Transpo

TRANSPORTATION LAW
I. PRELIMINARY CONSIDERATIONS
A. GOVERNING LAWS
1. New Civil Code (primary)
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall
be governed by the Code of Commerce and by special laws.
Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of
the common carrier for their loss, destruction or deterioration.
2. Code of Commerce
3. Warsaw Convention (Convention for the Unification of Certain Rules Relating to the International
Carriage by Air)
4. Carriage of Goods by Sea Act
5. Salvage Law
6. Public Service Act
7. Article XII, Section 11 (1987 Constitution)
B. CONCEPT OF PUBLIC UTILITY AND PUBLIC SERVICE
Public utility is a business or service engaged in regularly supplying the public with some commodity
or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph
service. The term implies public use and service.
When one devotes his property to a use in which the public has an interest, he, in effect grants to the
public an interest in that use, and must submit to the control by the public for the common good, to the
extent of the interest he has thus created.
The term "public service" includes every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both
with or without fixed route and whether may be its classification, freight or carrier service of any class,
express service, steamboat or steamship line, pontines, ferries, and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine railways, marine repair shop,
[warehouse] wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power water supply and power, petroleum, sewerage system, wire or wireless
communications system, wire or wireless broadcasting stations and other similar public services:
Provided, however, That a person engaged in agriculture, not otherwise a public service, who owns a
motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is
offered for hire or compensation to a third party or third parties engaged in agriculture, not itself or
themselves a public service, for operation by the latter for a limited time and for a specific purpose
directly connected with the cultivation of his or their farm, the transportation, processing, and marketing
of agricultural products of such third party or third parties shall not be considered as operating a public
service for the purposes of this Act. (Section 13, par. b, Public Service Act)
The difference between an ordinary business and a public utility is that the latter, being impressed with
public interest, is subjected to greater regulation/monitoring by the State. However, both are not
proscribed from earning profits from the public.
C. CONSTITUTIONAL LIMITATIONS ON OPERATION OF PUBLIC

UTILITIES
No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws
of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall
franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years.
Neither shall any such franchise or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the common good so requires. The State shall
encourage equity participation in public utilities by the general public. The participation of foreign
investors in the governing body of any public utility enterprise shall be limited to their proportionate
share in its capital, and all the executive and managing officers of such corporation or association must
be citizens of the Philippines. (Section 11, Article XII, 1987 Philippine Constitution)
The limit imposed by the constitution on foreign equity applies only to the operation of a public utility
and not to ownership of the facilities. The Constitution requires a franchise for the operation of a public
San Beda College of Law

Maraiah April D. Mangulabnan
Transportation Law Reviewer
utility but it does not require a franchise before one can own the facilities needed to operate a public
utility. (Tatad vs. Garcia, Jr.).
D. REGULATORY AGENCIES
1. Department of Transportation and Communications other agencies are under this department and
it is the agency that issues certificates of public convenience for operation of national railroad carriers
2. Land Transportation Franchising Regulatory Board (LTFRB) land transportation
3. Land Transportation Office (LTO) registration of drivers and motor vehicles
4. Maritime Industry Authority (MARINA) water transportation
5. Philippine Coast Guard concerned with safety in water transportation
6. National Telecommunications Commission communication utilities and services, radio
communications systems, wire or wireless telephone and telegraph systems, radio and television
broadcasting systems and other similar public utilities.
7. Energy Regulatory Board (ERB) electric or power companies
8. National Water Resources Council water resources
9. Civil Aer1onautics Board air transportation, particularly its economic aspects
10. Air Transportation Office undertakes the maintenance and operations of airports and other similar
facilities; registers aircrafts and other incidents concerning the same and provides safety regulations in
air transportation
11. Philippine Ports Authority wharves and ports
E. CONCEPT OF FRANCHISE AND CERTIFICATE OF PUBLIC CONVENIENCE
In Radio Communication of the Philippines, Inc. vs. National
Telecommunications Commission, a franchise was distinguished from a certificate of public
convenience in that the former is a grant or privilege from the sovereign power, while the latter is a form
of regulation through the administrative agencies.
A certificate of public convenience is different from a certificate of public convenience and necessity in
that the former requires prior issuance of municipal franchise while the latter does not.
Certificate of Public Convenience (CPC)
An authorization issued by the appropriate government agency for the operation of public services for
which no franchise, either municipal or legislative, is required by law, e.g., common carriers
Certificate of Public Convenience and Necessity (CPCN)
An authorization issued by the appropriate government agency for the operation of public service for
which a prior franchise is required by law, e.g. telephone and other services
CONDITIONS THAT MUST CONCUR IN THE GRANT OF CERTIFICATE OF
PUBLIC CONVENIENCE (AND NECESSITY):
1. Grantee must be a citizen of the Philippines or a corporation or entity 60 percent of which is owned
by such citizens;
2. Grantee must have sufficient financial capability to undertake the service; and
3. Service will promote public interest and interest in a proper and suitable manner.
Note: The overriding principle still is public interest, necessity and convenience.
A. CONTRACT OF TRANSPORTATION, IN GENERAL
Contract of Transportation one where a person obligates himself to transport persons or property
from one place to another for a consideration.
The person who obligates himself to transport the goods or passengers may be a common carrier or a
private carrier.
B. PERFECTION
Contract of carriage of passengers
1. Contract to carry an agreement to carry a passenger at a future date. This contract is consensual
and is therefore perfected by mere consent.
2. Contract of carriage or of common carriage itself a real contract for not until the facilities of the
carrier are actually used can the carrier be said to have already assumed the obligation of the carrier.
Carriage of goods
Where the carrier agrees to accept and transport the goods at a future date, such is consensual.

However, by the act of delivery of the goods, that is, when the goods are unconditionally placed in the
possession and control of the carrier, and upon their receipt by the carrier for transportation, the
contract of carriage is perfected.
Aircraft
There is a perfected contract to carry passengers even if no tickets have been issued to said
passengers so long as there was already a meeting of the minds with respect to the subject matter and
the consideration.
Buses, Jeepneys and Streetcars
Once a public utility bus or jeepney stops, it is in effect making a continuous offer to riders. Hence, it is
the duty of the drivers to stop their conveyances for a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up of the carrier. Liability of the carrier is already based
on a contract. It follows that the passenger is deemed to be accepting the offer if he is already
attempting to board the conveyances and the contract of carriage is perfected from that point. (Dangwa
Transportation Co., Inc. vs. CA)
Trains
A person who wants to board a train in a railway station must purchase a ticket and must present
himself at the proper place and in the proper manner to be transported.
Such person must have a bona fide intention to use the facilities of the carrier, possess sufficient fare
with which to pay his passage, and present himself to the carrier for transportation in the place and
manner provided. If he does not do so, he will not be considered a passenger.
C. COMMON CARRIER
1. STATUTORY DEFINITION
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
2. DISTINGUISHED FROM PRIVATE CARRIER
The distinction between a common or public carrier and a private or special carrier lies in the
character of the business, such that if the undertaking is a single transaction, not a part of a general
business or occupation, although involving the carriage of goods for a fee, the person or corporation
offering such service is a private carrier.
Significance of classification: Common carrier = presumption of fault or negligence
3. DISTINGUISHED FROM TOWAGE, ARRASTRE AND STEVEDORING
Towage a contract whereby one vessel, usually mo0torized, pulls another, whether loaded or not
with merchandise, from one place to another, for a compensation.
One vessel is hired to bring another vessel to another place. It merely facilitates the transport of goods
or persons of the common carrier.
In maritime law, it refers to a service rendered to a vessel by towing for the mere purpose of expediting
her voyage without reference to any circumstances of danger. Hence, it cannot be considered a
common carrier. It is a contract of services rather than a contract of carriage.
Arrastre Service a contract for the unloading of goods from a vessel.
Functions include the following:
1. To receive, handle, care for, and deliver all merchandise imported and exported, upon passing over
government-owned wharves and piers in the port; (depositary/ warehouseman)
2. To record and check all merchandise which may be delivered to said port at shipside; and
3. To furnish light and water services and other incidental services in order to undertake its arrastre
service.
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor
and warehouseman. The relationship between the consignee and the common carrier is similar to that
of the consignee and the arrastre operator. Since it is the duty of the arrastre operator to take good care
of the goods that are in its custody and to deliver them in good condition to the consignee, such
responsibility also devolves upon the carrier.
Stevedoring Service involves the loading and unloading of coastwise vessels calling at the port.

Towage, arrastre operations and stevedoring are not maritime in character.

They do not involve the functions of a common carrier.
4. TESTS TO DETERMINE COMMON CARRIER
In First Philippine Industrial Corp. vs. CA, the Supreme Court reiterated that the tests for determining
whether a party is a common carrier of goods are:
1. He must be engaged in the business of carrying goods for others as a public employment, and must
hold himself out as ready to engage in the transportation of goods for person generally as a business
and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
4. The transportation must be for hire.
The true test of a common carrier is the carriage of goods or passengers, provided it has space for all
who opt to avail themselves of its transportation for a fee. (National Steel Corp. vs. CA)
5. PARTIES TO THE CONTRACT OF CARRIAGE
Carriage of Passengers
1. Passenger one who travels in a public conveyance by virtue of a contract, express or implied, with
the carrier as to the payment of fare or that which is accepted as an equivalent thereof.
2. Common Carrier
Carriage of Goods
1. Shipper the person who delivers the goods to the carrier for transportation.
2. Common Carrier
3. Consignee the person to whom the goods are to be delivered.
The consignee may be the shipper himself as in the case where the goods are to be delivered to one
of the branch offices of the shipper. However, the consignee may be a third person who is not actually
part of the contract. (Principle of Relativity of Contracts)
Nevertheless, the third-party consignee may still enforce the agreement as an agent by virtue of the
designation made by the shipper, or as a beneficiary who accepted such stipulation in favor of a third
party (stipulation pour autrui).
D. REGISTERED OWNER RULE AND KABIT SYSTEM
Registered Owner Rule: The registered owner of a certificate of public convenience is liable to the
public for the injuries or damages suffered by third persons caused by the operation of said vehicle,
even though the same had been transferred to a third person.
Reason: It would be easy for him, by collusion with others or otherwise, to transfer the responsibility by
proving that a third person is the actual and real owner.
Kabit System a system or arrangement whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to operate under such license,
sometimes for a fee or percentage of such earnings. It is void and inexistent under Art. 1409, New Civil
Code for being contrary to public policy.
Persons who are parties to the Kabit system cannot invoke the same as against each other either to
enforce their legal agreement or to invoke the same to escape liability. (Pari Delicto Rule)
The determining factor which negates the existence of Kabit System is the possession of the
franchise to operate and not the issuance of one SSS ID Number for both bus lines. (Baliwag Transit
vs. CA)
Indeed to exempt from liability the owner of a public vehicle who operates it under the boundary
system on the ground that he is a mere lessor would be not only to abet flagrant violations of the

Public Service Law, but also to place the riding public at the mercy of reckless and irresponsible drivers.
(Spouses
Hernandez vs. Spouses Dolor)
OBLIGATIONS OF THE COMMON CARRIER IN A CONTRACT OF CARRIAGE OF GOODS
A. VIGILANCE OVER THE GOODS
1. DUTY TO EXERCISE EXTRAORDINARY DILIGENCE
Art. 1733, Civil Code Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the circumstances of each case.
A common carrier is required to faithfully comply with his obligation to deliver the goods and to ferry
the passenger to the point of destination. Compliance with this obligation must be with the element of
integrity in the sense that the goods should be delivered in the same condition that they were received
and to transport the passengers without encountering any harm or loss.
Art. 363, Code of Commerce. Outside of the cases mentioned in the second paragraph of Article 361,
the carrier shall be obliged to deliver the goods shipped in the same condition in which, according to the
bill of lading, they were found at the time they were received, without any damage or impairment, and
failing to do so, to pay the value which those not delivered may have at the point and at the time at
which their delivery should have been made.
If those not delivered form part of the goods transported, the consignee may refuse to receive the latter,
when he proves that he cannot make use of them independently of the others.
Art. 364, Code of Commerce. If the effect of the damages referred to in Article
361 is merely a diminution in the value of the goods, the obligation of the carrier shall be reduced to the
payment of the amount which, in the judgment of experts, constitutes such difference in value.
Art. 365, Code of Commerce. If, in consequence of the damage, the goods are rendered useless for
sale and consumption for the purposes for which they are properly destined, the consignee shall not be
bound to receive them, and he may have them in the hands of the carrier, demanding of the latter their
value at the current price on that day.
If among the damages goods there should be some pieces in good condition and without any defect,
the foregoing provision shall be applicable with respect to those damaged and the consignee shall
receive those which are sound, this segregation to be made by distinct and separate pieces and without
dividing a single object, unless the consignee proves the impossibility of conveniently making use of
them in this form.
The same rule shall be applied to merchandise in bales or packages, separating those parcels which
appear sound.
2. PRESUMPTION OF NEGLIGENCE
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence as required in
Article 1733.
Reason: As to when and how goods were damaged in transit is a matter peculiarly within the
knowledge of the carrier and its employees.
In case of loss, damage or deterioration of goods, the court need not make an express finding of fault
or negligence of common carriers; the law imposes liability upon common carriers, as long as it is
shown that:
1. There exists a contract between the shipper/passenger and the common carrier; and
2. That the loss, deterioration, injury or death took place during the existence of the contract.
Mere proof of delivery of the goods in good order to a common carrier and their arrival in bad order at
their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate
explanation as to how the deterioration, loss, or destruction of the goods happened, the transporter
shall be held responsible.

In effect, the shipper/passenger has no burden of proving that his injury was caused by the negligent
or intentional act or omission of the carrier or his agents.
However, the common carrier may prove by way of defense that the loss or damage cannot be traced
to any act of said carrier but the proximate and only cause of the loss is any of the circumstances
mentioned in Art. 1734 of the New Civil Code. The carrier can also prove that the proximate cause of
the loss is not any act or omission of the said carrier because he exercised extraordinary diligence.
3. DURATION OF LIABILITY
Art. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right
to receive them, without prejudice to the provisions of Article 1738.
Art. 1737. The common carrier's duty to observe extraordinary diligence over the goods remains in full
force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or
owner has made use of the right of stoppage in transitu.
Art. 1738. The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee
has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.
The goods are deemed delivered to the carrier when the goods are ready for and have been placed in
the exclusive possession, custody and control of the carrier for the purpose of their immediate
transportation and the carrier has accepted them. When such delivery has thus been accepted by the
carrier, the liability of the carrier commences eo instanti.
4. DEFENSES OF COMMON CARRIERS
Flood, storm earthquake, lightning and other natural disaster and calamity
Acts of the public enemy in war, whether international or civil
Act of omission of the shipper or owner of the goods
Character of the goods or defects in the packing or in the containers
Order or act of competent public authority
Exercise of extraordinary diligence
The above enumeration is exclusive. For example, the defense of exercise of due diligence in the
selection and supervision of employees that is available in tort is not available in an action for breach of
contract of carriage.
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
a. FORTUITOUS EVENT
Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster
must have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence to prevent or minimize loss before, during
and after the occurrence of flood, storm or other natural disaster in order that the common carrier may
be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is
incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734,
No. 2.
Requisites:
1. The cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with
his obligation, must be independent of human will.
2. It must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid.
3. The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner.

4. The obligor (debtor) must be free from any participation in or aggravation of the injury resulting to the
creditor.
Fortuitous event, to be a valid defense, must be established to be the proximate and only cause of the
loss.
Case: Edgar Cokaliong Shipping Lines, inc. vs. UCPB General Insurance Company, 25 June 2003
Petitioners vessel, M/V Tandag, sank due to a fire which resulted from a crack in the auxiliary engine
fuel oil service tank. Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing
the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere
two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.
The sinking of the vessel was not considered due to fortuitous event. Having originated from an
unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure.
Hijacking of the carrier does not fall among the five categories of exempting causes. The carriers
vehicle must be dealt with under Art. 1735 of the New Civil Code. In other words, the common carrier is
presumed to be at fault or to have acted negligently unless there is a proof of extraordinary diligence on
its part of the common carrier. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat, violence or force. (Bascos
vs. CA)
Damage or injury that can be traced to mechanical defects is not a damage or injury that was caused
by fortuitous event. The prevailing rule in this jurisdiction is that a carrier is liable to its passengers for
damages caused by mechanical defects of the conveyance. (Necesito vs. Paras)
b. PUBLIC ENEMY
Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster
must have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence to prevent or minimize loss before, during
and after the occurrence of flood, storm or other natural disaster in order that the common carrier may
be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is
incumbent upon the common carrier in case of an act of the public enemy referred to in Article 1734,
No. 2.
The term public enemy, in its general acceptation presupposes the existence of an actual state of
war wit the country to which the carrier belongs, though not necessarily with that to which the owner of
the goods owes allegiance.
In order that the common carrier may be exempted from responsibility, the act of the public enemy
must have been the proximate and only cause of the loss, and the common carrier must exercise due
diligence to prevent or minimize loss before, during and after the performance of the act of the public
enemy.
c. IMPROPER PACKING
Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character
of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise
due diligence to forestall or lessen the loss.
If the carrier accepts the goods knowing the fact of improper packing of the goods upon ordinary
observation or notwithstanding such condition, it is not relieved o liability for loss or injury resulting
therefrom.
For Article 1734 [4] to apply, the rule is that if the improper packing or in this case, the defects in the
container, are known to the carrier or his employees or apparent upon ordinary observation, but he
nevertheless accepts the same without protest or exception notwithstanding such condition, he is not
relieved of liability for damage resulting therefrom. In this case, petitioner accepted the cargo without
exception despite the apparent defects in some of the container vans. Hence, for failure of petitioner to
prove that she exercised extraordinary diligence in the carriage of goods in this case or that she is
exempt from liability, the presumption of negligence as provided in Art. 1735 holds. (Calvo vs. UCPB
General Insurance Co., Inc.)

In Belgian Overseas Chartering & Shipping N.V. vs. Philippine First Insurance Co., the petitioners tried
to escape liability under Art. 1734 [4] of the Civil Code. They cite the notation metal envelopes rust
stained and slightly dented printed on the Bill of Lading as evidence that the character of the goods or
defect in the packing or the containers was the proximate cause of the damage. The Supreme Court
rejected the argument explaining that:
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was
due to the condition noted on the Bill of lading. The aforecited exception refers to cases when the
goods are lost and damages while in transit as a result of the natural decay of perishable goods or the
fermentation or evaporation of substances liable therefore, the necessary or natural wear of goods in
transport, defects in packages in which they are shipped, or the natural propensities of animals. None
of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon
ordinary observation, it is not relived of liability for loss or injury resulting therefrom, once it accepts the
goods notwithstanding such condition. Thus, petitioners have not successfully proven the application of
any of the aforecited exceptions in the present case.
Refusal by the carrier by reason of improper packing is not an actionable wrong. Nevertheless, should
the carrier decide to accept, notwithstanding the improper packing, the common carrier must, in order
to invoke it as a defense, make the proper notation/ reservation in a Foul Bill of Lading, indicating such
improper packing; and exercise due diligence to forestall or lessen loss or damage. Hence, mere
acceptance does not always amount to an abandonment of such defense.
Foul Bill of Lading one which contains a notation thereon indicating that the goods covered by it are
in bad condition.
d. ORDER OF PUBLIC AUTHORITY
Art. 1743. If through the order of public authority the goods are seized or destroyed, the common carrier
is not responsible, provided said public authority had power to issue the order.
In Ganzon vs. CA, the petitioner carrier was not excused from liability because the Supreme Court did
not consider the order of an acting mayor as a valid order of a public authority. In other words, the
public authority who issues the order must be duly authorized to issue the order as provided for in the
proviso in Art. 1743.
It should be noted that the Carriage of Goods by Sea Act provides that neither the carrier nor the ship
shall be responsible for loss or damage resulting from arrest or restraint of princes, rulers, or people, or
seizure under legal process and from quarantine restrictions.
Degree of diligence: that of a good father of a family
5. CONTRIBUTORY NEGLIGENCE OF THE SHIPPER
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the
goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be
liable in damages, which however, shall be equitably reduced.
The obligation to exercise due diligence is not limited to the carrier. The shipper is obliged to exercise
due diligence in avoiding damage or injury. Nevertheless, contributory negligence is not a defense that
will excuse the carrier from liability. It will only mitigate such liability.
However, the negligence of the shipper/passenger may be the proximate and only cause of the loss,
in which case, the carrier should not be made liable. The carrier may be able to overcome the
presumption of negligence and may be able to prove that it is exercised extraordinary diligence in
handling the goods or in transporting the passenger. Thus, the carrier may be able to prove that the
only cause of the loss of the goods is any of the following acts of the shipper:
1. Failure of the shipper to disclose the nature of the goods;
2. Improper marking or direction as to destination; or
3. Improper loading when he assumes such responsibility

The shipper must see to it that the goods are properly packed, otherwise, liability of he carrier may
either be mitigated or barred depending on the circumstances.
6. STIPULATION LIMITING LIABILITY OF CARRIER
a. REQUISITES
Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary
diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
The contract of carriage itself does not need to be in writing to be valid and enforceable. Being a
consensual contract, it is perfected by the mere agreement of the parties as to the subject matter and
consideration. There is no formality is needed to become enforceable before the courts since it is not
one covered by the Statute of Frauds (Art. 1403, NCC)
However, in case of a stipulation limiting common carriers responsibility, such stipulation is required
by law to be in writing. If not in writing, the general rule will apply, that is, extraordinary diligence.
Delay without just cause prevents the common carrier from availing of such
stipulation limiting its liability.
Art. 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots is
valid.
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances,
and has been fairly and freely agreed upon.
VALID STIPULATIONS
1. Reduction of degree of diligence to ordinary diligence, provided it be
a. In writing, signed by the shipper or owner;
b. Supported by a valuable consideration other than the service rendered by the carriers; and
c. Reasonable, just and not contrary to public policy. (Art. 1744)
2. Fixed amount of liability: A contract fixing the sum to be recovered by the owner or shipper for the
loss, destruction or deterioration of the goods, if it is reasonable and just under the circumstances and
has been fairly and freely agreed upon. (Art. 1750)
3. Limited liability for delay: An agreement limiting the common carriers liability for delay on account of
strikes or riots. (Art. 1748)
4. Stipulation limiting liability to the value of the goods appearing in the bill of lading, unless the shipper
or owner declares a greater value. (Art. 1749)
The diligence required in the carriage of goods may be reduced only by one degree, from
extraordinary to ordinary diligence or diligence of a good father of a family.
The purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such
stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter may
be liable for in case of loss of the goods. The common carrier can then take appropriate measures
getting insurance, if needed, to cover or protect itself. This precaution on the part of the carrier is
reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of the goods he
seeks to transport does not only violate a valid contractual stipulation, but commits a fraudulent act
when it seeks to make the common carrier liable for more than the amount declared in the bill of lading.
(Edgar Cokaliong Shipping Lines, Inc. vs. UCPB General Insurance Co.)
b. INVALID STIPULATIONS

Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a
family, or of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omission of his or its employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
c. EFFECT OF DELAY
Art. 1747. If the common carrier, without just cause, delays the transportation of the goods or changes
the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in
case of the loss, destruction, or deterioration of the goods.
Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster
shall not free such carrier from responsibility.
d. RULE ON PRESUMPTION OF NEGLIGENCE DESPITE STIPULATION
Art. 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably presumed to have been negligent in case of their loss,
destruction or deterioration.
B. OTHER OBLIGATIONS
1. DUTY TO ACCEPT GOODS
Gen. Rule: A common carrier cannot ordinarily refuse to carry a particular class of goods.
Exception: When for some sufficient reason the discrimination against the traffic in such goods is
reasonable and necessary. (Fisher vs. Yangco Steamship Co.)
a. GROUNDS FOR VALID REFUSAL OF ACCEPTANCE OF GOODS
1. Hazardous and dangerous substances
2. Unfit for transport
These goods may by nature be unfit for transportation or are unfit because of improper packaging or
defect in their containers. However, the carrier may choose to transport such goods and limit its liability
by stipulation.
3. Acceptance would result in overloading
4. Contrabands or illegal goods
5. Goods are injurious to health
6. Goods will be exposed to untoward danger like flood, capture by enemies and the like.
7. Goods like livestock will be exposed to disease
8. Strike
9. Failure to tender goods on time
2. DUTY TO DELIVER GOODS
a. TIME OF DELIVERY
In the absence, of any agreement as to the time of deliver, when a common carrier undertakes to
convey goods, the law implies a contract that they shall be delivered at destination within a reasonable
time.
Art. 358, Code of Commerce. If there is no period fixed for the delivery of the goods to the carrier shall
be bound to forward them in the first shipment of the same or similar goods which he may make to the
point of delivery; and should he not do so, the damages caused by the delay should be for his account.
But where a carrier has made an express contract to transport and deliver property within a specified
time, he is bound to fulfill the contract and is liable for any delay, no matter from what cause it may have
arisen.
b. CONSEQUENCES OF DELAY
Art. 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster
shall not free such carrier from responsibility.
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Art. 1747. If the common carrier, without just cause, delays the transportation of the goods or changes
the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in
case of the loss, destruction, or deterioration of the goods.
Effects of delay:
1. Merely suspends and generally does not terminate the contract of carriage
2. Carrier remains duty bound to exercise extraordinary diligence
3. Natural disaster shall not free carrier from responsibility
4. If the delay is without just cause, the contract limiting the carriers liability cannot be availed of in
case of loss or deterioration of goods
Art. 370, Code of Commerce. If a period has been fixed for the delivery of the goods, it must be made
within such time, and, for failure to do so, the carrier shall pay the indemnity stipulated in the bill of
lading, neither the shipper nor the consignee be entitled to anything else.
If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading, the carrier
shall be liable for the damages which the delay may have caused.
Art. 371, Code of Commerce. In case of delay through the fault of the carrier, referred to in the
preceding articles, the consignee may leave the goods transported in the hands of the former, advising
him thereof in writing before their arrival at the point of destination.
When this abandonment takes place, the carrier shall pay the full value of the goods as if they had
been lost or mislaid.
If the abandonment is not made, the indemnification for losses and damages by reason of the delay
cannot exceed the current price which the goods transported would have had on the day and at the
place in which they should have been delivered; this same rule is to be observed in all other cases in
which the indemnity may be due.
Art. 372, Code of Commerce. The value of the goods which the carrier must pay in cases of loss or
misplacement shall be determined in accordance with that declared in the bill of lading, the shipper not
being allowed to present proof that among the goods declared therein there were articles of greater
value and money.
Horses, vehicles, vessels, equipment and all other principal and accessory means of transportation
shall be especially bound in favor of the shipper, although with respect to railroads said liability shall be
subordinated to the provisions of the laws of concession with respect to the property, and to what this
Code established as to the manner and form of effecting seizures and attachments against said
companies.
Art. 373, Code of Commerce. The carrier who makes the delivery of the merchandise to the consignee
by virtue of combined agreements or services with other carriers shall assume the obligations of those
who preceded him in the conveyance, reserving his right to proceed against the latter if he was not the
party directly responsible for the fault which gave rise to the claim of the shipper or consignee.
The carrier who makes the delivery shall likewise acquire all the actions and rights of those who
preceded him in the conveyance.
The shipper and consignee shall have an immediate right of action against the carrier who executed the
transportation contract, or against the other carriers who may have received the goods transported
without reservation.
However, the reservation made by the latter shall not relieve them from the responsibilities which they
may have incurred by their own acts.
Art. 374, Code of Commerce. The consignee to whom the shipment was made may not defer the
payment of the expenses and transportation charges of the goods they receive after the lapse of
twenty-four hours following their delivery; and in case of delay of this payment, the carrier may demand
the judicial sale of the goods transported in an amount necessary to cover the cost of transportation
and the expenses incurred.
c. PLACE OF DELIVERY
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The goods should be delivered in the place agreed upon by the parties. If the specific place or
warehouse is designated in the bill of lading, the goods must be delivered in such place even if it is not
the usual place of delivery in the place of destination.
Art. 360, Code of Commerce. The shipper, without changing the place where the delivery is to be
made, may change the consignment of the goods which he delivered to the carrier, provided that at the
time of ordering the change of consignee, the bill of lading signed by the carrier, if one has been issued,
be returned to him, in exchange for another wherein the novation of the contract appears.
The expenses which this change of consignment occasions shall be for the account of the shipper.
d. TO WHOM DELIVERY SHALL BE MADE
The goods shall be delivered to the consignee or any other person to whom the bill of lading was
validly transferred or negotiated.
Art. 368, Code of Commerce. The carrier must deliver to the consignee, without any delay or
obstruction, the goods which he may have received, by the mere fact of being named in the bill of
lading to receive them; and if he does not do so, he shall be liable for the damages which may be
caused thereby.
Art. 369, Code of Commerce. If the consignee cannot be found in the residence found in the bill of
lading, or if he refuses to pay the transportation charges and expenses, or if he refuses to receive the
goods, the municipal judge, where there is none of the first instance, shall provide for their deposit at
the disposal of the shipper, this deposit producing all the effects of delivery without prejudice to third
parties with a better right.
It should be noted that a negotiable bill of lading is a document of title that may be transferred to a
holder for value. In case of such transfer, the carrier is obligated to deliver the goods to the transferee
or holder. The transferee to whom the bill of lading has been negotiated acquires the direct obligation of
the carrier from the time of such negotiation. There is even no need to notify the carrier that there was
such a transfer.
OBLIGATIONS OF THE COMMON CARRIER IN A CONTRACT OF CARRIAGE OF PASSENGERS
A. SAFETY OF PASSENGERS
1. DUTY TO OBSERVE UTMOST DILIGENCE
Art. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.
Extraordinary diligence rendition of service with the greatest skill or foresight, with due regard for all
circumstances.
2. DURATION OF LIABILITY
With respect to carriage of passengers by trains, the extraordinary responsibility of common carriers
commences the moment the person who purchases the ticket from the carrier presents himself at the
proper place and in a proper manner to be transported with a bona fide intent to ride the coach.
The duty of a common carrier to provide safety to its passengers so obligates it not only during the
course of the trip, but also for as long as the passengers are within its premises and where they ought
to be in pursuance to the contract of carriage.
All persons who remain on the premises within a reasonable time after leaving the conveyance are
deemed passengers, and what is a reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances, and includes a reasonable time to see after his baggage and
prepare for his departure. (La Mallorca vs. CA; Aboitiz Shipping Corp. vs. CA)
It is the duty of common carriers of passengers to stop their conveyances a reasonable length of time
to afford passengers an opportunity to enter, and they are liable for injuries suffered for 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 those alighting therefrom. (Dangwa
Transportation Co., Inc. vs. CA)
3. PRESUMPTION OF NEGLIGENCE
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Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence as
prescribed in Articles 1733 and 1755.
With respect to passengers, the carriers defense is exercise of extraordinary or utmost diligence. It is
believed that the defenses mentioned in Art. 1734 like fortuitous event or acts of public enemy (except
No. 4 character or packing of goods) may be invoked against the passenger or his heirs provided that
utmost diligence is exercised. However, the presumption under Art. 1756 applies.
4. LIABILITY OF ACTS OF EMPLOYEES
Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence
or wilful acts of the former's employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employees.
Diligence in the selection and supervision of employees under Article 2180 of the
Civil Code cannot be interposed as a defense by the common carrier because the liability of the carriers
arises from the breach of the contract of carriage. The defense under said articles is applicable to
negligence in quasi-delicts under Art.
2176.
When the crime was committed by a train guard who had no duties to discharge in connection with
the transportation of the victim, the crime stands on the same footing as if committed by a stranger or
co-passenger since the killing was not in the line of duty. (Gillaco vs. Manila Railroad)
It is no defense that the employee acted beyond the scope of his authority because the riding public is
not expected to inquire from time to time before they board the carrier whether or not the driver or any
other employee is authorized to drive the vehicle or that said driver is acting within the scope of his
authority and observing the existing rules and regulations required of him by management.
At least three very cogent reasons underlie this rule: (1) the special undertaking of the carrier requires
that it furnish its passenger that full measure of protection afforded by the exercise of high degree of
care prescribed by the law, inter alia from violence and insults at the hands of strangers and other
passengers, but above all, from the acts of the carriers own servants charged with the passengers
safety; (2) said liability of the carrier for the servants violation of duty to passengers, is the result of the
formers confiding in the servants hands the performance of his contract to safely transport the
passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed
bylaw; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts
and negligence of the carriers employees against passengers, since it, and not the passengers, has
power to select and remove them. (Maranan vs. Perez)
Willful acts of the employees include theft.
5. LIABILITY FOR ACTS OF STRANGERS
Art. 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful
acts or negligence of other passengers or of strangers, if the common carrier's employees through the
exercise of the diligence of a good father of a family could have prevented or stopped the act or
omission.
With respect to acts of strangers and other passengers resulting in injury to a passenger, the
availability of such defense is also subject to the exercise of due diligence to prevent or stop the act or
omission.
Negligence of the carrier need not be the sole cause of the damage or injury to the passenger or the
goods. The carrier would still be liable even if the contractual breach concurs with the negligent act or
omission of another person.
6. EFFECT OF STIPULATION ON LIABILITY
Art. 1757. The responsibility of a common carrier for the safety of passengers as required in Articles
1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise.
There can be no stipulation lessening the utmost diligence that is owed to passengers.
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Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability
for negligence is valid, but not for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the common carrier's liability.
The provision implies that the same degree of diligence is required even if the passenger is carried
gratuitously. A common carrier should therefore exercise extraordinary diligence even as to non-paying
passengers. What the carrier can do is just limit its liability.
Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated
or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise.
There can be no stipulation lessening the utmost diligence that is owed to
passengers.
B. PASSENGERS BAGGAGES
Art. 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage which is not
in his personal custody or in that of his employee. As to other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable.
The term baggage has been defined to include whatever articles the passenger usually takes with him
for his own personal use, comfort, and convenience according to the habits or wants of a particular
class to which he belongs, either with reference to his immediate necessities or to the ultimate purpose
of his journey.
Baggage that are checked-in or delivered to the carrier are governed by Art. 1754 requiring
extraordinary diligence. If the passenger had hand carried luggage, the rules under Article 1998, 2000
to 2003 of the Civil Code on necessary deposit apply.
Art. 1998. The deposit of effects made by the travellers in hotels or inns shall also be regarded as
necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that
notice was given to them, or to their employees, of the effects brought by the guests and that, on the
part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative
to the care and vigilance of their effects.
Art. 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to
the personal property of the guests caused by the servants or employees of the keepers of hotels or
inns as well as strangers; but not that which may proceed from any force majeure. The fact that
travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered
in determining the degree of care required of him.
Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it
is done with the use of arms or through an irresistible force.
Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his
family, servants or visitors, or if the loss arises from the character of the things brought into the hotel.
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that
he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the
guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or
diminished shall be void.
C. RELEVANT PROVISIONS OF THE WARSAW CONVENTION
1. BINDING EFFECT OF THE WARSAW CONVENTION
The rights and obligations of the air carrier and the passengers in international flights are governed by
the Convention for the Unification of Certain Rules
Relating to International Carriage by Air (Warsaw Convention), signed on
October 12, 1929, coming into force in February 13, 1933, adhered to by the
Philippines on November 9, 1951. This Convention was partly amended by the
Hague Protocol of September 28, 1955, the Montreal Agreement of 1966, the
Guatemala Protocol of 1971 and Montreal Protocols of 1975 (Alitalia vs. IAC, 192 SCRA 9)
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The Warsaw Convention of 1929 to which the Republic of the Philippines is a party and which has the
force and effect of law in this country applies to all international transportation of persons, baggage, or
goods performed by an aircraft gratuitously or for hire. As enumerated in the Preamble of the
Convention, one of the objectives is to regulate in a uniform manner the conditions of international
transportation by air. (American vs. CA, 327 SCRA
482)
The Warsaw Convention is as much a part Philippine law as the Civil Code,
Code of Commerce, and other municipal special laws, and the provisions therein contained, specifically
on the limitation of carriers liability, are operative in the Philippines but only in appropriate situations.
(PAL vs. CA, 255 SCRA 48)
Warsaw Convention denies to the carrier availment of the provisions which exclude or limit his liability
if the damage is caused by his willful misconduct or by such default on his part as, in accordance with
the law of the court seized the case, is considered to be equivalent to willful misconduct, or if the
damage is similarly caused by a agent of the carrier acting within the scope of his employment.
(Sabena vs. CA)
Under domestic law and jurisprudence, the attendance of gross negligence (given the equivalent of
fraud or bad faith) holds the common carrier liable for all damages which can be reasonably attributed,
although unforeseen, to the nonperformance of the obligation, including moral and exemplary
damages.
While the Warsaw Convention has the force and effect of law in the Philippines, the same does not
operate as an exclusive enumeration of the instances when a carrier shall be liable for breach of
contract or as an absolute limit to the extent of liability, nor does it preclude the operation of the Civil
Code or other pertinent laws. (Cathay vs. CA, 219 SCRA 520)
Applicability: The transportation must be:
1. International transportation
2. Air transportation; and
3. Carriage of passengers, baggage or goods.
2. CATEGORIES OF INTERNATIONAL AIR TRANSPORTATION
International Transportation any transportation in which the place of departure and the place of
destination are situated either:
1. Within the territories of two High Contracting Parties regardless of whether or not there be a break in
the transportation or transshipment, or
2. Within the territory of a single High Contracting party, if there is an agreed stopping place within a
territory subject to the sovereignty, mandate or authority of another power, even though that power is
not a party to the Convention.
Effect of the absence of an agreement concerning a stopping place: the transportation shall not be
deemed to be international for the purposes of the Convention.
High Contracting Party is one of the original parties to the convention
3. LIABILITY UNDER THE CONVENTION
Article 22, Warsaw Convention
1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of
125,000 francs. Where, in accordance with the law of the Court seized of the case, damages may be
awarded in the form of periodical payments, the equivalent capital value of the said payments shall not
exceed 125,000 francs.
Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability.
2. In the carriage of registered luggage and of goods, the liability of the carrier is limited to a sum of 250
francs per kilogram, unless the consignor has made, at the time when the package was handed over to
the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case
so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless
he proves that that sum is greater than the actual value to the consignor at delivery.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to
5,000 francs per passenger.
15

4. The sums mentioned above shall be deemed to refer to the French franc consisting of 65 1/2
milligrams gold of millesimal fineness 900. These sums may be converted into any national currency in
round figures.
Limit of Liability (Art. 22, as amended by Guatemala Protocol, 1971; Alitalia vs. IAC, December 4,
1990)
1. Passengers
Gen. Rule: $100,000 per passenger
Exception: Agreement to a higher limit
Note: An agreement relieving the carrier from liability or fixing a lower limit is null and void (Art. 23).
Carrier is not entitled to the foregoing limit if the damage is caused by willful misconduct or default on
its part. (Art. 25)
2. Checked-in baggage
Gen. Rule: $20 per kilogram
Exception: In case of special declaration of value and payment of a supplementary sum by consignor,
carrier is liable to not more than the declared sum unless it proves that the sum is greater than the
actual value.
3. Hand-carried baggage: $1,000 per passenger
4. Goods to be shipped
Gen. Rule: $20 per kilogram
Exception: In case of special declaration of value and payment of a supplementary sum by consignor,
carrier is liable to not more than the declared sum unless it proves that the sum is greater than the
actual value.
OBLIGATIONS OF THE SHIPPER, CONSIGNEE AND PASSENGER
A. EFFECT OF NEGLIGENCE OF SHIPPER OR PASSENGER
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the
goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be
liable in damages, which however, shall be equitably reduced.
The obligation to exercise due diligence is not limited to the carrier. The shipper is obliged to exercise
due diligence in avoiding damage or injury. Nevertheless, contributory negligence on the part of the
passenger is not a defense that will excuse the carrier from liability. It will only mitigate such liability.
Art. 1761. The passenger must observe the diligence of a good father of a family
to avoid injury to himself.
Art. 1762. The contributory negligence of the passenger does not bar recovery of damages for his
death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount
of damages shall be equitably reduced.
The negligence of the passenger or the shipper may be the proximate and only cause of the loss, in
which case, the carrier should not be made liable. Moreover, even if the carrier is responsible for the
loss or injury, the passenger is al required to lessen the damage or injury in what is known as the
doctrine of avoidable consequences.
Doctrine of Last Clear Chance: A negligent defendant is held liable to a negligent plaintiff, or even to a
plaintiff who has been grossly negligent in placing himself in peril, if he, aware of the plaintiffs peril, or
according to some authorities, should have been aware of it in the reasonable exercise of due care,
had in fact an opportunity later than that of the plaintiff to avoid an accident.
Assumption of Risk
Passengers must take such risks incident to the mode of travel. Carriers are not insurers of the lives of
their passengers. Thus, in air travel, adverse weather conditions or extreme climactic changes are
some of the perils involved in air travel, the consequences of which the passenger must assume or
expect. (Japan Airlines vs. CA, August 7, 1998)
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B. PAYMENT OF FREIGHT
Art. 374, Code of Commerce. The consignees to whom the shipment was made may not defer the
payment of the expenses and transportation charges of the goods they receive after the lapse of
twenty-four hours following their delivery; and in case of delay in this payment, the carrier may demand
the judicial sale of the goods transported in an amount necessary to cover the cost of transportation
and the expenses incurred.
Who will pay: The shipper may pay the necessary freight before or at the time he delivers the goods to
the carrier for shipment. However, the parties may stipulate that the freight may be paid by the
consignee at the point of destination. The consignee is bound by such stipulation the moment he
accepts the goods.
Nevertheless, the consignor with whom the contract of carriage is made is primarily liable for the
payment of the freight charges whether or not he is the owner of the goods. The obligation to pay is
implied from the mere fact that the consignor has placed the goods with the carrier for the purpose of
transportation.
Time to pay: In the absence of any agreement, the consignee who is supposed to pay must do so
within 24 hours from the time of the delivery. (Code of Commerce provisions on Overland
Transportation)
With respect to carriage of goods by sea, the tickets are purchased in advance from ticket outlets or
booking offices that are required to be set up in every ports of call of the vessel. Carriers are not
supposed to allow passengers without tickets the carrier is bound to observe a No Ticket, No
Boarding Policy. (MARINA Memorandum Circular No. 112 dated December 15, 1995)
Art. 375. Code of Commerce. The goods transported shall be especially bound to answer for the cost
of transportation and for the expenses and fees incurred for them during their conveyance and until the
moment of their delivery.
This special right shall prescribe eight days after the delivery has been made, and once prescribed, the
carrier shall have no other action than that corresponding to him as an ordinary creditor.
Carriers Lien. If the consignor or the consignee failed to pay the consideration for the transportation
of goods, the carrier may exercise his lien in accordance with Art. 375 of the Code of Commerce.
C. LIABILITY FOR DEMURRAGE
Demurrage the compensation provided for in the contract of affreightment for the detention of the
vessel beyond the time agreed on for loading and unloading.
Essentially, it is the claim for damages for failure to accept delivery. Liability for demurrage, using the
word in its strictly technical sense, exists only when expressly stipulated in the contract.
Using the term in its broader sense, damages in the nature of demurrage are recoverable from a
breach of the implied obligation to load or unload the cargo with reasonable dispatch, but only by the
party to whom the duty is owed and only against one who is a party to the shipping contract. Notice of
arrival of vessels or conveyances, or of their placement for purposes of unloading if often a condition
precedent to the right to collect demurrage charges. (Magellan Manufacturing Marketing Corporation
vs. Court of Appeals)
EXTRAORDINARY DILIGENCE
A. UNDERLYING REASON
This extraordinary diligence required of common carriers is calculated to protect the passengers from
the tragic mishaps that frequently occur in connection with the rapid modern transportation. This high
standard of care is imperatively demanded by the preciousness of human life and by the consideration
that every person must in every way be safeguarded against all injury. (Report of the Code
Commission)
Rationale:
1. From the nature of the business and for reasons of public policy
2. Relationship of trust
3. Business is impressed with a special public duty
4. Possession of the goods
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5. Preciousness of human life

Note: A common carrier is not an absolute insurer of all risks of travel.
B. EFFECT OF STIPULATION
Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary
diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art. 1757. The responsibility of a common carrier for the safety of passengers as required in Articles
1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise.
Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability
for negligence is valid, but not for wilful acts or gross negligence. The reduction of fare does not justify
any limitation of the common carrier's liability.
The provision implies that the same degree of diligence is required even if the passenger is carried
gratuitously. A common carrier should therefore exercise extraordinary diligence even as to non-paying
passengers. What the carrier can do is just limit its liability.
Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot be eliminated
or limited by stipulation, by the posting of notices, by statements on the tickets or otherwise.
C. EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA
1. SEAWORTHINESS OF THE VESSEL
Generally, seaworthiness is that strength, durability and engineering skill made a part of a ships
construction and continued maintenance, together with a competent and sufficient crew, which would
withstand the vicissitudes and dangers of the elements which might reasonably be expected or
encountered during her voyage without loss or damage to her particular cargo. (Standard Vacuum Oil
Co. vs. Luzon Stevedoring Co., Inc.)
Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to exercise due
diligence to
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods
are carried, fit and safe for their reception, carriage, and preservation.
(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the
goods carried. (COGSA)
Sec. 116, Insurance Code. A warranty of seaworthiness extends not only to the condition of the
structure of the ship itself, but requires that it be properly laden, and provided with a competent master,
a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment,
such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other
necessary or proper stores and implements for the voyage.
Sec. 119, Insurance Code. A ship which is seaworthy for the purpose of an insurance upon the ship
may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of
the insurance upon the cargo.
Art. 609, Code of Commerce. Captains, masters or patrons of vessels must be
Filipinos, have legal capacity to contract in accordance with this code, and prove the skill, capacity, and
qualifications necessary to command and direct the vessel, as established by marine or navigation
laws, ordinances, or regulations, and must not be disqualified according to the same for the discharge
of the duties of the position.
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If the owner of the vessel desires to be the captain thereof, without having the legal qualifications
therefore, he shall limit himself to the financial administration of the vessel, and shall intrust the
navigation to a person possessing the qualifications required by said ordinances and regulations.
2. OVERLOADING
Duty to exercise due diligence likewise includes the duty to take passengers or cargoes that are within
the carrying capacity of the vessel.
3. PROPER STORAGE
The vessel itself may be suitable for the cargo but this is not enough because the cargo must also be
properly stored.
4. OBLIGATION OF CAPTAIN AND CREW
Failure on the part of the carrier to provide competent captain and crew should be distinguished from
the negligence of the captain and the crew. Under the
Limited Liability Rule, the liability of the shipowner may be limited to the value of the vessel. On the
other hand, if the negligence of the captain or crew can be traced to the fact that they are really
incompetent, the Limited Liability Rule cannot be invoked because the shipowner may be deemed
negligent.
5. RULE ON DEVIATION AND TRANSSHIPMENT
Art. 359, Code of Commerce. If there is an agreement between the shipper and the carrier as to the
road over which the conveyance is to be made, the carrier may not change the route, unless it be by
reason of force majeure; and should he do so without this cause, he shall be liable for all the losses
which the goods he transports may suffer from any other cause, beside paying the sum which may
have been stipulated for such case.
When on account of said cause of force majeure, the carrier had to take another route which produced
an increase in transportation charges, he shall be reimbursed for such increase upon formal proof
thereof.
Improper deviation may be a valid ground to deny a marine insurance claim under the Insurance
Code.
Transshipment the act of taking cargo out of one ship and loading it in another; or the transfer of
goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named in the contract has been
reached; or the transfer for further transportation from one ship or conveyance to another.
The fact of transshipment is not dependent upon the ownership of the transporting ships or
conveyances or in the change of carriers, but rather on the fact of actual physical transfer of cargo from
one vessel to another.
D. EXTRAORDINARY DILIGENCE IN CARRIAGE BY LAND
1. VEHICLES CONDITION
Common carriers that offer transportation by land are required to make sure that the vehicles that they
are using are in good order or condition.
Thus, the carrier will not be excused from liability on the ground that the tire blowout was due to
fortuitous event when it was shown that the passengers were injured because the floor of the bus gave
way.
Explosion of tires are not considered fortuitous event. It is a long-standing rule that a carrier cannot
escape liability by claiming that the accident that resulted because of a defective brake or tire is due to
a fortuitous event. This is true, even if it can be established, for instance, that the tire that was subject
of a blowout is brand new. The duty to exercise extraordinary diligence requires the carrier to purchase
and use vehicle parts that are not defective.
2. TRAFFIC RULES
The carrier fails to exercise extraordinary diligence if it will not comply with basic traffic rules. For the
presumption of negligence under Article 1756 to operate, all that is required is proof of death or injury to
a passenger. For the presumption under Article 21851 to operate, there must be proof of violation of
traffic rules.
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Proof of violation of traffic rules confirms that the carrier failed to exercise extraordinary diligence.
The basic traffic rules that must be complied with include those provided under the Land
Transportation and Traffic Code, RA No. 4136. Other traffic rules are embodied in the ordinances
issued by the local government units and the Metro manila Development Authority. These rules are
violated if the carrier did not comply with the rules on overtaking on a curve under Sec. 41 of the Code,
when there was improper parking under Sec. 54, when the carrier is overloaded in violation of Sec. 32
(a), or when there was overtaking in a junction without extreme caution.
3. OBLIGATION TO INSPECT
There is no unbending duty to inspect each and every package or baggage that is being brought
inside the bus or jeepney. The carrier is duty bound to conduct such inspection depending on the
circumstances.
E. EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR
Airworthiness means that an aircraft, its engines, propellers, and other components and
accessories, are of proper design and construction, and are safe for air navigation purposes, such
design and construction being consistent with accepted engineering practice and in accordance with
aerodynamic laws and aircraft science.
(RA 779)
Proof of airworthiness is not by itself sufficient to prove exercise of extraordinary diligence. For
instance, extraordinary diligence likewise requires the carrier to provide competent and well-trained
crew.
With respect to goods, the failure of the carriers to exercise due diligence in a number of cases
consists in their failure to take care of the baggage of the carriers passengers. In the cases where the
carriers are made liable, the baggage of their passengers are either damaged or transported to another
place, or are delayed or are lost altogether.
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has
been negligent if at the time of the mishap, he was violating any traffic regulation.
BILL OF LADING & OTHER FORMALITIES
A. DEFINITION OF BILL OF LADING
A bill of lading is a written acknowledgement, signed by the master of a vessel or other authorized
agent of the carrier, that he has received the described goods from the shipper, to be transported on the
expressed terms to the described place of destination, and to be delivered there to the designated
consignee or parties.
A bill of lading or a ticket is not necessary for the perfection of a contract of carriage. Thus, the
obligation of the carrier to exercise extraordinary diligence in transporting the goods or passengers is
present even if no bill of lading or ticket was issued by the carrier.
In the absence of any bill of lading, disputes shall be determined on the basis of the provisions of the
New Civil Code and suppletorily by the Code of Commerce.
B. CLASSES OF BILL OF LADING
1. Negotiable one in which it is stated that the goods referred to therein will be delivered to the bearer
or the order of the person named therein.
2. Non-negotiable one in which it is stated that the goods referred to therein will be delivered to a
specified person.
3. Clean B/L one which does not indicate any defect in the goods
4. Foul B/L one which contains a notation thereon indicating that the goods covered by it are in bad
condition.
5. On Board Bill issued when the goods have been actually placed aboard the ship with very
reasonable expectation that the shipment is as good as on its way.
6. Received for shipment bill one in which it is stated that the goods have been received for shipment
with or without specifying the vessel by which the goods are to be shipped.
7. Spent B/L one which covers goods that already have been delivered by the carrier without a
surrender of a signed copy of the bill.
8. Through B/L one issued by a carrier who is obliged to use the facilities of other carriers as well as
his own facilities for the purpose of transporting the goods from the city of the seller to the city of the
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buyer, which bill of lading is honored by the second and other interested carriers who do not issue their
own bills.
9. Custody B/L one wherein the goods are already received by the carrier but the vessel indicated
therein has not yet arrived at the port.
10. Port B/L one which is issued by the carrier to whom the goods have been delivered, and the
vessel indicated in the bill of lading by which the goods are to be shipped is already in the port where
the goods are held for shipment.
C. NATURE OF BILL OF LADING
It is a long-standing jurisprudential rule that a bill of lading operates as a receipt, as a contract, and is
a document of title.
Art. 353. Code of Commerce. The legal evidence of the contract between the shipper and the carrier
shall be the bills of lading, by the contents of which the disputes which may arise regarding their
execution and performance shall be decided, no exceptions being admissible other than those of falsity
and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued shall be
returned to him, and by the virtue of exchange of this title with the thing transported, the respective
obligations and actions shall be considered cancelled, unless in the same act the claim which the
parties may wish to reserve be reduced to writing, with exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the
carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of the bill of lading.
Art. 709, Code of Commerce. A bill of lading drawn up in accordance with the provisions of this title
shall be proof as between all those interested in the cargo and between the latter and the insurers,
proof to the contrary being reserved for the latter.
Sec 3. COGSA (4) Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the
goods as therein described in accordance with paragraphs (3) (a), (b), and (c) of this section:
(5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment
of the marks, number, quantity, and weight, as furnished by him; and the shipper shall indemnify the
carrier against all loss damages, and expenses arising or resulting from inaccuracies in such
particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability
under the contract of carriage or to any person other than the shipper.
1. As a contract
As a contract, it stipulates the rights and obligations assumed by the parties, it names the parties,
which includes the consignee, fixes the route, destination, and freight rates and charges. Being a
contract, it is the law between the parties who are bound by its terms and conditions provided that
these are not contrary to law, morals, good customs, public order and public policy.
a. Basic stipulations in a bill of lading
Overland Transportation
Art. 350, Code of Commerce. The shipper as well as the carrier of merchandise or goods may mutually
demand that a bill of lading be made, stating:
1. The name, surname and residence of the shipper.
2. The name, surname and residence of the carrier.
3. The name, surname and residence of the person to whom or to whose order the goods are to be
sent or whether they are to be delivered to the bearer of said bill.
4. The description of the goods, with a statement of their kind, of their weight, and of the external marks
or signs of the packages in which they are contained.
5. The cost of transportation.
6. The date on which shipment is made.
7. The place of delivery to the carrier.
8. The pace and the time at which delivery to the consignee shall be made.
9. The indemnity to be paid by the carrier in case of delay, if there should be any agreement on this
matter.
Maritime Commerce
Art. 706, Code of Commerce. The captain of the vessel and the shipper shall have the obligation of
drawing up the bill of lading in which shall be stated:
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1. The name, registry, and tonnage of the vessel.

2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued in the name of a specified person.
6. The quantity, quality, number of packages and marks of the merchandise.
7. The freightage and the primage stipulated.
The bill of lading may be issued to bearer, to order, or in the name of a specified person, and must be
signed within 24 hours after the cargo has been received on board, the shipper being entitled to
demand the unloading at the expense of the captain should the latter not sign it, and, in every case, the
losses and damages suffered thereby.
Read substantially: Arts. 707-718, Code of Commerce
b. Prohibited stipulations
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a
family, or of a man of ordinary prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or omission of his or its employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
2. As a document of title
Negotiation of the document has the effect of manual delivery so as to constitute the transferee the
owner of the goods. Under the Civil Code, the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him. Negotiation of the instrument results in the same transfer of
ownership because transfer of the document likewise transfers control over the goods.
Art. 1508, New Civil Code. A negotiable document of title may be negotiated by delivery:
(1) Whereby the terms of the document the carrier, warehouseman or other bailee issuing the same
undertakes to deliver the goods to the bearer; or
(2) Whereby the terms of the document the carrier, warehouseman or other bailee issuing the same
undertakes to deliver the goods to the order of a specified person, and such person or a subsequent
endorsee of the document has indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to bearer or where a
negotiable document of title has been indorsed in blank or to bearer, any holder may indorse the same
to himself or to any specified person, and in such case the document shall thereafter be negotiated only
by the endorsement of such endorsee.
Art. 1509. A negotiable document of title may be negotiated by the endorsement of the person to whose
order the goods are by the terms of the document deliverable.
Such endorsement may be in blank, to bearer or to a specified person. If indorsed to a specified
person, it may be again negotiated by the endorsement of such person in blank, to bearer or to another
specified person. Subsequent negotiations may be made in like manner.
Art. 1510. If a document of title which contains an undertaking by a carrier, warehouseman or other
bailee to deliver the goods to bearer, to a specified person or order of a specified person or which
contains words of like import, has placed upon it the words "not negotiable," "non-negotiable" or the
like, such document may nevertheless be negotiated by the holder and is a negotiable document of title
within the meaning of this Title. But nothing in this Title contained shall be construed as limiting or
defining the effect upon the obligations of the carrier, warehouseman, or other bailee issuing a
document of title or placing thereon the words "not negotiable," "non-negotiable," or the like.
Art. 1513. A person to whom a negotiable document of title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the document to him had or had ability to convey to
a purchaser in good faith for value and also such title to the goods as the person to whose order the
22

goods were to be delivered by the terms of the document had or had ability to convey to a purchaser in
good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him
according to the terms of the document as fully as if such bailee had contracted directly with him.
Art. 1515. Where a negotiable document of title is transferred for value by delivery, and the
endorsement of the transferor is essential for negotiation, the transferee acquires a right against the
transferor to compel him to endorse the document unless a contrary intention appears. The negotiation
shall take effect as of the time when the endorsement is actually made.
3. As a receipt
The issuance of a bill of lading carries the presumption that the goods were delivered to the carrier
issuing the bill, for immediate shipment. A bill of lading is a prima facie evidence of the receipt of the
goods by the carrier. In the absence of convincing testimony establishing mistake, recitals in the bill of
lading showing that the carrier received the goods for shipment on a specified date control.
An airway bill estops the carrier from denying receipt of the goods of the quantity and quality
described in the bill. However, as between the shipper and the carrier, when no goods have been
delivered for shipment no recitals in the bill can estop the carrier from showing the true facts. Between
the consignor of goods and receiving carrier, recitals in a bill of lading as to the goods shipped raise
only the rebuttable presumption that such goods were delivered for shipment. As between the
consignor and a receiving carrier, the fact must outweigh the recital.
D. RELEVANT PROVISIONS OF THE WARSAW CONVENTION
Airway bill a document which the consignor is obliged to make out and hand over to the carrier.
Functions: An Airway Bill is prima facie evidence of:
1. The conclusion of the contract
2. The receipt of the goods
3. The conditions of the transportation
4. The weight, dimensions and packaging of the goods
5. The number of packages
The carrier has the right to require the consignor to make out separate airway bills when there is more
than one package.
There is nothing in the Convention which prohibits the carrier from making out the airway bill itself.
A printed stipulation in the airway bill or airline ticket limiting the liability of the air carrier to a specified
amount is valid, but any ambiguity is strictly construed against the carrier. (Ong Yiu vs. CA)
Liability of Carrier for Damages
1. Death or injury of a passenger if the accident causing it took place on board the aircraft or in the
course of its operations of embarking or disembarking. (Art. 17,WC)
2. Destruction, loss or damage to any baggage or goods, if it took place during the transportation by
air (Art. 18, WC)
Transportation by air the period during which the baggage or goods are in charge of the carrier,
whether in an airport or on board an aircraft, or, in case of a landing outside an airport, in any place
whatsoever. It includes any transportation by land or water outside an airport if such takes place in the
performance of the contract of transportation by air, for the purpose of loading, delivery, or
transshipment.
3. Delay in the transportation of passengers, baggage or goods (Art. 19, WC)
The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline
took all the necessary steps to avoid the damage, it could exculpate itself completely. (Alitalia vs. IAC,
192 SCRA 9)
Effect of absence, irregularity or loss of passenger ticket/ baggage check/ airway bill:
1. Does not affect the existence and validity of the contract of transportation which shall nevertheless
be subject to the rules of the Convention.
2. If the carrier accepts the passenger without a passenger ticket, or a baggage without a baggage
check, or goods without an airway bill, the carrier shall not be entitled to avail of the provisions of the
Convention which exclude or limit its liability.
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ACTION FOR DAMAGES

1. Notice of claim
A written complaint must be made within 3 days from receipt of baggage,
7 days from receipt of goods; in case of delay, 14 days from receipt of baggage or goods. The
complaint is a condition precedent. Without the complaint, the action is barred except in case of fraud
on the part of the carrier. (Art. 26, WC)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination an intermediate place where carriage may be broken (i.e. stopping
place) is not a place of destination
b. date of expected arrival
c. date on which the transportation stopped (Art. 29, WC)
In United Airlines vs. UY, the two-year prescriptive period was not applied where the airline employed
delaying tactics.
Rule in case of Various Successive Carriers
1. Carriage of passengers
Gen. Rule: Action is filed only against the carrier in which the accident or delay occurred.
Exception: Agreement or contract whereby the first carrier assumed liability for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an action against the first carrier and the carrier in which the damage
occurred.
b. Passenger or consignee can file an action against the last carrier and the carrier in which the
damage occurred
Note: These carriers are jointly and severally liable. (Art. 30, WC)
A contract of international carriage by air, although performed by different carriers under a series of
airline tickets constitutes a single operation. Members of the International Air Transportation Association
(IATA) are under a general pool partnership agreement wherein they act as agent of each other in the
issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time
provide passengers access to airlines which are otherwise inaccessible in some parts of the world.
(American Airlines vs. CA, 197 SCRA 645)
Under a general pool partnership agreement, the ticket-issuing airline is the principal in a contract of
carriage while the endorsee-airline is the agent. The obligation of the former remained and did not
cease even when the breach occurred not on its own flight but on that of another airline which had
undertaken to carry the passengers to one of their destinations. (China Airlines vs. Chiok)
At the option of the plaintiff, the action for damages may be filed in the:
1. Court of domicile of the carrier;
2. Court of its principal place of business;
3. Court where it has a place of business through which the contract has been made; or
4. Court of the place of destination. (Art. 28 [1])
NOTE: It is the passengers ultimate destination not an agreed stopping place that determines the
country where suit is to be filed. The place of destination is determined by the terms of the contract of
carriage.
The forum of action provided in Art. 28(1) is a matter of jurisdiction rather than of venue. (Santos III vs.
Northwest Airlines)
Article 17, Warsaw Convention. The carrier is liable for damage sustained in the event of the death or
wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which
caused the damage so sustained took place on board the aircraft or in the course of any of the
operations of embarking or disembarking.
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Article 18. 1. The carrier is liable for damage sustained in the event of the destruction or loss of, or of
damage to, any registered luggage or any goods, if the occurrence which caused the damage so
sustained took place during the carriage by air.
2. The carriage by air within the meaning of the preceding paragraph comprises the period during which
the luggage or goods are in charge of the carrier, whether in an aerodrome or on board an aircraft, or,
in the case of a landing outside an aerodrome, in any place whatsoever.
3. The period of the carriage by air does not extend to any carriage by land, by sea or by river
performed outside an aerodrome. If, however, such a carriage takes place in the performance of a
contract for carriage by air, for the purpose of loading, delivery or transshipment, any damage is
presumed, subject to proof to the contrary, to have been the result of an event which took place during
the carriage by air.
Article 19. The carrier is liable for damage occasioned by delay in the carriage by air of passengers,
luggage or goods.
Article 22. 1. In the carriage of passengers the liability of the carrier for each passenger is limited to the
sum of 125,000 francs. Where, in accordance with the law of the Court seised of the case, damages
may be awarded in the form of periodical payments, the equivalent capital value of the said payments
shall not exceed 125,000 francs. Nevertheless, by special contract, the carrier and the passenger may
agree to a higher limit of liability.
2. In the carriage of registered luggage and of goods, the liability of the carrier is limited to a sum of 250
francs per kilogram, unless the consignor has made, at the time when the package was handed over to
the carrier, a special declaration of the value at delivery and has paid a supplementary sum if the case
so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless
he proves that that sum is greater than the actual value to the consignor at delivery.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to
5,000 francs per passenger.
4. The sums mentioned above shall be deemed to refer to the French franc consisting of 65
milligrams gold of millesimal fineness 900. These sums may be converted into any national currency in
round figures.
ACTIONS IN CASE OF CONTRACT OF BREACH OF CONTRACT OF CARRIAGE
A. CAUSES OF ACTION AND NATURE/EXTENT OF LIABILITY (CULPA CONTRACTUAL, CULPA
AQUILIANA AND CULPA DELICTUAL)
1. CULPA CONTRACTUAL (Breach of contract)
Only the carrier is primarily liable and not the driver, because there is no privity of contract between the
driver and the passenger.
No defense of due diligence in the selection and supervision of employees.
Basis: Art. 1759, New Civil Code. Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the former's employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employees.
2. CULPA AQUILIANA (quasi-delict)
The carrier and driver are solidarily liable as joint tortfeasors.
Defense of due diligence in the selection and supervision of employees is available.
Exception: Marine tort resulting in collision.
Basis: Art. 2180, New Civil Code. The obligation imposed by Article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is responsible.
xxx
The owners and managers of an establishment or enterprise are likewise responsible for damages
caused by their employees in the service of the branches in which the latter are employed or on the
occasion of their functions.
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Employers shall be liable for the damages caused by their employees and household helpers acting
within the scope of their assigned tasks, even though the former are not engaged in any business or
industry.
xxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that
they observed all the diligence of a good father of a family to prevent damage.
Although the relation of passenger and carrier is contractual both in origin and nature, nevertheless, the
act that breaks the contract, may also be a tort. (Air France vs. Carrascoso)
In the case of injury to a passenger due to the negligence of the driver of the bus on which the
passenger was riding on and of the driver of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages. It should not make any difference that the
liability of the bus owner springs from a contract while that of the driver springs from quasi-delict. (Tiu
vs. Arriesgado)
Since the employers (owner) liability is primary, direct and solidary, its only recourse is to recover what
it has paid from its employee (driver) who committed the negligence. (Philtranco vs. CA)
3. CULPA CRIMINAL (criminal negligence)
The driver is primarily liable. The carrier is subsidiarily liable only if the driver is convicted and declared
insolvent.
Basis: Art. 100, RPC
In case of injury to a passenger due to the negligence of the driver of the bus on which he is riding and
of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and
severally liable for damages. It makes no difference that the liability of the bus driver and owner springs
from contract while that of the owner and driver of the other vehicle arises from quasi-delict. (Fabre vs.
CA)
The principle of last clear chance would call for application in suit between the owners and drivers of
two colliding vehicles. It does not arise where a passenger demands responsibility from carrier to
enforce its contractual obligations. (Phil.
Rabbit Bus Lines vs. CA)
The act of the shipper in furnishing the carrier with inaccurate weight of payloader is not an excuse to
avoid liability, but said act constitutes a contributory circumstance which mitigates liability of the carrier.
(Compania Maritima vs. CA)
Passengers have the right to be treated by the carriers employees with kindness, respect, courtesy
and due consideration. Such that any discourteous conduct on the part of these employees toward a
passenger gives the latter an action for damages against the carrier. (Korean Airline vs. CA)
B. PRESCRIPTIVE PERIOD AND CONDITIONS PRECEDENT
1. OVERLAND TRANSPORTATION OF GOODS AND COASTWISE SHIPPING
The filing of a claim with the carrier within the period prescribed under Article 366 of the Code of
Commerce is a condition precedent for an action against the carrier in overland transportation. Nonfiling of the claim bard recovery.
Art. 366, Code of Commerce. Within the twenty-four hours following the receipt of the merchandise, the
claim against the carrier for damage or average be found therein upon opening the packages, may be
made, provided that the indications of the damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which case the claim shall be admitted only at
the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim, no
claim shall be admitted against the carrier with regard to the condition in which the goods transported
were delivered.
An action for damages is barred if the goods arrived in damaged condition and no claim is filed by the
shipper within the following period:
a. Immediately if damage is apparent.
b. Within 24 hours from delivery if damage is not apparent.
26

The period does not begin to run until the consignee has received possession of the merchandise that
he may exercise over it in the ordinary control pertinent to ownership. The period prescribed in Art. 366
may be subject to modification by agreement of the parties as stipulated in the bill of lading.
Requirement under Art 366 applies even to transportation by sea within the Philippines or coastwise
shipping but does not apply to misdelivery of goods.
2. INTERNATIONAL CARRIAGE OF GOODS BY SEA
Section 3, par. 6. COGSA. Unless notice or loss or damage and the general nature of such loss or
damage be given in writing to the carrier or his agent at the port of discharge or at the time of the
removal of the goods into the custody of the person entitled to delivery thereof under the contract of
carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as
described in the bill of lading. If the loss or damage is not apparent, the notice must be given within
three days of delivery.
Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person
taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the
subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered: Provided, That, if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice
the shipper to bring suit within one year after the delivery of the goods or the date when the goods
should have been delivered.
In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all
reasonable facilities to each other for inspecting and tallying the goods.
A claim must be filed with the carrier within the following period:
1. Immediately upon discharge of the goods if the damage is apparent.
2. Within 3 days from delivery if damage is not apparent.
Nevertheless, the filing of claim is not condition precedent.
The action for damages under the COGSA must be filed within a period of 1 year from the discharge
of the goods. In other words, the prescriptive period commences from discharge.
The period is not suspended by extra-judicial demand. The period does not apply to conversion or
misdelivery. The one-year period provided for in
Section 3 (6) of COGSA refers to loss of the cargo and not to misdelivery.
Similarly, damages arising from delay or late delivery is not the damage or loss contemplated under
the COGSA. The goods are not actually lost or damaged. The applicable period is 10 years.
The rule applies in collision cases. However, the one-year period starts not from the date of the
collision but when the goods should have been delivered, had the cargoes been saved.
C. RECOVERABLE DAMAGES
Damages is the pecuniary compensation, recompense, or satisfaction for an injury sustained, or as
otherwise expressed, the pecuniary consequences which the law imposes for the breach of some duty
or violation of some rights.
Extent of recovery
Art. 2201, New Civil Code. In contracts and quasi-contracts, the damages for which the obligor who
acted in good faith is liable shall be those that are the natural and probable consequences of the
breach of the obligation, and which the parties have foreseen or could have reasonably foreseen at the
time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages
which may be reasonably attributed to the non-performance of the obligation.
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The carrier in good faith is liable only to pay for the damages that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted. However, if the carrier is in bad faith or
was guilty of gross negligence, the said carrier is liable for all damages, whether the same can be
foreseen or not.
The carrier who may be compelled to pay damages for the loss or damage to the goods or
passengers has the right of recourse against the employee who committed the negligent, willful or
fraudulent act.
Kinds of Damages
Art. 2197, New Civil Code. Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.
Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or
exemplary damages, may be adjudicated. The assessment of such damages, except liquidated ones, is
left to the discretion of the court, according to the circumstances of each case.
Proof of pecuniary loss is necessary if actual or compensatory damages is being claimed.
Actual or Compensatory Damages
Article 2199 of the Civil Code provides that except as provided by law or by stipulation, one is entitled
to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages. Article 2200 provides that
indemnification for damages shall comprehend not only the value of the loss suffered, but also that of
the profits which the obligee failed to obtain.
There are two kinds of actual and compensatory damages:
1. The loss of what a person already possesses (dano emergente), and
2. The failure to receive as a benefit that would have pertained to him (lucro
cesante).
Damages cannot be presumed by the courts, in giving an award, must point out specific facts that could
afford a basis for measuring whatever compensatory or actual damages are borne. The burden of proof
rests on the plaintiff who is claiming actual damages against the carrier.
In the case of goods, the plaintiff is entitled to their value at the time of destruction.
Normally, the award is the sum of money which plaintiff would have to pay in the market for identical or
essentially similar good, plus in proper cases, damages for the loss of use during the period before
replacement.
Moral Damages
The Civil Code provides that moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.
Though incapable of pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendants wrongful act for omission. The award of moral damages is designed
to compensate the claimants for actual injury and is not meant to enrich the complainant at the expense
of the defendant. Moral damages are not awarded to punish the defendant but to compensate the
victim. The Civil Code allows the award of moral damages not only in favor of the injured passenger
himself but also to his heirs in the event of his death.
Generally, no moral damages may be awarded where the breach of contract is not malicious. The
presence of contractual negligence is insufficient for such award.
However, moral damages may be awarded if the contractual negligence is considered gross
negligence.
Other factors that affect the amount to be recovered:
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1. The extent of humiliation may also determine the amount of moral damages that can be awarded.
2. The extent of pain and suffering.
3. Official, political, social and financial standing of the offended party and the business and financial
position of the offender affect the amount of damages
4. The age of the claimant.
Nominal Damages
The assessment of nominal damages is left to the discretion of the court according to the
circumstances of the case. The award of nominal damages is also justified in the absence of competent
proof of the specific amounts of actual damages suffered.
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in every obligation arising from any source
enumerated in Article 1157, or in every case where any property right has been invaded.
Art. 2223. The adjudication of nominal damages shall preclude further contest upon the right involved
and all accessory questions, as between the parties to the suit, or their respective heirs and assigns.
Temperate or Moderate Damages
Art. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory
damages, may be recovered when the court finds that some pecuniary loss has been suffered but its
amount can not, from the nature of the case, be provided with certainty.
Liquidated Damages
Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach
thereof.
Ordinarily, the court cannot change the amount of liquidated damages agreed upon by the parties.
However, Article 2227 of the Civil Code provides that liquidated damages, whether intended as an
indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. In addition,
Article 2228 provides that when the breach of the contract committed by the defendant is not the one
contemplated by the parties in agreeing upon the liquidated damages, the law shall determine the
measure of damages, and not the stipulation.
Exemplary or Corrective Damages
Requisites for the award of exemplary damages:
1. They may be imposed by way of example in addition to compensatory damages, and only after the
claimants right to them has been established.
2. They cannot be recovered as a matter of right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant.
3. The act must be accompanied by bad faith or done in wanton, fraudulent, oppressive or malevolent
manner.
MARITIME LAW
A. CONCEPT OF MARITIME LAW
Maritime law is the system of laws which particularly relates to the affairs and business of the sea, to
ships, their crews and navigation, and to marine conveyance of persons and property.
Primary law on maritime commerce: New Civil Code provisions on common carriers
Suppletory laws: Code of Commerce and special laws (Salvage Law, COGSA, Ship Mortgage Decree
of 1978, etc.)
Maritime laws apply only to maritime trade and sea voyages.
Characteristics of Maritime Transaction
1. Real similar to transactions over real property with respect to effectivity against third persons which
is done through registration. The evidence of real nature is shown by:
a. The limitation of the liability of the agents to the actual value of the vessel and the freight money; and
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b. The right to retain the cargo and embargo and detention of the vessel. (Luzon Stevedoring Corp. vs.
CA)
2. Hypothecary the liability of the owner is limited to the value of the vessel itself. (Doctrine of Limited
Liability)
The real and hypothecary nature of maritime law simply means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which stands as the
guaranty for their settlement. (Aboitiz Shipping Corp. vs. General Accident Fire and Life Assurance
Corp.)
B. LIMITED LIABILITY RULE
Art. 587, Code of Commerce. The ship agent shall also be civilly liable for the indemnities in favor of
third persons which may arise from the conduct of the captain in the care of the goods which he loaded
on the vessel; but he may exempt himself therefrom by abandoning the vessel with all her equipment
and the freight it may have earned during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their contribution to the
common fund for the results of the acts of the captain, referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part
of the vessel belonging to him.
Art. 643. If the vessel and her cargo should be totally lost, by reason of capture or wreck, all rights shall
be extinguished, both as regards the crew to demand any wages whatsoever, and as regards the ship
agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be saved, the crew engaged on wages,
including the captain, shall retain their rights on the salvage, so far as they go, on the remainder of the
vessel as well as on the amount of the freightage of the cargo saved; but sailors who are engaged on
shares shall not have any right whatsoever on the salvage of the hull, but only on the portion of the
freightage saved. If they should have worked to recover the remainder of the shipwrecked vessel they
shall be given from the amount of the salvage an award in proportion of the efforts made and to the
risks, encountered in order to accomplish the salvage.
Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all her appurtenances and freight earned during
the voyage.
Article 837 applies the principle of limited liability in cases of collision while Articles
587 and 590 embody the universal principle of limited liability in all cases.
Cases where applicable:
1. Art. 587 civil liability for indemnities to third persons
2. Art. 590 indemnities from negligent acts of the captain (NOT the shipowner or agent)
3. Art. 837 collision
4. Art. 643 liability for wages of the captain and the crew and for advances made by the ship agent if
the vessel is lost by shipwreck or capture
1. CONCEPT
The real and hypothecary nature of maritime law simply means that the liability of the carrier in
connection with losses related to maritime contracts is confined to the vessel, which stands as the
guaranty for their settlement. It has its origin by reason of the conditions and risks attending maritime
trade in its earliest years when such trade was replete with innumerable and unknown hazards since
vessels had to go through largely uncharted waters to ply their trade. It was designed to offset such
adverse conditions and encourage people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising
from the operation of such vessel were confined to the vessel itself, its equipment, freight, and
insurance, if any, which limitation served to induce capitalists into effectively wagering their resources
against the consideration of the large profits attainable in their trade.
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NO VESSEL, NO LIABILITY, expresses in a nutshell the limited liability rule (Monarch Ins. Co. vs.
CA).
The Supreme Court ruled in Monarch Ins. Co. vs. CA that the limited liability rule does not apply if the
carrier failed to overcome the presumption of negligence.
2. EXCEPTIONS TO THE RULE
GEN. RULE: The liability of shipowner and ship agent is limited to the amount of interest in said
vessel such that where vessel is entirely lost, the obligation is extinguished.
The interest extends to:
1. The vessel itself
2. Equipment
3. Freightage; and
4. Insurance proceeds
EXCEPTIONS:
1. Injury or damage due to shipowner or to the concurring negligence of the
shipowner and the captain.
2. The vessel is insured
3. Claims under Workmens Compensation
4. Expenses for repair on vessel completed before loss
5. In case there is no total loss and the vessel is not abandoned.
The limited liability rule applies if the captain or the crew caused the damage or injury. For instance,
the shipowners or shipagents liability is limited to the value of the vessel if the damage was caused by
the unseaworthiness of the vessel caused by the negligence of the captain or crew during the voyage.
(Aboitiz
Shipping Corp. vs. GAFLAC) However, if the failure to maintain the
unseaworthiness of the vessel can be ascribed to the shipowner alone or the
shipowner concurrently with the captain, then the limited liability principle cannot be invoked.
The carrier is liable for the damages to the full extent and not up to the value of the vessel if it was
established that the carrier was guilty of negligence in allowing the captain and crew to play mahjong
during the voyage, in failing to maintain the ship as seaworthy and in allowing the ship to carry more
passengers than it was allowed to carry.
The limited liability doctrine applies not only to the goods but also in all cases like death or injury to
passengers.
The rights of a vessel owner or agent under the limited liability rule are akin to those of the rights of
shareholders to limited liability under our Corporation laws.
In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in
their recovery to the remaining value of accessible assets. (Aboitiz Shipping Corp. vs. GAFLAC)
But the provisions of the Code of Commerce invoked by appellant have no room in the application of
the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for the damage or loss of the cargo or injury to,
or death of, a passenger by or through the misconduct of the captain or master of the ship; nor the
liability for the loss of the ship as a result of collision; nor the responsibility for wages of the crew, but a
liability created by a statute to compensate employees and laborers in cases of injury received by or
inflicted upon them, while engaged in the performance of their work or employment, or the heirs and
dependents of such laborers and employees in the event of death caused by their employment. Such
compensation has nothing to do with the provisions of the Code of Commerce regarding maritime
commerce. It is an item in the cost of production which must be included in the budget of any well
managed industry. (Abueg vs. San Diego)
3. ABANDONMENT
Abandonment of the vessel, its appurtenances and the freightage is an indispensable requirement
before the shipowner or shipagent can enjoy the benefits of the limited liability principle. If the carrier
does not want to abandon the vessel, then he is still liable even beyond the value of the vessel.
Abandonment is the act of the insured by which, after a constructive total loss, he declares the
relinquishment to the insurer of his interest in the thing insured. (Sec. 138, ICP)
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Right of Shipowner or Ship agent to abandon vessel; Instances:

1. In case of civil liability from indemnities to third persons (Art. 587)
2. In case of leakage of at least of the contents of a cargo containing liquids
(Art. 687); and
3. In case of constructive loss of the vessel (Sec. 138, Insurance Code)
How claims are satisfied under the Limited Liability Rule
All claims should be collated before they can be satisfied from what remains of the insurance proceeds
and freightage at the time of the loss. No claimant can be given precedence over the others by the
simple expedience of having filed or completed its action earlier than the rest. Thus, execution of
judgment in earlier completed cases, even those already final and executory, must be stayed pending
completion of all cases occasioned by the subject sinking. Then and only then can all such claims be
simultaneously settled, either completely or prorate should the insurance proceeds and freightage be
not enough to satisfy all claims (Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation, Ltd.).
C. VESSELS
"Vessels" or Watercraft" Any barge, lighter, bulk carrier, passenger ship, freighter, tanker, container
ship, fishing boats or other artificial contrivance utilizing any source of motive power, designed, used or
capable of being used as a means of water transportation operating either as common contract carrier,
including fishing vessels covered under Presidential Decree No. 43, except (i) those owned and/or
operated by the Armed Forces of the Philippines and by foreign governments for military purposes, and
(ii) bancas, sailboats and other waterborne contrivance of less than three gross tons capacity and not
motorized. (Section 3 (b) PD 474)
This definition is important for purposes of applying the laws and regulations that are being
implemented by the Maritime Industry Authority. ALPHA PHI BETA
Vessels are personal property under Article 416 of the Civil Code. The same rule can be found in
Article 585 of the Code of Commerce which provides: For all purposes of law not modified by the
provisions of this Code, vessels shall continue to be considered as personal property.
Ships or vessels, whether moved by steam or by sail, partake, to a certain extent, of the nature and
conditions of real property, on account of their value and importance in the world commerce (Rubiso
and Calixto vs. Rivera). For instance, under Article 573 of the Code of Commerce, transfer of vessels
should be in writing and must be recorded in the appropriate registry.
1. ACQUISITION
a. BY PRESCRIPTION
Art. 573, Code of Commerce. Merchant vessels constitute property which may be acquired and
transferred by any of the means recognized by law. The acquisition of a vessel must appear in a written
instrument, which shall not produce any effect with respect to third persons if not inscribed in the
registry of vessels.
The ownership of a vessel shall likewise be acquired by possession in good faith, continued for three
years, with a just title duly recorded.
In the absence of any of these requisites, continuous possession for ten years shall be necessary in
order to acquire ownership.
A captain may not acquire by prescription the vessel of which he is in command.
Art. 575. Co-owners of vessels shall have the right of repurchase and redemption in sales made to
strangers, but they may exercise the same only within the nine days following the inscription of the sale
in the registry, and by depositing the price at the same time.
b. BY SALE
Art. 576. In the sale of a vessel it shall always be understood as included the rigging, masts, stores and
engine of a streamer appurtenant thereto, which at the same time belongs to the vendor.
The arms, munitions of war, provisions and fuel shall not be considered as included in the sale.
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The vendor shall be under the obligation to deliver to the purchaser a certified copy of the record sheet
of the vessel in the registry up to the date of the sale.
Art. 577. If the alienation of the vessel should be made while it is on voyage, the freightage which it
earns from the time it receives its last cargo shall pertain entirely to the purchaser, and the payment of
the crew and other persons who make up its complement for the same voyage shall be for his account.
If the sale is made after the vessel has arrived at the port of its destination, the freightage shall pertain
to the vendor, and the payment of the crew and other individuals who make up its complement shall be
for his account, unless the contrary is stipulated in either case.
Art. 578. If the vessel being on a voyage or in a foreign port, its owner or owners should voluntarily
alienate it, either to Filipinos or to foreigners domiciled in the capital or in a port of another country, the
bill of sale shall be executed before the consul of the Republic of the Philippines at the port where it
terminates its voyage and said instrument shall produce no effect with respect to third persons if it is not
inscribed in the registry of the consulate. The consul shall immediately forward a true copy of the
instrument of purchase and sale of the vessel to the registry of vessels of the port where said vessel is
inscribed and registered.
In every case the alienation of the vessel must be made to appear with a statement of whether the
vendor receives its price in whole or in part, or whether he preserves in whole or in part any claim on
said vessel. In case the sale is made to a Filipino, this fact shall be stated in the certificate of
navigation.
When a vessel, being on a voyage, shall be rendered useless for navigation, the captain shall apply to
the competent judge on court of the port of arrival, should it be in the Philippines; and should it be in a
foreign, to the consul of the Republic of the Philippines, should there be one, or, where there is none, to
the judge or court or to the local authority; and the consul, or the judge or court, shall order an
examination of the vessel to be made.
If the consignee or the insurer should reside at said port, or should representatives there, they must be
cited in order that they may take part in the proceedings on behalf of whoever may be concerned.
c. REGISTRATION
Sec. 810, Tariff and Customs Code. Privileges Conferred by Certificate of Philippine Registry. A
certificate of Philippine registry confers upon the vessel the right to engage, consistently with law, in the
Philippine coastwise trade and entities it to the protection of the authorities and the flag of the
Philippines in all ports and on the high seas, and at the same time secures to it the same privileges and
subjects it to the same disabilities as, under the laws of the
Philippines, pertain to foreign-built vessels transferred abroad to citizens of the Philippines.
Vessels are now registered through the Maritime Industry Authority. It is a long standing rule that the
person who is the registered owner of the vessel is presumed to be the owner of the vessel. Moreover,
it is likewise a settled rule that the sale or transfer of the vessel is not binding on third persons unless
the same is registered.
d. SHIPS MANIFEST
Sec. 906, Tariff and Customs Code. Manifests shall be required for cargo and passengers transported
from one place or port in the Philippines to another only when one or both of such places is a port of
entry.
Vessels are required to carry manifests in coastwise trade. This requirement is likewise imposed on
every vessel from a foreign port under Section 1005 of the same Code.
A manifest is a declaration of the entire cargo. The object of a manifest is to furnish customs officers
with a list to check against, to inform the revenue officers what goods are being brought into a port of
the country on a vessel.
Hence, the requirement that a vessel must carry a manifest is not complied with even if a bill of lading
can be presented. A bill of lading is just a declaration of a specific cargo rather than the entire cargo. It
is issued as a matter of convenience by virtue of a contract.
2. MORTGAGE OF VESSELS
Mortgage and other encumbrances over vessels are governed by the provisions of Presidential
Decree 1521, otherwise known as the Ship Mortgage Decree of
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1978.
Vessels are susceptible of maritime liens such as for the repair, equipping and provisioning of the
vessel in the preparation of a voyage, as well as mortgage liabilities, in satisfaction of which a vessel
may be validly arrested and sold. (Ship Mortgage Decree of 1978)
Maritime Lien
It constitutes a present right of property in the ship, a jus in re, to be afterward enforced in admiralty by
process in rem.
If the maritime lien arose prior to the recording of a preferred mortgage, it shall have priority over the
said mortgage lien.
Effect of sale: All pre-existing claims in the vessel are terminated. They will then be satisfied from the
proceeds of the sale subject to the order of preference.
D. PERSONS WHO TAKE PART IN MARITIME COMMERCE
1. SHIPOWNERS AND SHIP AGENTS
Art. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor
proves that the amount claimed was invested for the benefit of the same.
By ship agent is understood the person entrusted with provisioning or representing the vessel in the
port in which it may be found.
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but
he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it
may have earned during the voyage.
Art. 588. Neither the shipowner nor the ship agent shall be liable for the obligations contracted by the
captain, if the latter exceeds the powers and privileges pertaining to him by reason of his position or
conferred upon him by the former.
Nevertheless, if the amounts claimed were invested for the benefit of the vessel, the responsibility
therefor shall devolve upon its owner or agent.
Shipowner (proprietario) person who has possession, control and management of the vessel and
the consequent right to direct her navigation and receive freight earned and paid, while his possession
continues.
Ship agent (naviero) person entrusted with provisioning and representing the vessel in the port in
which it may be found; also includes the shipowner (Chua Hek Yong vs. IAC).
Not a mere agent under civil law; he is solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade
2. Discharge duties of the captain, subject to Art. 609;
3. Contract in the name of the owners with respect to repairs, details of equipment, armament,
provisions of food and fuel, and freight of the vessel, and all that relate to the requirements of
navigation;
4. Order a new voyage, make a new charter or insure the vessel after obtaining authorization from the
ship owner or if granted in certificate of appointment.
Civil Liabilities of the Shipowner and Ship Agent
1. All contracts of the captain, whether authorized or not, to repair, equip and provision the vessel (Art.
586)
2. Loss and damage to the goods loaded on the vessel without prejudice to their right to free
themselves from liability by abandoning the vessel to the creditors (Art. 587).
Duty of Ship Agent to Discharge the Captain and Members of the Crew
o If the seamen contract is not for a definite period or voyage, he may discharge them at his discretion.
(Art. 603)
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o If for a definite period, he may not discharge them until after the fulfillment of their contracts, except
on the following grounds:
1. Insubordination in serious matters;
2. Robbery;
3. Theft;
4. Habitual drunkenness;
5. Damage caused to the vessel or to its cargo through malice or manifest or proven negligence (Art.
605)
a. RULES IN CASE OF PART-OWNERS (ARTICLES 589-594, CODE OF COMMERCE)
Art. 589. If two or more persons should be part owners of a merchant vessel, a partnership shall be
presumed as established by the co-owners.
This partnership shall be governed by the resolutions of the majority of the members.
If the part owners should not be more than two, the disagreement of views, if any, shall be decided by
the vote of the member having the largest interest. If the interests are equal, it should be decided by lot.
The person having the smallest share in the ownership shall have one vote; and proportionately the
other part owners as many votes as they have parts equal to the smallest one.
b. RULES IN CASE OF SHIP AGENTS (ARTICLES 595-602, CODE OF COMMERCE)
Art. 595. The ship agent, whether he is at the same time the owner of the vessel, or a manager for an
owner or for an association of co-owners, must have the capacity to trade and must be recorded in the
merchants registry of the province.
The ship agent shall represent the ownership of the vessel, and may, in his own name and in such
capacity, take judicial and extrajudicial steps in matters relating to commerce.
2. CAPTAINS AND MATERS OF VESSELS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are particularly used in accordance with the size of the vessel
governed and the scope of transportation, i.e., large and overseas, and small and coastwise,
respectively.
Nature of position (3-fold character)
1. General agent of the shipowner
2. Technical director of the vessel
3. Representative of the government of the country under whose flag he navigates.
a. QUALIFICATIONS
1. Filipino citizen
2. Legal capacity to contract
3. Must have passed the required physical and mental examinations required for licensing him as such.
(Art. 609)
b. POWERS AND FUNCTIONS
Inherent powers:
1. Appoint crew in the absence of ship agent;
2. Command the crew and direct the vessel to its port of destination;
3. Impose correctional punishment on those who, while on board vessel, fail to comply with his orders
or are wanting in discipline;
4. Make contracts for the charter of vessel in the absence of ship agent; and
5. Order repair of vessel to enable it to continue its voyage. (Art. 610)
Sources of funds to comply with the inherent powers of the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Duties:
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1. Bring on board the proper certificate and documents and a copy of the
Code of Commerce;
2. Keep a log Book, Accounting Book and Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and unloading of the cargo;
5. Be on deck while leaving and entering the port;
6. Protest arrivals under stress and in case of shipwreck;
7. Follow instructions of and render an accounting to the ship agent;
8. Leave the vessel last in case of shipwreck;
9. Hold in custody properties left by deceased passengers and crew members;
10. Comply with the requirements of customs, health, etc. at the port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a port. (Art. 612)
No liability for the following:
1. Damages caused to the vessel or to the cargo by force majeure;
2. Obligations contracted for the repair, equipment and provisioning of the vessel unless he has
expressly bound himself personally or has signed a bill of exchange or promissory note in his name.
(Art. 620)
Solidary liabilities of the Ship Agent/ Shipowner for acts done by the
Captain towards Passengers and cargoes
1. Damages to vessel and to cargo due to lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine regulations (Art. 618)
c. DISCRETIONARY POWERS
A ships captain must be accorded a reasonable measure of discretionary authority to decide what the
safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage (InterOrient Maritime Enterprises, Inc. vs. CA).
It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all
things with respect to the vessel and its equipment and conduct of the voyage which are reasonably
necessary for the protection and preservation of the interests under his charge, whether those be of the
shipowners, charterers, cargo owners or of underwriters. It is a basic principle of admiralty law that in
navigating the vessel, the master must be left free to exercise his own best judgment.
Under the requirements of safe navigation, the judgment and discretion of the captain of the vessel may
be confined within a straitjacket, even in this age of electronic communications. (Inter-Orient Maritime
Enterprises, Inc. vs. CA).
3. PILOT
a. CONCEPT
Pilot a person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain
waters.
The term generally connotes a person taken on board at a particular place for the purpose of
conducting a ship through a river, road or channel, or from a port.
Compulsory pilotage States possessing harbors have enacted laws or promulgated rules requiring
vessels approaching their ports to take on board pilots licensed under the local law.
b. RELATIONSHIP TO MASTER AND SHIPOWNER
Master and pilot
While exercising his functions a pilot is in sole command of the ship and supersedes the master for the
time being in the commands and navigation of the ship; the master does not surrender his vessel to the
pilot and the pilot is not the master. There are occasions in which the master may and should interfere
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and even displace the pilot, as when the pilot is obviously incompetent or intoxicated. (Far Eastern
Shipping Company vs. CA)
Master pro hac vice (for the time being) in the command and navigation of the ship.
Shipowner and pilot
Gen. Rule: On compulsory pilotage grounds, the Harbor Pilot is responsible for damage to a vessel or
to life or property due to his negligence. (Such negligence of the pilot in the performance of duty
constitutes a maritime tort.)
Exceptions:
1. Accident caused by force majeure or natural calamity provided the pilot exercised prudence and
extra diligence to prevent or minimize damages.
2. Countermand or overrule by the master of the vessel in which case there registered owner of the
vessel is liable.
The fact that the law compelled the master to take the pilot does not exonerate the vessel from liability.
The owners of the vessel are responsible for the acts of the pilot, and they must be left to recover the
amount against him. (Far Eastern Shipping Company vs. CA)
4. OFFICERS AND CREW OF THE VESSEL
Sailing Mate/ First Mate second chief of the vessel who takes the place of the captain in case of
absence, sickness, or death and shall assume all of his duties, powers and responsibilities.
Second Mate Takes command of the vessel in case of the inability or disqualification of the captain
and the sailing mate, assuming in such case their powers and responsibilities. (Third in command)
Engineers Officers of the vessel but have no authority except in matter referring to the motor
apparatus. When two or more are hired, one of them shall be the chief engineer.
Members of the crew the aggregate of seamen who man a ship, or the ships company. Hired by the
ship agent, where he is present and in his absence, the captain hires them, preferring Filipinos, and in
their absence, he may take in foreigners, but not exceeding 1/5 of the crew. (Art. 634)
Just causes for the discharge of seaman while contract subsists:
1. Perpetration of a crime
2. Repeated insubordination, want of discipline
3. Repeated incapacity and negligence
4. Habitual drunkenness
5. Physical incapacity
6. Desertion
Supercargoes person who discharges administrative duties assigned to him by ship agent or
shippers, keeping an account and record of transaction as required in the accounting book of the
captain.
E. CHARTER PARTIES
1. CONCEPT
The term charter party is taken from carta partita which literally means divided document. Carta
partita refers to the ancient practice of writing out the terms and conditions of the contract in duplicate
on one piece of parchment and then dividing it down the middle thus providing each party with a copy.
Charter Party a contract by which the entire ship or some principal part thereof is let by the owner to
another person for a specified period of time or use, in consideration of the payment of freight. (Often
referred to as a form of mercantile lease)
Parties: Charterer, Charter Party, and the Shipowner
2. KINDS: BAREBOAT AND CONTRACT OF AFFREIGHTMENT
Bareboat or demise by the terms of which the whole vessel is let to the charterer which transfers to
him its entire command and possession and consequent control over its navigation, including the
master and crew who are his servants. The charterer is treated as owner pro hac vice of the vessel. In
such case, a common carrier becomes a private carrier. (Planters
Products, Inc. vs. CA)
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o The charterer provides crew, food and fuel. The charterer is liable as if he were the owner, except
when the cause arises from the unworthiness of the vessel.
o The charterer becomes the owner of the vessel pro hac vice, just for that one particular purpose only.
Because the charterer is treated as owner pro hac vice, the charterer assumes the customary rights
and liabilities of the shipowner to third persons and is held liable for the expense of the voyage and the
wages of the seamen.
Contract of affreightment a contract whereby the owner of the vessel leases part or all of its space to
haul goods for others.
o The shipowner retains the possession, command and navigation of the ship, the charterer merely
having use of the space in the vessel in return for his payment of the charter hired.
o What the time charterer acquires is the right to utilize the carrying capacity and facilities of the vessel
and to designate her destinations during the term of the charter.
o In a voyage charter, master and crew remain in the employ of the owner of the vessel.
o Kinds:
A. Time charter vessel is chartered for a fixed period of time or duration of the voyage.
B. Voyage or trip charter the vessel is leased for one or series of voyages usually for purposes of
transporting goods for charterer.
Bareboat or Demise Charter
Charterer becomes liable to others caused by its negligence.
Charterer regarded as owner pro hac vice fir the voyage.
Owner of the vessel relinquishes possession, command and navigation to charterer.
Common carrier is converter to private carrier.
Contract of Affreightment
Owner remains liable as carrier and must answer for any breach of duty.
Charterer is not regarded as owner
The vessel owner retains possession,command and navigation of the ship.
Common carrier is not converted into private carrier.
3. PERSONS QUALIFIED TO MAKE CHARTER
The owner of the vessel, either in whole or in majority part, who have legal control and possession of
the vessel, may validly enter into charter parties with a charterer. A third person called a broker may,
however, intervene in the execution of the charter between the principals.
The charterer, by himself, may subcharter the entire vessel to a third person but only in the absence
of an express prohibition in the original charter regarding any subcharter. In such case, any cargo
delivered by the second charterer for loading may not generally be refused by the captain. The
subcharter, where entered into, is an independent contract by itself involving only the charterer and the
subcharterer and therefore does not give rise to any contractual relation between the general owner
and the subcharterer.
Part owners of the vessel are not precluded from chartering the same for their own commercial
purposes. In fact, such part owners enjoy preference in the charter of the vessel over other persons
who offer equal conditions and freight.
The ship agent is not allowed to make contracts for a new charter unless he is properly or duly
authorized by the owner, or by virtue of an authority given by a resolution of the majority of the coowners. He may, however, make such charter if the same has been extended to him in his certificate of
appointment.
It is one of the inherent powers of the captain or master of the vessel to enter into valid and binding
charter parties, but only in the event of absence of the ship agent or consignee, and only of the said
captain or master acts in accordance with the instructions of the agent or owner and protects the
latters interests.
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The validity of the charter is not affected by the circumstance that the captain or master who executed
the charter violated the orders or instructions of the agent or owner. In this latter case, the agent or
owner shall have a right of action to recover damages against the erring captain or master.
4. REQUISITES OF A VALID CHARTER
As the charter party is a contract, it is therefore to be governed by the general principles governing
ordinary contracts. Hence, the parties therein are free to stipulate upon such terms and conditions that
would suit their purposes, subject to the caveat that these should not be contrary to law or public policy.
1. Consent of the contracting parties;
2. Existing vessel which should be placed at the disposition of the shipper;
3. Freight;
4. Compliance with the requirements of Art. 652 of the Code of Commerce, which requires that:
A charter party must be drawn in duplicate and signed by the contracting arties, 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, tonnage of the vessel.
2. Her 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 of the person for shoes account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or weight, or measurement which they respectively bind themselves to
load and transport, or whether the charter party is total.
8. The freight to be paid, stating whether it is to be a fixed amount for the voyage or so much per
month, or for the space to be occupied, or for the weight or measurement of goods making up the
cargo, or in any other manner whatsoever agreed upon.
9. The amount of primage to be paid by the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the demurrage for each of them to be paid.
Primage bonus to be paid to the captain after the successful voyage (San
Beda Memory Aid 2006); payment for the use of the equipment belonging to the captain.
(Aquino/Hernando)
5. CONCEPT OF AND LIABILITY FOR DEMURRAGE
Demurrage, in the strict sense of the term, means a sum of money due by the express contract for the
detention of the vessel in loading or unloading, beyond the time allowed for that purpose in the charter
party.
In other words, if the vessel is detained beyond the number of days agreed upon in the charter
contract for the loading and unloading of cargo, or for eventual sail, the charterer shall answer for the
demurrage incurred thereby, the sum of which is usually fixed by the parties in the charter party.
Deadfreight the amount paid by or recoverable from a charterer of a ship for the portion of the ships
capacity the latter contracted for but failed to occupy.
Lay Days days allowed to charter parties for loading and unloading the cargo.
6. RIGHTS AND OBLIGATIONS OF CHARTER PARTIES
Shipowner or Ship Agent
1. If the vessel is chartered wholly, not to accept cargo from others;
2. To observe represented capacity;
3. To unload cargo clandestinely placed;
4. To substitute another vessel if load is less than 3/5 of capacity;
5. To leave the port if the charterer does not bring the cargo within the lay days and extra lay days
allowed;
6. To place in a vessel in a condition to navigate;
7. To bring cargo to nearest neutral port in case of war or blockade.
Charterer
1. To pay the agreed charter price;
39

2. To pay freightage on unboarded cargo;

3. To pay losses to others for loading uncontracted cargo and illicit cargo;
4. To wait if the vessel needs repair;
5. To pay expenses for deviation.
F. LOANS ON BOTTOMRY AND RESPONDENTIA
1. DEFINITION
Bottomry loan secured by the shipowner or ship agent guaranteed by the vessel itself and payable
only upon arrival of vessel at destination. This can also be secured by the captain outside the residence
of the shipowner or shipagent.
Respondentia loan secured by the owner of the cargo payable upon safe arrival of cargo at
destination. The shipowner, shipagent or captain cannot secure the loan.
Hypothecary nature of Bottomry and Respondentia
Gen. Rule: The obligation of the borrower to pay the loan is extinguished if the goods given as security
are absolutely lost by reason of an accident of the sea, during the voyage designated, and if it is proven
that the goods were on board.
Exceptions:
1. Loss due to inherent defect
2. Loss due to barratry (willful misconduct on the pat of the master or crew in pursuance of some
unlawful or fraudulent purpose without the consent of the owners, and to the prejudice of the owners
interest)
3. Loss due to the fault or malice of the borrower;
4. The vessel was engaged in contraband; and
5. The cargo loaded on the vessel be different from that agreed upon.
2. DISTINGUISHED FROM ORDINARY LOAN
Bottomry/ Respondentia
Not subject to Usury Law
Liability of the borrower is contingent on the
safe arrival of the vessel or cargo at destination
The last lender is a preferred creditor
Existence of marine risks
Must be recorded in the registry of vessels in
order to bind third persons
Ordinary Loan (Mutuum)

Subject to Usury Law
Not subject to any contingency (absolute
liability)
The first lender is a preferred creditor
No such risks
No registration required
3. PARTIES TO THE LOAN

The shipowner may secure a loan on bottomry upon his ship, although in the case where he is only a
part owner, any bottomry that he may contract shall be limited only to the extent of his interest in the
vessel.
The captain, although he has no interest in the ship, may nevertheless enter into a loan on bottomry
as when, on account of extreme necessity, he may borrow by means of a loan on bottomry in order to
comply with the obligations under Article 583 and 611 of the Code of Commerce. No loans on bottomry
may however be made, in any case, on the salaries of the crew, nor on the profits which may be
expected.
The cargo owner shall have the right to enter into a loan on respondentia involving his cargo. The
captain, being a mere agent of the ship owner and not of the cargo owner, may not contract a loan on
respondentia, and of he does so, such a loan would be void and the principal, interest, and costs of the
contract shall be chargeable to his private account, and he may even be discharged altogether as ship
captain by the shipowner.
4. FORMALITIES NEEDED
The loans on bottomry and respondentia must be executed in accordance with the form and manner
prescribed in Article 720 of the Code of Commerce, to wit:
1. By means of a 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.
Under whichever of these forms the contract is executed, it shall be entered in the certificate of registry
of the vessel and shall be recorded in the registry of vessel, without which requisites, the credits of this
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kind shall not have, with regard to other credits, the preference which, according to their nature. They
should have although the obligation shall be valid between the contracting parties.
The contracts made during a voyage shall be governed by the provisions of Articles 583 and 611, and
shall be effective with regard to third persons from the date of their execution, if they should be
recorded in the registry of vessels of the port of registry of the vessel before the lapse of eight days
from the date of her arrival. Should the said eight days elapse without the record having been made in
the registry of vessels, the contracts made during the voyage of the vessel shall produce no effect with
regard to third persons, except from the day of their inscription.
In order that the policy of the contracts executed in accordance with No. 2 may have binding force, they
must conform to the registry of the broker who took part therein. With respect to those executed in
accordance with No. 3, the acknowledgment of the signature shall be required.
Contracts which are not reduced to writing shall not give rise to judicial action. (Art. 720, Code of
Commerce)
G. AVERAGES
1. CONCEPT
Average an extraordinary or accidental expense incurred during the voyage in order to preserve the
cargo, vessel, or both, and all damages or deterioration suffered by the vessel from departure to the
port of destination, and to the cargo from the port of loading to the port of consignment. (Art. 806, Code
of
Commerce)
The person whose property has been saved must contribute to reimburse the damage caused or
expense incurred if the situation constitutes general average.
Where both vessel and cargo are saved, it is general average; where only the cargo is saved, it is
particular average.
Expenses incurred to refloat a vessel, which accidentally ran aground, in order to continue its voyage,
do not constitute general average. Not only is there absence of a marine peril, common safety factor,
and deliberateness. It is the safety of the property, and not the voyage, which constitutes the true
foundation of general average.
Petty and ordinary expenses incident to navigation, such as those of pilotage of coasts and ports,
those of lighterage and towage, anchorage, inspection, health, quarantine, lazaretto, and other socalled expenses, costs of barges and unloading until the merchandise is placed on the wharf, and any
other usual expenses of navigation, shall be considered ordinary expenses to be defrayed by the
shipowner, unless there is an express agreement to the contrary.
Jettison act of throwing of cargo over board in order to lighten the vessel.
Order of goods to be cast overboard:
1. Those which are on the deck, preferring the heaviest one with the least utility and value;
2. Those which are below the upper deck, beginning with the one with greatest weight and smallest
value. (Art. 815)
Jettisoned goods are not res nullius nor deemed abandoned within the meaning of the civil law so as
to be the object of occupation by salvage.
2. CLASSES OF AVERAGE AND THE PERSON LIABLE
A. Gross or General average includes all damages and expenses which are deliberately caused in
order to save the vessel, its cargo, or both at the same time from real and known risk.
Requisites of General Average:
1. Common danger to ship and the cargo after it has been loaded whether during the voyage or port of
loading and unloading;
2. That for the common safety part of the vessel or cargo or both is sacrificed deliberately;
3. That from the expenses or damages caused follows the successful saving of the vessel and cargo;
4. That the expenses or damages should have been incurred after taking legal steps and authority.
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Formalities
The claim for contribution will not prosper of the formalities prescribed under
Articles 813 and 814 are not complied with. The formalities are as follows:
1. There must be resolution of the captain, adopted after a deliberation with the other officers of the
vessel and after hearing all persons interested in the cargoes. If the latter disagree, the decision of the
captain should prevail but they shall register their objections.
2. The resolution must be entered in the logbook, stating the reasons and motives for the dissent, and
the irresistible and urgent causes if he acted in his own accord. It must be signed I the first case, by all
persons present in the hearing. In the second case, by the captain and all the officers of the vessel. The
minutes must also contain a detail of all the goods jettisoned and those injuries caused to those on
board.
B. Particular or Simple average all the expenses and damages caused to the vessel or to her cargo
which have not inured to the benefit and common profit of all the persons interested in the vessel and
her cargo. If damage is not a general average, the same can be considered particular average.
Since simple or particular averages do not inure to the common benefit, the owner of the goods that
suffered the damage bears the loss. Article 810 of the Code of Commerce provides that the owner of
the goods which gave rise to the expense or suffered the damage shall bear the simple or particular
averages. The rules on simple or particular average are consistent with the maxim res perit domino.
However, under Article 732 of the Code of Commerce, if the vessel or goods are hypothecated by a
loan on bottomry or respondentia, the lender shall also bear the loss in proportion to his interest.
Good not covered by general; 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, par. 2)
3. Fuel for the vessel if there is more that sufficient fuel for the voyage.
H. COLLISIONS
1. DEFINITION
Collision an impact or sudden contact of a moving body with an obstruction in its line of motion,
whether both bodies are in motion or one stationary and the other, no matter which, in motion.
Collision therefore is an impact or sudden contact of a vessel with another whether both are in motion
or one stationary.
Allision impact between a moving vessel and a stationary one.
2. ZONES IN COLLISION
There are three zones in collision:
1. First zone time up to the moment when risk of collision begins; within this zone no rule is applicable
because non is necessary; each vessel is free to direct its course as it deems best without reference to
the movements of the other vessel.
2. Second zone time between moment when risk of collision begins up to the moment it becomes
practical certainty.
3. Third zone time when collision is certain up to the time of impact.
Doctrine of Error in Extremis: If a vessel having a right of way suddenly changes its course during the
third zone, in an effort to avoid an imminent collision due to the fault of another vessel, such act may be
said to be done in extremis, and even if wrong cannot create responsibility on the part of said vessel
with the right of way.
3. RULES ON LIABILITY
ONE VESSEL AT FAULT
Art. 826. If a vessel should collide with another, through or the fault, negligence, or lack of skill of the
captain, sailing mate, or any other member of the complement, the owner of the vessel at fault shall
indemnify the losses and damages suffered, after an expert appraisal.
BOTH VESSELS AT FAULT
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Art. 827. If the collision is imputable to both vessels, each shall suffer its own damages, and both shall
be solidarily responsible for the losses and damages occasioned to their cargoes.
PARTY AT FAULT CANNOT BE DETERMINED
Art. 828. The provisions of the preceding article are applicable to the use in which it cannot be
determined which of the two vessels has caused the collision.
CAUSE IS FORTUITOUS EVENT
Art. 830. If a vessel should collide with another, through fortuitous event or force majeure, each vessel
and its cargo shall bear its own damages.
Art. 832. If by reason of a storm or other cause of force majeure, a vessel which is properly anchored
and moored should collide with those nearby, causing
them damages, the injury occasioned shall be considered as particular average of the vessel run into.
THIRD PERSON AT FAULT
Art. 831. If a vessel should be forced by a third vessel to collide with another, the owner of the third
vessel shall indemnify the losses and damages caused, the captain thereof being civilly liable to said
owner.
The doctrine of last clear chance and the rule on contributory negligence cannot be applied in collision
cases because of Article 827 of the Code of Commerce. If both vessels were negligently operated, it
does not matter of the other has the last clear chance of avoiding the injury because under Article 827,
each must suffer its own damage if both of them are negligent. Proof that the plaintiff was negligent will
bar recovery from the defendant in collision cases even if the plaintiffs negligence can be classified as
merely contributory.
The doctrine of res ipsa loquitor applies in case a moving vessel strikes a stationary object, such as a
bridge post, dock, or navigational aid. (Far Eastern Shipping vs. CA)
Doctrine of inscrutable fault: In case of collision where it cannot be determined which between the two
vessels was at fault, both vessels bear their respective damage, but both should be solidarily liable for
damage to the cargo of both
vessels.
4. LIMITED LIABILITY RULE
Art. 837. The civil liability incurred by the shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage earned during
the voyage.
The real and hypothecary nature of maritime law limits the liability of the shipowner and shipagent to
the value of the vessel in collision cases. Although
Article 837 does not require abandonment, it is understood that abandonment is also necessary in
order to benefit from this limited liability.
I. ARRIVAL UNDER STRESS
1. CONCEPT (ART. 819, CC)
Arrival under stress the arrival of a vessel at the nearest and most convenient port which was
decided upon after determining that there is a well-founded fear of seizure, privateers, or pirates or by
reason of any accident of the sea disabling it to navigate.
The steps to be taken in the determination of the propriety of an arrival under stress may be
summarized as follows:
1. The captain should determine during the voyage if there is well founded fear of seizure, privateers
and other valid grounds.
2. The captain shall then assemble the officers.
3. The captain shall summon the persons interested in the cargo who may be present and who may
attend but without right to vote.
4. The officers shall determine and agree of there is well founded reason after examining the
circumstances. The captain shall have the deciding vote.
5. The agreement shall be drafted and the proper minutes shall be signed and entered in the log book.
6. Objections and protests shall likewise be entered in the minutes.
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2. WHEN IMPROPER
Art. 820. An arrival shall not be considered lawful in the following cases:
1. If the lack of provisions should arise from failure to take the necessary provisions for the voyage
according to the usage and customs, or if they should have been rendered useless or lost through bad
stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based
on positive and provable facts.
3. If the defect of the vessel should have arisen from the fact that it was not repaired, rigged, equipped,
and prepared in a manner suitable for the voyage, or from some erroneous order of the captain.
4. When malice, negligence, want of foresight, or lack of skill on the part of the captain exists in the act
causing the damage.
3. EXPENSES
Art. 821. The expenses of an arrival under stress shall always be for the account of the shipowner or
agent, but they shall not be liable for the damages which may be caused the shippers by reason of the
arrival provided the latter is legitimate.
Otherwise, the ship agent and the captain shall be jointly liable.
Art. 822. Of in order to make repairs to the vessel or because there is danger that the cargo may suffer
damage, it should be necessary to unload, the captain must request authorization from the competent
judge or court for the removal, and carry it out with the knowledge of the person interested in the cargo,
or his representative, should there be any.
In a foreign port, it shall be the duty, of the Philippine Consul, where there is one, to give the
authorization.
In the first case, the expenses shall be for the account of the ship agent or owner, and in the second,
they shall be chargeable against the owners of the merchandise for whose benefit the act was
performed.
If the unloading should take place for both reasons, the expenses shall be divided proportionately
between the value of the vessel and that of the cargo.
4. CUSTODY OF CARGO
Article 823. The custody and preservation of the cargo which has been unloaded shall be intrusted to
the captain, who shall be responsible for the same, except in cases of force majeure.
Article 824. If the entire cargo or part thereof should appear to be damaged, or there should be
imminent danger of its being damaged, the captain may request of the competent judge or court, or of
the consul in a proper case, the sale of all or of part of the former, and the person taking cognizance of
the matter shall authorize it, after an examination and declaration of experts, advertisements, and other
formalities required by the case, and an entry in the book, in accordance with the provisions of Article
624.
The captain shall, in a proper case, justify the legality of his conduct, under the penalty of answering to
the shipper for the price the merchandise would have brought if they had arrived in good condition at
the port of destination.
5. CAPTAINS LIABILITY
Art. 825. The captain shall be responsible for the damages caused by his delay, if after the cause of
the arrival under stress has ceased, he should not continue the voyage.
If the cause of arrival should have been the fear of enemies, privateers, or pirates, a deliberation and
resolution in a meeting of the officers of the vessel and persons interested in the cargo who may be
present, in accordance with the provisions contained in Article 819, shall precede the departure.
6. RULES IN CASE OF SHIPWRECK (Read: Articles 840-845)
Shipwreck the demolition or shattering of a vessel caused by her driving ashore or on rocks and
shoals in the midseas, or by the violence of winds and waves in tempests.
If the wreck was due to malice, negligence or lack of skill of the captain, the owner of the vessel may
demand indemnity from said captain.
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The rules on collision or allision, as may be pertinent, can equally apply to shipwrecks.
J. SALVAGE
ACT NO. 2616 or The Salvage Law, enacted February 4, 1916
1. DEFINITION
Salvage a service which one person renders to the owner of a ship or goods, by his own labor,
preserving the goods or the ship which the owner or those entrusted with the care of them have either
abandoned in distress at sea, or are unable to protect and secure.
Salvage is founded on equity of remunerating private and individual services performed in saving, in
whole or in part, a ship or its cargo from impending peril, or recovering them after actual loss. It is a
compensation for actual services rendered to the property charged with it, and is allowed for
meritorious conduct of the salvor, and in consideration of a benefit conferred upon the person whose
property he has saved.
Taking passengers from a sinking ship, without rendering any service in rescuing the vessel, is not a
salvage service, being a duty of humanity and not for reward.
A claim for salvage rests on the principle that, unless the property be in fact saved by those who claim
the compensation, it cannot be allowed, however benevolent their intention and however heroic their
conduct.
Requisites of Salvage Claim
1. Marine peril
2. Service is voluntarily rendered and is not required as an existing duty or from a special contract
3. Success in whole or in part or that service contributed to the success
4. Vessel is shipwrecked beyond the control of the crew or shall have been abandoned.
5. Valid object of salvage.
Persons who have no right to a reward for salvage
1. Crew of the vessel saved;
2. Person who commenced salvage in spite of opposition of the captain or his representative;
3. In accordance with Sec. 3 of the Salvage Law, a person who fails to deliver a salvaged vessel or
cargo to the Collector of Customs, if the port has a collector, and otherwise to the provincial treasurer or
municipal mayor.
Derelict a ship or her cargo which is abandoned and deserted at sea by those who are in charge of
it, without any hope of recovering it, or without any intention of returning to it.
The intention of those in charge must be ascertained. If those in charge left with the intention of
returning, or of procuring assistance, the property is not derelict, but if they quitted the property with the
intention of finally leaving it, it is derelict and a change of their intention and an attempt to return will not
change its nature. (Erlanger and Galinger vs. Swedish East Asiatic Co., Ltd)
If it is clear that the intention to return is slight, the salvage which was done thereafter is considered
valid. (Aquino/ Hernando)
When the contract created is one of towage, only the owner of the towing vessel, to the exclusion of
the crew of said vessel, may be entitled to reimbursement. (Barrios vs. Go Thong and Co.)
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea, and there and sink and remain under water;
3. Floatsam or Flotsam goods which float upon the sea when cast overboard;
4. Ligan or Lagan goods cast into the sea tied to a buoy, so that they may be found again by the
owners.
Basis for entitlement to salvage reward
1. The labor expended by the salvors in rendering the salvage service.
2. The promptitude, skill and energy displayed in rendering the service and saving the property.
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3. The value of the property employed by the salvors in rendering the service, and the danger to which
such property was exposed.
4. The risk incurred by the salvors in rescuing the property salved.
5. The value of the property salved.
6. The degree of danger from which the property was rescued.
2. RIGHTS AND OBLIGATIONS OF SALVORS AND OWNERS
A salvor, in view of maritime law, has an interest in the property. This is called
a lien, but it never goes, in the absence of a contract expressly made, upon the idea of a debt. He is, to
all intents and purposes, a joint owner and if the property is lost he must bear his share like the other
joint owners.
If the ship and its cargo are saved together by the salvor, the salvage allowance should be charged
against the ship and the cargo in proportion of their respective values, as in the case of general
average; and neither is liable for the salvage due from the other.
The salvor has a right of possession of a derelict for purposes of a salvage claim. A derelict is a boat
or vessel found entirely deserted or abandoned on the sea without hope or intention of recovery or
return by the master or the crew, whether resulting from wreck, accident, necessity, or voluntary
abandonment.
Rules on Salvage Reward
1. The reward is fixed by the RTC judge in the absence of agreement or where the latter is excessive.
(Sec. 9)
2. The reward should constitute a sufficient compensation for the outlay and effort of the salvors and
should be liberal enough to offer an inducement to others to render services in similar emergencies in
the future.
3. If sold at public auction (no claim being made within 3 months from publication), the proceeds, after
deducting expenses and the salvage claim, shall go to the owner; if the latter does not claim it within 3
years, 50% of said proceeds shall go to the salvors, who shall divide it equitably, and the other half to
the government. (Sec. 11-12)
4. If a vessel is the salvor, the reward shall be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in proportion to their salaries. (Sec. 13)
The owner of the vessel, which is a derelict, does not renounce his right to the property. There is no
presumption of an intention to abandon such property rights on the part of such owner under the
Salvage Law. What the owner abandons temporarily is his right of possession, which is thereby
transferred to the salvor who becomes bound to preserve the property with good faith and bring it to a
place of safety for the owners use.
The owner or his representative shall have a right to the delivery of the vessel or things saved after
the salvage is accomplished, provided that he pays, or gives a bond to secure the expenses and the
proper reward. The amount and sufficiency of the bond, in the absence of agreement, shall be
determined by the collector of customs or by the RTC judge of the province where the things saved
may be found.
The owner of the salving vessel is also entitled to the salvage reward for the use of his vessel in
rendering salvage services even though he may not have been present at the time the salvage service
was rendered. Remuneration for salvage service is awarded to the owners of the salving vessel on
account of the danger to which the service exposes their property, and the risk which they run of loss in
suffering their vessels engaged in such perilous undertaking.
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TRANSPORTATION LAW

C. CONSTITUTIONAL LIMITATIONS ON OPERATION OF PUBLIC

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Towage, arrastre operations and stevedoring are not maritime in character.

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5. Preciousness of human life

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1. The name, registry, and tonnage of the vessel.

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ACTION FOR DAMAGES

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Right of Shipowner or Ship agent to abandon vessel; Instances:

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2. To pay freightage on unboarded cargo;

Ordinary Loan (Mutuum)

3. PARTIES TO THE LOAN

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