Two Forms of Contracts

Charter Party – ( charter agreement or charter

contract) is a contract between the
charterer and the shipowner, in which
the formers hires from the latter the use of
the ship, either for a certain length of time is
called a time charter or for a certain voyage
which may be called a round voyage or
voyage charter.
Simple Charter – the shipper or cargo is
concerned only with the transport of his
goods, is usually not desirous to concern
himself with the management of the ship
Kinds of Charter Party
1. Demise/Bareboat Charter
the charterer takes responsibility for the crewing and maintenance of
the ship during the time of the charter. He assumes the legal
responsibilities of the owner,

 the owner of the vessel must completely and

exclusively relinquish “possession, command
and navigation”;
 charterer mans and equips the vessel and assumes
all the responsibility for its navigation,
management and operation;
 charterer acts as the owner of the vessel in all
important respects for the duration of the charter;
 tantamount to, though short of, an outright transfer of
ownership;
 demise charterer often called an owner pro hac vice*
(latin: *for this occasion)
Kinds of Charter Party
2. Time Charter

 Vessel is leased for a specific period of time;

 Owner’s people continue to navigate and manage
the vessel, but her carrying capacity is taken by
the charterer for a fixed time, for the carriage of
goods to anywhere within stipulated geographic
limits;
 Vessel is therefore under the charterers orders as
to ports touched, cargo loaded and other
business matters;
 Used where the charterer’s affairs make it
desirable for him to have the tonnage under his
control for a period of time , without undertaking
the responsibility of navigation and management;
Kinds of Charter Party
3. Voyage Charter
charter bargains for the right to use the carrying
vessel and to direct her movements during the charter
time

 the charterer hires the vessel for a single

voyage;
 Ship engaged in full cargo;
 Vessel manned and navigated by the owner;
 Manifestly, charter is merely a special kind of
contract of carriage;
 Adaptable to any commercial situation the
object of which is the moving of a shipload of
cargo from one point to another;
 Form most frequently encountered.
Codal Provisions:
 Articles 652 – 692, Code of Commerce
 Articles 706 – 736, Code of Commerce

 A. Requisites and Effects of Charter Parties

(Contrato de Fletamento)
 Rights and Obligations of Shipowner under
Charter Party
 Obligations of Charterers
 Bills of lading (Conocimiento de Embarque)
 Loans and Bottomry Respondentia
A. Requisites and Effects of Charter Parties

 Art 652. A charter Party must be drawn in

duplicate and signed by the contracting parties
, and when either does not know how or is not
able to do so, by two witnesses at his request.

The charter party shall contain, besides the

conditions freely stipulated, the following
circumstances:

1. The kind, name, and tonnage of the vessel;

2. Its flag and port of registry;
3. The name, surname, and domicile of the captain;
4. The name, surname, and domicile of the ship
agent, if the latter should make the charter party;
5. The name, surname, and domicile of the
charterer; and if he states that he is acting by
commission, that the person for whose account he
makes the contract;
6. The port of loading and unloading;
7. The capacity, number of tons or the weight or
measurement which they respectively bind
themselves to load and to transport, or whether
the charter party is total;
8. The freightage to be paid, stating whether it is to be
fixed amount for the voyage or so much per month, or for
the space to be occupied, or for the weight or measure of
the goods of which the cargo consists, or in any other
manner whatsoever agreed upon;
9. The amount of primage to be paid to the captain;
10. The days agreed upon for loading and unloading;
11. The lay days and extra lay days to be allowed and
demurrage to be paid for each of them

*Lay days - the number of days permitted for the loading or

unloading of a ship without payment of demurrage
*demurrage - a charge payable to the owner of a chartered
ship in respect of failure to load or discharge the ship within
the time agreed.
Formalities of Charter Under Art 652

1. It must be in writing;
2. It must be drawn in duplicate;
3. It must be signed by the parties; and
4. It must contain the stipulations enumerated in said
article. *
*Non stipulation of primage, state port of registration or
domicile of the parties, or the name of the captain does not
invalidate the contract. If the amount of freightage is not
stipulated, the rate is governed by the current rate at the time the
contract was executed.
Conditions in Chartered - Parties

The most important conditions usually appearing in a contract of

affreightment:
1. Name and Nationality of the Ship. The ship actually used
for the fulfillment of the contract must correspond in the
namen and nationality to that under which she was chartered
or put up as general ship or common carrier;
2. Whereabouts of the Ship. It is of the utmost importance to
the charterer and shipper that they should know when loading
of the cargo can begin and when it I likely to arrive at the port
of destination;
3. Class of Ship. As the general condition and nature of the
ship are important factors to be considered by the charterer, a
statement ion the charter – party of her class as being on
Lloyd’s Register of Shipping or American Bureau of Shipping
(these are societies formed primarily for the benefit of the
shipowners, merchants and underwriters)
4. Tonnage. Size of the vessel is measured by so-called
registered tons for which cargo space is available on board.
Implied Terms in Contract

Seaworthiness. By entering into a contract to carry goods

in his ship whether under a charter – party or as a common
carrier, a shipowner undertakes that ship is seaworthy. In
practice commonly called warranty. Charter parties usually
contain the express warranty that the ship is “tight, staunch
and strong and in every way fitted for the voyage.”

To be seaworthy, a vessel “ must have that degree

of fitness which an ordinary, careful and prudent owner
would require his vessel to have at the commencement of
her voyage, having regard to all the probable
circumstances of it”.
Implied Terms in Contract
Due Dispatch and Proper Route. The ship will
commence and carry out her voyage with reasonable
diligence and that she will not deviate from her route.
Under Art 670 of the Code of Commerce, the
shipowner is mandated to undertake the voyage at the
time agreed upon, or within 15 days from the time the
loading began if no time is stipulated . Even if the
shipowner should not find the cargo sufficient to make to
make up at least 3/5 of the amount for which the vessel
may hold , where he fails to exercise his right to change
vessel.
Under 673 of the same code , the shipowner
answers for losses arising from the delay in putting to sea
but it is required that the charterer must first request the
same, judicially or notarially.
BILLS OF LADING (conocimiento de embarque)
Controls in the Absence of of Charter Party

Art. 653. If the cargo should be received

without the charter party having been
signed, the contract shall be understood
as executed in accordance with what
appears in the bill of lading, the sole
evidence of title with regard to the
cargo for determining the rights and
obligations of the ship agent, of the
captain, and of the charterer.
BILLS OF LADING (conocimiento de embarque)
Controls in the Absence of of Charter Party

Art. 653. If the cargo should be received

without the charter party having been
signed, the contract shall be understood
as executed in accordance with what
appears in the bill of lading, the sole
evidence of title with regard to the
cargo for determining the rights and
obligations of the ship agent, of the
captain, and of the charterer.
WHERE BROKER INTERVENES

Art. 654. The charter parties executed with the intervention of

a broker, who certifies to the authenticity of the signatures of
the contracting parties because they were signed in his
presence, shall be full evidence in court; and if they should be
conflicting , that which accords with one which the broker
must keep in his registry, if kept in accordance with law, shall
govern.
The contracts shall also be admitted as evidence, even
though a broker has not taken part therein, if the contracting
parties acknowledged the signatures to be the same as their
own.
If no broker has intervened in the charter party and the
signature are not acknowledged , doubts shall be decided by
what is provided for in the bill of lading and in the absence
thereof, by the proofs submitted by the parties.
CHARTER PARTIES executed by CAPTAIN in the
absence of the Agent

Art. 655. Charter parties executed by the

captain in the absence of the ship
agent shall be valid and effective, even
though in executing them he should have
acted in violation of the orders and
instructions of the ship agent or
shipowner; but the latter shall have a
right of action against the captain for
indemnification of damages.
Issues on Charter Party and Bill of Lading

As a rule, a bill of lading is the principal and the only

document evidencing shipment on a liner vessels
(carrying general cargo to the port to which he wishes to
send his goods) but often bills of lading are issued under
a charter party. Hence, a time charterer who operates a
vessel as a “general ship” (sailing from port to port
looking for cargo) will issue [thru the master] bills of
lading to the shippers who engage his service. A
voyage charterer [for the purpose of making
documentary presentment to banks or buyers] take a bill
or bills of lading from the owner. In this regard, various
questions and problems may arise as to which of two
instruments control: charter party or the bill of lading.
Issues on Charter Party and Bill of Lading

Bill of Lading in the hands of the charterer.

Where the charterer is himself the shipper, and
receives as such shipper a bill of lading with
terms differing from the charter, the proper
construction of the two documents taken
together, is that prima facie, as between the
shipowner and the charterer, the bill of lading,
although inconsistent with certain parts of the
charter, is to be taken only as an
acknowledgement of the receipt of the goods.
Issues on Charter Party and Bill of Lading

Bill of Lading in the hands of Indorsee from

Charterer. Where the bill of lading has been transferred
or endorsed for value to a third party not a party to the
charter party, it constitutes and undertaking independent
of the charter party, except as to provisions of the charter
party expressly incorporated to it.
Hence although as between the shipowner and
charterer, the bill of lading may be merely in the nature of
a receipt for the goods, yet, where it is endorsed over, as
between the shipowner and endorsee, the bill of lading
must be considered to contain the contract.
Issues on Charter Party and Bill of Lading

Incorporating Charter in the Bill of

Lading. Where the terms of the charter
party are expressly incorporated in the bill of
lading, they are part of the contract of
carriage and are binding upon those making
claims for damages for breach of that
contract, just as they would if the dispute
were between the charterer and the
shipowner.
Usages of Port as to Loading/Unloading

Art. 656. If in the charter party, the time in

which the loading and unloading are to take
place is not stated, the usages of the port
where these acts take place shall be observed.
After the stipulated or the customary period has
passed, and there is not express provision in
the charter party fixing the indemnity for the
delay, the captain shall be entitled to demand
demurrage for the days and extra lay days
which may have elapsed in loading and
unloading.
Lay Days (laying or unloading days)
The period of time which the shipper
has his disposal for loading or unloading
For anytime which he uses beyond this period;
he is prima facie liable to pay demurrage for the
delay. If stipulated, the period fixed shall
govern, and if not the usage of the port where
these acts are performed shall be observed.
Fixing of Lay Days
Important points to consider:

a. Days are whole days/ 24 hours

b. A day starts at midnight. This means that a shipper is not
bound to pay for the day he ship arrives, unless, of
course, he uses it. This point may be dealt with the
terms of the charter – party.
c. Fractions of days count as whole days.
d. In the absence of contrary stipulation or custom, the lay
days run consecutively without intermission, and if loading
prove impossible on some of them it is so much the
worse for the shipper. It is common to make provision
against this in respect for weather and holidays.
True Meaning of Demurrage Days

Because of the possibility of delay in

loading a vessel, the charterer may wish to
obtain to an additional number of lay days, a
period during which he is entitled to keep the
ship waiting. These extra days are called
“demurrage days, and requires extra
payment and in the nature of liquidated
damages.
Detention Damages

Damages that the shipper has to pay

when he keeps the ship beyond her lay days
or the provision of demurrage beyond period.
Also referred to as demurrage. But in reality
they are different because in demurrage
there is no breach of contract at all for the
charterer has simply bargained for an option
to keep the vessel waiting for an additional
period.
Failure of Demurrage Clause

Where the delay is so long that the whole

purpose of the contract, or it results in a breach
of a fundamental obligation, the shipowner is not
bound to accept the “agreed damages” fixed in
the demurrage clause. He can claim all the
damages he has suffered.

A demurrage clause is an advantage to both

parties to protect them against fluctuations in
market rates of freight and may also prevent
recourse to litigation.
Vessel becomes Unseaworthy

Art 657. If during the voyage the vessel should be rendered

unseaworthy, the captain shall be obliged to charter at his expense
another one in good condition to receive the cargo and carry it to its
detention, for which purpose he shall be obliged to look for a vessel not
only at the port of arrival but also in the neighborhood within a distance
of 150 kilometers.

If the Captain, through indolence or malice, should not furnish a vessel

to its destination, the shippers, after requiring the captain to charter a
vessel within an inextendible period, may charter one and petition the
judicial authority to summarily approve the charter party which they
may have made.

The same authority shall judicially (por la via de appremio) compel the
Captain, to carry out, for his account and under his responsibility, the
charter made by the shippers.

If the Captain, notwithstanding his diligence, should not find a vessel for
the charter , he shall deposit the cargo at the disposal of the shipper
facts on the opportunity which presents itself , the freight being
adjusted in such cases by the distance covered by the vessel, with no
right to any indemnification whatsoever
Effect of Failure to Transship

If the master or captain relinquishes the attempt

either to carry on the goods on his own ship or to
send them to their destination in another ship or
to send them to their destination in another ship,
or to send them to their destination in another
ship, he wholly abandons any claim for freight,
unless it has been made payable in advance, or
irrespective of delivery. And where freight is only
payable on delivery, no part is earned until it is
delivered.
RULES AS TO FREIGHTAGE

Art 658. If the freightage shall accrue according to

the conditions stipulated in the contract, and should
they not be expressed , or should they not be
expressed, or should they be ambiguous, the
following rules shall be observed:
1. If the vessel has been chartered by days, the
freightage shall begin to run from the day the loading
from vessel is begun;
2. In charters made for fixed period, the freightage
shall begin to run from that very day;
3. If the freightage is charged according to weight,
the payment shall be made according to gross
weight, including the containers, such as barrels or
any other objects in which the cargo is contained.
MERCHANDISE SOLD PAYS FREIGHTAGE

Art 659. The merchandise sold by the captain to pay

for the necessary repairs to the hull, machinery or
equipment, or for un avoidable and urgent needs,
shall pay freightage.
The price of this merchandise shall be fixed
according to the result of the voyage, namely:
1. If the vessel should arrive safely at the port of
destination, the captain shall pay the price which the
sale of merchandise of the same kind brings at the
port;
2. If the vessel should be lost, the captain shall pay
the price realized from said merchandise in the sale;
The same rule shall be observed in the payment of
freightage, which shall be in full if the vessel arrives
at her destination, and in proportion to the distance
covered if she should be lost before the arrival.
JETTISONED CARGO DOES NOT PAY
FREIGHT

Art 660. Merchandise jettisoned for

the common safety shall not
freightage; but the amount of the
latter shall be considered as general
average computing the same in
proportion to the distance covered
when they were jettisoned.
LOST CARGO DOES NOT PAY FREIGHT

Art 661. Neither merchandise lost

by reason of shipwreck or standing
nor those seized by the pirates or
enemies, shall to pay freightage;
If the freightage should have
been paid in advance, it shall be
returned, unless there was an
agreement to the contrary.
FULL OR PARTIAL FREIGHT

Art 662. If the vessel or the

merchandise should be recovered, or
should the goods of the shipwreck be
salvaged, the freightage corresponding
to the distance covered by the vessel be
repaired and transport said
merchandise to the port of destination ,
the full freightage shall be paid , without
prejudice to what may be due by reason
of the average.
DAMAGED CARGO PAYS FREIGHT

Art 663. Merchandise, which

suffers deterioration or
diminutions on account of
inherent defects or bad quality
and condition of the packing, or
because of fortuitous event, shall
pay freightage in full and as
stipulated in the charter party.
INCREASED IN WEIGHT

Art 664. The natural increase in

weight or size of the merchandise
loaded on the vessel shall accrue
to the benefit of the owner, and
shall pay the proper freightage
fixed in the contract for the same.
CARGO NOT REQUIRED TO PAY FREIGHT

1. Those jettisoned for common safety but

the freight that should have been paid shall
be considered as general average, and
therefore computed accordingly;
2. Those lost due to shipwreck or stranding.
If the freight shall have been paid in
advance, it shall be returned, unless there
was an agreement to the contrary;
3. Those seized by pirates or enemies. And,
if the freightage shall have been paid in
advance, it should also be returned unless
otherwise agreed.
CARGO REQUIRED TO PAY FREIGHTAGE

1. Cargo sold by the captain to pay for the

necessary repairs to the hull, machinery or
equipment or equipment, or for avoidable and
urgent needs. But the freightage may or may not
be required to be paid in full. If the vessel arrives
at her destination, the freightage shall be paid in
proportion to the distance covered until the
vessel is lost (Art 659)
2. suffers deterioration or diminutions on account
of inherent defects or bad quality and condition
of the packing, or because of fortuitous event (Art
663) ;
3. The natural increase in weight or size of the
merchandise loaded on the vessel shall accrue to
the benefit of the owner, and shall pay the proper
freightage fixed in the contract for the same (Art
664).
LIEN ON CARGO

Art 665. The cargo shall be specially liable

for the payment of the freightage, expenses
and duties arising therefrom, which must be
reimbursed by the shippers, as well as for
the part of the general average which may
correspond to it; but it shall not be legal for
the captain to delay unloading on account
of suspicion that this obligation may not
complied with
Should there be reason for distrust, the
judge or court, at the instance of the
captain, may order the deposit of the
merchandise until he has been paid in full.
SALE OF CARGO TO PAY FREIGHT

Art 666. The captain may request

the sale of the cargo to the amount
necessary to pay the freightage,
expenses and averages due him,
reserving the right to demand the
balance due him therefore, if the
proceeds of the sale should not
suffice to cover his credit.
WHEN LIEN TERMINATES

Under Art 667, the period during

which the liens shall subsist is 20 –
days. But has been modified by
article 2241 of the civil code which
provides that credits for
transportation of the goods carried,
for the price of the contract and
incidental expenses shall constitute
a preferred claim or lien on such
goods, until their delivery and for 30
days thereafter.
DEPOSIT OF GOODS

The goods may be ordered deposited

by the competent court in the
following cases;
1. Where the reasons for distrust
that freightage, expenses and
duties will not be paid (Art 665);
2. Where the consignee could not
be found (Art 668);
3. Where the consignee refuses to
receive the cargo (Art. 668)
WHEN THE GOODS MAY BE SOLD

The sale of goods may be requested by the captain in the following

cases:
1. Under Art 666, for the amount necessary to pay the freightage,
expenses and average due the captain. The captain may
reserve the right to demand the deficiency;
2. Under Art 667, to pay for the freight and expenses thereof;
3. Under Art 668, where the consignee refuses to receive the
cargo. The goods may be sold in such amount as may be
necessary to pay for the freightage and expenses;
4. Under the same Article, where the consignee refuses to
receive the cargo. The goods may be sold in such amount as
may be necessary to pay for the freightage and expenses;
5. Under the same article , where the goods deposited run the
risk of deterioration, or by reason of their condition or other
circumstances the expenses of preservation and custody
should be disproportionate.
SOME OBLIGATIONS OF SHIPOWNER

Some Obligations of Shipowner :

1. Under Art 669, to observe in their charter parties, the capacity of the vessel, and to
indemnify the shippers whose contract are not fulfilled, for the losses they may have
suffered by the failure of the ship owner to observe the capacity of the vessel. In
such cases, there may be one or more charterers.
2. Under article 670, to undertake the voyage at the time agreed upon, or within 15
days from the time the loading began if not time the loading began if no time is
stipulated, even if the shipowner should not find cargo sufficient to make up at least
3/5 of the amount which the vessel may hold, where he fails to exercise his right to
change vessel.
3. Under the same art, where the shipowner should not find the cargo sufficient to
make up at least 3/5 of the amount which the vessel may hold , to accept other cargo
proccured by the owner of the freight already loaded under the same price and
condition;
4. Under Art 671, not to change the vessel after 3/5 of the vessel has been
loaded without the consent of the charterer of shipper . Otherwise, the
shipowner shall be liable for the losses and damages occuring during the
voyage to the cargo of those who did not give their consent;
5. Under Art. 672, if the vessel has been chartered in whole not to accept cargo from
any other person without the consent of the charterer. Otherwise the captain shall
answer for the losses suffered and be required to unload.
SOME OBLIGATIONS OF SHIPOWNER

Some Obligations of Shipowner :

6. Under art 673, to answer for losses arising
from delay in putting to sea. But the charterer
must request the same judicially or notarially;
7. Under art 676, to have the vessel in
condition to navigate at the time of
receiving the cargo. Otherwise, the
captain shall lose the freightage and shall
indemnify the charterers.
8. Under Art 677, in case of declaration of war
or blockage during the voyage, where the
captain has not received any instructions from
the charterer for the captain to proceed to the
nearest port, requesting and awaiting orders
from the shipper.
SOME RIGHTS OF THE SHIPOWNER

Some Rights of the Shipowner under charter parties

as set forth in the provisions::
1. Under Art 670, where the cargo rcvd is not sufficient
to make up at least 3/5 of the amount which the vessel
may hold, he may substitute another vessel inspected
and declared suitable for the voyage. The expenses of
transfer and the increase in the price of the charter , if
any, shall be paid by him;
2. Under Art 674, to collect the freightage in
accordance with the price stipulated for cargo in
excess of that agreed upon if such excess can be
properly stowed.
3. Under the same article, to refuse and unload at the
expense of the owner excess cargo that cannot be
properly stowed ;
4. Under the same art, to unload merchandise
clandestinely placed on board, or to transport them if
he can do so, demanding the highest freightage;
SOME RIGHTS OF THE SHIPOWNER

5. Under Art 675, to find freight to take the place of the

freight not received, if the vessel has been chartered to
receive cargo in another port after he receives no cargo
from the consignee and after he receives no answer
from the charterer;
6.Under the same art, to receive the freightage in full,
discounting that which may have been earned on the
merchandise carried as substitute
7. Under art 677, to have the charter subsist
notwithstanding the declaration of war or a blockage
during the voyage, and to receive in such cases, the
freightage in full where the shipper orders that the
cargo should be discharged at the port of arrival.
OBLIGATIONS OF THE CHARTERER

1. Under Art 680, to pay the freightage in full even if the

charterer foes not complete the full cargo he bound
himself to ship;
2. Under Art 681, to assume limited liability with the
value of the shipment and other property of the losses
suffered by the shipowner, captain, or other shippers
arrising from confiscation, embargo, detention and
other causes, where the charterer loads goods different
from those stated from the time of the execution of the
charter party;
3. Under Art 682, to be jointly liable with the captain for
losses which may be suffered by other shippers where
the charterer ships goods for the purpose of illicit
commerce with the knowledge of the shipowner or
captain;
OBLIGATIONS OF THE CHARTERER

4. Under Art 682, in a case going to a port to repair the hull.

Machinery or equipment of the vessel, to wait until the vessel is
repaired or to pay;
5. Under Art 684, where the charterer unload goods before
arriving at the port of destination without the occurence of the
case of force majeur metioned in Art 683’, to pay (1) the
expenses of arrival (2) the freightage in full and (3) for the
damages ang losses.
6. Under Art 685, where the character unloads before the
beginning of the voyage (1) to pay one half of the freightage (2)
to pay for the expenses of stowing ang restowing the cargo;
7. Under Art 686, to pay for the freightage, other expenses and
the primage after the vessel has neen unloaded and the cargo
placed under the disposal of the consignee;
8. Under Art 687, not abandone merchandise danaged on
account of inherent defect or fortuituous event for the payment
of the freightage and other expenses.
RESCISSION OF CHARTER PARTIES

Art. 688. A charter party may me rescinded at the

request of the charterer:
1. If before loading the vessel he should not agree
with that stated in the certificate of tonnage, or if
there should be an error in the statement of the flag
underwhich she sails;
2. If the vessel should not be place at the disposal of
the charterer within the period and in manner
agreed upon;
3. If after the vessel has put to sea, she should return
to the port of departure , on account of risk from
pirates, enemies , or bad weather, and the shipper
should agree to unload her;
In the second and third cases the person from
whom the vessel was chartered shall indemnify the
charterer for the voyage out;
RESCISSION OF CHARTER PARTIES

4. If the charter should have been made by the

months, the charterers shall pay the full freightage
for one month, if the voyage is for a port in the same
waters, and for two months, if for a port in the same
waters, and for two months. If for a port in different
waters
For one port to another of the Philippines and
adjacent islands, the freightage for one month only
shall be paid.
5. If the vessel should make a port during the voyage
in order to make urgent repairs, and the charterers
should prefer to dispose of the merchandise;
When the delay does not exceed thirty days, the
shippers shall pay the full freightage for the voyage
out.
Should the delay exceed thirty days, they shall
only pay the freightage in proportion to the distance
covered by the vessel.
RESCISSION AT OWNER’S INSTANCE

1. Art 689. At the request of the person from whom the vessel is
chartered the charter party may be rescinded:
xxx
2. Art 690. Other cases of recission

CLOSING OF PORT
Art 691. If the vessel cannot put to sea on account of the
closing of the port of departure or any other temporary cause,
the charter shall remain in force, with either one of the
contracting parties having a right to claim damages.
xxx

PARTIAL RESCISSION
Art 692. A charter party shall be rescinded, unless there is an
agreement to the contrary, and the captain shall only be entitled
to the freightage for the voyage out, if, by reason of a declaration
of war, closing of ports, or interdiction of commercial relations
during the voyage , the vessel should make the port designated
for such a case in the instructions of the charterer.
BILLS OF LADING

Is a written acknowledgement, signed by the master

of the vessel , that he has received he goods therein
described, from the shipper, to be transported on the
terms therein expressed, to the described place of
destination, and there to be transported on the terms
therein expressed, to the describe place of
destination , and there is to be delivered to the
consignee or parties of destination, and there to be
delivered to the consignee or parties therein
designated.
They comprehend all forms of transportation
whether by sea or land, and include the receipts for
cargo transported.
It is a written evidence of a contract for the
carriage and delivery of goods. No particular form
for it is prescribed.
LIMITED LIABILITY STIPULATIONS

Generally, a stipulation that the common

carrier’s liability is limited to the value of
the goods appearing in the bill of lading,
unless the owner declares a greater
value, is valid and binding.
LOANS ON BOTTOMRY AND RESPONDENTIA

LOAN ON BOTTOMRY � made by shipowner/ship

agent guaranteed by vessel itself, repayable upon
arrival at destination

Bottomry is a contract in the nature of a mortgage of

a ship on which the owner borrows money to enable
him to fit out the ship, ot to purchase cargo for a
voyage proposed; and he pledges the keel or bottom
of the ship, par pro-toto (“a part for the whole”)as a
security for repayment .
It is stipulated that if the ship be lost in the
course of voyage by any of the perils enumerated in
the contract , the lender also shall lose his money.
Ship should arrive in safety , then he shall
receive back his principal with interest (marine
interest), which is very high rate of interest to cover
the risk of loss of the ship.
LOAN ON RESPONDENTIA � taken on security of the cargo
repayable upon the safe arrival at cargo Destination

Respondentia “One made on the goods laden on board, the

ship and which are to be sold or exchanged in the course of
the voyage, the borrower’s personal responsibility being
deemed the principal security for the performance of the
contract, which is therefore called respondentia.

Concept under Code of Commerce .

Art 719. A loan in which under any condition whatever, the
repayment of the sum loaned and of the premium stipulated
depends upon the safe arrival in port of the goods on which it
is made, or of the price they may receive in case of accident,
shall be considered a loan on bottomry or respondentia.
Nature
a. Delivery of the amount loaned is necessary for the
perfection of the contract;
b. Although there are reciprocal benefits, the contract
produces obligations only for one party. The borrower,
who must return the amount borrowed plus premium; and
c. The lender really runs known risk

How Executed
Art. 720. xxx
1. By means of Public instrument ;
2. By means of a policy signed by the contracting
parties and the broker taking part therein;
3. By means of a private instrument
xxx
REQUISITES OF BOTTOMRY or
RESPONDENTIA

ART 721
In a bottomry or respondentia bond there must be
stated:
1. The kind, name, and registry of the vessel;
2. The name, surname, and domicile of the captain;
3. The names, surnames, and domicile of the person;
giving and of the person receiving the loan;
4. The amount of the loan and the premium stipulated;
5. The time for repayment;
6. The goods pledged to secure repayment; and
7. The voyage for which the risk is run
May be Made to Order
Art 722. The bonds may be issued to order, in
which case they shall be transferable by
indorsement,and the assignee shall acquire all
the rights and run all the risks corresponding to
the indorser.

Maybe made in kind and not in cash

Art 723. Loans made be made in goods and in
Merchandise, fixing their value in order to
determine the principal of the loan.
 HOW CONSTITUTED
ART 724 xxx
1. On the hull of the vessel;
2. On the rigging;
3. On the equipment, provisions, and fuel;
4. On the engine, if the vessel is steamer;
5. On the merchandise loaded.

No Loan on Freightage and Salary

Art 725. No Loans on bottomry may me
made on the salaries of the crew or on the
profits expected
Where Loan exceeds Security
Art 726. ARTICLE 726
If the lender should prove that he loaned a larger
amount than the value of the article liable for the
bottomry loan, by reason of fraudulent measures
employed by the borrower the loan shall only be valid for
the amount at which said object is appraised by experts.
The surplus principal shall be returned with legal
interest for the entire time required for re payment.

Return of Balance
Art 727. If the full amount of the loan contracted to load
the vessel should not be made use of for the cargo, the
surplus shall be returned before clearing. The same
procedure shall be observed with regard to the goods
taken as a loan if they could not all have been loaded.
Loan Taken by Captain at Owner’s Residence
Art 728
The loan which the captain take sat the point of
residence of the owners of the vessel shall only affect that
part of the latter which belongs to the captain, if the other
owners or their agents should not have given their express
authorization thereto or should not have taken part in the
transaction.
If one or more of the owners should be requested to
furnish the amount necessary to repair or provision the vessel,
and should not do so within twenty-four hours, the interest
which the parties in default may have in the vessel shall be
liable for the loan in the proper proportion.
Outside of the residence of the owners the captain may
contract loans in accordance with the provisions of Articles
583 and 611.
Simple Loan when Goods not subjected to risk
Art 729. Should the goods on which money is taken not be
subjected to risk, the contract shall be considered a simple
loan, with the obligation on the part of the borrower to return
the principal and interest at the legal rate, If that agreed upon
should not be lower.

Preference among loan in Inverse Order

Art 730. Loan made during the voyage shall have preference
over those made before the clearing of the vessel, and they
shall be graduated in the inverse order of their dates.
The loans for the last voyage shall have preference
over prior once.
Should several loans have been made at the same
port of arrival under stress and for the same purpose, all of
them be paid pro rata.
Actions pertaining to lender
Art 731. The actions pertaining to lender shall be
extinguished by the absolute loss of the goods on
which the loan was made, if it arose from an accident
of the sea at the time and during the voyage
designated in the contract, and it is proven that the
cargo was on board . But this shall not take place if
the loss was caused by the inherent defect of the thing
, or through fault or malice, of the borrower , or
barrantry on the part of the captain, or if it was caused
by damages suffered by the vessel as a consequence
of being engaged in contraband, or if it arose from
having loaded the merchandise on a vessel different
from the designated in the contract, unless this change
should have been made by reason of force majeur.
xxx
Lenders Share on Average
Art 732. Lenders on bottomry or respondentia
shall suffer , in proportion to their respective
interest, the general average which may take
place in the goods on which the loan is made.
In particular averages, in the absence of
an express agreement between the contracting
parties, the lender on bottomry or respondentia
shall also contribute in proportion to his
respective interest, should it not belong to the
kind of risks excepted in the forgoing article.
When Lender runs Risk
In the absence of express stipulation designating the port
of destination, commentators agree that the lender
assumes the risk not only on the voyage out, but also on
the return of voyage. The vessel is not considered as
having reached the port of destination until it is legally
received in said port. (Art 733)

In case of shipwreck (Art 734)

In case of shipwreck, the amount liable for the payment of
the loan shall be reduced to the proceeds of the goods
saved, after deducting the costs of the salvage.
If the loan should be on the vessel or any of its
parts, the freightage earned during the voyage for which
saidd loan was contracted shall also be liable for its
payment, as far as it may reach.
Rights of Lender and Insurer
Art 735 . If the same vessel or cargo should be the
object of the loan on bottomry or respondentia and
marine insurance, the value of what may be saved
in case of shipwreck shall be devided between the
lender and the insurer, in proportion to the
legitimate interest of each one, taking into
consideration for this purpose only, the principal
with respect to the loan, and without prejudice to
the right of preference of other creditors in
accordance with Art 580.

Premium do not bear interest

Art 736 If there should be delay in the repayment of
the principal and premiums of the loans, only the
former shall bear interest.