Fee of P1,000.

 TEMPORARY TAKE-OVER OF
OPERATIONS (SEC. 1, RULE IX, IRR)
• In times of national emergency;

• When the public interest so requires;

• Under reasonable terms prescribed by the Flag state;

• Flag state may temporarily take over or direct the operations of any vessel
engaged in domestic trade and commerce or prescribe its rates or routes of
operation.

• Immediately upon the cessation of the emergency, the State shall immediately
reinstate to the domestic shipowner/operator the operation of the ship under the
same terms and conditions existing prior to the occurrence of the emergency.
PERSONS WHO TAKE PART IN
MARITIME COMMERCE
 SHIP OWNER AND SHIP
AGENT
• Ship owner – the person primarily liable for damages
sustained in the operation of vessel.

• Ship agent – the person entrusted with provisioning of the

vessel, or who represents her in the port in which she
happens to be.

• Both are civilly liable for the acts of the captain and for the
obligations contracted by the him to repair, equip, and
provision the vessel. [Art. 586, Code of Commerce]
 DOMESTIC SHIPOWNER /
OPERATOR
• A citizen of the Philippines, or a commercial partnership
wholly owned by Filipinos, or a corporation at least sixty
percent (60%) of the capital of which is owned by
Filipinos, which is duly accredited by the MARINA under
Memorandum Circular No. 79/79-A or their subsequent
amendments to engage in the business of domestic
shipping, which may include cooperative or association
duly registered with relevant government agency. [IRR,
R.A. 9295]
 CAPTAIN AND MASTERS
• Captain – those who govern vessels that navigate the
high seas or ships of large dimensions and importance,
although they may be engaged in coastwise trade.

• Masters – those who command smaller ships engaged

exclusively in the coastwise trade.

• Note: For purposes of maritime commerce, both have

the same meaning, i.e. they command ships.
 POWERS AND FUNCTIONS
OF CAPTAINS (MASTERS)
• Nature of his position: confidential and managerial.
• 3 distinct roles he performs:
(1) As general agent. If he is also a co-owner, his agency
becomes one coupled with interest. He may not be dismissed
if he is a co-owner or the partnership agreement stipulates as
a condition as ship captain [see Art. 602 & 606 -607];
(2) As commander and technical director of the vessel; and
(3) As representative of the country under whose flag he
navigates.
 VESSEL PILOT

• A person duly qualified, and licensed, to conduct a vessel into

or out of ports, or in certain waters.
• In a broad sense, the term ‘pilot’ includes:
- Those whose duty it is to guide vessels into or out of ports,
or in particular waters; and
- Those entrusted with navigation of vessels on the high seas.
• Compulsory pilotage is enforced in the Port of Manila, Port of
Cebu, Port of Tacloban, among others.
 PRO HAC VICE NATURE OF
POSITION OF PILOT
• Under English and American authorities, generally
speaking, the pilot supersedes the master for the time
being in the command and navigation of the ship, and his
order must be obeyed in all matters connected with her
navigation.
• He becomes master pro hac vice and should give all
directions as to speed, course, stopping and reversing,
anchoring, towing and the like.
• And when a licensed pilot is employed in a place where
pilotage is compulsory, it is his duty to insist on having
effective control of the vessel or to decline as pilot. [Far
Eastern Shp., v. CA, G.R. No. 130068, Oct. 1, 1998]
WHEN MASTER MAY INTERFERED
OR EVEN DISPLACE PILOT
• When Pilot is obviously incompetent or intoxicated;

• In cases of danger which pilot does not foresee;

• In all cases of great necessity.

• To advise or offer suggestions to the pilot considering that he is still in command of

the vessel, except so far as her navigation is concerned.

• To see that there is sufficient watch on deck and that the men are attentive to their
duties, etc.

• Failure on the part of the Master to comply with above duties makes him personally
liable for resulting damage cause. [Ibid]
 LIABILITY OF PILOT
• Rule: a pilot is personally liable for damages caused by his own negligence
or default to the owners of the vessel and to third parties for damages
sustained in a collision.

• Negligence of Pilot is known as ‘MARITIME TORT’

• As held In Far Eastern Shipping:

• In the United States, the owners of a vessel are not personally liable for
the negligent acts of a compulsory pilot, but by admiralty law, the fault or
negligence of a compulsory pilot is imputable to the vessel and it may be
held liable therefor in rem.
• Where, however, by the provisions of the statute the pilot is
compulsory only in the sense that his fee must be paid, and is
not in compulsory charge of the vessel, there is no exemption
from liability.

• Even though the pilot is compulsory, if his negligence was not

the sole cause of the injury, but the negligence of the master
or crew contributed thereto, the owners are liable.

• But the liability in rem does not release the pilot from the
consequences of his own negligence. The rationale for this
rule is that the master is not entirely absolved of responsibility
with respect to navigation when a compulsory pilot is in
charge.
OTHER OFFICERS AND CREW
• Deck Officer – an officer qualified in accordance with the provision
of the International Convention on Standards of Training,
Certification and Watchkeeping for Seafarers (STCW) 1978, as
amended, Chapter II.

• Chief Engineer – a senior licensed marine engine officer responsible

for the mechanical propulsion and the operation and maintenance
of the mechanical and electrical installations of the ship.

• Engineer Officer – an officer qualified in accordance with the

provision of (STCW) 1978, as amended, Chapter III.
• Radio Officer –a person holding an appropriate certificate issued and recognized by the
MARINA under the provisions of the Radio regulations.

• Ratings – a member of the ship’s crew other than the master or an officer.

• Major Patron (MAP) – a marine deck officer duly registered and certificated to act as officer or
master of vessel of not more than 500 GT navigating in the major coastwise trade routes within
the territorial limits of the Philippines.

• Minor Patron (MIP) – a marine deck officer duly registered and certificated to act as officer or
master of vessel of not more than 250 GT navigating within a specified body of water in the
minor coastwise trade route in the Philippines.

• Marine Diesel Mechanic (MDM) – a person authorized by MARINA to operate and maintain
the ship’s diesel engines or the qualification/license to act as such.

• Supercargoes – administrative officers of the ship with duties to keep an account and record of
their transaction. Powers and duties of the captain with regard to that part of the administration
shall cease when thee is a supercargo.

• Supernumerary - a person who is not a regular member of the crew but performing functions
appropriate to the certificate possessed. 
CHARTER PARTY
 DEFINITION OF A CHARTER
PARTY
• A written contract whereby the ship owner or the
ship agent leases the vessel to transport passengers or
cargo for a fixed price. [Art. 652, Code of Commerce]

• A contact by which an entire ship or some principal

part thereof, is left by the owner to another person
for a specified time or use. [Caltex Philippines, Inc. v.
Sulpicio Lines, Inc., 315 SCRA 709]
 OBLIGATION OF THE
CHARTERER
• Charterer, before transporting its cargo, is of no
obligation to ensure that the vessel it chartered
complied with all legal requirements. The duty
rests upon the common carrier as it is the one
engaged in ‘public service’. [Caltex v. Sulpicio Lines,
infra]
 TERMS
• Primage – the bonus to be paid to the captain after a successful voyage.

• Demurrage – A penal clause intended to compensate the owner of the

vessel for its non-use.

• Lay days – The period when the vessel will be delayed in port for loading
and unloading.

• Deadfreight –The portion of the cargo under a charter not loaded. It is

also used as the amount recoverable by the ship owner from the
charterer for that portion of the ship’s capacity that the latter failed to
occupy despite the stipulation in the charter party.
 DEMURRAGE
• In its strict sense, demurrage is the compensation provided for in
the contract of affreightment for the detention of the vessel
beyond the lay time or that period of time agreed on for loading
and unloading of cargo and is given to compensate the ship owner
for the non-use of the vessel. [National Steel v. CA, 283 SCRA 45]

• Demurrage is the sum fixed in a charter party as remuneration to

the ship owner for the detention of his vessel beyond the number
of days allowed by the charter party for loading or unloading or
for sailing. [NFA v. CA, 311 SCRA 700]
 NFA V. CA, 311 SCRA 700
• The shipper or charter is liable for the payment of demurrage claims when he exceeds the period of loading
or unloading as agreed upon or the agreed lay days. The period for such may or may not be stipulated in the
contract. A charter party may either provide for a fixed lay days or contain general or indefinite words such as
‘customary quick dispatch’ or ‘as fast as the steamer can load’.

• Customary quick dispatch implies that loading and unloading of the cargo should be within a reasonable
period of time. Due diligence should be exercised according to the customs and usages of the port or ports of
call.

• The circumstances obtaining at the time of loading and unloading are to be taken into account.

• When the provision is for ‘demurrage/dispatch: NONE’ it will be deemed a waiver of the right to claim
demurrage.

• Delay in loading or unloading, to be deemed as demurrage, runs against the charterer as soon as the vessel is
detained for an unreasonable length of time from the arrival of the vessel because no available berthing space
was provided for the vessel due to the negligence of the charterer or by reason of the circumstances caused
by the fault of the charterer.
 KINDS OF CHARTER PARTY
• Contract of Affreightment – one whereby the owner of the vessel
leases a part or all of its space to haul goods for others. It is a contract
for special services to be rendered by the ship owner. The ship owner
RETAINS the possession, command and navigation of the ship, the
charterer merely having use of the space in the vessel in return for his
payment.

• Bare-boat or Demise Charter – where the shipowner turns over

possession of his vessel to the charterer, with the latter undertaking to
provide the crew, victuals, supplies and fuel during the term of the
charter. Charterer is owner PRO HAC VICE.
 TWO CLASSES OF
AFFREIGHTMENT

• Voyage Charter –The vessel is leased to the

chartered for a single voyage only;

• Time Charter – The vessel is leased for a fixed

period of time.
 SUBSTANTIVE PROVISIONS
• If charterer’s cargo is not sufficient to fill up 3/5 of the capacity of the vessel, carrier has the right to unload the cargo
and put it on a smaller vessel at the expense of the charterer. If cargo exceeds 3/5 of the capacity, the carrier cannot
exercise the right. [Arts. 670 & 671, CoC]

• If vessel has been chartered in whole by one party, the owner cannot receive the cargo of any other person as the
charter party becomes an exclusive contract. [Art. 672]

• The owner of the vessel is liable to the charterer for damages in case the captain unduly delays the voyage. [Art. 673]

• If charterer brings more than that agreed upon, the carrier may accept the increase in cargo and demand increase of
freightage provided the vessel is not overloaded. [Art. 674]

• If vessel has been chartered to load cargo in another port and upon arrival in that port there is no cargo delivered,
the captain has two options:

a) Look for other cargo; or

b) After expiry of lay days there is still no cargo, the captain should file a marine protest and return to home port
in full ballast. The charterer should pay freightage in full. [Art. 675]
• No right to freightage if charterer can prove that the vessel is not in condition to navigate. [Art. 676]

• Charter may sub-charter where there is no express prohibition. [Art. 679]

• Charterer who cannot fill the vessel is liable for full freightage. [Art. 680]

• Charterer is liable for damages if loaded cargo subjects the vessel to forfeiture or confiscation. Under
Art. 356, carrier can open the packages of shipper to find out whether they contain items which may
subject the vessel to forfeiture. [Art. 681]

• If merchandise should have been shipped for purpose of illicit commerce, and were taken on board
with knowledge of the person from whom the vessel was chartered or of the captain, the captain is
jointly liable with the ship owner for all the losses which may cause the other shippers. [Art. 682]

• Where the vessel is in need of repairs, charterer must wait until vessel is repaired. [Art. 683]

• Before beginning of the trip, charterer may unload the cargo by paying ½ of the freightage. [Art. 685
in relation to Art. 688]

• Charterer is under obligation to pay the freightage after the discharge of the cargo. [Art. 686]

• Charterer and shippers cannot abandon the cargo unless it consist of liquids and ¾ leaks out due to
inherent defect of the cargo and with not more than ¼ remaining in the container. [Art. 687]
 OTHER RULES
• If merchandise sold to make necessary repairs, charterer shall still pay for the freightage.
[Art. 659]

• If merchandise is jettisoned, lost at sea or seized by pirates, no obligation to pay

freightage. Considered as general average. [Arts. 660 & 661]

• Merchandise damaged due to inherent defect: pay full freightage. [Art. 663]

• Where payment is based on weight and the cargo increases in weight during the
voyage, the charterer must pay the increase. [Art. 664]

• Cargo carried is subject to retaining lien by the ship owner. Retaining lien – while in
possession; Carrier’s lien – subsists up to 30 days from date of release of cargo. [Arts.
665 - 667]
VALID RESCISSION BY CHARTERER OF
CHARTER PARTY (ARTS. 688-690, COC)
• Before loading by paying ½ of the freightage agreed upon. The consent of ship owner is NOT
NECESSARY. Mere notice to him is sufficient. {Note: This is the 1st distinction between charter
party and in ordinary lease. In lease, none of the parties may unilaterally cancel the contract without
paying the full consideration plus damages};

• When the vessel is not up to the capacity agreed upon or the flag under which she sails differs
from that agreed upon. No obligation to pay the freightage.

• When the vessel is not placed at the disposal of the charterer. No obligation to pay the freightage.

• When the vessel returns due to pirates or to bad weather and charterer decides to unload. He
must pay the full freightage.

• When the vessel returns for repairs. If repairs take less than 30 days, charterer must pay in full the
freightage; if it exceeds 30 days, he must pay that portion of the freightage proportionate to the
distance covered.
 TOTAL RESCISSION BY THE
SHIP OWNER (ART. 689)
• When the charterer fails to load the vessel and lay days have expired.
In this case, charterer is under obligation to pay ½ of the freightage.

• When the owner sells the vessel and the new owner, despite
knowledge of the charter party, decides to load the vessel with his
own cargo. There is no obligation on the part of the ship owner to
compensate the charterer. But if the new owner has no cargo to load,
he must respect the charter party. {Note: This is the 2nd distinction
between charter party and in ordinary lease. In ordinary lease
contract, if the buyer of the object of lease was aware of the lease, he
must respect the contract.}
 TOTAL RESCISSION DUE TO
FORTUITOUS EVENT (ART. 690)
• War

• Blockade

• Prohibition to receive cargo

• Embargo of vessel by a Government

• Inability of vessel to navigate due to no fault of the captain

or ship agent.
BOTTOMRY AND
RESPONDENTIA
 CONCEPTS
• Bottomry: A maritime contract whereby the owner of a ship
borrows for the use, equipment or repair of the vessel, for a
definite term, and pledges the ship (or the keel or bottom of the
ship pars pro toto) as security, with the stipulation that if the ship
is lost during the voyage or during the limited time on account
of the perils enumerated, the lender shall lose his money.

• Respondentia: A maritime contract where it is the goods, or

some part thereof, are hypothecated as security for a loan, the
repayment of which is dependent upon maritime risks.
DISTINGUISHED FROM SIMPLE
LOAN
• Firstly, in bottomry & respondentia, rate of interest is not subject to the Usury Law on account of the
extraordinary risks involved while in simple loan, the rate of interest must not exceed the ceiling fixed by
the Usury Law (note: read now as unconscionable).

• Secondly, in the former, there must necessarily be a marine risk, the existence of which must be duly
established while there is no need for such risk under the latter.

• Thirdly, in the former, it must be executed in accordance with form and manner required in the Code of
Commerce while in the latter, the formal requisites on contract apply.

• Fourthly, loan on bottomry or respondentia must be recorded in the registry of vessels in order to bind
third persons while no such registration is required in simple loan.

• Lastly, in the former, preference is extended to the last lender if there are several lenders upon the theory
that were it not for the last lender, then the prior lenders would not have benefited from the preservation
of the security. Whereas in the latter, the first lender, as a general rule, enjoys preference over subsequent
ones. [Art. 730, CoC]
 COMMON ELEMENTS OF
BOTTOMRY AND RESPONDENTIA

• Exposure of security to marine peril. [Art. 732]

• Obligation of debtor conditioned only upon the

safe arrival of the security at the point of
destination.
 WHO MAY CONTRACT

• Bottomry: General rule – only the owner. If owner

is absent – the captain. [Art. 728]

• Respondentia: only the owner of the cargo.

 HYPOTHECARY NATURE OF
BOTTOMRY & RESPONDENTIA
General Rule:
• The loss of the security, i.e. vessel in bottomry or cargo in
respondentia, extinguishes the obligation.
Exceptions:
1.Due to inherent defect (cargo);
2.Due to barratry on the part of the captain, i.e. malfeasance;
3.Due to fault or malice of borrower;
4.Vessel was engaged in contraband; and
5.Cargo loaded different from that agreed upon.
 OTHER RELEVANT
•
PROVISIONS
No bottomry on the salaries of the crew. [Art. 725]

• If loan given in excess of security through overvaluation by borrower, the excess must be returned with legal interest.
[Art. 726]

• When respondentia loan is not all utilized for the cargo, the excess must be returned. [Art. 727]

• If the security in bottomry or respondentia is not subject to a marine peril, it becomes an ordinary loan. [Art. 729]

• Lenders of bottomry and respondentia must contribute to the general average once jettison has made possible the
safe arrival of the security. [Art. 732]

• Exposure to marine peril takes place from the time the anchors are a weighed at the port of departure until anchors
are dropped at the port of destination. [Art. 733]

• In case of shipwreck and there is salvage, loan will depend on the repayment on what may be salvaged. [Art. 734]

• The concurrence of bottomry loan with insurance, the insurable interest of the owner of the vessel is the value of the
vessel less the loan in bottomry, in reference to Sec. 101 of the Insurance Code. [Art. 735]

• Failure to pay the premium on time of bottomry or respondentia loans gives rise to liability for legal interest (delay ex
re). [Art. 736]
AVERAGES
 DEFINED
• Any damage deliberately caused, or any expense deliberately incurred due
to a marine peril and because of which the vessel and/or cargo is saved.

• Art. 806: All extraordinary or accidental expenses which may be incurred

during the voyage in order to preserve the vessel, the cargo, or both.

• Excludes: Petty and ordinary expenses incident to navigation, e.g., pilotage,

lighterage, towage, anchorage, inspection, health, quarantine, lazaretto [i.e.,
quarantine station for maritime travelers] , and other so-called port
expenses, costs of barges and unloading until the merchandise is place in
the wharf, and any other usual expenses in navigation.
 KINDS
• Particular (or Simple) Average – All the damages and expenses
caused to the vessel or to her cargo which have NOT INURED
TO THE COMMON BENEFIT AND PROFIT of all the persons
interested in the vessel and her cargo. The damages sustained shall
be borne by the owner of the vessel or the goods only. [Art. 809]

• General Average – All the damages and expenses which are

DELIBERATELY caused in order to save the vessel, its cargo or
both, AT THE SAME TIME, from REAL AND KNOW RISKS. [Art.
811]
 EXAMPLES OF PARTICULAR
AVERAGE (ART. 809)
• Losses suffered by the cargo from the time of its embarkation until it is
unloaded, either on account of inherent defect of the goods or by reason
of an accident of the sea or force majeure, and the expenses incurred to
avoid and repair the same.

• Losses and expenses suffered by the vessel in its hull, rigging, arms, and
equipment, for the same causes and reasons, from the time it puts to sea
from the port of departure until it anchors and lands in the port of
destination.

• Losses suffered by the merchandise LOADED ON DECK, except in

coastwise navigation, if the marine ordinances allow it.
• The wages and victuals of the crew when the vessel is detained or embargoed by
legitimate order or force majeure, it the charter has been contracted for a fixed sum for
the voyage.

• The necessary expenses on arrival at a port, in order to make repairs or secure

provisions.

• The lowest value of the goods sold by the captain in arrivals under stress for the
payment of provisions and in order to save the crew, or to meet any other need of the
vessel, against which the proper amount shall be charged.

• The victuals and wages of the crew while the vessel is in quarantine.

• The loss inflicted upon the vessel or cargo by reason of an impact or collision with
another, if it is accidental and unavoidable. If the accident should occur through the fault
or negligence of the captain, the latter shall be liable for all the losses caused.

• Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or
of the crew, without prejudice to the right of th owner to recover the corresponding
indemnity from the captain, the vessel, and the freightage.
 REQUISITES OF GENERAL
AVERAGE
• There must be common danger;

• That for the common safety, part of the vessel or of the

cargo or both is sacrificed DELIBERATELY;

• That from the expenses or damages caused follows the

successful saving of the vessel and cargo; and

• That the expenses or damages should have been incurred

or inflicted after taking proper legal steps and authority
 PROCEDURE IN GENERAL
AVERAGE
• Before the loss is caused or the expenses incurred, the captain must call a
meeting with the chief mate and other officers and any cargo owner who may
be on board;

• They shall decide by voting on a resolution of the captain. If majority disagrees

with the captain, the latter shall have the final decision;

• The minutes must be entered in the deck log book, signed by all the persons
present and stating in detail all the goods jettisoned and the injuries caused to
those kept on board;

• Copy of the minutes to be filed within 24 hours after arrival at first port of
entry.
 EXAMPLES OF GENERAL
AVERAGE
• The goods or cash invested in the redemption of the vessel or of the cargo
captured by enemies, privateers, or pirates, and the provisions, wages, and
expenses of the vessel detained during the time the settlement or
redemption is being made.

• The goods jettisoned to lighten the vessel, whether they belong to the
cargo, to the vessel, or to the crew, and the damage suffered through said
act by the goods which are kept on board.

• The cables and masts which are cut or rendered useless, the anchors and
the chains which are abandoned, in order to save the cargo, the vessel or
both.
• The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place
it in condition to enter a port or roadstead, and the damage resulting therefrom to the goods removed
or transferred.

• The damage suffered by the goods of the cargo by the opening made in the vessel in order to drain it
and prevent its sinking.

• The expenses caused in order to float a vessel intentionally stranded for the purpose of saving it.

• The damage caused to the vessel which had to be opened, scuttled or broken in order to save the cargo.

• The expenses for the treatment and subsistence of the members of the crew who may have been
wounded or crippled in defending or saving the vessel.

• The wages of any member of the crew held as hostage by enemies, privateers, or pirates, and the
necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his
domicile, should he prefer it.

• The wages and victuals of the crew of a vessel chartered by the month, during the time that it is
embargoed or detained by force majeure or by order of the government, or in order to repair the
damage caused for the common benefit.

• The depreciation resulting in the value of the goods sold at arrival under stress in order to repair the
vessel by reason of gross average.

• The expenses of the liquidation of the average.

WHO WILL CONTRIBUTE FOR
THE GENERAL AVERAGE
• Those who benefited from the sacrifice: the ship
owner and owners of the cargoes that were
saved.

• Contribution may also be imposed on the insurers

of the vessel or cargoes that were saved as well as
lenders on bottomry or respondentia.
 WHO ARE ENTITLED TO THE
GENERAL AVERAGE
• All the owners whose goods were sacrificed pro rata.
Exceptions:
1.Goods carried on deck unless the law or customs of
the place allow such stowage.
2.Goods that are not recorded in the books or records
of the vessel.
3.Fuel for the vessel if there is more than sufficient
fuel for the voyage.
 JETTISON OF CARGO
• Cargo on deck shall be first to be jettisoned followed by those
from the lower deck then those of bigger bulk but of smaller value.
[Art. 815]

• Cargo jettisoned, to be entitled to reimbursement for general

average, must be covered by a bill of lading. [Art. 816]

• Expenses to lighten a vessel by the transfer of goods to other

vessels is general average. Also when there is fire on port and there
is need to sink the vessel to save the goods. [Arts. 817 & 818]
 LIQUIDATION OF AVERAGE
• Whether general or particular average, the person
benefited by the damage or expense incurred must
contribute his proportionate share, to be determined by
the amount of damages or expenses incurred and
apportioned among the those benefited in proportion to
the value of their property save.

• In particular average, it is implied that there is only one

interest involved and the proportion pertains to him 100%.
 THE YORK-ANTWERP RULES
• Allow deck cargo on coastwise shipping but prohibits it on
overseas trade.

• Hence, a deck cargo stowed on deck, with consent of the shipper

in an overseas trade must always contribute to general average. But
if it is the one jettisoned, it will not be entitled to reimbursement.

• On the other, a deck cargo stowed on deck in a coastwise trade

with consent of the shipper while also must contribute to general
average is likewise entitle to reimbursement if jettisoned.
COLLISIONS
 COLLISION & ALLISION
• Collision – occurs when both vessels are on motion.

• Allision – happens when one of the vessels is stationary.

• Rule on Collision: The guilty vessel shall pay for the

damage caused by the collision. Exception: If guilty vessel
sinks due to the hypothecary nature of maritime
transactions. Exception to exception: When there is
negligence of ship owner [see Abdulhaman case]
 FIVE CASES COVERED
• One vessel is at fault – Vessel at fault is liable for the damage caused to the
innocent vessel as well as to the damage suffered by the owners of cargo of
both vessels.

• Both vessels at fault – Each vessel must bear its own loss, but the shippers of
both vessels may go against the ship owners, being solidarily liable to them.

• Vessel at fault is unknown – Same rule when both vessels are at fault.

• Third vessel at fault – Same rule as when one vessel is at fault.

• Fortuitous Event – No liability; res perit domino.

 3 STAGES IN COLLISION
• When the 2 vessels approach each other.

• When the vessel are so near each other that contact is imminent.

• Actual contact or collision.

• Note: The foregoing rule was laid down in Urrutia v. Baco River
Plantation, 26 Phil. 623 to apply the doctrine of last clear chance.
But this ruling was abandoned in Williams v. Yangco, 27 Phil. 68
(infra)
 DOCTRINE OF ERROR IN
EXTREMIS
• There are three (3) zones in collusion: (a) first zone - time up to the
moment when risk of collision begins; (b) second zone - time between
moment when risk of collision begins up to the moment it becomes
practical certainty; and (c) third zone - time when collision is certain
up to the time of impact.

• If a vessel having a right of way suddenly changes its course during the
3rd zone, in an effort to avoid an imminent collision due to the fault of
another, such act may be said to be done in extremis, and even if
wrong cannot create responsibility on the part of said vessel with the
right of way.
 WILLIAMS V. YANGCO, 27 PHIL.
68 (1914)
• The doctrine of last clear chance is inapplicable for marine
collision since the rule of liability in this jurisdiction for
maritime accidents such as that now under consideration is
clearly, definitely, and unequivocally laid down in Art. 827 of
the Code of Commerce.

• Under the rule, the evidence disclosing that both vessels were
at fault gives neither of the owners an action against the other
for the loss or injury sustained by their respective vessel.
ARRIVAL UNDER STRESS &
SHIPWRECKS
 STEPS TO BE UNDERTAKEN IN
DETERMINATION OF PROPRIETY OF
ARRIVAL UNDER STRESS
• Captain to determine during voyage if there is well-founded fear of seizure,
privateers or other valid grounds.

• He then assembles all the officers.

• He summons the persons interested in the cargo who are present and who
may attend. They have no right to vote.

• Officers to be determined and agree if there is well-founded reason after

examining the circumstances. The captain has the deciding vote.

• Agreement to be drafted and minutes to be signed and entered in the deck

log book. Also objections.
 ARRIBADA
• Lack of provision or fuel
• Pirates
• Inability to navigate.
Note: If the lack of fuel or provision is not due to lack of
foresight, or the fear of pirates is well-founded or the
inability to navigate is not attributable to fault of captain
or crew, then these arrivals under stress becomes
particular average of the vessel. Shippers must wait.
No damage needs to be paid to the shippers. But if due to
bad faith, the damages must be paid to shippers for delay
and the vessel bears the loss.
 IMPROPER ARRIBADA
• If lack of provisions should arise from the failure to take the necessary provisions for the
voyage according to usage and customs, or if they should have been rendered useless or lost
through bad stowage or negligence in their care.

• If the risk of enemies, privateers, or pirates should not have been well-known, manifest, and
based on positive and provable facts.

• If the defect of the vessel should have arisen from the fact that it was not repaired, rigged
equipped, and prepared in a manner suitable for the voyage, or from some erroneous order
of the captain.

• When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in
the act causing the damage.

• Expenses. [Art. 820, Code of Commerce]

 SHIPWRECK (AGROUNDING)

• The demolition or shattering of a vessel caused by

her driving ashore or on rocks and shoals in the
mid-seas, or by the violence of winds and waves in
tempests.
 RULES ON SHIPWRECKS
(ARTS. 840-845)
• Losses/deterioration due to shipwreck or stranding to the account of the owners & ship owner.

• If caused by malice, negligence, or lack of skill of the captain or because vessel put to sea was
insufficiently repaired and equipped: Shippers can demand indemnity from the captain.

• The goods saved from the wreck to be specially bound for the payment of the expenses of the
respective salvage.

• If several vessels sail under convoy, and any of them should be wrecked, the cargo saved will be
distributed among the rest in proportion to the amount which each one is able to take.

• If any captain should refuse, without sufficient cause, to receive what may correspond to him, the
captain of the wrecked vessel to enter a marine protest against him.

• If it is not possible to transfer to the other vessels the entire cargo of the vessel wrecked, the goods of
the highest value and smallest volume to be saved first. Designation to be made by the captain with
concurrence of his officers.
• The captain taking on-board the goods saved from the wreck to
continue his course to the port of destination and upon arrival he
should deposit the goods for disposal to their owners.

• In case the captain changes his course, and if he can unload them at
the port of which they were consigned, he may make said port if the
shippers or supercargoes present and the officers and passengers of
the vessel consent thereto. But he is not required to do so even if he
has the consent during time of war or when the port is difficult and
dangerous to make.

• The owners of the cargo to defray all the expenses of this arrival and
the payment of the freightage.

• If cannot be, proceed to judicial sale complying with the formalities

and on publicity.
SALVAGE
 DEFINITION AND
PHILOSOPHY
• Salvage is a service which 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 and secure.

• Salvage Law provides for the compulsory reward to those who brave
the perils of the sea to save the cargo or vessel in order to
encourage such services. Whether the owner of the property save
likes it or not, he must give a reward. The maximum amount is 50%
of the value of the property save.
 KINDS OF SALVAGE SERVICES
• Voluntary – compensation is dependent on the
success.

• Under contract for a per diem or per horam

wage, payable at all event.

• Under contract for compensation payable only in

case of success.
 REQUISITES FOR SALVAGE
REWARD
• Valid object of salvage.

• Such object must be exposed to marine peril.

• Must be rendered voluntarily.

• Must be successful.
 DERELICT
• A vessel or cargo badly damaged and abandoned
by the crew to the mercy of the sea.

• Mere abandonment does not make such vessel or

cargo res nullius.

• Proper procedure must be followed by the salvors

to be entitled of the reward.
 PROCEDURE IN DERELICT
• If vessel is abandoned, salvor must tow her to the nearest port where it will
be delivered to the municipal treasurer or collector of customs who will
advertise the fact of salvage.

• If owner of salvaged vessel or cargo appears, he may take possession of vessel

or cargo and pay the reward amount not exceeding 50% of the value of the
vessel.

• Reward is determined by considering:

- the value of the property save; zeal employed; danger posed to the salvors;
number of persons who took part; services render; and expenses incurred.
• If no claim for the vessel is made within 3
months after publication, the municipal
treasurer to sell the property salvaged at public
auction. The reward and expenses will be
deducted from the proceeds. The balance to be
deposited with the treasury.
• If no one claims for the balance after 3 years, ½
will go to the salvors and the other half to the
government.
• If one vessel saves another:
- ½ to the ship owner of the saving vessel.
- ¼ to the captain
- ¼ to the crew
PART III
Aviation Law
 APPLICABLE LAWS
1. New Civil Code;
2. Code of Commerce;
3. Civil Aviation is governed by RA No. 9497 (Civil Aviation
Authority Act of 2008);
4. Economic regulation of air transportation is governed by
RA No. 776;
5. Treaties and conventions likewise have the effect of law in
this jurisdiction. Thus,
• Warsaw Convention applies to liabilities of the carriers in
international transportation by air;
• Chicago Convention signed on 7 December 1944.
 REGISTRATION
• Aircraft have the nationality of the State in which they are registered (Article 17, Chapter III of the
Chicago Convention).

• An aircraft cannot be validly registered in more than one State, but its registration may be changed from
one State to another;

• The State of Registry refers to the State on whose register the aircraft is entered. (Part 4, Section 4.1.1.2
[16], Civil Aviation Rules dated 23 June 2008);

• An aircraft is a Philippine National if the same is registered with the Civil Aviation Authority of the
Philippines. The Certificate of Registration issued by the CAAP shall be deemed conclusive evience of
nationality for international purposes. Such Certificate of Registration shall be carried aboard the aircraft
in all of its operations.

• ALL CONVEYANCES made or executed, which affects title to, or interest in, any aircraft of Philippine
registry, or any portion thereof shall be registered with the CAAP (See Section 49, Civil Aviation Authority
Act of 2008)
 ELIGIBILITY FOR
REGISTRATION
• The aircraft is owned by or leased to a citizen or
citizens of the Philippines or corporations or
associations organized under the laws of the
Philippines at least 60 per centum (60%) of whose
capital is owned by Filipino citizens; and

• The aircraft is not registered under the laws of any

country.
Note:
• Exceptionally, foreign-owned or registered aircraft may
be registered if utilized by members of aero clubs
organized for recreation, sport of the development of
flying skills as a prerequisite to any aeronautical activities
of such clubs within the Philippines.
• No aircraft can be operated in the Philippines unless it
displays nationality and registration marks.
• The nationality mark for Philippines registered aircraft is
“RP.”
 RULES FOR THE VALIDITY OF
REGISTRATION OF VOLUNTARY DEALINGS
CONCERNING AIRCRAFTS WITH THE CAAP
• The registration is valid only with the respect to the parties and their
heirs, assignees, executors, administrators, devisees, or successors-in-
interest, and any person having actual notice thereof;

• The registration is valid as against all persons and any instrument,

recording of which is required shall take effect from the date of its record
in the books of the Authority, and not from the date of its execution.

• The foregoing requirements are similar to the requirements in land

registration. The owner’s duplicate of the certificate of registration must
be presented before registration is effected.
 CHARTER OF AIRCRAFT
• Regulated by the CAB.
• Charter flight or Charter trip – air transportation performed by an air
carrier where the entire capacity if one or more aircraft, or less than the
entire capacity of an aircraft, has been engaged for the movement of
persons and their personnel baggage or for the movement of property
on a time, mileage or trip basis:
1. By a person for his own use (including a direct air carrier when
such aircraft is engaged solely for the transportation of company
personnel or commercial traffic in cases of emergency);
2. By a representative (or representative acting jointly) of a group for
the use of such group (provided no such representative is
professionally engaged in the formation of groups for
transportation or in the solicitation or sale of transportation
services); or
3. By an airfreight forwarded holding a currently effective permit.
 CLASSIFICATIONS OF
AIRCRAFT CHARTER
• On-route – refers to service performed by an air carrier between points which said
carrier is authorized to provide service pursuant to its CPCN or foreign air carrier
permit;

• Off-route – refers to any charter that is not on-route;

• Pro-rata – means a charter the cost of which is divided among the passengers
transported;

• Single Entity – means a charter the cost of which is borne by the charterer and not by
individual passengers, directly or indirectly;

• Mixed – means a charter the cost of which is borne, or pursuant to a contract may be
borne, partly by the charter participants and partly by the charterer.
 SOVEREIGNTY AND AIR
FREEDOMS
• Article 1, Chapter 1 of the Chicago Convention provides that “the contracting States
recognize that every State has complete and exclusive sovereignty over the airspace above its
territory.” Hence, consent is necessary for other States to operate within the territory of
another.

• The bilateral system of air traffic negotiations is in force under the Chicago Convention.
“Before airlines of treaty partners are able to launch air services to, through and from another
partner’s territory, the convention requires that the two governments shall have negotiated a
bilateral treaty between them that will define the air traffic rights each grants to the other
during the life of the treaty.”

• The resulting agreement is known as the Air Service Agreement.

• The air traffic rights that may be agreed in the Air Service Agreement are referred to as the
Freedoms of the Air enumerated by the International Civil Aviation Organization (ICAO).
 DENIED BOARDING
PASSENGERS
• General Rule – Carrier is duty bound to accept and board a passenger with confirmed
tickets if the passenger presents himself on time in the airline counter in the airport.

• Under the Civil Aviation Regulations, an operator may deny transportation if a

passenger (1) refuses to comply with the instructions regarding exit seating restrictions
prescribed by the CAAp; or (2) has handicap that can be physically accommodated
only by an exit row seat (Section 8.9.2.2, CAAP Civil Aviation Regulations).

• While an air carrier will not be liable if the passenger failed to present himself on time
in the airport counter, the burden of proving that the passenger is a “no-show”
passenger rest with carrier. (Northwest Airlines, Inc. v. Steven P. Chiong, G.R. No.
155550, 31 January 2008).
• The applicable rule that should be applied when a passenger is
denied boarding is Economic Regulation No. 7 of the Civil
Aeronatics Board which provides for rules on “Boarding Priority
and Denied Boarding Compensation” when the denial is due to
honest mistakes (excludes deliberate and willful acts of non-
accomodation).

• In addition, the carrier would still be liable independent of the

reason for the denial of the boarding of a passenger if the carrier’s
officer or employee was guilty of rude or uncalled for conduct and
the passenger was the victim of ill treatment.

• Under the rules, overbooking not exceeding 10% of the seating

capacity of the aircraft shall not be considered as a deliberate and
willful act of non-accomodation.
 TRAVEL DOCUMENTS
• It is the obligation of the passenger, not the air carrier, to
secure the appropriate travel documents (Air France Phils./
KLM Air France v. John Anthony De Camilis, G.R. No.
1889651, 13 October 2009). Hence, it is not the obligation
of the carrier to secure the necessary visa for a passenger.

• However, the airline may be held liable if the loss of

documents was due to the negligence of its employee.
(PAL, Inc. v. CA, G.R. No. 123238, 22 September 2008)
 INSPECTION OF AIRCRAFT
AND CARGO
• The duty to inspect aircraft is mandated under RA No. 6235 which prohibits acts inimical to civil aviation.

• The carrier is likewise not deemed to have exercised extraordinary diligence if it did not exercise its duty
to inspect as Mandated by RA No. 6235.

• If the owner, shipper or his representative refuses to have the same opened and inspected, the airline or
air carrier is authorized to refuse the loading thereof.

• Every ticket issued to a passenger shall contain among others the following condition printed thereon:
“Holder hereof and his hand-carried luggage(s) are subject to search for, and seizure of, prohibited
materials or substances. A holder who refuses to be searched shall not be allowed to board the aircraft
and such condition shall constitute a part of the contract between the passenger and the air carrier.
(Section 38, RA 9497).

• Protection of passengers must take precedence over convenience. Nevertheless, the implementation of
security measures must be attended by basic courtesies. (Northwest Airlines v. Laya, G.R. No. 146020, 29
May 2002)
WARSAW CONVENTION
 INTERNATIONAL
TRANSPORTATION
• There is international transportation when:
1. The place of departure and the place of destination are
within the territories of two contracting countries
regardless of whether or not there was a break in the
transportation or transshipment;
2. The place of departure and the place of destination are
within the territory of a single contracting country if there
is an agreed stopping place within a territory subject to
the sovereignty, mandate or authority of another power,
even thought the power is not a party to the Convention.
 PERIOD COVERED

• 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 the case of a
landing outside an airport, in any place whatsoever.
It does not cover any transportation by land, by
sea, or by river performed outside an airport.
 WHEN INTERNATIONAL
CARRIER IS LIABLE
• If the passenger’s injury was inflicted:

1. On board the aircraft;

2. In the course of any of the operations of embarking;

3. In the course of disembarking; or

4. When there was or because of delay.

• With respect to baggage or goods that are checked in, the carrier is liable
if damage occurred during air transportation or when there is delay.
 TORT LIABILITY

• Warsaw Convention does not provide.

• Complaint for quasi-delict can still be filed even if

the filing is beyond the prescriptive period
provided for under the Warsaw Convention so
long as it is within the prescriptive period of 4
years under the Civil Code.
 VENUE OF ACTION
• Plaintiff may bring the action for damages before:

1. The court where the carrier is domiciled;

2. The court where the carrier has its principal place of business;

3. The court where the carrier has an establishment by which

the contract has been made; or

4. The court of the place of destination. (Section 28 (1), Warsaw

Convention)
 SUCCESSIVE CARRIERS
• Transportation to be performed by several successive carriers
shall be deemed, for the purposes of this convention, 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 series of contracts, and it shall not
lose its international character merely because one contract or
series of contracts is to be performed entirely within the territory
subject of the sovereignty, suzerainty, mandate or authority of the
same High Contracting Party.” (Article 1 (3), Warsaw
Convention).
PART IV
Public Utilities
MEANING AND CONCEPT OF
PUBLIC UTILITY
• A business or service engaged in regularly supplying the public with some commodity
or service of public consequence such as electricity, gas, water, transportation, telephone
or telegraph service. [National Power Corporation v. Court of Appeals, G.R. No.
112702, September 26, 1997]

• In a very real sense, a public utility is engaged in public service-- providing basic
commodities and services indispensable to the interest of the general public. [Republic
v. Meralco, G.R. No. 141314, April 9, 2003]

• When, therefore, one devotes his property to a use in which the public has an interest,
he, in effect grants to the public an interest in that use, and must submit to the control
by the public for the common good, to the extent of the interest he has thus created.
[Kilusang Mayo Uno Labor Center v. Hon. Jesus B. Garcia Jr., G.R. No. 115381,
December 23, 1994 citing Pantranco v. Public Service Commission, 70 Phil.221]
 CONSTITUTIONAL
PROVISIONS
• Public utilities – must be owned by Filipino citizen or 60% owned by Filipino citizens. [Art. XII, Sec. 11]

• Mass media – must 100% Filipino.

• Government take-over: In times of national emergency, when the public interest so requires, the State
may, during the emergency and under reasonable terms, temporarily take over or direct the operation
of any privately owned public utility or business affected with public interests. [Art. XII, Sec. 17]

• Operation of vital industries: The State, may, in the interest of national welfare or defense, establish
and operate vital industries and upon payment of just compensation, transfer to public ownership
utilities and other private enterprises to be operated by the government. [Art. XII, Sec. 18]

• Prohibition against monopolies: The State shall regulate or prohibit monopolies when the public
interest so requires; no combination in restraint of trade or unfair competition shall be allowed. [Art.
XII, Sec. 19]
 PUBLIC SERVICE
• Includes every person who may own, operate, manage, or
control in the Philippines for hire or compensation, with
general or limited clientele, whether permanent,
occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway,
fraction railway, subway motor vehicle, steamboat, or
steamship line ferries, and water craft, shipyard, ice plant,
electric light, heat and power or any other public utility.
[Sec. 13(b), Act. 146]
 PAL V. CAB, 270 SCRA 538
• Held: The terms ‘convenience and necessity’ if used together is a statute, are usually held not to be
separable, but are construed together. Both words modify each other and must be construed
together. The word ‘necessity’ is so connected, not as an additional requirement but to modify and
qualify what might otherwise be taken as the strict significance of the word necessity.

• Public convenience and necessity exists when the proposed facility will meet a reasonable want of
the public and supply a need which the existing facilities do not adequately afford.

• It does not mean or require an actual physical necessity or an indispensable thing.

• The use of the word ‘necessity’, in conjunction with ‘public convenience’ in a certificate of
authorization to a public service entity to operate, does not in any way modify the nature of such
certification, or the requirements for the issuance of the same.

• It is the law which determines the requisite for the issuance of such certification, and not the title
indicating the certificates.
DIFFERENCE BETWEEN OPERATION OF
A PUBLIC UTILITY AND OWNERSHIP OF
FACILITIES
• While the Constitution in no uncertain terms requires a franchise for the operation of
a public utility, it does not require a franchise before one can own the facilities needed
to operate a public utility so long as it does not operate them to serve the public.

• In law, there is clear distinction between the operation of a public utility and the
ownership of the facilities and equipment used to serve the public. (Tatad v. Garcia, 243
SCRA 436)

• The right to operate a public utility may exist independently and separately from the
ownership of the facilities thereof. One can own said facilities without operating them
as a public utility, or conversely, one may operate a public utility without owning the
facilities used to serve the public. The devotion of property to serve the public may be
done by the owner or by the person in control thereof who may not necessarily be the
owner thereof.
• A mere owner and lessor of the facilities used by a public utility is
not a public utility. (Providence and W.R. Co. v. US, 46 F. 2d 149,
152)

• Even the formation of a public utility corporation does not ipso

facto characterize the corporation as one operating a public utility.
The moment for determining the requisite Filipino Nationality is
when the entity applies for a franchise, certificate or any other
form of authorization for the purpose (Pp. V. Quasha, 93 Phil. 333)

• Consequently, a corporation is not subject to the 60% Filipino

equity requirement under Section 11 of Article XII of the
Constitution if it will ust own the equipment or properties that
will be used by another entity which shall operate as public utility.
 DIFFERENCE BETWEEN CERTIFICATE OF
PUBLIC CONVENIENCE AND CERTIFICATE
OF PUBLIC CONVENIENCE AND NECESSITY
• A CPC is an authorization issued by the Board for the operation
of public services for which no franchise, either municipal or
legislative, is required by law, such as common carrier;

• A CPCN is an authorization issued by the Board for the

operation of public services for which a prior franchise is
required by law such as electric, telephone, and other services;

• A CPC is “property” and having a considerable value, can be the

subject of sale by the holder. (Cogeo v. CA, 207 SCRA 343)
 FRANCHISE V. CPC
• A franchise is distinguished from a CPC in that the former is
a grant or privilege from the sovereign power, while the latter
is a form of regulation through the administrative agencies.

• A franchise, being merely a privilege emanating from the

sovereign power of the state and owing its existence to a
grant, is subject to regulation by the state itself by virtue of its
police power through its administrative agencies. (Assoc. V.
National, 397 SCRA 574)
 NON-EXCLUSIVITY

• Every franchise, certificate or authority to operate

a public utility is, by constitutional mandate, non-
exclusive. Thus, a franchisee of a public utility
cannot complain of seizure or taking of property
because of the issuance of another franchise to a
competitor.
 BASIC REQUIREMENTS FOR
THE ISSUANCE OF CPC
• Applicant must be a citizen of the Philippines, or a corporation or co-
partnership, association or joint stock company constituted and organized
under the laws of the Philippines, 60 per centum at least of the stock or
paid-up capital of which belong entirely to citizens of the Philippines;

• Applicant must be financially capable of undertaking the proposed

service and meeting the responsibilities incident to its operations; and

• Applicant must prove that the operation of the public service proposed
and the authorization to do business will promote the public interest in a
proper and suitable manner.
 REGULATORY AGENCIES
The basic law that governs public service is the Public Service Act, Commonwealth Act No. 146
as amended. However, the powers of the Public Service Commission are now distributed
among different government agencies, including:
• Department of Transportation and Communications – issues certificates of pubic convenience for operation of
national railroad carriers under EO 125-A;
• Land Transportation Franchising Regulatory Board – Land Transportation as provided for in EO No. 202;
• Land Transportation Office – Registration of Drivers and Motor Vehicles. Under RA No. 4136, Land
Transportation and Traffic Code as amended;
• Maritime Industry Authority – water transportation. Powers are defined under EO No. 125 as amended by EO
125-A;
• Philippine Coast Guard – concerned with safety in water transportation. Present governing law is RA No.
9993, otherwise known as the Philippine Coast Guard Law of 2009 (signed by the President on 10 Feb. 2010). It
is described as an armed and uniformed service attached to the DOTC. However, in times of war, it is attached
to the DND.;
• National Telecommunications Commission – created under EO No. 546 with regulatory and quasi-judicial
functions. Communication utilities and services, radio communications systems, wire or wireless telephone
and telegraph systems, radio and television broadcasting systems and other similar public utilities.
• Energy Regulatory Commission – Electric or Power Companies. Replaced the Energy Regulatory Board under
Electric Power Industry Reform Act of 2001, RA No. 9136;
• National Water Resources Council – water resources;
• Civil Aeronautics Board – air transportation particularly particularly to regulate,
promote, and develop the economic aspect of air transportation in the
Philippines and ensure that existing CAB policies are adapted to the present
and future air commerce of the Philippines. It shall have the general supervision
and jurisdiction over air carriers as well as their properties, property rights,
equipment and franchise. In addition, it has supervision jurisdiction and control
over air carrier, general sales agents, cargo sales agents, and airfreight forwarders
as well as their property, property rights, equipment, facilities, and franchise.
Mandated under RA No. 776 as amended by PD No. 1462.;

• Civil Aviation Authority of the Philippines – undertakes the maintenance and

operation of airports and other similar facilities; registers aircrafts and other
incidents concerning the same and provides safety regulations in air
transportation. Governing law is RA No. 9497 or the Civil Aviation Authority
Act of 2008.;

• Philippine Ports Authority – wharves and ports under PD No. 857 (Dec. 1975)
• Local Water Utilities Administration – PD No. 198 as amended, otherwise
known as the Provincial Water Utilities Act.

• Local water districts may be formed for the purposes of (a) acquiring,
installing, improving, maintaining and operating water supply and
distribution systems for domestic, industrial, municipal and agricultural uses
for residents and lands within the boundaries of such districts, (b) providing,
maintaining, and operating water collection, treatment and disposal facilities,
and (c) conducting such other functions and operations incidental to water
resource development, utilization and disposal within such districts, as are
necessary or incidental to said purpose. These water districts which are in
the nature or quasi-public corporations are public utilities.

• Local water districts are regulated by the Local Water Utilities

Administration (LWUA). (PD 198, sections 62 and 63 as amended by PD
768 and PD 1479)
 OTHER RULES AND POLICIES
• While public interest, convenience, and necessity is the controlling
policy (OVERRIDING PRINCIPLE), the regulating administrative
bodies previously applied different policies and rules, such as:

1. The prior operator rule;

2. Prior applicant rule;

3. Third Operator Rule;

4. Protection of Investment Rule.

 PRIOR OPERATOR RULE
• Under this rule, before permitting a new operator to invade the territory of
another already established with a certificate of public convenience, the
prior operator must first be given the opportunity to extend its service in
order to meet public needs in the matter of transportation. (Mandaluyong v.
Francisco, 32 SCRA 405);

• The granting of preference to an old operator applies only when said

operator has made an offer to meet the increase in traffic or demand for
the service and not when another operator, even a new one has made the
offer to serve the new line or increase the service on said line. The rule of
preference protects only those who are vigilant in meeting the needs of the
traveling public. (Tiongson v. Public Service, 36 SCRA 241)
 PRIOR APPLICANT RULE
• Presupposes a situation when two interested
persons apply for a certificate to operate a public
utility in the same community over which no
person has as yet been granted any certificate. If it
turns out, after hearing, that the circumstances
between the 2 applicants are more or less equal,
then the applicant who applied ahead of the other,
will be granted the certificate.
 THIRD OPERATOR RULE

• A variation of the Prior Operator Rule.

• Instead of one prior operator, there are two prior

operators who are rendering sufficient, adequate
and satisfactory service, and who in all things and
respects are complying with the rules and
regulations of the Public Service Commission.
 PROTECTION OF
INVESTMENT RULE
• The law aims not only to protect the public but
the operators as well. Hence, it is the duty of the
government to protect the investment of the
operators of public utilities. It is the duty of the
government to protect said operators from unfair,
unjustified, and ruinous competition.
 ACTION IN REM ACTION IN PERSONAM QUASI IN REM

Directed against the thing itself. Directed against particular persons. Directed against particular persons.

Jurisdiction over the person of the Jurisdiction over the person of the Jurisdiction over the person of the
defendant is not required. defendant is required. defendant is not required as long as
jurisdiction over the res is acquired.

A proceeding to determine the state/ An action to impose responsibility/ A proceeding to subject the interest of a
condition of a thing. liability upon a person directly. named defendant over a particular
property to an obligation/lien
burdening it.

Judgment is binding on the whole Jurdgment is binding only upon the Judgment is binding upon particular
world. parties impleaded or their successors in persons.
interest.

Ex.: Accion reivindicatoria, annulment Ex. Action for specific performance, Action for partition, action to foreclose
of marriage, naturalization proceedings. action to recover money or property real estate mortgage.
(real or personal)
 SOURCES
• www.sc.judiciary.gov.ph

• Timoteo B. Aquino and Ramon Paul L. Hernando,

Essentials of Transportation and Public Utilities Law
(Rex Printing Company, Inc., Reprinted 2013).

• Jose R. Sundiang, Sr. and Timoteo B. Aquino, Reviewer

on Commercial Law (Rex Book Store, 2014 Edition).