San Beda College of Law: Contract of Transportation/ Carriage

San Beda College of Law 54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ A person or entity is a common carrier

CARRIAGE even if he did not secure a Certificate of
 A contract whereby a person, natural or Public Convenience (De Guzman vs. CA, 168
juridical, obligates to transport persons, SCRA 612).
goods, or both, from one place to another,  It makes no distinction as to the means
by land, air or water, for a price or of transporting, as long as it is by land,
compensation. water or air. It does not provide that the
 Classifications: transportation should be by motor vehicle.
1. Common or Private (First Philippine Industrial Corporation vs.
2. Goods or Passengers CA)
3. For a fee (for hire) or Gratuitous  One is a common carrier even if he has
4. Land, Water/maritime, or Air no fixed and publicly known route, maintains
5. Domestic/inter-island/coastwise or no terminals, and issues no tickets (Asia
International/foreign Lighterage Shipping, Inc. vs. CA).
 It is a relationship which is imbued with  Characteristics:
the public interest. 1. Undertakes to carry for all people
indifferently and thus is liable for
COMMON CARRIER refusal without sufficient reason
 Persons, corporations, firms or (Lastimoso vs. Doliente, October 20,
associations engaged in the business of 1961);
carrying or transporting passengers or goods 2. Cannot lawfully decline to accept a
or both, by land, water, or air, for particular class of goods for carriage to
compensation, offering their services to the the prejudice of the traffic in these
public (Art. 1732, Civil Code). goods;
 Art. 1732 of the New Civil Code avoids 3. No monopoly is favored (Batangas
any distinction between one whose principal Trans. vs. Orlanes, 52 PHIL 455);
business activity is the carrying of persons 4. Provides public convenience.
or goods or both and one who does such
carrying only as an ancillary activity PRIVATE CARRIER
(sideline). It also avoids a distinction  One which, without being engaged in the
between a person or enterprise offering business of carrying as a public
transportation service on a regular or employment, undertakes to deliver goods or
scheduled basis and one offering such passengers for compensation. (Home
service on an occasional, episodic or Insurance Co. vs. American Steamship
unscheduled basis. Agency, 23 SCRA 24)
Neither does the law distinguish between
a carrier offering its services to the general  TESTS WHETHER CARRIER IS
public that is the general community or COMMON OR PRIVATE:
population and one who offers services or  The SC in First Philippine Industrial
solicits business only from a narrow segment Corporation vs. CA (1995) reiterated the
of the general population. following tests:
COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws); Robespierre CU (Law
on Intellectual Property)
1. It must be engaged in the business of provided by not contrary to
carrying goods for others as a public law law, morals or
employment and must hold itself out good customs
as ready to engage in the 5. Exempting circumstance
transportation of goods generally as a Prove caso fortuito,
business and not as a casual extraordinary Art. 1174 NCC
occupation; diligence and
2. It must undertake to carry goods of Art. 1733, NCC
the kind to which its business in 6.Presumption of negligence
confined; There is a No
3. It must undertake to carry by the presumption of presumption of
method by which his business is fault or fault or
conducted and over its established negligence negligence
roads; and 7.Governing law
4. The transportation must be for hire. Law on Law on
 In National Steel Corp. vs. CA (1997) the common obligations and
SC held that the true test of a common carriers contracts
carrier is the carriage of goods or
passengers provided it has space for all who GOVERNING LAWS
opt to avail themselves of its transportation A. Domestic/inter-island/coastwise
for a fee.  Applicable to Land, Water, and Air
transportation
COMMON PRIVATE 1. Civil Code - primary
CARRIER CARRIER 2. Code of Commerce (Arts. 349, 379,
573-734, 580, 806-845) - suppletory
1. As to availability
Holds himself Contracts with
B. International/foreign/overseas
out for all particular
(Foreign country to Philippines)
people individuals or
 Applicable to Water/maritime and Air
indiscriminately groups only
transportation
2. As to required diligence
 The law of the country of destination
Extraordinary Ordinary generally applies.
diligence is diligence is 1. Civil Code - primary
required required 2. Code of Commerce - suppletory
3. As to regulation 3. Others - suppletory
Subject to Not subject to a. Water/maritime: Carriage of Goods
State State by Sea Act (COGSA)
regulation regulation b. Air: Warsaw Convention
4. Stipulation limiting liability
Parties may Parties may I. NEW CIVIL CODE
not agree on limit the (Arts. 1732-1766)
limiting the carrier’s
carrier’s liability liability, REQUIREMENT OF EXTRAORDINARY
except when provided it is DILIGENCE
 Rendition of service with the greatest skill f. Invited guests and accommodation
and utmost foresight. (Davao Stevedore Co. passengers. (Lara vs. Valencia)
v. Fernandez) g. One who rides any part of the vehicle
 Rationale: which is unsuitable or dangerous or
1. From the nature of the business and which he knows is not designed or
for reasons of public policy (Art. 1733) intended for passengers.
2. Relationship of trust
3. Business is impressed with a special DEFENSES OF A COMMON CARRIER IN
public duty THE CARRIAGE OF GOODS
4. Possession of the goods 1. CASO FORTUITO/FORCE MAJEURE
5. Preciousness of human life  Requisites:
 A common carrier is not an absolute a. Must be the proximate and only cause
insurer of all risks of travel. of the loss
b. Exercise of due diligence to prevent or
COVERAGE minimize the loss before, during or after
1. Vigilance over goods (Arts. 1734-1754); the occurrence of the disaster (Art. 1739)
and c. Carrier has not negligently incurred in
2. Safety of passengers (Arts. 1755-1763). delay in transporting the goods (Art.
1740)
PASSENGER  Fire is not considered a natural disaster or
 A person who has entered into a contract calamity as it arises almost invariably from
of carriage, express or implied, with the some act of man. (Eastern Shipping Lines
carrier. They are entitled to extraordinary Inc. vs. IAC)
diligence from the common carrier.  Mechanical defects are not force majeure
 The following are not considered if the same was discoverable by regular and
passengers, and are entitled to ordinary adequate inspections. (Notes and Cases on
diligence only: the Law on Transportation and Public
a. One who has not yet boarded any Utilities, Aquino, T. & Hernando, R.P. 2004
part of a vehicle regardless of whether ed. p.120-122)
or not he has purchased a ticket;
b. One who remains on a carrier for an 2. ACTS OF PUBLIC ENEMY
unreasonable length of time after he  Requisites:
has been afforded every safe a. Must be the proximate and only cause
opportunity to alight; of the loss
c. One who has boarded by fraud, b. Exercise of due diligence to prevent or
stealth, or deceit; minimize the loss before, during or after
d. One who attempts to board a moving the act causing the loss, deterioration or
vehicle, although he has a ticket, destruction of the goods (Art. 1739)
unless the attempt be with the
knowledge and consent of the carrier; 3. NEGLIGENCE OF THE SHIPPER OR
e. One who has boarded a wrong OWNER
vehicle, has been properly informed of a. Sole and proximate cause: absolute
such fact, and on alighting, is injured defense
by the carrier; b. Contributory: partial defense. (Art.

1741) Electric Co., 52 Phil 900)
4. CHARACTER OF THE GOODS OR LIABILITY OF A COMMON CARRIER

DEFECTS IN THE PACKING OR IN THE FOR
CONTAINER DEATH OR INJURIES TO PASSENGERS
 Even if the damage should be caused by DUE TO ACTS OF ITS EMPLOYEES AND
the inherent defect/character of the goods, OTHER PASSENGERS OR STRANGERS
the common carrier must exercise due
diligence to forestall or lessen the loss. (Art. FOR ACTS
1742) FOR ACTS OF OF OTHER
 The carrier which, knowing the fact of ITS PASSENGER
improper packing of the goods upon EMPLOYEES S OR
ordinary observation, still accepts the goods STRANGERS
notwithstanding such condition, is not Required diligence and defense
relieved of liability or loss or injury resulting Extraordinary Ordinary
therefrom. (Southern Lines, Inc. v. CA, 4 diligence diligence
SCRA 258) Nature of liability
Tort; however, Not absolute;
5. ORDER OR ACT OF PUBLIC AUTHORITY The employee limited by Art.
 Said public authority must have the must be on 1763
power to issue the order (Art. 1743). duty at the
Consequently, where the officer acts without time of the act.
legal process, the common carrier will be (Maranan v.
held liable. (Ganzon v. CA 161 SCRA 646) Perez)
 Diligence in the selection and supervision
of employees under Article 2180 of the Civil  The carrier is liable when its
Code cannot be interposed as a defense by personnel allowed a passenger to drive
the common carrier because the liability of the vehicle causing it to collide with
the carriers arises from the breach of the another vehicle resulting to the
contract of carriage. The defense under said injuries suffered by the other
articles is applicable to negligence in quasi- passengers. (MRR vs. Ballesteros, 16
delicts under Art. 2176. (Del Prado v. Manila SCRA 641)
CARRIAGE OF GOODS CARRIAGE OF PASSENGERS
Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, Death or injury to the passengers
destruction, or deterioration of
the goods

Duration of liability
From the time the goods are The duty of a common carrier to
unconditionally placed in the provide safety to its passengers
possession of, and received by so obligates it not only during the
the carrier for transportation until course of the trip, but for so long
the same are delivered actually or as the passengers are within its
constructively by the carrier to premises and where they ought
the consignee or to the person to be in pursuance to the
who has the right to receive contract of carriage. (LRTA v.
them. (Art. 1736) Navidad, [2003])
 It remains in full force and  All persons who remain on the
effect even when they are premises within a reasonable
temporarily unloaded or stored in time after leaving the
transit unless the shipper or conveyance are to be deemed
owner has made use of the right passengers, and what is a
of stoppage in transitu. (Art. reasonable time or a reasonable
1737) delay within this rule is to be
 It continues to be operative determined from all the
even during the time the goods circumstances, and includes a
are stored in a warehouse of the reasonable time to see after his
carrier at the place of destination baggage and prepare for his
until the consignee has bee departure. (La Mallorca v. CA, 17
advised of the arrival of the SCRA 739 ; Abiotiz Shipping
goods and has had reasonable Corporation v. CA, 179 SCRA 95)
opportunity thereafter to remove  It is the duty of common
them or otherwise dispose of carriers of passengers to stop
them. (Art. 1738) their conveyances a reasonable
 Delivery of goods to the length of time in order to afford
custom authorities is not delivery passengers an opportunity to
to the consignee. (Lu Do v. enter, and they are liable for
Binamira, 101 Phil 120) injuries suffered from the sudden
starting up or jerking of their
conveyances while doing so. The
duty which the carrier of
passengers owes to its patrons
extends to persons boarding the
cars as well as to those alighting
therefrom (Dangwa Trans Co.,
Inc. vs. CA 202 SCRA 574).

Presumption of negligence
Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how Reason: The contract between
goods were damaged in transit is the passenger and the carrier
a matter peculiarly within the imposes on the latter the duty to
knowledge of the carrier and its transport the passenger safely;
employees. (Mirasol v. Dollar, 53 hence the burden of explaining
PHIL 124) should fall on the carrier.
Mere proof of delivery of goods
to a carrier in good order and the
subsequent arrival of the same
goods at the place of destination
in bad order makes for a prima
facie case against the carrier.
(Coastwise Lighterage Corp. v.
CA, 245 SCRA 796)
Defenses
1. Ordinary circumstance: 1. Exercise of extraordinary

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

Valid stipulations
1. Reduction of degree of Stipulation limiting liability when

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

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

Void stipulations
1. That the goods are Dispensing with or lessening the

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

Rules on Passengers’ Baggage the negligence of the driver of the bus on
IN THE IN THE which he is riding and of the driver of
CUSTODY OF CUSTODY another vehicle, the drivers as well as the
THE OF THE owners of the two vehicles are jointly and
PASSENGERS COMMON severally liable for damages. It makes no
(HAND- CARRIER difference that the liability of the bus driver
CARRIED) (CHECKED- and owner springs from contract while that
IN) of the owner and driver of the other vehicle
Legal nature of the baggage arises from quasi-delict. (Fabre vs. CA)
Necessary Considered as
deposit “goods” LIMITATIONS AS TO CARRIER’S
Required diligence by the LIABILITY
common carrier INVALID AS VALID &
Diligence of a Extraordinary BEING ENFORCEAB
depositary diligence CONTRARY LE
(ordinary TO PUBLIC
diligence) POLICY
Applicable rules 1. One 1. One
Arts. 1998 and Arts. 1733- exempting the limiting the
2000-2003 1753 carrier from any liability of the
and all liability carrier to an
CONCURRING CAUSES OF ACTION for loss or agreed
ARISING FROM THE NEGLIGENT ACT damage valuation,
OF THE COMMON CARRIER occasioned by unless the
1. Culpa contractual (breach of contract) its own shipper
 Only the carrier is primarily liable and not negligence. declares a
the driver, because there is no privity 2. An higher value
between the driver and the passenger. unqualified and pays a
 Basis: Art.1759, NCC. limitation of higher rate of
 No defense of due diligence in the liability to an freight
selection and supervision of employees. agreed (H.E. Heacock
valuation. Company vs.
2. Culpa aquiliana (quasi-delict) Macondray &
 The carrier and driver are solidarily liable Company
as joint tortfeasors. Inc.)
 Basis: Art. 2180, NCC.
 Defense of due diligence in the selection  However, the carrier cannot limit its
and supervision of employees is available. liability for injury to, or loss of, goods
Exception: maritime tort resulting in shipped where such injury or loss was
collision. (See notes on Collision) caused by its own negligence.
(Shewaram vs. PAL, 17 SCRA 606)
3. Culpa criminal (criminal negligence)
 The driver is primarily liable. The carrier SPECIAL RULES ON LIABILITES OF
is subsidiarily liable only if the driver is AIRLINE CARRIERS
convicted and declared insolvent. 1. In case of flight diversion due to bad
 Basis: Art. 100, RPC. weather or other circumstances beyond the
pilot’s control, the relation between the
 In case of injury to a passenger due to carrier and the passenger continues until the
latter has been landed at the port of 2. Domestic Air Transportation. (Commercial
destination and has left the carrier’s Law Review, Cesar Villanueva, 2004 ed.)
premises. The carrier should necessarily
exercise extraordinary diligence in IMPORTANT CONCEPTS:
safeguarding the comfort, convenience and 1. Bill of lading
safety of its stranded passengers until they 2. Obligations of the carrier
have reached their final destination. 3. Right of abandonment
(Philippine Airlines vs. CA, 226 SCRA 423) 4. Notice of damage
2. Even where overbooking of passengers is 5. Combined carrier agreement
allowed as a commercial practice, the airline
company would still be guilty of bad faith BILL OF LADING
and still be liable for damages if it did not  The written acknowledgment of receipt of
properly inform passenger that it could goods and agreement to transport them to a
breach the contract of carriage even if they specific place to a person named or to his
were confirmed passengers. (Zalamea vs. order.
CA, 228 SCRA 23)  Rules:
3. An open-dated ticket constitutes a 1. It is not indispensable for the creation of
complete contract between the carrier and a contract of carriage. (Compania Maritima
passenger. Hence, the airline company is vs. Insurance Company of North America,
liable if it refused to confirm a passenger’s 12 SCRA 213)
flight reservation. (Singson vs. CA, 282
SCRA 149) 2. Ambiguity is construed against the carrier,
4. An airline company which issued a the contract being one of adhesion.
confirmed ticket to a passenger covering
successive trips on different airlines can be 3. The consignee, although the instrument is
held liable for damages occasioned by oftentimes drawn up only by the consignor
“bumping off” by one of the successive and carrier, becomes bound by all the
airlines. (Lufthansa German Airlines vs. CA, stipulations contained therein by making a
238 SCRA 290) claim for loss on the basis of said bill of
5. An airline ticket providing that carriage by lading. (Sea-Land Services Inc. vs. IAC)
successive air carriers is to be regarded as a
“single operation” is to make the issuing 4. The right of a party to recover for loss of
carrier liable for the tortuous conduct of the shipment consigned to him under a bill of
other carrier. A printed provision in the lading drawn up only by and between the
ticket limiting liability only to its own conduct shipper and the carrier, springs from either
is not enough to rebut that liability. (KLM a relation of agency between him and the
Royal Dutch Airlines vs. CA, 65 SCRA 237) shipper, or his status as stranger in whose
favor some stipulation is made in said
II. CODE OF COMMERCE contract, and who becomes a party thereto
when he demands fulfillment of that
A. OVERLAND TRANSPORTATION stipulation. (Art. 1311 (2), (Mendoza vs. PAL
(Arts. 349-379) Inc.)
Applicability 5. Acceptance of the bill of lading without

1. Domestic land and water/maritime dissent raises the presumption that all the
transportation. (Pandect of Commercial Law terms therein where brought to the
and Jurisprudence, Justice Jose Vitug, 1997 knowledge of the shipper and agreed to by
ed.) him and, in the absence of fraud or mistake;
he is estopped from thereafter denying that carrier to whom the goods have been
he assented to such terms. (Notes and delivered, and the vessel indicated in
Cases on the Law on Transportation and the bill of lading by which the goods are
Public Utilities, Aquino, T. & Hernando, R.P. to be shipped is already in the port
2004 ed. p.261) where the goods are held for shipment.
 Functions:
 Kinds: 1. Best evidence of the existence of the
1. On board - issued when the goods have contract of carriage of cargo (Art. 353)
been actually placed aboard the ship 2. Document of title
with very reasonable expectation that 3. Receipt of cargo
the shipment is as good as on its way. 4. Contract to transport and deliver goods
2. Received - one in which it is stated that as stipulated
the goods have been received for 5. Symbol of the goods
shipment with or without specifying the
vessel by which the goods are to be OBLIGATIONS OF THE CARRIER
shipped. A. Duty to accept the goods
3. Negotiable - one in which it is stated GENERAL RULE: A common carrier cannot
that the goods referred to therein will ordinarily refuse to carry a particular class of
be delivered to the bearer or to the goods.
order of any person named therein. EXCEPTION: For some sufficient reason
4. Non-negotiable - One in which it is the discrimination against the traffic in such
stated that the goods referred to goods is reasonable and necessary. (Fisher
therein will be delivered to a specified vs. Yangco Steamship Co. 31 Phil 1).
person.  Instances when the carrier may validly
5. Clean – One which does not indicate refuse to accept the goods include the ff:
any defect in the goods. 1.) Goods sought to be transported are
6. Foul – One which contains a notation dangerous objects, or substances including
thereon indicating that the goods dynamite and other explosives
covered by it are in bad condition. 2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
7. Spent – One which covers goods that 4.) Contrabands or illegal goods
already have been delivered by the 5.) Goods are injurious to health
carrier without a surrender of a signed 6.) Goods will be exposed to untoward
copy of the bill. danger like flood, capture by enemies and
8. Through – One issued by the carrier the like
who is obliged to use the facilities of 7.) Goods like livestock will be exposed to
other carriers as well as his own disease
facilities for the purpose of transporting 8.) Strike
the goods from the city of the seller to 9.) Failure to tender goods on time. (Notes
the city of the buyer, which bill of and Cases on the Law on Transportation
lading is honored by the second and and Public Utilities, Aquino, T. & Hernando,
other interested carriers who do not R.P. 2004 ed. p.68)
issue their own bills.  In case of carriage by railway, the carrier
9. Custody – One wherein the goods are is exempted from liability if carriage is
already received by the carrier but the insisted upon by the shipper, provided its
vessel indicated therein has not yet objections are stated in the bill of lading.
arrived in the port.  However, when a common carrier accepts
10. Port – One which is issued by the cargo for shipment for valuable
consideration, it takes the risk of delivering 1. Partial non-delivery, where the goods are
it in good condition as when it was loaded. useless without the others (Art. 363);
(PAL vs. CA) 2. Goods are rendered useless for sale or
consumption for the purposes for which they
B. Duty to deliver the goods are properly destined (Art. 365); and
 Not only to transport the goods safely but 3. In case of delay through the fault of the
to the person indicated in the bill of lading. carrier (Art. 371).
The goods should be delivered to the
consignee or any other person to whom the NOTICE OF DAMAGE (ART. 366)
bill of lading was validly transferred or  Requisites for applicability:
negotiated. 1. Domestic/inter-island/coastwise
transportation
Time of delivery 2. Land/water/air transportation
Stipulated in No 3. Carriage of goods
Contract/Bill stipulation 4. Goods shipped are damaged
of Lading  Rules:
1. Carrier is 1. Within a a. Patent damage: shipper must file a claim
bound to fulfill reasonable against the carrier immediately upon
the contract time. delivery (it may be oral or written)
and is liable 2. Carrier is b. Latent damage: shipper should file a
for any delay; bound to claim against the carrier within 24 hours
no matter from forward them from delivery.
what cause it in the 1st Note: These rules does not apply to
may have shipment of misdelivery of goods. (Roldan vs. Lim
arisen. the same or Ponzo)
similar goods Purpose of notice: To inform the carrier
which he may that the shipment has been damaged, and it
make to the is charged with liability therefore, and to
point of give it an opportunity to make an
delivery. (ART. investigation and fix responsibility while the
358 Code of matter is fresh.
Commerce)  The filing of notice of claim is a condition
precedent for recovery.
Effects of delay  Shorter period may be stipulated by the
a. Merely suspends and generally does not parties because it merely affects the
terminate the contract of carriage shipper’s remedy and does not affect the
b. Carrier remains duty bound to exercise liability of the carrier. (PHILAMGEN vs.
extraordinary diligence Sweetlines, Inc.)
c. Natural disaster shall not free the carrier Prescriptive Period
from responsibility (Art.1740)  Not provided by Article 366. Thus, in such
d. If delay is without just cause, the absence, Civil Code rules on prescription
contract limiting the common carrier’s apply.
liability cannot be availed of in case of loss  If despite the notice of claim, the carrier
or deterioration of the goods (Art.1747) refuses to pay, action must be filed in court.
1. No bill of lading was issued:
RIGHT OF CONSIGNEE TO ABANDON within 6 years
GOODS 2. Bill of lading was issued: within
 Instances: 10 years.
ARTICLE 366 COGSA Sec.3 transportation of several legs, each carrier is
(6) responsible for its particular leg in the
Applicability contract.
1. Dom 1. Internationa EXCEPTION: A combined carrier
estic/inter- l/ agreement where a carrier makes itself
island/coastwis overseas/forei liable assuming the obligations and acquiring
e gn (from as well the rights and causes of action of
transportation foreign those which preceded it.
2. Land, country to
water, air Phils.) B. MARITIME COMMERCE
transportation Note: subject (Arts. 573-869)
3. Carri to the rule on
age of goods Paramount IMPORTANT CONCEPTS:
Clause 1. Merchant vessel
2. 2. Maritime lien and Preference of Credit
Water/maritim 3. Doctrine of limited liability
e 4. Causes of revocation of voyage
transportation 5. Participants in maritime commerce
3. Carriage of 6. Charter party
goods 7. Loans on bottomry and respondentia
Notice of damage 8. Accidents in maritime commerce
1. 1. Not a
Condition condition MARITIME/ADMIRALTY LAW
precedent precedent  It is the system of laws which particularly
2. 2. 3-day period relates to the affairs and business of the
24-hour for claiming sea, to ships, their crews and navigation,
period for latent damage and to maritime conveyance of persons and
claiming latent property. (Notes and Cases on the Law on
damage Transportation and Public Utilities, Aquino &
Prescriptive period Hernando, citing Francisco, p.254)
None provided; One year from
Civil Code the date of  Maritime laws apply only to maritime
applies. delivery trade and sea voyages. (Pandect of
(delivered but Commercial Law and Jurisprudence, Justice
damaged Jose Vitug, 1997 ed.)
goods), or
date when the  Arrastre service is not maritime in
vessel left port character. It refers to a contract for the
or from the unloading of goods from a vessel. (ICTSI vs.
date of Prudential Guarantee, 320 SCRA 244)
delivery to the
arrastre (non- CHARACTERISTICS OF MARITIME
delivery or TRANSACTION
loss). 1. Real - similar to transactions over real
property with respect to effectivity against
COMBINED CARRIER AGREEMENT third persons which is done through
(ART. 373) registration. (Rubiso vs. Rivera, 37 Phil. 72).
GENERAL RULE: In case of a contract of The evidence of real nature is shown by: 1)
the limitation of the liability of the agents to ORDER OF PREFERENCE IN CASE OF
the actual value of the vessel and the freight SALE OF VESSEL
money; and 2) the right to retain the cargo
and embargo and detention of the vessel R.A. 6106 P.D. 1521
(Luzon Stevedoring Corp v. CA, 156 SCRA Effectivity date
169); 1969 1978
2. Hypothecary - the liability of the owner of Applicability
the value of the vessel is limited to the Overseas Both domestic
vessel itself (Doctrine of Limited Liability). shipping only and overseas
shipping
 The real and hypothecary nature of Kind of sale
maritime law simply means that the liability Judicial Judicial and
of the carrier in connection with losses extrajudicial
related to maritime contracts is confined to Order of Preference
the vessel, which stands as the guaranty for A preferred The preferred
their settlement. (Aboitiz Shipping Corp. vs. mortgage mortgage lien
General Accident Fire and Life Assurance shall have shall have
Corp. 217 SCRA 359). priority over priority over
all claims all claims
MERCHANT VESSEL against the against the
 Vessel engaged in maritime commerce, vessel, except vessel, except
whether foreign or otherwise. (Bar Review the following the following
Materials in Commercial Law, Jorge Miravite, preferences in preferences in
2002 ed.) the order the order
 Constitutes property which may be stated: stated:
acquired and transferred by any of the 1. Judicial 1. Expenses
means recognized by law. They shall costs of the and fees
continue to be considered as personal proceedings; allowed and
property. (Arts. 573, 585) 2. Taxes due costs taxed by
 They are susceptible to maritime liens the Philippine the court and
such as for the repair, equipping and Government; taxes due to
provisioning of the vessel in the preparation 3. Salaries and the
of a voyage, as well as mortgage liabilities, wages of the Government;
in satisfaction of which a vessel may be Captain and 2. Crew’s
validly arrested and sold. (Ship Mortgage Crew of the wages;
Decree of 1978) vessel during 3. General
its last average;
MARITIME LIEN voyage; 4. Salvage,
 It constitutes a present right of property 4. General including
in the ship, a jus in re, to be afterward average or contract
enforced in admiralty by process in rem. salvage salvage;
(PNB vs. CA, 337 SCRA 381) including 5. Maritime
 If the maritime lien arose prior to the contract liens arising
recording of a preferred mortgage, it shall salvage, prior in time
have priority over the said mortgage lien. bottomry to the
(PNB vs. CA, 337 SCRA 381) loans, and recording of
indemnity due the preferred
shippers for mortgage;
the value of 6. Damages 156 SCRA 169) The interest extends to: 1)
goods arising out of the vessel itself; 2) equipments; 3)
transported tort; and freightage; and 4) insurance proceeds.
but which 7. Preferred (Chua v. IAC, 166 SCRA 183)
were not mortgage EXCEPTIONS:
delivered to registered 1. Claims under Workmen’s Compensation
the consignee; prior in time. (Abueg vs. San Diego 77 Phil 730);
5. Costs of 2. Injury or damage due to shipowner or to
repair and the concurring negligence of the
equipment of shipowner and the captain;
the vessel, 3. The vessel is insured (Vasquez vs. CA
and 138 SCRA 553).
provisioning of 4. Expenses for repair on vessel completed
food, supplies before loss;
and fuel 5. In case there is no total loss and the
during its last vessel is not abandoned;
voyage; and 6. Collision between two negligent vessels;
6. Preferred
mortgages  Abandonment of the vessel is necessary
registered to limit the liability of the shipowner. The
prior in time. only instance were abandonment is
dispensed with is when the vessel is entirely
lost (Luzon Stevedoring vs. CA 156 SCRA
 Effect of sale: All pre-existing claims in
169).
the vessel are terminated. They will then be
satisfied from the proceeds of the sale
RIGHT OF SHIPOWNER OR SHIP
subject to the order of preference.
AGENT TO ABANDON VESSEL
 Instances:
DOCTRINE OF LIMITED LIABILITY
1. In case of civil liability from
(HYPOTHECARY RULE)
indemnities to third persons (Art. 587);
 Cases where applicable:
2. In case of leakage of at least ¾ of
1. Art. 587 – civil liability for indemnities
the contents of a cargo containing liquids
to third persons
(Art. 687); and
2. Art. 590 – indemnities from negligent
3. In case of constructive loss of the
acts of the captain (not the shipowner
vessel (Sec. 138, Insurance Code).
or ship agent)
3. Art. 837 – collision RIGHT OF ABANDONMENT
4. Art. 643 – liability for wages of the
captain and the crew and for SHIPOWNER CONSIGNEE
advances made by the ship agent if OR SHIP
the vessel is lost by shipwreck or AGENT
capture What may be abandoned
Vessel Goods shipped
GENERAL RULE: The liability of shipowner Instances
and ship agent is limited to the amount of 1. In case of 1. Partial non-
interest in said vessel such that where civil liability delivery,
vessel is entirely lost, the obligation is from where the
extinguished. (Luzon Stevedoring v. Escano, indemnities to goods are
third persons useless 1. Interdiction of commerce – A
(Art. 587); without the governmental prohibition of commercial
2. Sec. 138, others (Art. intercourse intended to bring about an
Insurance 363); entire cessation for the time being of all
Code; 2. Goods are trade whatever.
3. In case of rendered 2. Blockade – A sort of circumvallation of a
leakage of at useless for place by which all foreign connection and
least ¾ of the sale or correspondence is, as far as human
contents of a consumption power can effect it, to be cut off.
cargo for the 3. Embargo – A proclamation or order of a
containing purposes for state, usually issued in time of war or
liquids (Art. which they are threatened hostilities, prohibiting the
687) properly departure of ships or goods from some or
destined (Art. all the ports of such state until further
365); and order.
3. In case of
delay through PARTICIPANTS IN MARITIME
the fault of COMMERCE
the carrier A. Shipowners and ship agents
(Art. 371). B. Captains and masters of the vessel
Effects C. Officers and crew of the vessel
1. Transfer 1. Transfer of D. Supercargoes
of ownership ownership on E. Pilot
of the vessel the goods
from the from the A. SHIPOWNERS AND SHIP AGENTS
shipowner to shipper to the Shipowner (proprietario)
the shippers or carrier.  Person who has possession, control and
insurer. 2. Carrier management of the vessel and the
2. In case should pay the consequent right to direct her navigation
of (2), the shipper the and receive freight earned and paid, while
insurer must market value his possession continues.
pay the insured of the goods
as if there was at the point of Ship agent (naviero)
actual total destination.  Person entrusted with provisioning and
loss of the representing the vessel in the port in which
vessel. it may be found; also includes the
shipowner.
CAUSES OF REVOCATION OF VOYAGE  Not a mere agent under civil law; he is
1. War or interdiction of commerce; solidarily liable with the ship owner.
2. Blockade;  Powers and functions:
3. Prohibition to receive cargo at 1. Capacity to trade;
destination; 2. Discharge duties of the captain, subject
4. Embargo; to Art.609;
5. Inability of the vessel to navigate. (Art. 3. Contract in the name of the owners with
640) respect to repairs, details of equipment,
armament, provisions of food and fuel,
Terms: and freight of the vessel, and all that
relate to the requirements of navigation;
4. Order a new voyage, make a new charter 1. Filipino citizen;
or insure the vessel after obtaining 2. Legal capacity to contract;
authorization from the shipowner or if 3. Must have passed the required
granted in certificate of appointment. physical and mental examinations
required for licensing him as such.
Civil Liabilities of the Shipowner And (Art. 609)
Ship Agent  Inherent powers:
1. All contracts of the captain, whether 1. Appoint crew in the absence of ship
authorized or not, to repair, equip and agent;
provision the vessel; (Art. 586) 2. Command the crew and direct the
2. Loss and damage to the goods loaded on vessel to its port of destination;
the vessel without prejudice to their right 3. Impose correctional punishment on
to free themselves from liability by those who, while on board vessel, fail
abandoning the vessel to the creditors. to comply with his orders or are
(Art. 587) wanting in discipline;
4. Make contracts for the charter of
Duty of Ship Agent to Discharge the vessel in the absence of ship agent.
Captain and Members of the Crew 5. Supply, equip, and provision the
 If the seamen contract is not for a vessel; and
definite period or voyage, he may discharge 6. Order repair of vessel to enable it to
them at his discretion. (Art. 603) continue its voyage. (Art. 610)
 If for a definite period, he may not  Sources of funds to comply with the
discharge them until after the fulfillment of inherent powers of the captain (in
their contracts, except on the following successive order):
grounds: 1. From the consignee of the vessel;
a. Insubordination in serious matters; 2. From the consignee of the cargo;
b. Robbery; 3. By drawing on the ship agent;
c. Theft; 4. By a loan on bottomry;
d. Habitual drunkenness; 5. By sale of part of the cargo. (Art. 611)
e. Damage caused to the vessel or to its  Duties:
cargo through malice or manifest or 1. Bring on board the proper certificate
proven negligence. (Art. 605) and documents and a copy of the
Code of Commerce;
B. CAPTAINS AND MASTERS 2. Keep a Log Book, Accounting Book
 They are the chiefs or commanders of and Freight Book;
ships. 3. Examine the ship before the voyage;
 The terms have the same meaning, but 4. Stay on board during the loading and
are particularly used in accordance with the unloading of the cargo;
size of the vessel governed and the scope of 5. Be on deck while leaving or entering
transportation, i.e., large and overseas, and the port;
small and coastwise, respectively. 6. Protest arrivals under stress and in
 Nature of position (3-fold character): case of shipwreck;
1. General agent of the shipowner; 7. Follow instructions of and render an
2. Technical director of the vessel; accounting to the ship agent;
3. Representative of the government of 8. Leave the vessel last in case of wreck;
the country under whose flag he 9. Hold in custody properties left by
navigates. deceased passengers and crew
 Qualifications: members;
10. Comply with the requirements 1. If, before beginning voyage, captain
of customs, health, etc. at the port of attempts to change it, or a naval war
arrival; with the power to which the vessel was
11. Observe rules to avoid collision; destined occurs;
12. Demand a pilot while entering 2. If a disease breaks out and be officially
or leaving a port. (Art. 612) declared an epidemic in the port of
destination;
 A ship’s captain must be accorded a 3. If the vessel should change owner or
reasonable measure of discretionary captain. (Art. 647)
authority to decide what the safety of the
ship and of its crew and cargo specifically Sailing Mate/First Mate
requires on a stipulated ocean voyage  Second chief of the vessel who takes the
(Inter-Orient Maritime Enterprises Inc. vs. place of the captain in case of absence,
CA). sickness, or death and shall assume all of
his duties, powers and responsibilities. (Art.
 No liability for the following: 627)
1. Damages caused to the vessel or to  Duties:
the cargo by force majeure; 1. Provide himself with maps and charts
2. Obligations contracted for the repair, with astronomical tables necessary for
equipment, and provisioning of the the discharge of his duties;
vessel unless he has expressly bound 2. Keep the Binnacle Book;
himself personally or has signed a bill 3. Change the course of the voyage on
of exchange or promissory note in his consultation with the captain and the
name. (Art. 620) officers of the boat, following the
decision of the captain in case of
Solidary Liabilities of the Ship disagreement;
Agent/Shipowner for Acts Done by the 4. Responsible for all the damages
Captain towards Passengers and caused to the vessel and the cargo by
Cargoes reason of his negligence. (Arts. 628 -
1. Damages to vessel and to cargo due 631)
to lack of skill and negligence;
2. Thefts and robberies of the crew; Second Mate
3. Losses and fines for violation of laws;  Takes command of the vessel in case of
4. Damages due to mutinies; the inability or disqualification of the captain
5. Damages due to misuse of power; and the sailing mate, assuming in such case
6. For deviations; their powers and responsibilities.
7. For arrivals under stress;  Third in command
8. Damages due to non-observance of  Duties:
marine regulations. (Art. 618) 1. Preserve the hull and rigging of the
vessel;
C. OFFICERS AND CREW 2. Arrange well the cargo;
1. Sailing Mate/First Mate 3. Discipline the crew;
2. Second Mate 4. Assign work to crew members;
3. Engineers 5. Inventory the rigging and equipment
4. Crew of the vessel, if laid up. (Art. 632)
 No liability under the following
circumstances: Engineers
 Officers of the vessel but have no a. compensation up to time of death if
authority except in matters referring to the engaged on wage
motor apparatus. When two or more are b. if by voyage - half of amount if death
hired, one of them shall be the chief occurs on voyage out; and full, if on
engineer. voyage in
 Duties: c. if by shares - none, if before
1. In charge of the motor apparatus, departure; full, if after departure
spare parts, and other instruments 2. if death is due to defense of vessel - full
pertaining to the engines; payment;
2. Keep the engines and boilers in good 3. if captured in defense of vessel - full
condition; payment;
3. Not to change or repair the engine 4. if captured due to carelessness - wages
without authority of the captain; up to the date of the capture. (Art. 645)
4. Inform the captain of any damage to
the motor apparatus; Complement of the Vessel
5. Keep an Engine Book;  All persons on board, from the captain to
6. Supervise all personnel maintaining the cabin boy, necessary for the
the engine. (Art. 632) management, maneuvers, and service, thus
including the crew, the sailing mates,
Crew engineers, stokers and other employees on
 The aggregate of seamen who man a board not having specific designations.
ship, or the ship’s company.  Does not include the passengers or the
 Hired by the ship agent, where he is persons whom the vessel is transporting.
present and in his absence, the captain hires
them, preferring Filipinos, and in their D. SUPERCARGOES
absence, he may take in foreigners, but not  Persons who discharges administrative
exceeding 1/5 of the crew. (Art. 634) duties assigned to him by ship agent or
shippers, keeping an account and record of
Classes of Seaman’s Contracts transaction as required in the accounting
1. By the voyage; book of the captain. (Art. 649)
2. By the month; and
3. By share of profits or freightage. E. PILOT
 A person duly qualified, and licensed, to
Just Causes for the Discharge of conduct a vessel into or out of ports, or in
Seaman While Contract Subsists certain waters.
1. Perpetration of a crime;  The term generally connotes a person
2. Repeated insubordination, want of taken on board at a particular place for the
discipline; purpose of conducting a ship through a
3. Repeated incapacity and negligence; river, road or channel, or from a port.
4. Habitual drunkenness;  Master pro hac vice for the time being in
5. Physical incapacity; the command and navigation of the ship.
6. Desertion. (Art. 637)  While in exercising his functions a pilot is
in sole command of the ship and supersedes
Rules in case of Death of a Seaman the master for the time being in the
 The seaman’s heirs are entitled to command and navigation of the ship, the
payment as follows: master does not surrender his vessel to the
1. If death is natural: pilot and the pilot is not the master. There
are occasions when the master may and
should interfere and even displace the pilot, 1. Ship owner or ship agent
as when the pilot is obviously incompetent 2. Charterer
or intoxicated (Far Eastern Shipping  Classes:
Company vs. CA). 1. Bareboat or demise – The charterer
 Compulsory Pilotage – States possessing provides crew, food and fuel. The charterer
harbors have enacted laws or promulgated is liable as if he were the owner, except
rules requiring vessels approaching their when the cause arises from the
ports to take on board pilots licensed under unworthiness of the vessel. The shipowner
the local laws. (Notes and Cases on the Law leases to the charterer the whole vessel,
on Transportation and Public Utilities, transferring to the latter the entire
Aquino, T. & Hernando, R.P. 2004 ed. p. command, possession and consequent
518) control over the vessel’s navigation,
including the master and the crew, who
Liablity of Pilot thereby become the charter’s servants. It
GENERAL RULE: On compulsory pilotage transforms a common carrier into a private
grounds, the Harbor Pilot is responsible for carrier.
damage to a vessel or to life or property due  The charterer becomes the owner of
to his negligence. the vessel pro hac vice, just for that one
EXCEPT: particular purpose only. Because the
1. Accident caused by force majeure or charterer is treated as owner pro hac
natural calamity provided the pilot exercised vice, the charterer assumes the
prudence and extra diligence to prevent or customary rights and liabilities of the
minimize damages. shipowner to third persons and is held
2. Countermand or overrule by the master liable for the expense of the voyage and
of the vessel in which case the registered the wages of the seamen.
owner of the vessel is liable. (Sec.11, Art.III 2. Contract of Affreightment – A contract
PPA Admin Order 03-85) whereby the owner of the vessel leases part
or all of its space to haul goods for others.
SPECIAL CONTRACTS OF MARITIME  The shipowner retains the possession,
COMMERCE command and navigation of the ship, the
1. Charter party charterer merely having use of the space
2. Bill of lading in the vessel in return for his payment of
3. Contract of transportation of the charter hired.
passengers on sea voyages  Kinds:
4. Loan on bottomry a. Time charter – vessel is chartered for
5. Loan on respondentia a fixed period of time or duration of
6. Marine insurance voyage.
b. Voyage or trip charter – the vessel is
CHARTER PARTY leased for one or series of voyages
 A contract by virtue of which the owner usually for purposes of transporting
or agent binds himself to transport goods for charterer.
merchandise or persons for a fixed price.
 A contract by which an entire ship, or LEASE CHARTER
some principal part thereof is let/leased by PARTY
the owner to another person for a specified If for a definite Charterer may
time or use. (Planters Products, Inc. vs. CA, period, lessee rescind charter
226 SCRA 476) cannot give up party by
 Parties: the lease by paying half of
paying a the freightage Owner of The vessel
portion of the agreed upon. vessel owner retains
amount agreed relinquishes possession,
upon. possession, command and
If the leased The new command and navigation of
property isowner is not navigation to the ship
sold to one compelled to charterer
who knows of respect the Common Common
the existence charter party carrier is carrier is not
of the lease, so long as he converted to converted to a
the new owner can load the private carrier. private carrier.
must respect vessel with his
the lease. own cargo.
(Art. 689) PERSONS WHO MAY MAKE A CHARTER
Civil law Commercial 1. Owner or owners of the vessel, either
concept law concept in whole or in majority part, who have
legal control and possession of the
vessel
2. Charterer may subcharter entire
CHARTER BILL OF vessel to 3rd person only if not
PARTY LADING prohibited in original charter.
An entire or More like a (Art.679)
complete private receipt 3. Ship agent if authorized by the
contract. which the owner/s or given such power in the
captain gives certificate of appointment. (Art.598)
to accredit 4. Captain in the absence of the ship
goods received agent or consignee and only if he acts
from persons in accordance with the instructions of
Consensual Real contract the agent or owner and protects the
contract latter’s interests. (Art.609)
BAREBOAT CONTRACT REQUISITES OF A VALID CHARTER

OR DEMISE OF PARTY
CHARTER AFFREIGHTM 1. Consent of the contracting parties
ENT (TIME 2. Existing vessel which should be placed
OR VOYAGE at the disposition of the shipper
CHARTER) 3. Freight
Charterer Owner remains 4. Compliance with Art. 652 of the Code
becomes liable liable as carrier of Commerce
to others and must
caused by its answer for any
negligence breach of duty
Charterer Charterer is
regarded as not regarded Clauses Which May Be Included In a Charter Party
owner pro hac as owner.
vice for the Jason clause Clause
voyage paramount
or
paramount placed cargo and
clause 4. To illicit cargo;
A stipulation in A clause in a substitute 4. To wait if
a charter party charter party another vessel the vessel
that in case of providing that if load is less needs repair;
a maritime the COGSA than 3/5 of 5. To pay
accident for shall apply, capacity; expenses for
which the even though 5. To leave deviation.
shipowner is the the port if the (Arts. 679-
not responsible transportation charterer does 687)
by law, is domestic, not bring the
contract or subject to the cargo within
otherwise, the extent that any the lay days
cargo shippers, term of the bill and extra lay
consignees or of lading is days allowed;
owners shall repugnant to 6. To place in
contribute with the COGSA or a vessel in a
the shipowner applicable law, condition to
in general then to the navigate;
average. extent thereof 7. to bring
(Pandect of the provision cargo to
Commercial of the bill of nearest neutral
Law and lading is void. port in case of
Jurisprudence, (Pandect of war or
Justice Jose Commercial blockade.
Vitug, 1997 Law and (Arts. 669-
ed.) Jurisprudence, 678)
Justice Jose
Vitug, 1997
ed.) Rescission of a Charter Party
At At Fortuito
Rights and Obligations of Parties charter shipow us
er’s ner’s causes
SHIPOWNER CHARTERER request request (Art.
OR SHIP (Art (Art. 690)
AGENT 688) 689)
1. If the 1. To pay the
vessel is agreed charter 1. By 1. If the 1. War or
chartered price; abandoni extra lay interdicti
wholly, not to 2. To pay ng the days on of
accept cargo freightage on charter terminat commerc
from others; unboarded and e without e;
2. To observe cargo; paying the cargo 2.
represented 3. To pay half of being Blockade;
capacity; losses to the placed 3.
3. To unload others for freightag alongside Prohibitio
cargo loading e; the n to
clandestinely uncontracted 2. Error vessel; receive
in 2. Sale cargo; 4. C. & F. - cost and freight.
tonnage by the 4.
or flag; owner of Embargo TRANSSHIPMENT OF GOODS
3. Failure the ; and  The act of taking cargo out of one ship
to place vessel 5. and loading it in another, or the transfer of
the before Inability goods from the vessel stipulated in the
vessel at loading of the contract of affreightment to another vessel
the by the vessel to before the place of destination named in the
charterer charterer navigate. contract has been reached, or the transfer
’s ; for further transportation from one ship or
disposal; conveyance to another.
4. Return  It is not dependent on the ownership of
of the the transporting ships or in the change of
vessel carriers, but rather on the fact of actual
due to physical transfer of cargo from one vessel to
pirates, another.
enemies  If done without legal excuse, however
or bad competent and safe the vessel into which
weather; the transfer is made, is a violation of
5. Arrival contract and infringement of right of shipper
at a port and subjects carrier to liability if freight is
for lost event by cause otherwise excepted.
repairs. (Magellan Manufacturing vs. CA, 201 SCRA
102)
Terms:
1. Primage - bonus to be paid to the captain LOAN ON BOTTOMRY AND
after the successful voyage. RESPONDENTIA
2. Demurrage – the sum fixed in the charter  A real, unilateral, aleatory contract, by
party as a remuneration to the owner of virtue of which one person lends to another
the ship for the detention of his vessel a certain amount of money or goods on
beyond the number of days allowed by things exposed to maritime risks, which
the charter party for loading or unloading amount, with its earnings, is to be returned
or for sailing. if the things are safely transported, and
3. Deadfreight – the amount paid by or which is lost if the latter are lost.
recoverable from a charterer of a ship for
the portion of the ship’s capacity the
latter contracted for but failed to occupy. LOAN ON LOAN ON
4. Lay Days - days allowed to charter BOTTOMRY RESPONDEN
parties for loading and unloading the TIA
cargo. Definition
5. Extra Lay Days – days which follow after Loan made by Loan taken on
the lay days have elapsed. shipowner or security of the
ship agent cargo laden
USUAL FORMS OF CONSUMMATING guaranteed by on a vessel,
CONTRACTS vessel itself and repayable
1. C.I.F. – cost, insurance and freight; and repayable upon safe
2. F.O.B. - free on board; upon arrival of arrival of
3. F.A.S. - free alongside ship; and vessel at cargo at
destination. destination. Usury Law Usury Law
(Art. 719) (Art. 719) Liability of the Not subject to
borrower is any
contingent on contingency
the safe (absolute
Who may contract arrival of the liability)
Shipowner or Only the vessel or
ship agent. owner of the cargo at
Outside of the cargo. destination
residence of
The last The first
the owners -
lender is a lender is a
the captain.
preferred preferred
Common elements:
creditor creditor
1. Exposure of security to
marine peril;
2. Obligation of the debtor WHEN LOAN ON BOTTOMRY OR
conditioned only upon safe RESPONDENTIA REGARDED AS SIMPLE
arrival of the security at the LOAN
point of destination. 1. Lender loaned an amount larger than
Forms: the value of the object due to
1. Public instrument fraudulent means employed by the
2. Policy signed by the borrower. (ART.726)
contracting parties and the 2. Full amount of the loan is not used for
broker taking part therein the cargo or given on the goods if all
3. Private instrument (Art. of them could not have been loaded,
720) the balance will be considered a
Contents: simple loan. (ART.727)
1. Kind, name and registry of 3. If the effects on which the money is
the vessel; taken is not subjected to any risk.
2. Name, surname and (ART.729)
domicile of the captain;
3. Names, surnames and Note: Under existing laws, the parties to a
domiciles of the borrower loan, whether ordinary or maritime, may
and the lender; agree on any rate of interest. (CB Circular
4. Amount of the loan and the 905)
premium stipulated;
5. Time for repayment;
6. Goods pledged to secure MARINE LOAN ON
repayment; INSURANCE BOTTOMR
7. Voyage during which the Y OR
risk is run (Art.721) RESPOND
ENTIA
Indemnity is Indemnity is
paid after the paid in
BOTTOMRY/ ORDINARY
loss has advance by
RESPONDEN LOAN
occurred way of a
TIA (MUTUUM)
loan
Not subject to Subject to In case of loss of In case of
the vessel due to loss of the likewise of an insurance coverage to the
a risk insured vessel due extent of the loan accommodation. The
against, the to a marine same rule would apply to the hypothecation
obligation of the peril, the of the cargo by respondentia. (Pandect of
insurer becomes obligation of Commercial Law and Jurisprudence, Justice
absolute the Jose Vitug, 1997 ed.)
borrower to
pay is ACCIDENTS IN MARITIME COMMERCE
extinguishe 1. Averages
d 2. Arrival Under Stress
Consensual Real 3. Collision
contract contract 4. Shipwreck
Hypothecary Nature of Bottomry/ AVERAGE

Respondentia  An extraordinary or accidental expense
GENERAL RULE: The obligation of the incurred during the voyage in order to
borrower to pay the loan is extinguished if preserve the cargo, vessel or both, and all
the goods given as security are absolutely damages or deterioration suffered by the
lost by reason of an accident of the sea, vessel from departure to the port of
during the voyage designated, and if it is destination, and to the cargo from the port
proven that the goods were on board. of loading to the port of consignment. (Art.
EXCEPTIONS: 806)
1. Loss due to inherent defect;  The person whose property has been
2. Loss due to the barratry on the part of saved must contribute to reimburse the
the captain; damage caused or expense incurred if the
3. Loss due to the fault or malice of the situation constitutes general average.
borrower;  Classes:
4. The vessel was engaged in contraband; 1. Particular or Simple Average
and 2. Gross or General Average
5. The cargo loaded on the vessel be  Where both vessel and cargo are saved, it
different in from that agreed upon. is general average; where only the vessel or
only the cargo is saved, it is particular
Concurrence of Marine Insurance and average.
Loan on Bottomry/Respondentia  Expenses incurred to refloat a vessel,
1. The insurable interest of the owner of which accidentally ran aground, in order to
a ship hypothecated by bottomry is continue its voyage, do not constitute
only the excess of the value over the general average. Not only is there absence
amount secured by bottomry. (Sec. of a marine peril, common safety factor, and
101, Insurance Code) deliberateness. It is the safety of the
2. The value of what may be saved in property, and not the voyage, which
case of shipwreck shall be divided constitutes the true foundation of general
between the lender and the insurer in average. (A. Magsaysay, Inc. vs. Agan,
proportion to the interest of each one. G.R.No. L-6393, Jan. 31, 1955)
(Art. 735)
Note: If a vessel is hypothecated by PARTICULAR GROSS OR

bottomry only the excess is insurable, since OR SIMPLE GENERAL
a loan on bottomry partakes of the nature
Definition Number of interests
Damages or Damages or involved
expenses expenses Only one Several
caused to the deliberately interest interests
vessel or cargo caused in involved involved
that did not order to save Share in the damage or
inure to the the vessel, its expense
common cargo or both 100% share In proportion
benefit, and from real and to the value of
borne by known risk. the owner’s
respective (Art. 811) property
owners. (Art. saved
809) Right to recover
Requisites No There may be
1. common reimbursement reimbursemen
danger; t
2. deliberate Kinds (not exclusive)
sacrifice; Art. 809 Art. 811
3. success; Procedure for recovery
4. proper 1. Assembly
formalities and
and legal deliberation
steps. 2. Resolution
Liability of the captain
The owner of All the persons 3. Entry of the
the goods having an resolution in
which gave rise interest in the the logbook
to the expense vessel and the 4. Detailed
or suffered the cargo therein minutes
damage shall at the time of 5. Delivery of
bear this the occurrence the minutes to
average. (Art. of the average the maritime
810) shall judicial
contribute to authority of
satisfy this the first port,
average. (Art. within 24
812) hours from
 The arrival,
insurers 6. Ratification
(Art.859) and by captain
lenders on under oath.
bottomry and (Arts. 813-
respondentia 814)
shall likewise
contribute. GOODS NOT COVERED BY GENERAL
(Art.732). AVERAGE EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2)) are usually short and the seas are gen erally
3. Fuel for the vessel if there is more not rough. In overseas shipping, the vessel is exposed for many
days to perils of the sea.
than sufficient fuel for the voyage.
(Rule IX, York-Antwerp Rule)
DOMESTIC INTERNATIO
NAL
Jettison
 Act of throwing cargo overboard in order Deck cargo is Deck cargo is
to lighten the vessel. allowed not allowed
 Order of goods to be cast overboard: With shipper’s consent
1. Those which are on the deck, General Particular
preferring the heaviest one with the average average
least utility and value; Without shipper’s consent
2. Those which are below the upper Captain is Captain is
deck, beginning with the one with liable liable
greatest weight and smallest value.
(Art. 815) ARRIVAL UNDER STRESS (ARRIBADA)
 The arrival of a vessel at the nearest and
 Jettisoned goods are not res nullius nor most convenient port instead of the port of
deemed “abandoned” within the meaning of destination, if during the voyage the vessel
civil law so as to be the object of occupation cannot continue the trip to the port of
by salvage. (Pandect of Commercial Law destination.
and Jurisprudence, Justice Jose Vitug, 1997
ed.) When When Who
 In order that the jettisoned goods may be lawful unlawful bears
included in the gross or general average, the expense
existence of the cargo on board should be s:
proven by means of the bill of lading. (Art.
816) The 1. Lack The
inability of shipowne
York-Antwerp (Y-A) Rules on to provisions r or ship
Determining Liability for Averages continue due to agent is
With Regard To Deck Cargo voyage negligenc liable in
1. Deck cargo is allowed only in is due to e to carry case of
domestic/coastwise/inter-island shipping, lack of according unlawful
and is prohibited in provision to usage arrival
international/overseas/foreign shipping. s, well- and under
2. If deck cargo is loaded with the consent founded customs; stress.
of the shipper on overseas trade, it must fear of 2. Risk of But they
always contribute to general average, but seizure, enemy shall not
should the same be jettisoned, it would not privateer not well be liable
be entitled to reimbursement because there s, known or for the
is violation of the Y-A Rules. pirates, manifest damages
3. If deck cargo is loaded with the consent or 3. Defect caused
of the shipper on coastwise shipping, it must accidents of vessel by
always contribute to general average and if of the due to reason of
jettisoned would be entitled to sea improper a lawful
reimbursement. disabling repair; arrival.
 Reason: In domestic shipping, voyages it to and (Art.
navigate. 4. Malice, 821) one who arrived later, unless it can be
(Art. negligenc proved that there was no fault on its
819) e, lack of part.
foresight 2. When two vessels meet, the smaller
or skill of should give the right of way to the larger
captain. one.
(Art. 820) 3. A vessel leaving port should leave the
way clear for another which may be
 It is the duty of the captain to continue entering the same port.
the voyage without delay after the cause of 4. The vessel which leaves later is
the arrival under stress has ceased failing in presumed to have collided against one
such duty renders him liable. However, in which has left earlier.
case the cause has been risk of enemies, 5. There is a presumption against the vessel
there must first be an assembly before which sets sail in the night.
departure. (Art. 825) 6. There is a presumption against the vessel
 Steps: with spread sails which collides with
1. Captain should determine during the another which is at anchor and cannot
voyage if there is well founded fear of move, even when the crew of the latter
seizure, privateers and other valid has received word to lift anchor, when
grounds; there was not sufficient time to do so or
2. Captain shall assemble the officers there was fear of a greater damage or
and summon the persons interested in other legitimate reason.
the cargo who may attend the 7. There is a presumption against an
meeting but without a right to vote; improperly moored vessel.
3. The officers shall determine and agree 8. There is a presumption against a vessel
if there is well-founded reason after which has no buoys to indicate the
examining the circumstances. The location of its anchors to prevent damage
captain shall have the deciding vote; to vessels which may approach it.
4. The agreement shall be drafted and 9. Vessels must have “proper look-outs” or
the proper minutes shall be signed persons trained as such and who have no
and entered in the log book; other duty aside therefrom. (Smith Bell v.
5. Objections and protests shall likewise CA)
be entered in the minutes.
Nautical Rules as to Sailing Vessel and
COLLISION Steamship
 Impact of two vessels both of which are 1. Where a steamship and a sailing vessel
moving. are approaching each other from
opposite directions, or on intersecting
Allision lines, the steamship from the moment
 Impact between a moving vessel and a the sailing vessel is seen, shall watch
stationary one. with the highest diligence her course and
movements so as to be able to adopt
Nautical Rules to Determine such timely means of precaution as will
Negligence necessarily prevent the two boats from
1. When two vessels are about to enter a coming in contact.
port, the farther one must allow the 2. The sailing vessel is required to keep her
nearer to enter first; if they collide, the course unless the circumstances require
fault is presumed to be imputable to the otherwise.
their respective damage, but both should
Zones of Time in the Collision of be solidarily liable for damage to the
Vessels cargo of both vessels.
1. First zone – all time up to the moment 4. Third vessel at fault
when risk of collision begins.  The third vessel will be liable for losses
 No rule is as yet applicable for none is and damages. (Art. 831)
necessary. 5. Fortuitous event/force majeure
2. Second zone – time between moment  No liability. Each bears its own loss. (Art.
when risk of collision begins and moment it 830)
becomes a practical certainty.
 It is in this period where conduct of the  The doctrine of res ipsa loquitur applies in
vessels is primordial. It is in this zone that case a moving vessel strikes a stationary
vessels must strictly observe nautical rules, object, such as a bridge post, dock, or
unless a departure therefrom becomes navigational aid. (Far Eastern Shipping v.
necessary to avoid imminent danger. CA, Luzon Stevedoring vs. CA)
3. Third zone – time when collision is
certain and time of impact.  Even if the cause of action against the
 An error in this zone would no longer be common carrier is based on quasi-delict, the
legally consequential. defense of due diligence in the selection and
 Error in Extremis - sudden movement supervision of employees is unavailing in
made by a faultless vessel during the third case of a maritime tort resulting in collision.
zone of collision with another vessel which is It is not a civil tort governed by the Civil
at fault during the 2nd zone. Even if such Code but a maritime one governed by Arts.
sudden movement is wrong, no 826-839 of the Code of Commerce. (Manila
responsibility will fall on said faultless vessel. Steamship vs. Insa Abdulhaman)
(Urrutia and Co. v. Baco River Plantation
Co., 26 PHIL 632)  Doctrine of Last Clear Chance and Rule
on Contributory Negligence cannot be
Cases Covered By Collision and Allision applied in collision cases because of Art.827
1. One vessel at fault of the Code of Commerce. (Notes and Cases
 Vessel at fault is liable for damage caused on the Law on Transportation and Public
to innocent vessel as well as damages Utilities, Aquino, T. & Hernando, R.P. 2004
suffered by the owners of cargo of both ed.)
vessels. (Art. 826)
2. Both vessels at fault MARITIME PROTEST
 Each vessel must bear its own loss, but  Condition precedent or prerequisite to
the shippers of both vessels may go against recovery of damages arising from collisions
the shipowners who will be solidarily liable. and other maritime accidents.
(Art. 827)  It is a written statement made under oath
3. Vessel at fault not known by the captain of a vessel after the
 Each vessel must bear its own loss, but occurrence of an accident or disaster in
the shippers of both vessels may go against which the vessel or cargo is lost or
the shipowners who will be solidarily liable. damaged, with respect to the circumstances
(Art. 828) attending such occurrence, for the purpose
 Doctrine of Inscrutable Fault – In case of recovering losses and damages.
of collision where it cannot be  Excuses for not filing protest: 1) where
determined which between the two the interested person is not on board the
vessels was at fault, both vessels bear vessel; and 2) on collision time, need not be
protested. (Art. 836) discharging functions which are heavily
 Cases applicable: invested with public interest.
1. Collision (Art. 835);  Liability:
2. Arrival under stress (Art. 612(8)); 1. Similar to a warehouseman (Lua Kian v.
3. Shipwrecks (Arts. 612(15), 843); Manila Railroad)
4. Where the vessel has gone through a 2. Similar to a common carrier (Northern
hurricane or when the captain Motors v. Prince Line)
believes that the cargo has suffered 3. Solidary liability with the common carrier
damages or averages (Art. 624).
 Who makes: Captain Note: In order that the arrastre operator
 When made: within 24 hours from the may be held liable, the consignee must
time the collision took place. prove that the damage was due to the
 Before whom made: competent authority negligence and while the goods are in the
at the point of collision or at the first port of custody of the arrastre operator. (Hartford
arrival, if in the Philippines and to the Fire Insurance v. E. Razon, Inc.)
Philippine consul, if the collision took place
abroad. (Art. 835) STEVEDORING SERVICE
 The carriage of goods from the
SHIPWRECK warehouse or pier to the holds of the vessel.
 It is the loss of the vessel at sea as a (Chief of Staff vs. CIR)
consequence of its grounding, or running  As understood in the port business, the
against an object in sea or on the coast. It term consists of the handling of cargo from
occurs when the vessel sustains injuries due the hold of the ship to the dock, in case of
to a marine peril rendering her incapable of pier-side unloading; or to a barge, in case of
navigation. unloading at sea. (Anglo-Fil Trading Corp.
 If the wreck was due to malice, vs. Lazaro)
negligence or lack of skill of the captain, the  The loading on the ship of outgoing cargo
owner of the vessel may demand indemnity is also part of stevedoring work. (Ibid.)
from said captain. (Art. 841)
 The rules on collision or allision, as may CONTAINERIZATION/ “SAID-TO-
be pertinent, can equally apply to CONTAIN”/ “SHIPPER’S LOAD AND
shipwrecks. COUNT” SYSTEM
 System whereby the shipper loads his
SPECIAL CONCEPTS cargoes in a specially designed container,
ARRASTRE SERVICE seals the container and delivers it to the
 A contract for the unloading of goods carrier for transportation. The carrier does
from a vessel. not participate in the counting of the
 Applicability: Overseas trade only. merchandise for loading into the container,
(Commercial Law Review, C. Villanueva, the actual loading, and the sealing of the
2004 ed.) container. (US Lines v. Comm. Of Customs,
 Significance: When a person brings in ICTSI v. Prudential Guarantee)
cargo from abroad, he cannot unload and  The matter of quantity, description and
deliver the cargo by himself. The unloading conditions of the cargo inside the container
must be done by the arrastre operator, is the sole responsibility of the shipper,
which will then deliver the cargo to the unless there is stipulation to the contrary.
importer. (Commercial Law Review, C. (US Lines vs. Comm. Of Customs, Reyma
Villanueva, 2004 ed.) Brokerage v. Phil. Home Assurance)
 Nature of business: It is a public utility,
Note: In order to attribute to the carrier should be brought within one year after:
any damage to the shipment that may be a. Delivery of the goods (delivered but
found, inspection of the goods should be damaged goods); or
done at pier-side. (Bankers vs. CA) b. The date when the goods should have
been delivered (non-delivery). (Sec.
III. CARRIAGE OF GOODS BY SEA 3[6])
ACT/COGSA (C.A. No. 65)
 “Loss or Damage” as applied to the
APPLICABILITY COGSA contemplates a situation where no
 The transportation must be: delivery at all was made by the shipper of
1. Water/maritime transportation; the goods because the same had perished,
2. for the carriage of goods; and gone out of commerce, or disappeared in
3. overseas/international/foreign (from such a way that their existence is unknown
foreign port to Philippine port). or they cannot be recovered. Thus, it is
 It can be applied in domestic sea inapplicable in case of misdelivery or
transportation if agreed upon by the parties. conversion. (Ang vs. American Steamship
(Clause paramount or paramount clause) Agencies Inc.) and damage arising from
delay or late delivery (Mitsui O.S.K. Lines
IMPORTANT FEATURES: Ltd. vs. CA). In such instance the, Civil Code
1. Amount of carrier’s liability rules on prescription shall apply.
2. Notice of damage
3. Prescriptive period  The one-year prescriptive period is
suspended by:
AMOUNT OF CARRIER’S LIABILITY 1. The express agreement of the parties
 Under the Sec. 4(5), the liability limit is (Universal Shipping Lines, Inc. vs.
set at $500 per package or customary IAC, 188 SCRA 170)
freight unit unless the nature and value of 2. The filing of an action in court until it
such goods is declared by the shipper. This is dismissed. (Stevens & Co. vs.
is deemed incorporated in the bill of lading Nordeutscher Lloyd, 6 SCRA 180)
even if not mentioned in it. (Eastern
Shipping vs. IAC, 150 SCRA 463)  The one-year period shall run from
 Note that Art. 1749, NCC applies to delivery of the last package and is not
domestic/inter-island/coastwise trade. suspended by extrajudicial demand. (Dole
Phils.,Inc. vs. Maritime Co.,148 SCRA 118)
NOTICE OF DAMAGE (SEC. 3(6))
 Rules:  The one-year period shall run from
a. Patent damage: shipper should file a delivery to the arrastre operator and not to
claim with the carrier immediately upon the consignee. (Union Carbide Phils, Inc. vs.
delivery Manila Railroad Co.,SCRA 359)
b. Latent damage: shipper should file a
claim with the carrier within three days  The insurer exercising its right of
from delivery. subrogation is bound by the one-year
prescriptive period. However, it does not
Note: The filing of a notice of claim is not a apply to the claim against the insurer for the
condition precedent. insurance proceeds. (Fil. Merchants Ins. Co.
vs. Alejandro; Mayer Steel Pipe Corp. vs.
PRESCRIPTIVE PERIOD CA)
 Action for loss or damage to the cargo
IV. WARSAW CONVENTION OF 1929 2. If the requirements under the
(WC) Convention are not complied with.
PURPOSE: To protect the emerging air IMPORTANT CONCEPTS:

transportation industry and to secure the 1. Transportation documents
uniformity of recovery by the passengers. a. Passenger ticket
APPLICABILITY b. Baggage check
 The transportation must be: c. Air way bill
1. International transportation; 2. Liability of the carrier for damages
2. Air transportation; and a. Death or injury to passengers
3. Carriage of passengers, baggage or b. Loss or damage to baggage or goods
goods. c. Delay
 The WC shall also apply to fortuitous 3. Successive carrier agreement
transportation by aircraft performed by an 4. Jurisdiction
air transportation enterprise. 5. Combined transportation agreement
 International transportation - any PASSEN BAGGA AIR

transportation in which the place of GER GE WAYBIL
departure and the place of destination are TICKET CHECK L
situated either: Passenge Checked- Goods to
1. Within the territories of two High r in be
Contracting Parties regardless of whether baggage shipped
or not there be a break in the
transportation or transshipment, or LIABILITY OF CARRIER FOR DAMAGES
2. Within the territory of a single High 1. Death or injury of a passenger if the
Contracting Party, if there is an agreed accident causing it took place on board the
stopping place within a territory subject aircraft or in the course of its operations of
to the sovereignty, mandate or authority embarking or disembarking; (Art. 17)
of another power, even though that 2. Destruction, loss or damage to any
power is not a party to the Convention. baggage or goods, if it took place during the
(“round trip”, Am. Jur.) “transportation by air”; (Art. 18) and
 Transportation by air – The period during
 Transportation to be performed by which the baggage or goods are in the
several successive air carriers shall be charge of the carrier, whether in an airport
deemed to be one undivided transportation, or on board an aircraft, or, in case of a
if it has been regarded by the parties as a landing outside an airport, in any place
single operation, whether it has been agreed whatsoever.
upon under the form of a single contract or It includes any transportation by land or
of a series of contracts, and it shall not lose water outside an airport if such takes place
its international character merely because in the performance of a contract for
one contract or a series of contracts is to be transportation by air, for the purpose of
performed entirely within a territory subject loading, delivery, or transshipment.
to the sovereignty, suzerainty, mandate, or 3. Delay in the transportation of passengers,
authority of the same High Contracting baggage or goods. (Art. 19)
Party. (Art. 1 Sec.3)
Note: The Hague Protocol amended the WC
WHEN INAPPLICABLE by removing the provision that if the airline
1. When public policy is contradicted; took all necessary steps to avoid the
damage, it could exculpate itself completely  In PanAm v. IAC, the WC was applied as
(Art. 20(1)). (Alitalia vs. IAC, 192 SCRA 9) regards the limitation on the carrier’s
liability, there being a simple loss of
LIMIT OF LIABILITY (Art. 22, as baggage without any improper conduct on
amended by Guatemala Protocol, the part of the officials or employees of the
1971; Alitalia vs. IAC) airline or other special injury sustained by
1. Passengers the passenger.
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit  In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as not
restrictive of the carrier’s liability, where
there was satisfactory evidence of malice or
2. Checked-in baggage bad faith attributable to its officers and
GENERAL RULE: $20 per kilogram employees. (Alitalia vs. IAC)
EXCEPTION: In case of special declaration
of value and payment of a supplementary
sum by consignor, carrier is liable to not
more than the declared sum unless it proves ACTION FOR DAMAGES
the sum is greater than actual value. 1. Notice of claim
3. Hand-carried baggage  A written complaint must me made
 $1000/passenger within:
4. Goods to be shipped a. 3 days from receipt of baggage
GENERAL RULE: $20 per kilogram b. 7 days from receipt of goods
EXCEPTION: In case of special declaration c. In case of delay, 14 days from receipt
of value and payment of a supplementary of baggage/goods
sum by consignor, carrier is liable to not  The complaint is a condition precedent.
more than the declared sum unless it proves Without the complaint, the action is barred
the sum is greater than actual value. except in case of fraud on the part of the
carrier. (Art. 26)
 An agreement relieving the carrier from
liability or fixing a lower limit is null and 2. Prescriptive period
void. (Art. 23)  Action must be filed within 2 years from:
 Carrier is not entitled to the foregoing a. date of arrival at the destination
limit if the damage is caused by willful b. date of expected arrival
misconduct or default on its part. (Art. 25) c. date on which the transportation
stopped. (Art. 29)
 Thus, the WC does not operate as an
exclusive enumeration of the instances of an  In United Airlines vs. Uy the two-year
absolute limit of the extent of liability. It prescriptive period was not applied where
does not preclude the application of the Civil the airline employed delaying tactics.
Code and other pertinent local laws. It does
not regulate or exclude liability for other RULE IN CASE OF VARIOUS
breaches of contract by the carrier, or SUCCESSIVE CARRIERS
misconduct of its employees, or for some 1. Carriage of passengers
particular or exceptional type of damage. GENERAL RULE: Action is filed only
(Alitalia vs. CA) against the carrier in which the accident or
delay occurred.
EXCEPTION: Agreement or contract NOTE: It is the passenger’s “ultimate
whereby the first carrier assumed liability for destination” not “an agreed stopping place”
the whole journey. that determines the country where suit is to
2. Carriage of baggage or goods be filed.
a. Passenger or consignor can file an  The forum of action provided in Art. 28(1)
action against the first carrier and the is a matter of jurisdiction rather than of
carrier in which the damage occurred venue. (Santos III vs. Northwest; 2A C.J.S.)
b. Passenger or consignee can file an
action against the last carrier and the V. SALVAGE LAW (Act No. 2616)
carrier in which the damage occurred.
 These carriers are jointly and severally SALVAGE
liable. (Art. 30)  Two concepts:
1. Services one person renders to the owner
 A contract of international carriage by air, of a ship or goods, by his own labor,
although performed by different carriers preserving the goods or the ship which the
under a series of airline tickets constitutes a owner or those entrusted with the care of
single operation. Members of the them have either abandoned in distress at
International Air Transportation Association sea, or are unable to protect or secure.
(IATA) are under a general pool partnership 2. Compensation allowed to persons by
agreement wherein they act as agent of whose voluntary assistance a ship at sea or
each other in the issuance of tickets to her cargo or both have been saved in whole
contracted passengers to boost ticket sales or in part from impending sea peril, or such
worldwide and at the same time provide property recovered from actual peril or loss,
passengers easy access to airlines which are as in cases of shipwreck, derelict or
otherwise inaccessible in some parts of the recapture.
world. (American Airlines vs. CA)  Requisites:
1. Valid object of salvage;
 Under a general pool partnership 2. Object must have been exposed to
agreement, the ticket-issuing airline is the marine peril (not perils of the ship);
principal in a contract of carriage while the 3. Services rendered voluntarily (neither
endorsee-airline is the agent. The obligation an existing duty nor out of a pre-
of the former remained and did not cease existing contract);
even when the breach occurred not on its 4. Services are successful, total or
own flight but on that of another airline partial.
which had undertaken to carry the  Subjects of Salvage:
passengers to one of their destinations. 1. Ship itself;
(China Airlines vs. Chiok) 2. Jetsam – goods which are cast into the
sea, and there sink and remain under water;
JURISDICTION 3. Floatsam or Flotsam – goods which float
 At the option of the plaintiff, the action upon the sea when cast overboard;
for damages may be filed in the: 4. Ligan or Lagan – goods cast into the sea
a. Court of domicile of the carrier; tied to a buoy, so that they may be found
b. Court of its principal place of business; again by the owners (p.173, Judge Diaz).
c. Court where it has a place of business  Persons who have no right to a
through which the contract has been reward for salvage:
made; or 1. Crew of the vessel saved;
d. Court of the place of destination. (Art.
28(1))
2. Person who commenced Salvage in spite payment
of opposition of the Captain or his
representative; Must be done Only the
3. In accordance with Sec. 3 of the with the consent of the
Salvage Law, a person who fails to deliver a consent of tugboat
salvaged vessel or cargo to the Collector of the owner is
Customs. captain/crew needed
men
 Derelict – a ship or her cargo which is Vessel must Vessel need
abandoned and deserted at sea by those be involved in not be
who are in charge of it, without any hope of an accident involved in an
recovering it, or without any intention of accident
returning to it. Fees Fees belong
distributed to the tugboat
 The intention of those in charge must be among owner
ascertained. If those in charge left with the crewmen
intention of returning, or of procuring
assistance, the property is not derelict, but if RULES ON SALVAGE REWARD
they quitted the property with the intention 1. The reward is fixed by the RTC judge in
of finally leaving it, it is derelict and a the absence of agreement or where the
change of their intention and an attempt to latter is excessive. (Sec. 9)
return will not change its nature (Erlanger & 2. The reward should constitute a sufficient
Galinger vs. Swedish East Asiatic Co. Ltd.). compensation for the outlay and effort of
the salvors and should be liberal enough
 If it is clear that the intention to return is to offer an inducement to others to
slight, the salvage which was done render services in similar emergencies in
thereafter is considered valid. (Notes and the future.
Cases on the Law on Transportation and 3. If sold (no claim being made within 3
Public Utilities, Aquino, T. & Hernando, R.P. months from publication), the proceeds,
2004 ed. p. 616) after deducting expenses and the salvage
claim, shall go to the owner; if the latter
CONTRACT OF TOWAGE does not claim it within 3 years, 50% of
 A contract whereby one vessel, usually the said proceeds shall go to the salvors,
motorized, pulls another, whether loaded or who shall divide it equitably, and the
not with merchandise, from one place to other half to the government. (Secs. 11-
another, for a compensation. It is a 12)
contract for services rather than a contract 4. If a vessel is the salvor, the reward shall
of carriage. be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
SALVAGE TOWAGE
Governed by Governed by
special law Civil Code on c. 25% to the officers and crew in
(Act No. contract of proportion to their salaries. (Sec. 13)
2616) lease
Requires Success is not  Taking passengers from a sinking ship,
success, required without rendering any service in rescuing
otherwise no the vessel, is not a salvage service, being a
duty of humanity and not for reward. public character and interest is not brought
within the category. The question depends
VI. PUBLIC SERVICE ACT on such factors as the extent of services,
(C.A. No. 146) whether such person or company has held
himself or itself out as ready to serve the
PURPOSES: public or a portion of the public generally.
1. To secure adequate, sustained service (Luzon Stevedoring vs. PSC)
for the public at the least possible
cost; NOTE: The Public Service Commission
2. To protect the public against created under the Public Service Law has
unreasonable charges and poor, already been abolished under P.D. No. 1 and
inefficient service; other issuances. It has been replaced by the
3. To protect and secure investments in following government agencies: LTO;
public services; LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC;
4. To prevent ruinous competition. CAB; and MIA.
AUTHORITY TO OPERATE PUBLIC

SERVICES CERTIFICAT CERTIFICAT
GENERAL RULE: No public service shall E OF E OF PUBLIC
operate without having been issued a PUBLIC CONVENIEN
certificate of public convenience or a CONVENIEN CE AND
certificate of public convenience and CE (CPC) NECESSITY
necessity. (CPCN)
EXCEPTIONS: An An
1. Warehouses; authorization authorization
2. Animal drawn vehicles and bancas issued by the issued by the
moved by oar or sail; appropriate appropriate
3. Airships, except for the fixing of government government
maximum rates for fare and freight; agency for agency for
4. Radio companies, except for rates the operation the operation
fixing; of public of public
5. Public services owned or operated by services for service for
the government, except as to rates which no which a prior
fixing; franchise, franchise is
6. Ice plants; and either required by
7. Public markets. municipal or law; e.g.
legislative, is telephone and
PUBLIC SERVICE required by other
 A person who owns, operates, manages law, e.g., services.
or controls in the Philippines for hire or common
compensation, with general or limited carriers.
clientele, whether permanent, occasional or
accidental, and done for general business  A CPC or a CPCN constitutes neither a
purposes, any common carrier or public franchise nor a contract, confers no property
utility, ice plants, power and water supplies, right, and is a mere license or a privilege.
communication and similar public services. The holder of said certificate does not
(Sec. 13b, CA 146) acquire a property right in the route covered
 A casual or incidental service devoid of thereby. Nor does it confer upon the holder
any proprietary right or interest or franchise and proper
in the public highways. Revocation of this classifications service;
certificate deprives him of no vested right. ; 3. Requiring
New and additional burdens, alteration of 4. Establish public services
the certificate, or even revocation or ment of rules to pay
annulment thereof is reserved to the State. to secure expenses of
(Luque vs. Villegas, 30 SCRA 408) accuracy of investigation;
all meters 4. Valuation
 It is a “property” and has a considerable and all of properties
value and can be the subject of sale or measuring of public
attachment. (Cogeo-Cubao Operators and appliances; utilities;
Drivers Assn. vs. CA, 207 SCRA 343, 5. Issuance 5. Examinatio
Raymundo vs. Luneta Motor Co.) of orders n and test of
requiring measuring
REQUREMENTS FOR GRANTING CPC establishmen appliances;
OR CPCN t or 6. Grant of
1. Applicant must be a citizen of the maintenance special
Philippines or a corporation or entity 60% of extension permits to
of the capital of which is owned by such of facilities; make extra or
citizens; 6. Revocatio special trips in
2. Applicant must prove public necessity; n, or territories
3. Applicant must prove that the operation modification specified in
of the public service proposed and the of CPC or the certificate;
authorization to do business will promote CPCN; 7. Uniform
the public interest on a proper and 7. accounting
suitable manner; Suspension system and
4. Applicant must have sufficient financial of CPC or furnishing of
capability to undertake the proposed CPCN, except annual
services and meeting the responsibilities when it is reports;
incident to its operation. necessary to 8. Compelling
avoid serious compliance
and with the laws
POWERS POWERS irreparable and
REQUIRING EXERCISABL damage or regulations.
PRIOR E WITHOUT inconvenienc
NOTICE PRIOR e to the
AND NOTICE AND public or
HEARING HEARING private
interest, in
which case, a
1. Issuance 1. Investigatio suspension
of CPC or n any matter not more
CPCN; concerning than 30 days
2. Fixing of public service; may be
rates, tolls, 2. Requiring ordered, prior
and charges; operators to to the
3. Setting up furnish safe, hearing.
of standards adequate, and (Soriano v.
Medina, 164 must first be given an opportunity to
SCRA 36) improve its service, if inadequate or
deficient.
UNLAWFUL ACTS OF PUBLIC UTILITY  Purpose: To prevent ruinous and wasteful
COMPANIES competition in order that the interests of the
1. Engagement in public service business public would be conserved and preserved.
without first securing the proper
certificate;  It subordinates the prior applicant rule
2. Providing or maintaining unsafe, which gives the first applicant priority only if
improper or inadequate service as things and circumstances are equal.
determined by the proper authority;
3. Committing any act of unreasonable and  Where the operator either fails or
unjust preferential treatment to any neglects to make the improvement or effect
particular person, corporation or entity as the increase in services, especially when
determined by the proper authority; given the opportunity, new operators should
4. Refusing or neglecting to carry public be given the chance to give the services
mail upon request. (Secs. 18 and 19) needed by the public.
ACTS REQUIRING PRIOR APPROVAL PRIOR APPLICANT RULE

1. Establish and maintain individual or joint  Presupposes a situation when two
rates; interested persons apply for a certificate to
2. Establish and operate new units; operate a public utility in the same
3. Issue free tickets; community over which no person has as yet
4. Issue any stock or stock certificates granted any certificate. If it turns out, after
representing an increase of capital; the hearing, that the circumstances between
5. Capitalize any franchise in excess of the the two applicants are more or less equal,
amount actually paid to the Government; then the applicant who applied ahead of the
6. Sell, alienate, mortgage or lease other, will be granted the certificate.
property, certificates or franchise.
RATE-FIXING POWER
 Under Sec. 20(g) of C.A. No. 146, the  The rate to be fixed must be just,
sale, etc. may be negotiated and completed founded upon conditions which are fair and
before the approval by the proper authority. reasonable to both the owner and the
Its approval is not a condition precedent to public.
the validity of the contract. The approval is  A rate is just and reasonable if it
necessary only to protect public interest. conforms to the following requirements:
1. One which yields to the carrier a fair
PRIOR OPERATOR/OLD OPERATOR return upon the value of the property
RULE employed in performing the service;
 The rule allowing an existing franchised and
operator to invoke a preferential right within 2. One which is fair to the public for the
the authorized territory as long as he service rendered.
renders satisfactory and economical service.
 The policy is not to issue a certificate to a REGISTERED OWNER RULE
second operator to cover the same field and  The registered owner of a certificate of
in competition with a first operator who is public convenience is liable to the public for
rendering sufficient, adequate and the injuries or damages suffered by third
satisfactory service. The prior operator persons caused by the operation of said
vehicle, even though the same had been
transferred to a third person.
 The registered owner is not allowed to
escape responsibility by proving that a third
person is the actual and real owner Reason:
It would be easy for him, by collusion with 2. The registered owner is primarily liable
others or otherwise, to transfer the for all the consequences flowing from the
responsibility to an indefinite person, or to operations of the carrier.
one who possesses no property with which  The public has the right to assume
to respond financially for the damage or that the registered owner is the actual or
injury done. (Erezo, et al. vs. Jepte 102 Phil lawful owner thereof. It would be very
103). difficult and often impossible, as a
practical matter, for the public to enforce
KABIT SYSTEM their rights of action that they may have
 A system whereby a person who has for injuries inflicted by the vehicle if they
been granted a certificate of public should be required to prove who the
convenience allows other persons who own actual owner is. (Benedicto vs. IAC, 187
motor vehicles to operate under such SCRA 547)
license, for a fee or percentage of such 3. The thrust of the law in enjoining the
earnings. It is void and inexistent under Art. kabit system is to identify the person
1409, Civil Code. upon whom responsibility may be fixed
 Effects: with the end in view of protecting the
1. The transfer, sale, lease or assignment of riding public (Lim vs. CA 373 SCRA 394).
the privilege granted is valid between the 4. The registered owner cannot recover
contracting parties but not upon the from the actual owner and the latter
public or third persons. (Gelisan vs. cannot obtain transfer of the vehicle to
Alday, 154 SCRA 388) himself, both being in pari delicto. (Teja
Marketing vs. IAC)
5. For the better protection of the public,
both the registered owner and the actual
owner are jointly and severally liable with
the driver. (Zamboanga Transportation
Co. vs. CA)

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San Beda College of Law 54

MEMORY AID IN COMMERCIAL LAW

CONTRACT OF TRANSPORTATION/ A person or entity is a common carrier

COMMERCIAL LAW COMMITTEE

COMMERCIAL LAW COMMITTEE

4. CHARACTER OF THE GOODS OR LIABILITY OF A COMMON CARRIER

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

COMMERCIAL LAW COMMITTEE

COMMERCIAL LAW COMMITTEE

Art.1735 Civil Code Art.1755 Civil Code

1. Ordinary circumstance: 1. Exercise of extraordinary

COMMERCIAL LAW COMMITTEE

1. Reduction of degree of Stipulation limiting liability when

 The diligence required in the

COMMERCIAL LAW COMMITTEE

1. That the goods are Dispensing with or lessening the

COMMERCIAL LAW COMMITTEE

Applicability 5. Acceptance of the bill of lading without

BAREBOAT CONTRACT REQUISITES OF A VALID CHARTER

Hypothecary Nature of Bottomry/ AVERAGE

Note: If a vessel is hypothecated by PARTICULAR GROSS OR

PURPOSE: To protect the emerging air IMPORTANT CONCEPTS:

 International transportation - any PASSEN BAGGA AIR

AUTHORITY TO OPERATE PUBLIC

ACTS REQUIRING PRIOR APPROVAL PRIOR APPLICANT RULE

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