San Beda College of Law

54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGE PRIVATE:

 A contract whereby a person, natural or juridical,  The SC in First Philippine Industrial Corporation
obligates to transport persons, goods, or both, from vs. CA (1995) reiterated the following tests:
one place to another, by land, air or water, for a 1. It must be engaged in the business of
price or compensation. carrying goods for others as a public
 Classifications: employment and must hold itself out as
1. Common or Private ready to engage in the transportation of
2. Goods or Passengers goods generally as a business and not as
3. For a fee (for hire) or Gratuitous a casual occupation;
4. Land, Water/maritime, or Air 2. It must undertake to carry goods of the
5. Domestic/inter-island/coastwise or kind to which its business in confined;
International/foreign 3. It must undertake to carry by the method
 It is a relationship which is imbued with the public by which his business is conducted and
interest. over its established roads; and
4. The transportation must be for hire.
COMMON CARRIER  In National Steel Corp. vs. CA (1997) the SC held
 Persons, corporations, firms or associations that the true test of a common carrier is the carriage
engaged in the business of carrying or transporting of goods or passengers provided it has space for all
passengers or goods or both, by land, water, or air, who opt to avail themselves of its transportation for
for compensation, offering their services to the a fee.
public (Art. 1732, Civil Code).
 Art. 1732 of the New Civil Code avoids any
distinction between one whose principal business COMMON CARRIER PRIVATE
activity is the carrying of persons or goods or both CARRIER
and one who does such carrying only as an ancillary 1. As to availability
activity (sideline). It also avoids a distinction Holds himself out for all Contracts with particular
between a person or enterprise offering people indiscriminately individuals or groups
transportation service on a regular or scheduled only
basis and one offering such service on an 2. As to required diligence
occasional, episodic or unscheduled basis. Extraordinary diligence Ordinary diligence is
Neither does the law distinguish between a is required required
carrier offering its services to the general public that 3. As to regulation
is the general community or population and one who Subject to State Not subject to State
offers services or solicits business only from a regulation regulation
narrow segment of the general population. 4. Stipulation limiting liability
A person or entity is a common carrier even if
Parties may not agree Parties may limit the
he did not secure a Certificate of Public
on limiting the carrier’s carrier’s liability,
Convenience (De Guzman vs. CA, 168 SCRA 612).
liability except when provided it is not
 It makes no distinction as to the means of provided by law contrary to law, morals
transporting, as long as it is by land, water or air. It or good customs
does not provide that the transportation should be
5. Exempting circumstance
by motor vehicle. (First Philippine Industrial
Corporation vs. CA) Prove extraordinary caso fortuito, Art. 1174
diligence and Art. 1733, NCC
 One is a common carrier even if he has no fixed
NCC
and publicly known route, maintains no terminals,
6.Presumption of negligence
and issues no tickets (Asia Lighterage Shipping, Inc.
vs. CA). There is a presumption No presumption of fault
 Characteristics: of fault or negligence or negligence
1. Undertakes to carry for all people indifferently 7.Governing law
and thus is liable for refusal without
Law on common carriers Law on obligations and
sufficient reason (Lastimoso vs. Doliente,
contracts
October 20, 1961);
2. Cannot lawfully decline to accept a particular
class of goods for carriage to the prejudice GOVERNING LAWS
of the traffic in these goods; A. Domestic/inter-island/coastwise
3. No monopoly is favored (Batangas Trans.  Applicable to Land, Water, and Air transportation
vs. Orlanes, 52 PHIL 455); 1. Civil Code - primary
4. Provides public convenience. 2. Code of Commerce (Arts. 349, 379, 573-
734, 580, 806-845) - suppletory
PRIVATE CARRIER
 One which, without being engaged in the business B. International/foreign/overseas (Foreign
of carrying as a public employment, undertakes to country to Philippines)
deliver goods or passengers for compensation.  Applicable to Water/maritime and Air
(Home Insurance Co. vs. American Steamship transportation
Agency, 23 SCRA 24)  The law of the country of destination generally
applies.
 TESTS WHETHER CARRIER IS COMMON OR 1. Civil Code - primary

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking
Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
55
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods by
Sea Act (COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT OF EXTRAORDINARY
DILIGENCE
 Rendition of service with the greatest skill and
utmost foresight. (Davao Stevedore Co. v.
Fernandez)
 Rationale:
1. From the nature of the business and for
reasons of public policy (Art. 1733)
2. Relationship of trust
3. Business is impressed with a special
public duty
4. Possession of the goods
5. Preciousness of human life
 A common carrier is not an absolute insurer of all
risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754); and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
 A person who has entered into a contract of
carriage, express or implied, with the carrier. They
are entitled to extraordinary diligence from the
common carrier.
 The following are not considered passengers,
and are entitled to ordinary diligence only:
a. One who has not yet boarded any part of
a vehicle regardless of whether or not he
has purchased a ticket;
b. One who remains on a carrier for an
unreasonable length of time after he has
been afforded every safe opportunity to
alight;
c. One who has boarded by fraud, stealth, or
deceit;
d. One who attempts to board a moving
vehicle, although he has a ticket, unless
the attempt be with the knowledge and
consent of the carrier;
e. One who has boarded a wrong vehicle,
has been properly informed of such fact,
and on alighting, is injured by the carrier;
f. Invited guests and accommodation
passengers. (Lara vs. Valencia)
g. One who rides any part of the vehicle
which is unsuitable or dangerous or which
he knows is not designed or intended for
passengers.
DEFENSES OF A COMMON CARRIER IN THE
CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
 Requisites:
a. Must be the proximate and only cause of
the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after the
occurrence of the disaster (Art. 1739)
c. Carrier has not negligently incurred in
delay in transporting the goods (Art. 1740)
COMMERCIAL LAW COMMITTEE
 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking
Laws); Robespierre CU (Law on Intellectual Property)
MEMORY AID IN COMMERCIAL LAW
 Fire is not considered a natural disaster or
calamity as it arises almost invariably from some act
of man. (Eastern Shipping Lines Inc. vs. IAC)
 Mechanical defects are not force majeure if the
same was discoverable by regular and adequate
inspections. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p.120-122)
2. ACTS OF PUBLIC ENEMY
 Requisites:
a. Must be the proximate and only cause of
the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after the act
causing the loss, deterioration or destruction of
the goods (Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute defense
b. Contributory: partial defense. (Art. 1741)
4. CHARACTER OF THE GOODS OR DEFECTS
IN THE PACKING OR IN THE CONTAINER
 Even if the damage should be caused by the
inherent defect/character of the goods, the common
carrier must exercise due diligence to forestall or
lessen the loss. (Art. 1742)
 The carrier which, knowing the fact of improper
packing of the goods upon ordinary observation, still
accepts the goods notwithstanding such condition,
is not relieved of liability or loss or injury resulting
therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)
5. ORDER OR ACT OF PUBLIC AUTHORITY
 Said public authority must have the power to issue
the order (Art. 1743). Consequently, where the
officer acts without legal process, the common
carrier will be held liable. (Ganzon v. CA 161 SCRA
646)
 Diligence in the selection and supervision of
employees under Article 2180 of the Civil Code
cannot be interposed as a defense by the common
carrier because the liability of the carriers arises
from the breach of the contract of carriage. The
defense under said articles is applicable to
negligence in quasi-delicts under Art. 2176. (Del
Prado v. Manila Electric Co., 52 Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS DUE TO
ACTS OF ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
FOR ACTS OF
FOR ACTS OF ITS OTHER
EMPLOYEES PASSENGERS OR
STRANGERS
Required diligence and defense
Extraordinary diligence Ordinary diligence
Nature of liability
Tort; however, Not absolute; limited by
The employee must be Art. 1763
on duty at the time of the
act. (Maranan v. Perez)
 The carrier is liable when its personnel allowed a
passenger to drive the vehicle causing it to collide
with another vehicle resulting to the injuries suffered
 San Beda College of Law
56
MEMORY AID IN COMMERCIAL LAW

by the other passengers. (MRR vs. Ballesteros, 16 SCRA 641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

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

From the time the goods are unconditionally placed in
the 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 the right to receive them. (Art. 1736)
 It 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. 1737)
 It 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 bee
advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or
otherwise dispose of them. (Art. 1738)
 Delivery of goods to the custom authorities is not
delivery to the consignee. (Lu Do v. Binamira, 101 Phil
120)
Presumption of negligence
The duty of a common carrier to provide safety to its
passengers so obligates it not only during the course
of the trip, but for so long as the passengers are within
its premises and where they ought to be in pursuance
to the contract of carriage. (LRTA v. Navidad, [2003])
 All persons who remain on the premises within a
reasonable time after leaving the conveyance are to
be 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 v. CA, 17 SCRA 739 ;
Abiotiz Shipping Corporation v. CA, 179 SCRA 95)
 It is the duty of common carriers of passengers to
stop their conveyances a reasonable length of time in
order to afford passengers an opportunity to enter,
and they are liable for injuries suffered from the
sudden starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to persons
boarding the cars as well as to those alighting
therefrom (Dangwa Trans Co., Inc. vs. CA 202 SCRA
574).

Art.1735 Civil Code Art.1755 Civil Code

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

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

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

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking
Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
57
MEMORY AID IN COMMERCIAL LAW

Valid stipulations

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

 The diligence required in the carriage of the goods

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

Void stipulations

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

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking
Laws); Robespierre CU (Law on Intellectual Property)
RULES ON PASSENGERS’ BAGGAGE (Shewaram vs. PAL, 17 SCRA 606)
IN THE CUSTODY OF IN THE CUSTODY
THE PASSENGERS OF THE COMMON SPECIAL RULES ON LIABILITES OF AIRLINE
(HAND-CARRIED) CARRIER CARRIERS
(CHECKED-IN) 1. In case of flight diversion due to bad weather or
Legal nature of the baggage other circumstances beyond the pilot’s control, the
Necessary deposit Considered as relation between the carrier and the passenger
“goods” continues until the latter has been landed at the port
Required diligence by the common carrier of destination and has left the carrier’s premises.
Diligence of a depositary Extraordinary The carrier should necessarily exercise
(ordinary diligence) diligence extraordinary diligence in safeguarding the comfort,
Applicable rules convenience and safety of its stranded passengers
until they have reached their final destination.
Arts. 1998 and 2000-2003 Arts. 1733-1753
(Philippine Airlines vs. CA, 226 SCRA 423)
2. Even where overbooking of passengers is
CONCURRING CAUSES OF ACTION ARISING allowed as a commercial practice, the airline
FROM THE NEGLIGENT ACT OF THE COMMON company would still be guilty of bad faith and still be
CARRIER liable for damages if it did not properly inform
1. Culpa contractual (breach of contract) passenger that it could breach the contract of
 Only the carrier is primarily liable and not the carriage even if they were confirmed passengers.
driver, because there is no privity between the driver (Zalamea vs. CA, 228 SCRA 23)
and the passenger. 3. An open-dated ticket constitutes a complete
 Basis: Art.1759, NCC. contract between the carrier and passenger.
 No defense of due diligence in the selection and Hence, the airline company is liable if it refused to
supervision of employees. confirm a passenger’s flight reservation. (Singson
vs. CA, 282 SCRA 149)
2. Culpa aquiliana (quasi-delict) 4. An airline company which issued a confirmed
 The carrier and driver are solidarily liable as joint ticket to a passenger covering successive trips on
tortfeasors. different airlines can be held liable for damages
 Basis: Art. 2180, NCC. occasioned by “bumping off” by one of the
 Defense of due diligence in the selection and successive airlines. (Lufthansa German Airlines vs.
supervision of employees is available. Exception: CA, 238 SCRA 290)
maritime tort resulting in collision. (See notes on 5. An airline ticket providing that carriage by
Collision) successive air carriers is to be regarded as a “single
operation” is to make the issuing carrier liable for the
3. Culpa criminal (criminal negligence) tortuous conduct of the other carrier. A printed
 The driver is primarily liable. The carrier is provision in the ticket limiting liability only to its own
subsidiarily liable only if the driver is convicted and conduct is not enough to rebut that liability. (KLM
declared insolvent. Royal Dutch Airlines vs. CA, 65 SCRA 237)
 Basis: Art. 100, RPC.
II. CODE OF COMMERCE
 In case of injury to a passenger due to the
negligence of the driver of the bus on which he is A. OVERLAND TRANSPORTATION
riding and of the driver of another vehicle, the (Arts. 349-379)
drivers as well as the owners of the two vehicles are
jointly and severally liable for damages. It makes no Applicability
difference that the liability of the bus driver and 1. Domestic land and water/maritime transportation.
owner springs from contract while that of the owner (Pandect of Commercial Law and Jurisprudence,
and driver of the other vehicle arises from quasi- Justice Jose Vitug, 1997 ed.)
delict. (Fabre vs. CA) 2. Domestic Air Transportation. (Commercial Law
Review, Cesar Villanueva, 2004 ed.)
LIMITATIONS AS TO CARRIER’S LIABILITY
INVALID AS BEING VALID & IMPORTANT CONCEPTS:
CONTRARY TO PUBLIC ENFORCEABLE 1. Bill of lading
POLICY 2. Obligations of the carrier
1. One exempting the 1. One limiting the 3. Right of abandonment
carrier from any and all liability of the carrier to 4. Notice of damage
liability for loss or damage an agreed valuation, 5. Combined carrier agreement
occasioned by its own unless the shipper
negligence. declares a higher value BILL OF LADING
2. An unqualified and pays a higher rate  The written acknowledgment of receipt of goods
limitation of liability to an of freight and agreement to transport them to a specific place
agreed valuation. (H.E. Heacock to a person named or to his order.
Company vs.  Rules:
Macondray & Company 1. It is not indispensable for the creation of a
Inc.) contract of carriage. (Compania Maritima vs.
Insurance Company of North America, 12 SCRA
 However, the carrier cannot limit its liability for 213)
injury to, or loss of, goods shipped where such injury
or loss was caused by its own negligence. 2. Ambiguity is construed against the carrier, the
contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor and
carrier, becomes bound by all the stipulations
contained therein by making a claim for loss on the
basis of said bill of lading. (Sea-Land Services Inc.
vs. IAC)
4. The right of a party to recover for loss of shipment
consigned to him under a bill of lading drawn up
only by and between the shipper and the carrier,
springs from either a relation of agency between him
and the shipper, or his status as stranger in whose
favor some stipulation is made in said contract, and
who becomes a party thereto when he demands
fulfillment of that stipulation. (Art. 1311 (2),
(Mendoza vs. PAL Inc.)
5. Acceptance of the bill of lading without dissent
raises the presumption that all the terms therein
where brought to the knowledge of the shipper and
agreed to by him and, in the absence of fraud or
mistake; he is estopped from thereafter denying that
he assented to such terms. (Notes and Cases on
the Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.261)
 Kinds:
1. On board - issued when the goods have
been actually placed aboard the ship with
very reasonable expectation that the
shipment is as good as on its way.
2. Received - one in which it is stated that the
goods have been received for shipment with
or without specifying the vessel by which the
goods are to be shipped.
3. Negotiable - one in which it is stated that the
goods referred to therein will be delivered to
the bearer or to the order of any person
named therein.
4. Non-negotiable - One in which it is stated
that the goods referred to therein will be
delivered to a specified person.
5. Clean – One which does not indicate any
defect in the goods.
6. Foul – One which contains a notation
thereon indicating that the goods covered by
it are in bad condition.
7. Spent – One which covers goods that
already have been delivered by the carrier
without a surrender of a signed copy of the
bill.
8. Through – One issued by the carrier who is
obliged to use the facilities of other carriers
as well as his own facilities for the purpose
of transporting the goods from the city of the
seller to the city of the buyer, which bill of
lading is honored by the second and other
interested carriers who do not issue their
own bills.
9. Custody – One wherein the goods are
already received by the carrier but the
vessel indicated therein has not yet arrived
in the port.
10. Port – One which is issued by the carrier to
whom the goods have been delivered, and
the vessel indicated in the bill of lading by
which the goods are to be shipped is already
in the port where the goods are held for
shipment.
 Functions:
1. Best evidence of the existence of the
contract of carriage of cargo (Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver goods as
stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of goods.
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such goods is
reasonable and necessary. (Fisher vs. Yangco
Steamship Co. 31 Phil 1).
 Instances when the carrier may validly refuse to
accept the goods include the ff:
1.) Goods sought to be transported are dangerous
objects, or substances including dynamite and other
explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger like
flood, capture by enemies and the like
7.) Goods like livestock will be exposed to disease
8.) Strike
9.) Failure to tender goods on time. (Notes and
Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
p.68)
 In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted upon by
the shipper, provided its objections are stated in the
bill of lading.
 However, when a common carrier accepts cargo
for shipment for valuable consideration, it takes the
risk of delivering it in good condition as when it was
loaded. (PAL vs. CA)
B. Duty to deliver the goods
 Not only to transport the goods safely but to the
person indicated in the bill of lading. The goods
should be delivered to the consignee or any other
person to whom the bill of lading was validly
transferred or negotiated.
Time of delivery
Stipulated in No stipulation
Contract/Bill of Lading
1. Carrier is bound to 1. Within a reasonable
fulfill the contract and is time.
liable for any delay; no 2. Carrier is bound to
matter from what cause forward them in the 1st
it may have arisen. shipment of the same or
similar goods which he
may make to the point of
delivery. (ART. 358
Code of Commerce)
Effects of delay
a. Merely suspends and generally does not
terminate the contract of carriage
b. Carrier remains duty bound to exercise
extraordinary diligence
c. Natural disaster shall not free the carrier from
responsibility (Art.1740) but damaged goods), or
d. If delay is without just cause, the contract date when the vessel
limiting the common carrier’s liability cannot be left port or from the
availed of in case of loss or deterioration of the date of delivery to the
goods (Art.1747) arrastre (non-delivery
or loss).
RIGHT OF CONSIGNEE TO ABANDON GOODS
 Instances: COMBINED CARRIER AGREEMENT (ART. 373)
1. Partial non-delivery, where the goods are
GENERAL RULE: In case of a contract of
useless without the others (Art. 363);
transportation of several legs, each carrier is
2. Goods are rendered useless for sale or
responsible for its particular leg in the contract.
consumption for the purposes for which they are
properly destined (Art. 365); and
EXCEPTION: A combined carrier agreement
where a carrier makes itself liable assuming the
3. In case of delay through the fault of the carrier
obligations and acquiring as well the rights and
(Art. 371).
causes of action of those which preceded it.
NOTICE OF DAMAGE (ART. 366)
 Requisites for applicability: A. MARITIME COMMERCE
1. Domestic/inter-island/coastwise transportation (Arts. 573-869)
2. Land/water/air transportation
3. Carriage of goods IMPORTANT CONCEPTS:
4. Goods shipped are damaged 1. Merchant vessel
 Rules: 2. Maritime lien and Preference of Credit
a. Patent damage: shipper must file a claim against 3. Doctrine of limited liability
the carrier immediately upon delivery (it may be 4. Causes of revocation of voyage
oral or written) 5. Participants in maritime commerce
b. Latent damage: shipper should file a claim 6. Charter party
against the carrier within 24 hours from delivery. 7. Loans on bottomry and respondentia
Note: These rules does not apply to misdelivery of 8. Accidents in maritime commerce
goods. (Roldan vs. Lim Ponzo)
Purpose of notice: To inform the carrier that the MARITIME/ADMIRALTY LAW
shipment has been damaged, and it is charged with  It is the system of laws which particularly relates
liability therefore, and to give it an opportunity to to the affairs and business of the sea, to ships, their
make an investigation and fix responsibility while the crews and navigation, and to maritime conveyance
matter is fresh. of persons and property. (Notes and Cases on the
 The filing of notice of claim is a condition Law on Transportation and Public Utilities, Aquino &
precedent for recovery. Hernando, citing Francisco, p.254)
 Shorter period may be stipulated by the parties
because it merely affects the shipper’s remedy and  Maritime laws apply only to maritime trade and
does not affect the liability of the carrier. sea voyages. (Pandect of Commercial Law and
(PHILAMGEN vs. Sweetlines, Inc.) Jurisprudence, Justice Jose Vitug, 1997 ed.)
Prescriptive Period
 Not provided by Article 366. Thus, in such  Arrastre service is not maritime in character. It
absence, Civil Code rules on prescription apply. refers to a contract for the unloading of goods from
 If despite the notice of claim, the carrier refuses to a vessel. (ICTSI vs. Prudential Guarantee, 320
pay, action must be filed in court. SCRA 244)
1. No bill of lading was issued:
within 6 years CHARACTERISTICS OF MARITIME
2. Bill of lading was issued: within TRANSACTION
10 years. 1. Real - similar to transactions over real property
with respect to effectivity against third persons
ARTICLE 366 COGSA Sec.3 (6)
which is done through registration. (Rubiso vs.
Applicability
Rivera, 37 Phil. 72). The evidence of real nature is
1. Domestic/inter- 1. International/
shown by: 1) the limitation of the liability of the
island/coastwise overseas/foreign (from
agents to the actual value of the vessel and the
transportation foreign country to
freight money; and 2) the right to retain the cargo
2. Land, water, air Phils.)
and embargo and detention of the vessel (Luzon
transportation Note: subject to the rule
Stevedoring Corp v. CA, 156 SCRA 169);
3. Carriage of goods on Paramount Clause
2. Hypothecary - the liability of the owner of the
2. Water/maritime
value of the vessel is limited to the vessel itself
transportation
(Doctrine of Limited Liability).
3. Carriage of goods
Notice of damage
 The real and hypothecary nature of maritime law
1. Condition precedent 1. Not a condition simply means that the liability of the carrier in
2. 24-hour period for precedent connection with losses related to maritime contracts
claiming latent damage 2. 3-day period for is confined to the vessel, which stands as the
claiming latent damage guaranty for their settlement. (Aboitiz Shipping Corp.
Prescriptive period vs. General Accident Fire and Life Assurance Corp.
None provided; Civil One year from the date 217 SCRA 359).
Code applies. of delivery (delivered
MERCHANT VESSEL  Effect of sale: All pre-existing claims in the vessel
 Vessel engaged in maritime commerce, whether are terminated. They will then be satisfied from the
foreign or otherwise. (Bar Review Materials in proceeds of the sale subject to the order of
Commercial Law, Jorge Miravite, 2002 ed.) preference.
 Constitutes property which may be acquired and
transferred by any of the means recognized by law. DOCTRINE OF LIMITED LIABILITY
They shall continue to be considered as personal (HYPOTHECARY RULE)
property. (Arts. 573, 585)  Cases where applicable:
 They are susceptible to maritime liens such as for 1. Art. 587 – civil liability for indemnities to
the repair, equipping and provisioning of the vessel third persons
in the preparation of a voyage, as well as mortgage 2. Art. 590 – indemnities from negligent acts
liabilities, in satisfaction of which a vessel may be of the captain (not the shipowner or ship
validly arrested and sold. (Ship Mortgage Decree of agent)
1978) 3. Art. 837 – collision
4. Art. 643 – liability for wages of the captain
MARITIME LIEN and the crew and for advances made by
 It constitutes a present right of property in the the ship agent if the vessel is lost by
ship, a jus in re, to be afterward enforced in shipwreck or capture
admiralty by process in rem. (PNB vs. CA, 337
SCRA 381) GENERAL RULE: The liability of shipowner and
 If the maritime lien arose prior to the recording of ship agent is limited to the amount of interest in said
a preferred mortgage, it shall have priority over the vessel such that where vessel is entirely lost, the
said mortgage lien. (PNB vs. CA, 337 SCRA 381) obligation is extinguished. (Luzon Stevedoring v.
Escano, 156 SCRA 169) The interest extends to: 1)
the vessel itself; 2) equipments; 3) freightage; and
ORDER OF PREFERENCE IN CASE OF SALE OF 4) insurance proceeds. (Chua v. IAC, 166 SCRA
VESSEL 183)
EXCEPTIONS:
R.A. 6106 P.D. 1521 1. Claims under Workmen’s Compensation
Effectivity date (Abueg vs. San Diego 77 Phil 730);
1969 1978 2. Injury or damage due to shipowner or to the
Applicability concurring negligence of the shipowner and
Overseas shipping only Both domestic and the captain;
overseas shipping 3. The vessel is insured (Vasquez vs. CA 138
Kind of sale SCRA 553).
Judicial Judicial and 4. Expenses for repair on vessel completed
extrajudicial before loss;
Order of Preference 5. In case there is no total loss and the vessel is
A preferred mortgage The preferred mortgage not abandoned;
shall have priority over lien shall have priority 6. Collision between two negligent vessels;
all claims against the over all claims against
vessel, except the the vessel, except the  Abandonment of the vessel is necessary to limit
following preferences in following preferences in the liability of the shipowner. The only instance
the order stated: the order stated: were abandonment is dispensed with is when the
1. Judicial costs of the 1. Expenses and fees vessel is entirely lost (Luzon Stevedoring vs. CA
proceedings; allowed and costs 156 SCRA 169).
2. Taxes due the taxed by the court and
Philippine Government; taxes due to the RIGHT OF SHIPOWNER OR SHIP AGENT TO
3. Salaries and wages Government; ABANDON VESSEL
of the Captain and 2. Crew’s wages;  Instances:
Crew of the vessel 3. General average; 1. In case of civil liability from indemnities to third
during its last voyage; 4. Salvage, including persons (Art. 587);
4. General average or contract salvage; 2. In case of leakage of at least ¾ of the contents of
salvage including 5. Maritime liens arising a cargo containing liquids (Art. 687); and
contract salvage, prior in time to the 3. In case of constructive loss of the vessel (Sec.
bottomry loans, and recording of the 138, Insurance Code).
indemnity due shippers preferred mortgage;
for the value of goods 6. Damages arising out RIGHT OF ABANDONMENT
transported but which of tort; and
were not delivered to 7. Preferred mortgage SHIPOWNER OR SHIP CONSIGNEE
the consignee; registered prior in time. AGENT
5. Costs of repair and What may be abandoned
equipment of the Vessel Goods shipped
vessel, and Instances
provisioning of food, 1. In case of civil liability 1. Partial non-delivery,
supplies and fuel during from indemnities to third where the goods are
its last voyage; and persons (Art. 587); useless without the
6. Preferred mortgages 2. Sec. 138, Insurance others (Art. 363);
registered prior in time. Code; 2. Goods are rendered
3. In case of leakage of useless for sale or
at least ¾ of the consumption for the
contents of a cargo purposes for which they
containing liquids (Art. are properly destined
687) (Art. 365); and
3. In case of delay
through the fault of the
carrier (Art. 371).
Effects
1. Transfer of ownership 1. Transfer of
of the vessel from the ownership on the goods
shipowner to the from the shipper to the
shippers or insurer. carrier.
2. In case of (2), the 2. Carrier should pay
insurer must pay the the shipper the market
insured as if there was value of the goods at
actual total loss of the the point of destination.
vessel.
CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640)
Terms:
1. Interdiction of commerce – A governmental
prohibition of commercial intercourse intended
to bring about an entire cessation for the time
being of all trade whatever.
2. Blockade – A sort of circumvallation of a place
by which all foreign connection and
correspondence is, as far as human power can
effect it, to be cut off.
3. Embargo – A proclamation or order of a state,
usually issued in time of war or threatened
hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state
until further order.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
 Person who has possession, control and
management of the vessel and the consequent right
to direct her navigation and receive freight earned
and paid, while his possession continues.
Ship agent (naviero)
 Person entrusted with provisioning and
representing the vessel in the port in which it may
be found; also includes the shipowner.
 Not a mere agent under civil law; he is solidarily
liable with the ship owner.
 Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject to
Art.609;
3. Contract in the name of the owners with
respect to repairs, details of equipment,
armament, provisions of food and fuel, and
freight of the vessel, and all that relate to the
requirements of navigation;
4. Order a new voyage, make a new charter or
insure the vessel after obtaining authorization
from the shipowner or if granted in certificate of
appointment.
Civil Liabilities of the Shipowner And Ship Agent
1. All contracts of the captain, whether authorized
or not, to repair, equip and provision the
vessel; (Art. 586)
2. Loss and damage to the goods loaded on the
vessel without prejudice to their right to free
themselves from liability by abandoning the
vessel to the creditors. (Art. 587)
Duty of Ship Agent to Discharge the Captain and
Members of the Crew
 If the seamen contract is not for a definite period
or voyage, he may discharge them at his discretion.
(Art. 603)
 If for a definite period, he may not discharge them
until after the fulfillment of their contracts, except on
the following grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to its
cargo through malice or manifest or proven
negligence. (Art. 605)
B. CAPTAINS AND MASTERS
 They are the chiefs or commanders of ships.
 The terms have the same meaning, but are
particularly used in accordance with the size of the
vessel governed and the scope of transportation,
i.e., large and overseas, and small and coastwise,
respectively.
 Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of the
country under whose flag he navigates.
 Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required physical
and mental examinations required for
licensing him as such. (Art. 609)
 Inherent powers:
1. Appoint crew in the absence of ship
agent;
2. Command the crew and direct the vessel
to its port of destination;
3. Impose correctional punishment on those
who, while on board vessel, fail to comply
with his orders or are wanting in
discipline;
4. Make contracts for the charter of vessel in
the absence of ship agent.
5. Supply, equip, and provision the vessel;
and
6. Order repair of vessel to enable it to
continue its voyage. (Art. 610)
 Sources of funds to comply with the inherent
powers of the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
 Duties:
1. Bring on board the proper certificate and
documents and a copy of the Code of
Commerce;
2. Keep a Log Book, Accounting Book and
Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and
unloading of the cargo;
5. Be on deck while leaving or entering the
port;
6. Protest arrivals under stress and in case
of shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by
deceased passengers and crew
members;
10. Comply with the requirements of customs,
health, etc. at the port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a
port. (Art. 612)
 A ship’s captain must be accorded a reasonable
measure of discretionary authority to decide what
the safety of the ship and of its crew and cargo
specifically requires on a stipulated ocean voyage
(Inter-Orient Maritime Enterprises Inc. vs. CA).
 No liability for the following:
1. Damages caused to the vessel or to the
cargo by force majeure;
2. Obligations contracted for the repair,
equipment, and provisioning of the vessel
unless he has expressly bound himself
personally or has signed a bill of
exchange or promissory note in his name.
(Art. 620)
Solidary Liabilities of the Ship Agent/Shipowner
for Acts Done by the Captain towards
Passengers and Cargoes
1. Damages to vessel and to cargo due to
lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of
marine regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
 No liability under the following circumstances:
1. If, before beginning voyage, captain attempts
to change it, or a naval war with the power to
which the vessel was destined occurs;
2. If a disease breaks out and be officially
declared an epidemic in the port of destination;
3. If the vessel should change owner or captain.
(Art. 647)
Sailing Mate/First Mate
 Second chief of the vessel who takes the place of
the captain in case of absence, sickness, or death
and shall assume all of his duties, powers and
responsibilities. (Art. 627)
 Duties:
1. Provide himself with maps and charts with
astronomical tables necessary for the
discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on
consultation with the captain and the
officers of the boat, following the decision
of the captain in case of disagreement;
4. Responsible for all the damages caused
to the vessel and the cargo by reason of
his negligence. (Arts. 628 - 631)
Second Mate
 Takes command of the vessel in case of the
inability or disqualification of the captain and the
sailing mate, assuming in such case their powers
and responsibilities.
 Third in command
 Duties:
1. Preserve the hull and rigging of the
vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the
vessel, if laid up. (Art. 632)
Engineers
 Officers of the vessel but have no authority except
in matters referring to the motor apparatus. When
two or more are hired, one of them shall be the chief
engineer.
 Duties:
1. In charge of the motor apparatus, spare
parts, and other instruments pertaining to
the engines;
2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine without
authority of the captain;
4. Inform the captain of any damage to the
motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the
engine. (Art. 632)
Crew
 The aggregate of seamen who man a ship, or the
ship’s company.
 Hired by the ship agent, where he is present and
in his absence, the captain hires them, preferring
Filipinos, and in their absence, he may take in
foreigners, but not exceeding 1/5 of the crew. (Art.
634)
Classes of Seaman’s Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman While
Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
 The seaman’s heirs are entitled to payment as
follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if death
occurs on voyage out; and full, if on
voyage in
c. if by shares - none, if before departure;
full, if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full payment;
4. if captured due to carelessness - wages up to
the date of the capture. (Art. 645)
Complement of the Vessel
 All persons on board, from the captain to the cabin
boy, necessary for the management, maneuvers,
and service, thus including the crew, the sailing
mates, engineers, stokers and other employees on
board not having specific designations.
 Does not include the passengers or the persons
whom the vessel is transporting.
D. SUPERCARGOES
 Persons who discharges administrative duties
assigned to him by ship agent or shippers, keeping
an account and record of transaction as required in
the accounting book of the captain. (Art. 649)
E. PILOT
 A person duly qualified, and licensed, to conduct a
vessel into or out of ports, or in certain waters.
 The term generally connotes a person taken on
board at a particular place for the purpose of
conducting a ship through a river, road or channel,
or from a port.
 Master pro hac vice for the time being in the
command and navigation of the ship.
 While in exercising his functions a pilot is in sole
command of the ship and supersedes the master for
the time being in the command and navigation of the
ship, the master does not surrender his vessel to the
pilot and the pilot is not the master. There are
occasions when the master may and should
interfere and even displace the pilot, as when the
pilot is obviously incompetent or intoxicated (Far
Eastern Shipping Company vs. CA).
 Compulsory Pilotage – States possessing
harbors have enacted laws or promulgated rules
requiring vessels approaching their ports to take on
board pilots licensed under the local laws. (Notes
and Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.
518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage
grounds, the Harbor Pilot is responsible for damage
to a vessel or to life or property due to his
negligence.
EXCEPT:
1. Accident caused by force majeure or natural
calamity provided the pilot exercised prudence and
extra diligence to prevent or minimize damages.
2. Countermand or overrule by the master of the
vessel in which case the registered owner of the
vessel is liable. (Sec.11, Art.III PPA Admin Order
03-85)
SPECIAL CONTRACTS OF MARITIME
COMMERCE
1. Charter party
2. Bill of lading
3. Contract of transportation of passengers
on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
CHARTER PARTY
 A contract by virtue of which the owner or agent
binds himself to transport merchandise or persons
for a fixed price.
 A contract by which an entire ship, or some
principal part thereof is let/leased by the owner to
another person for a specified time or use. (Planters
Products, Inc. vs. CA, 226 SCRA 476)
 Parties:
1. Ship owner or ship agent
2. Charterer
 Classes:
1. Bareboat or demise – 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. The shipowner
leases to the charterer the whole vessel, transferring
to the latter the entire command, possession and
consequent control over the vessel’s navigation,
including the master and the crew, who thereby
become the charter’s servants. It transforms a
common carrier into a private carrier.
 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.
2. Contract of Affreightment – A contract whereby
the owner of the vessel leases part or all of its space
to haul goods for others.
 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.
 Kinds:
a. Time charter – vessel is chartered for a
fixed period of time or duration of voyage.
b. Voyage or trip charter – the vessel is
leased for one or series of voyages
usually for purposes of transporting goods
for charterer.
LEASE CHARTER PARTY
If for a definite period, Charterer may rescind
lessee cannot give up charter party by paying
the lease by paying a half of the freightage
portion of the amount agreed upon.
agreed upon.
If the leased property is The new owner is not
sold to one who knows compelled to respect the
of the existence of the charter party so long as A stipulation in a charter A clause in a charter
lease, the new owner he can load the vessel party that in case of a party providing that the
must respect the lease. with his own cargo. (Art. maritime accident for COGSA shall apply,
689) which the shipowner is even though the
Civil law concept Commercial law concept not responsible by law, transportation is
contract or otherwise, domestic, subject to the
the cargo shippers, extent that any term of
consignees or owners the bill of lading is
CHARTER PARTY BILL OF LADING shall contribute with the repugnant to the
An entire or complete More like a private shipowner in general COGSA or applicable
contract. receipt which the average. (Pandect of law, then to the extent
captain gives to accredit Commercial Law and thereof the provision of
goods received from Jurisprudence, Justice the bill of lading is void.
persons Jose Vitug, 1997 ed.) (Pandect of Commercial
Consensual contract Real contract Law and Jurisprudence,
Justice Jose Vitug, 1997
ed.)
BAREBOAT OR CONTRACT OF
DEMISE CHARTER AFFREIGHTMENT
(TIME OR VOYAGE
CHARTER)
Charterer becomes Owner remains liable as
liable to others caused carrier and must answer
by its negligence for any breach of duty
Charterer regarded as Charterer is not Rights and Obligations of Parties
owner pro hac vice for regarded as owner.
the voyage SHIPOWNER OR SHIP CHARTERER
Owner of vessel The vessel owner AGENT
relinquishes possession, retains possession, 1. If the vessel is 1. To pay the agreed
command and command and chartered wholly, not to charter price;
navigation to charterer navigation of the ship accept cargo from 2. To pay freightage
others; on unboarded cargo;
2. To observe 3. To pay losses to
Common carrier is Common carrier is not represented capacity; others for loading
converted to private converted to a private 3. To unload cargo uncontracted cargo and
carrier. carrier. clandestinely placed illicit cargo;
4. To substitute 4. To wait if the
another vessel if load is vessel needs repair;
less than 3/5 of 5. To pay expenses
PERSONS WHO MAY MAKE A CHARTER capacity; for deviation. (Arts.
1. Owner or owners of the vessel, either in 5. To leave the port if 679-687)
whole or in majority part, who have legal the charterer does not
control and possession of the vessel bring the cargo within
2. Charterer may subcharter entire vessel to the lay days and extra
3rd person only if not prohibited in original lay days allowed;
charter. (Art.679) 6. To place in a
3. Ship agent if authorized by the owner/s or vessel in a condition to
given such power in the certificate of navigate;
appointment. (Art.598) 7. to bring cargo to
4. Captain in the absence of the ship agent nearest neutral port in
or consignee and only if he acts in case of war or blockade.
accordance with the instructions of the (Arts. 669-678)
agent or owner and protects the latter’s
interests. (Art.609)
Rescission of a Charter Party
REQUISITES OF A VALID CHARTER PARTY At charterer’s At Fortuitous
1. Consent of the contracting parties request shipowner’s causes
2. Existing vessel which should be placed at (Art 688) request (Art. 690)
the disposition of the shipper (Art. 689)
3. Freight 1. By 1. If the extra 1. War or
4. Compliance with Art. 652 of the Code of abandoning lay days interdiction of
Commerce the charter and terminate commerce;
paying half of without the 2. Blockade;
the freightage; cargo being 3. Prohibition
2. Error in placed to receive
tonnage or alongside the cargo;
Clauses Which May Be Included In a Charter flag; vessel; 4. Embargo;
Party 3. Failure to 2. Sale by the and
place the owner of the 5. Inability of
Jason clause Clause paramount or vessel at the vessel before the vessel to
paramount clause charterer’s loading by the navigate.
disposal; charterer; Loan made by Loan taken on security
4. Return of shipowner or ship of the cargo laden on a
the vessel due agent guaranteed by vessel, and repayable
to pirates, vessel itself and upon safe arrival of
enemies or repayable upon arrival cargo at destination.
bad weather; of vessel at destination. (Art. 719)
5. Arrival at a (Art. 719)
port for repairs.

Terms: Who may contract

1. Primage - bonus to be paid to the captain after Shipowner or ship Only the owner of the
the successful voyage. agent. Outside of the cargo.
2. Demurrage – the sum fixed in the charter party residence of the
as a remuneration to the owner of the ship for owners - the captain.
the detention of his vessel beyond the number Common elements:
of days allowed by the charter party for loading 1. Exposure of security to marine peril;
or unloading or for sailing. 2. Obligation of the debtor conditioned only
3. Deadfreight – the amount paid by or upon safe arrival of the security at the point
recoverable from a charterer of a ship for the of destination.
portion of the ship’s capacity the latter Forms:
contracted for but failed to occupy. 1. Public instrument
4. Lay Days - days allowed to charter parties for 2. Policy signed by the contracting parties and
loading and unloading the cargo. the broker taking part therein
5. Extra Lay Days – days which follow after the 3. Private instrument (Art. 720)
lay days have elapsed. Contents:
1. Kind, name and registry of the vessel;
USUAL FORMS OF CONSUMMATING 2. Name, surname and domicile of the captain;
CONTRACTS 3. Names, surnames and domiciles of the
1. C.I.F. – cost, insurance and freight; borrower and the lender;
2. F.O.B. - free on board; 4. Amount of the loan and the premium
3. F.A.S. - free alongside ship; and stipulated;
4. C. & F. - cost and freight. 5. Time for repayment;
6. Goods pledged to secure repayment;
TRANSSHIPMENT OF GOODS 7. Voyage during which the risk is run (Art.721)
 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 BOTTOMRY/ ORDINARY LOAN
named in the contract has been reached, or the RESPONDENTIA (MUTUUM)
transfer for further transportation from one ship or
conveyance to another. Not subject to Usury Subject to Usury Law
 It is not dependent on the ownership of the Law
transporting ships or in the change of carriers, but
Liability of the borrower Not subject to any
rather on the fact of actual physical transfer of cargo
is contingent on the contingency (absolute
from one vessel to another.
safe arrival of the liability)
 If done without legal excuse, however competent
vessel or cargo at
and safe the vessel into which the transfer is made,
destination
is a violation of contract and infringement of right of
shipper and subjects carrier to liability if freight is
lost event by cause otherwise excepted. (Magellan The last lender is a The first lender is a
Manufacturing vs. CA, 201 SCRA 102) preferred creditor preferred creditor

LOAN ON BOTTOMRY AND RESPONDENTIA

 A real, unilateral, aleatory contract, by virtue of
which one person lends to another a certain amount
of money or goods on things exposed to maritime
risks, which amount, with its earnings, is to be
returned if the things are safely transported, and
which is lost if the latter are lost.
LOAN ON LOAN ON
BOTTOMRY RESPONDENTIA
Definition
WHEN LOAN ON BOTTOMRY OR
RESPONDENTIA REGARDED AS SIMPLE LOAN
1. Lender loaned an amount larger than the
value of the object due to fraudulent
means employed by the borrower.
(ART.726)
2. Full amount of the loan is not used for the
cargo or given on the goods if all of them
could not have been loaded, the balance
will be considered a simple loan.
(ART.727)
3. If the effects on which the money is taken
is not subjected to any risk. (ART.729)

Note: Under existing laws, the parties to a loan,

whether ordinary or maritime, may agree on any
rate of interest. (CB Circular 905)
 1. Particular or Simple Average
2. Gross or General Average
MARINE INSURANCE LOAN ON  Where both vessel and cargo are saved, it is
BOTTOMRY OR general average; where only the vessel or only the
RESPONDENTIA cargo is saved, it is particular average.
Indemnity is paid after the Indemnity is paid in  Expenses incurred to refloat a vessel, which
loss has occurred advance by way of accidentally ran aground, in order to continue its
a loan voyage, do not constitute general average. Not only
In case of loss of the vessel In case of loss of is there absence of a marine peril, common safety
due to a risk insured the vessel due to a factor, and deliberateness. It is the safety of the
against, the obligation of marine peril, the property, and not the voyage, which constitutes the
the insurer becomes obligation of the true foundation of general average. (A. Magsaysay,
absolute borrower to pay is Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)
extinguished
Consensual contract Real contract
PARTICULAR OR GROSS OR GENERAL
Hypothecary Nature of Bottomry/ Respondentia SIMPLE
GENERAL RULE: The obligation of the borrower Definition
to pay the loan is extinguished if the goods given as Damages or expenses Damages or expenses
security are absolutely lost by reason of an accident caused to the vessel or deliberately caused in
of the sea, during the voyage designated, and if it is cargo that did not inure order to save the
proven that the goods were on board. to the common benefit, vessel, its cargo or both
EXCEPTIONS: and borne by respective from real and known
1. Loss due to inherent defect; owners. (Art. 809) risk. (Art. 811)
2. Loss due to the barratry on the part of the Requisites
captain; 1. common danger;
3. Loss due to the fault or malice of the borrower; 2. deliberate
4. The vessel was engaged in contraband; and sacrifice;
5. The cargo loaded on the vessel be different in 3. success;
from that agreed upon. 4. proper formalities
and legal steps.
Concurrence of Marine Insurance and Loan on Liability
Bottomry/Respondentia The owner of the goods All the persons having
1. The insurable interest of the owner of a which gave rise to the an interest in the vessel
ship hypothecated by bottomry is only the expense or suffered the and the cargo therein at
excess of the value over the amount damage shall bear this the time of the
secured by bottomry. (Sec. 101, average. (Art. 810) occurrence of the
Insurance Code) average shall contribute
2. The value of what may be saved in case to satisfy this average.
of shipwreck shall be divided between the (Art. 812)
lender and the insurer in proportion to the  The insurers
interest of each one. (Art. 735) (Art.859) and lenders
on bottomry and
Note: If a vessel is hypothecated by bottomry only respondentia shall
the excess is insurable, since a loan on bottomry likewise contribute.
partakes of the nature likewise of an insurance (Art.732).
coverage to the extent of the loan accommodation. Number of interests involved
The same rule would apply to the hypothecation of Only one interest Several interests
the cargo by respondentia. (Pandect of Commercial involved involved
Law and Jurisprudence, Justice Jose Vitug, 1997 Share in the damage or expense
ed.) 100% share In proportion to the
value of the owner’s
ACCIDENTS IN MARITIME COMMERCE property saved
1. Averages Right to recover
2. Arrival Under Stress
No reimbursement There may be
3. Collision
reimbursement
4. Shipwreck
Kinds (not exclusive)
AVERAGE Art. 809 Art. 811
 An extraordinary or accidental expense incurred Procedure for recovery
during the voyage in order to preserve the cargo, 1. Assembly and
vessel or both, and all damages or deterioration deliberation
suffered by the vessel from departure to the port of 2. Resolution of the
destination, and to the cargo from the port of loading captain
to the port of consignment. (Art. 806) 3. Entry of the
resolution in the
 The person whose property has been saved must
logbook
contribute to reimburse the damage caused or
4. Detailed minutes
expense incurred if the situation constitutes general
5. Delivery of the
average.
minutes to the maritime
 Classes:
 judicial authority of the trip to the port of destination.
first port, within 24
hours from arrival, When lawful When Who bears
6. Ratification by unlawful expenses:
captain under oath.
(Arts. 813-814) The inability to 1. Lack of The shipowner
continue provisions due or ship agent is
GOODS NOT COVERED BY GENERAL voyage is due to negligence to liable in case of
AVERAGE EVEN IF SACRIFICED to lack of carry according unlawful arrival
1. Goods carried on deck. (ART.855) provisions, to usage and under stress.
2. Goods not recorded in the books or well-founded customs; But they shall
records of the vessel. (ART.855 (2)) fear of seizure, 2. Risk of not be liable for
3. Fuel for the vessel if there is more than privateers, enemy not well the damages
sufficient fuel for the voyage. (Rule IX, pirates, or known or caused by
York-Antwerp Rule) accidents of manifest reason of a
the sea 3. Defect of lawful arrival.
Jettison disabling it to vessel due to (Art. 821)
 Act of throwing cargo overboard in order to lighten navigate. (Art. improper repair;
the vessel. 819) and
 Order of goods to be cast overboard: 4. Malice,
1. Those which are on the deck, preferring negligence,
the heaviest one with the least utility and lack of foresight
value; or skill of
2. Those which are below the upper deck, captain. (Art.
beginning with the one with greatest 820)
weight and smallest value. (Art. 815)
 It is the duty of the captain to continue the voyage
 Jettisoned goods are not res nullius nor deemed without delay after the cause of the arrival under
“abandoned” within the meaning of civil law so as to stress has ceased failing in such duty renders him
be the object of occupation by salvage. (Pandect of liable. However, in case the cause has been risk of
Commercial Law and Jurisprudence, Justice Jose enemies, there must first be an assembly before
Vitug, 1997 ed.) departure. (Art. 825)
 In order that the jettisoned goods may be  Steps:
included in the gross or general average, the 1. Captain should determine during the
existence of the cargo on board should be proven voyage if there is well founded fear of
by means of the bill of lading. (Art. 816) seizure, privateers and other valid
grounds;
York-Antwerp (Y-A) Rules on Determining 2. Captain shall assemble the officers and
Liability for Averages With Regard To Deck summon the persons interested in the
Cargo cargo who may attend the meeting but
1. Deck cargo is allowed only in without a right to vote;
domestic/coastwise/inter-island shipping, and is 3. The officers shall determine and agree if
prohibited in international/overseas/foreign shipping. there is well-founded reason after
2. If deck cargo is loaded with the consent of the examining the circumstances. The
shipper on overseas trade, it must always contribute captain shall have the deciding vote;
to general average, but should the same be 4. The agreement shall be drafted and the
jettisoned, it would not be entitled to reimbursement proper minutes shall be signed and
because there is violation of the Y-A Rules. entered in the log book;
3. If deck cargo is loaded with the consent of the 5. Objections and protests shall likewise be
shipper on coastwise shipping, it must always entered in the minutes.
contribute to general average and if jettisoned would
be entitled to reimbursement. COLLISION
 Reason: In domestic shipping, voyages are  Impact of two vessels both of which are moving.
usually short and the seas are generally not rough.
In overseas shipping, the vessel is exposed for Allision
many days to perils of the sea.  Impact between a moving vessel and a stationary
one.
DOMESTIC INTERNATIONAL
Deck cargo is allowed Deck cargo is not Nautical Rules to Determine Negligence
allowed 1. When two vessels are about to enter a port,
With shipper’s consent the farther one must allow the nearer to enter
General average Particular average first; if they collide, the fault is presumed to be
Without shipper’s consent imputable to the one who arrived later, unless it
Captain is liable Captain is liable can be proved that there was no fault on its
part.
ARRIVAL UNDER STRESS (ARRIBADA) 2. When two vessels meet, the smaller should
 The arrival of a vessel at the nearest and most give the right of way to the larger one.
convenient port instead of the port of destination, if 3. A vessel leaving port should leave the way
during the voyage the vessel cannot continue the clear for another which may be entering the
same port.
4. The vessel which leaves later is presumed to
have collided against one which has left earlier.
5. There is a presumption against the vessel
which sets sail in the night.
6. There is a presumption against the vessel with
spread sails which collides with another which
is at anchor and cannot move, even when the
crew of the latter has received word to lift
anchor, when there was not sufficient time to
do so or there was fear of a greater damage or
other legitimate reason.
7. There is a presumption against an improperly
moored vessel.
8. There is a presumption against a vessel which
has no buoys to indicate the location of its
anchors to prevent damage to vessels which
may approach it.
9. Vessels must have “proper look-outs” or
persons trained as such and who have no
other duty aside therefrom. (Smith Bell v. CA)
Nautical Rules as to Sailing Vessel and
Steamship
1. Where a steamship and a sailing vessel are
approaching each other from opposite
directions, or on intersecting lines, the
steamship from the moment the sailing vessel
is seen, shall watch with the highest diligence
her course and movements so as to be able to
adopt such timely means of precaution as will
necessarily prevent the two boats from coming
in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of Vessels
1. First zone – all time up to the moment when risk
of collision begins.
 No rule is as yet applicable for none is necessary.
2. Second zone – time between moment when risk
of collision begins and moment it becomes a
practical certainty.
 It is in this period where conduct of the vessels is
primordial. It is in this zone that vessels must strictly
observe nautical rules, unless a departure therefrom
becomes necessary to avoid imminent danger.
3. Third zone – time when collision is certain and
time of impact.
 An error in this zone would no longer be legally
consequential.
 Error in Extremis - sudden movement made by a
faultless vessel during the third zone of collision with
another vessel which is at fault during the 2nd zone.
Even if such sudden movement is wrong, no
responsibility will fall on said faultless vessel.
(Urrutia and Co. v. Baco River Plantation Co., 26
PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
 Vessel at fault is liable for damage caused to
innocent vessel as well as damages suffered by the
owners of cargo of both vessels. (Art. 826)
2. Both vessels at fault
 Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 827)
3. Vessel at fault not known
 Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 828)
 Doctrine of Inscrutable Fault – In case of
collision where it cannot be determined which
between the two vessels was at fault, both
vessels bear their respective damage, but both
should be solidarily liable for damage to the
cargo of both vessels.
4. Third vessel at fault
 The third vessel will be liable for losses and
damages. (Art. 831)
5. Fortuitous event/force majeure
 No liability. Each bears its own loss. (Art. 830)
 The doctrine of res ipsa loquitur applies in case a
moving vessel strikes a stationary object, such as a
bridge post, dock, or navigational aid. (Far Eastern
Shipping v. CA, Luzon Stevedoring vs. CA)
 Even if the cause of action against the common
carrier is based on quasi-delict, the defense of due
diligence in the selection and supervision of
employees is unavailing in case of a maritime tort
resulting in collision. It is not a civil tort governed by
the Civil Code but a maritime one governed by Arts.
826-839 of the Code of Commerce. (Manila
Steamship vs. Insa Abdulhaman)
 Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code of
Commerce. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed.)
MARITIME PROTEST
 Condition precedent or prerequisite to recovery of
damages arising from collisions and other maritime
accidents.
 It is a written statement made under oath by the
captain of a vessel after the occurrence of an
accident or disaster in which the vessel or cargo is
lost or damaged, with respect to the circumstances
attending such occurrence, for the purpose of
recovering losses and damages.
 Excuses for not filing protest: 1) where the
interested person is not on board the vessel; and 2)
on collision time, need not be protested. (Art. 836)
 Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a
hurricane or when the captain believes
that the cargo has suffered damages or
averages (Art. 624).
 Who makes: Captain
 When made: within 24 hours from the time the
collision took place.
 Before whom made: competent authority at the
point of collision or at the first port of arrival, if in the
Philippines and to the Philippine consul, if the
collision took place abroad. (Art. 835)
SHIPWRECK
 It is the loss of the vessel at sea as a
consequence of its grounding, or running against an
object in sea or on the coast. It occurs when the
vessel sustains injuries due to a marine peril
rendering her incapable of navigation.
 If the wreck was due to malice, negligence or lack
of skill of the captain, the owner of the vessel may
demand indemnity from said captain. (Art. 841)
 The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
 A contract for the unloading of goods from a
vessel.
 Applicability: Overseas trade only. (Commercial
Law Review, C. Villanueva, 2004 ed.)
 Significance: When a person brings in cargo
from abroad, he cannot unload and deliver the cargo
by himself. The unloading must be done by the
arrastre operator, which will then deliver the cargo to
the importer. (Commercial Law Review, C.
Villanueva, 2004 ed.)
 Nature of business: It is a public utility,
discharging functions which are heavily invested
with public interest.
 Liability:
1. Similar to a warehouseman (Lua Kian v. Manila
Railroad)
2. Similar to a common carrier (Northern Motors
v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be
held liable, the consignee must prove that the
damage was due to the negligence and while the
goods are in the custody of the arrastre operator.
(Hartford Fire Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
 The carriage of goods from the warehouse or pier
to the holds of the vessel. (Chief of Staff vs. CIR)
 As understood in the port business, the term
consists of the handling of cargo from the hold of the
ship to the dock, in case of pier-side unloading; or to
a barge, in case of unloading at sea. (Anglo-Fil
Trading Corp. vs. Lazaro)
 The loading on the ship of outgoing cargo is also
part of stevedoring work. (Ibid.)
CONTAINERIZATION/ “SAID-TO-CONTAIN”/
“SHIPPER’S LOAD AND COUNT” SYSTEM
 System whereby the shipper loads his cargoes in
a specially designed container, seals the container
and delivers it to the carrier for transportation. The
carrier does not participate in the counting of the
merchandise for loading into the container, the
actual loading, and the sealing of the container. (US
Lines v. Comm. Of Customs, ICTSI v. Prudential
Guarantee)
 The matter of quantity, description and conditions
of the cargo inside the container is the sole
responsibility of the shipper, unless there is
stipulation to the contrary. (US Lines vs. Comm. Of
Customs, Reyma Brokerage v. Phil. Home
Assurance)
Note: In order to attribute to the carrier any damage
to the shipment that may be found, inspection of the
goods should be done at pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA
(C.A. No. 65)
APPLICABILITY
 The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from
foreign port to Philippine port).
 It can be applied in domestic sea transportation if
agreed upon by the parties. (Clause paramount or
paramount clause)
IMPORTANT FEATURES:
1. Amount of carrier’s liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIER’S LIABILITY
 Under the Sec. 4(5), the liability limit is set at $500
per package or customary freight unit unless the
nature and value of such goods is declared by the
shipper. This is deemed incorporated in the bill of
lading even if not mentioned in it. (Eastern Shipping
vs. IAC, 150 SCRA 463)
 Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
 Rules:
a. Patent damage: shipper should file a claim with
the carrier immediately upon delivery
b. Latent damage: shipper should file a claim with
the carrier within three days from delivery.
Note: The filing of a notice of claim is not a condition
precedent.
PRESCRIPTIVE PERIOD
 Action for loss or damage to the cargo should be
brought within one year after:
a. Delivery of the goods (delivered but
damaged goods); or
b. The date when the goods should have
been delivered (non-delivery). (Sec. 3[6])
 “Loss or Damage” as applied to the COGSA
contemplates a situation where no delivery at all
was made by the shipper of the goods because the
same had perished, gone out of commerce, or
disappeared in such a way that their existence is
unknown or they cannot be recovered. Thus, it is
inapplicable in case of misdelivery or conversion.
(Ang vs. American Steamship Agencies Inc.) and
damage arising from delay or late delivery (Mitsui
O.S.K. Lines Ltd. vs. CA). In such instance the, Civil
Code rules on prescription shall apply.
 The one-year prescriptive period is suspended
by:
1. The express agreement of the parties
(Universal Shipping Lines, Inc. vs. IAC,
188 SCRA 170)
2. The filing of an action in court until it is
dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
 The one-year period shall run from delivery of the
last package and is not suspended by extrajudicial
demand. (Dole Phils.,Inc. vs. Maritime Co.,148
SCRA 118)
 The one-year period shall run from delivery to the
arrastre operator and not to the consignee. (Union
Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA
359)
 The insurer exercising its right of subrogation is
bound by the one-year prescriptive period.
However, it does not apply to the claim against the
insurer for the insurance proceeds. (Fil. Merchants
Ins. Co. vs. Alejandro; Mayer Steel Pipe Corp. vs.
CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE: To protect the emerging air
transportation industry and to secure the uniformity
of recovery by the passengers.
APPLICABILITY
 The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
 The WC shall also apply to fortuitous
transportation by aircraft performed by an air
transportation enterprise.
 International transportation - any transportation in
which the place of departure and the place of
destination are situated either:
1. Within the territories of two High Contracting
Parties regardless of whether or not there be a
break in the transportation or transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed
stopping place within a territory subject to the
sovereignty, mandate or authority of another
power, even though that power is not a party to
the Convention. (“round trip”, Am. Jur.)
 Transportation to be performed by several
successive air carriers shall be deemed to be one
undivided transportation, if it has been regarded by
the parties as a single operation, whether it has
been agreed upon under the form of a single
contract or of a series of contracts, and it shall not
lose its international character merely because one
contract or a series of contracts is to be performed
entirely within a territory subject to the sovereignty,
suzerainty, mandate, or authority of the same High
Contracting Party. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the Convention
are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSENGER BAGGAGE AIR WAYBILL
TICKET CHECK
Passenger Checked-in Goods to be
baggage shipped
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the accident
causing it took place on board the aircraft or in the
course of its operations of embarking or
disembarking; (Art. 17)
2. Destruction, loss or damage to any baggage or
goods, if it took place during the “transportation by
air”; (Art. 18) and
 Transportation by air – The period during which
the baggage or goods are in the charge of the
carrier, whether in an airport or on board an aircraft,
or, in case of a landing outside an airport, in any
place whatsoever.
It includes any transportation by land or water
outside an airport if such takes place in the
performance of a contract for transportation by air,
for the purpose of loading, delivery, or
transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC by
removing the provision that if the airline took all
necessary steps to avoid the damage, it could
exculpate itself completely (Art. 20(1)). (Alitalia vs.
IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is greater
than actual value.
3. Hand-carried baggage
 $1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is greater
than actual value.
 An agreement relieving the carrier from liability or
fixing a lower limit is null and void. (Art. 23)
 Carrier is not entitled to the foregoing limit if the
damage is caused by willful misconduct or default
on its part. (Art. 25)
 Thus, the WC does not operate as an exclusive
enumeration of the instances of an absolute limit of
the extent of liability. It does not preclude the
application of the Civil Code and other pertinent
local laws. It does not regulate or exclude liability
for other breaches of contract by the carrier, or
misconduct of its employees, or for some particular
or exceptional type of damage. (Alitalia vs. CA)
 In PanAm v. IAC, the WC was applied as regards
the limitation on the carrier’s liability, there being a
simple loss of baggage without any improper
conduct on the part of the officials or employees of
the airline or other special injury sustained by the
passenger.
 In KLM Royal v. Tuller, the WC has invariably
been held inapplicable, or as not restrictive of the
carrier’s liability, where there was satisfactory
evidence of malice or bad faith attributable to its
officers and employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES
1. Notice of claim
 A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from receipt of
baggage/goods
 The complaint is a condition precedent. Without
the complaint, the action is barred except in case of
fraud on the part of the carrier. (Art. 26)
2. Prescriptive period
 Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped.
(Art. 29)
 In United Airlines vs. Uy the two-year prescriptive
period was not applied where the airline employed
delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against the
carrier in which the accident or delay occurred.
EXCEPTION: Agreement or contract whereby the
first carrier assumed liability for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an action
against the first carrier and the carrier in
which the damage occurred
b. Passenger or consignee can file an action
against the last carrier and the carrier in
which the damage occurred.
 These carriers are jointly and severally
liable. (Art. 30)
 A contract of international carriage by air,
although performed by different carriers under a
series of airline tickets constitutes a single
operation. Members of the International Air
Transportation Association (IATA) are under a
general pool partnership agreement wherein they
act as agent of each other in the issuance of tickets
to contracted passengers to boost ticket sales
worldwide and at the same time provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world. (American
Airlines vs. CA)
 Under a general pool partnership agreement, the
ticket-issuing airline is the principal in a contract of
carriage while the endorsee-airline is the agent.
The obligation of the former remained and did not
cease even when the breach occurred not on its
own flight but on that of another airline which had
undertaken to carry the passengers to one of their
destinations. (China Airlines vs. Chiok)
JURISDICTION
 At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of business;
c. Court where it has a place of business
through which the contract has been made;
or
d. Court of the place of destination. (Art.
28(1))
NOTE: It is the passenger’s “ultimate destination”
not “an agreed stopping place” that determines the
country where suit is to be filed.
 The forum of action provided in Art. 28(1) is a
matter of jurisdiction rather than of venue. (Santos
III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
 Two concepts:
1. Services one person renders to the owner of a
ship or goods, by his own labor, preserving the
goods or the ship which the owner or those
entrusted with the care of them have either
abandoned in distress at sea, or are unable to
protect or secure.
2. Compensation allowed to persons by whose
voluntary assistance a ship at sea or her cargo or
both have been saved in whole or in part from
impending sea peril, or such property recovered
from actual peril or loss, as in cases of shipwreck,
derelict or recapture.
 Requisites:
1. Valid object of salvage;
2. Object must have been exposed to
marine peril (not perils of the ship);
3. Services rendered voluntarily (neither an
existing duty nor out of a pre-existing
contract);
4. Services are successful, total or partial.
 Subjects of Salvage:
1. Ship itself;
2. Jetsam – goods which are cast into the sea, and
there sink and remain under water;
3. Floatsam or Flotsam – goods which float upon the
sea when cast overboard;
4. Ligan or Lagan – goods cast into the sea tied to a
buoy, so that they may be found again by the
owners (p.173, Judge Diaz).
 Persons who have no right to a reward for
salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite of
opposition of the Captain or his representative;
3. In accordance with Sec. 3 of the Salvage Law,
a person who fails to deliver a salvaged vessel or
cargo to the Collector of Customs.
 Derelict – a ship or her cargo which is
abandoned and deserted at sea by those who are in
charge of it, without any hope of recovering it, or
without any intention of returning to it.
 The intention of those in charge must be
ascertained. If those in charge left with the intention VI. PUBLIC SERVICE ACT
of returning, or of procuring assistance, the property (C.A. No. 146)
is not derelict, but if they quitted the property with
the intention of finally leaving it, it is derelict and a PURPOSES:
change of their intention and an attempt to return 1. To secure adequate, sustained service for
will not change its nature (Erlanger & Galinger vs. the public at the least possible cost;
Swedish East Asiatic Co. Ltd.). 2. To protect the public against
unreasonable charges and poor,
 If it is clear that the intention to return is slight, the inefficient service;
salvage which was done thereafter is considered 3. To protect and secure investments in
valid. (Notes and Cases on the Law on public services;
Transportation and Public Utilities, Aquino, T. & 4. To prevent ruinous competition.
Hernando, R.P. 2004 ed. p. 616)
AUTHORITY TO OPERATE PUBLIC SERVICES
CONTRACT OF TOWAGE GENERAL RULE: No public service shall operate
 A contract whereby one vessel, usually motorized, without having been issued a certificate of public
pulls another, whether loaded or not with convenience or a certificate of public convenience
merchandise, from one place to another, for a and necessity.
compensation. It is a contract for services rather EXCEPTIONS:
than a contract of carriage. 1. Warehouses;
2. Animal drawn vehicles and bancas moved
by oar or sail;
SALVAGE TOWAGE 3. Airships, except for the fixing of maximum
rates for fare and freight;
Governed by special Governed by Civil 4. Radio companies, except for rates fixing;
law (Act No. 2616) Code on contract of 5. Public services owned or operated by the
lease government, except as to rates fixing;
Requires success, Success is not 6. Ice plants; and
otherwise no payment required 7. Public markets.

Must be done with the Only the consent of the PUBLIC SERVICE
consent of the tugboat owner is  A person who owns, operates, manages or
captain/crewmen needed controls in the Philippines for hire or compensation,
with general or limited clientele, whether permanent,
Vessel must be Vessel need not be occasional or accidental, and done for general
involved in an accident involved in an accident business purposes, any common carrier or public
utility, ice plants, power and water supplies,
Fees distributed Fees belong to the communication and similar public services. (Sec.
among crewmen tugboat owner 13b, CA 146)
 A casual or incidental service devoid of public
character and interest is not brought within the
RULES ON SALVAGE REWARD
category. The question depends on such factors as
1. The reward is fixed by the RTC judge in the
the extent of services, whether such person or
absence of agreement or where the latter is
company has held himself or itself out as ready to
excessive. (Sec. 9)
serve the public or a portion of the public generally.
2. The reward should constitute a sufficient
(Luzon Stevedoring vs. PSC)
compensation for the outlay and effort of the
salvors and should be liberal enough to offer
NOTE: The Public Service Commission created
an inducement to others to render services in
under the Public Service Law has already been
similar emergencies in the future.
abolished under P.D. No. 1 and other issuances. It
3. If sold (no claim being made within 3 months
has been replaced by the following government
from publication), the proceeds, after deducting
agencies: LTO; LTFRB; ATO; BOE; NTC; NEA;
expenses and the salvage claim, shall go to
ERB; NWRC; CAB; and MIA.
the owner; if the latter does not claim it within 3
years, 50% of the said proceeds shall go to the
salvors, who shall divide it equitably, and the
CERTIFICATE OF CERTIFICATE OF
other half to the government. (Secs. 11-12)
PUBLIC PUBLIC
4. If a vessel is the salvor, the reward shall be
CONVENIENCE CONVENIENCE AND
distributed as follows:
(CPC) NECESSITY (CPCN)
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)

 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.
 An authorization An authorization 6. Revocation, or 6. Grant of special
issued by the issued by the modification of CPC permits to make extra
appropriate appropriate or CPCN; or special trips in
government agency for government agency for 7. Suspension of CPC territories specified in
the operation of public the operation of public or CPCN, except the certificate;
services for which no service for which a when it is necessary 7. Uniform
franchise, either prior franchise is to avoid serious and accounting system and
municipal or required by law; e.g. irreparable damage or furnishing of annual
legislative, is required telephone and other inconvenience to the reports;
by law, e.g., common services. public or private 8. Compelling
carriers. interest, in which compliance with the
case, a suspension laws and regulations.
not more than 30
days may be ordered,
prior to the hearing.
 A CPC or a CPCN constitutes neither a franchise (Soriano v. Medina,
nor a contract, confers no property right, and is a 164 SCRA 36)
mere license or a privilege. The holder of said
certificate does not acquire a property right in the UNLAWFUL ACTS OF PUBLIC UTILITY
route covered thereby. Nor does it confer upon the COMPANIES
holder any proprietary right or interest or franchise in 1. Engagement in public service business without
the public highways. Revocation of this certificate first securing the proper certificate;
deprives him of no vested right. New and additional 2. Providing or maintaining unsafe, improper or
burdens, alteration of the certificate, or even inadequate service as determined by the
revocation or annulment thereof is reserved to the proper authority;
State. (Luque vs. Villegas, 30 SCRA 408) 3. Committing any act of unreasonable and unjust
preferential treatment to any particular person,
 It is a “property” and has a considerable value corporation or entity as determined by the
and can be the subject of sale or attachment. proper authority;
(Cogeo-Cubao Operators and Drivers Assn. vs. CA, 4. Refusing or neglecting to carry public mail
207 SCRA 343, Raymundo vs. Luneta Motor Co.) upon request. (Secs. 18 and 19)
REQUREMENTS FOR GRANTING CPC OR CPCN ACTS REQUIRING PRIOR APPROVAL
1. Applicant must be a citizen of the Philippines or 1. Establish and maintain individual or joint rates;
a corporation or entity 60% of the capital of 2. Establish and operate new units;
which is owned by such citizens; 3. Issue free tickets;
2. Applicant must prove public necessity; 4. Issue any stock or stock certificates
3. Applicant must prove that the operation of the representing an increase of capital;
public service proposed and the authorization 5. Capitalize any franchise in excess of the
to do business will promote the public interest amount actually paid to the Government;
on a proper and suitable manner; 6. Sell, alienate, mortgage or lease property,
4. Applicant must have sufficient financial certificates or franchise.
capability to undertake the proposed services
and meeting the responsibilities incident to its  Under Sec. 20(g) of C.A. No. 146, the sale, etc.
operation. may be negotiated and completed before the
approval by the proper authority. Its approval is not
a condition precedent to the validity of the contract.
POWERS POWERS The approval is necessary only to protect public
REQUIRING PRIOR EXERCISABLE interest.
NOTICE AND WITHOUT PRIOR
HEARING NOTICE AND PRIOR OPERATOR/OLD OPERATOR RULE
HEARING  The rule allowing an existing franchised operator
to invoke a preferential right within the authorized
1. Issuance of CPC 1. Investigation any territory as long as he renders satisfactory and
or CPCN; matter concerning economical service.
2. Fixing of rates, public service;  The policy is not to issue a certificate to a second
tolls, and charges; 2. Requiring operator to cover the same field and in competition
3. Setting up of operators to furnish with a first operator who is rendering sufficient,
standards and safe, adequate, and adequate and satisfactory service. The prior
classifications; proper service; operator must first be given an opportunity to
4. Establishment of 3. Requiring public improve its service, if inadequate or deficient.
rules to secure services to pay  Purpose: To prevent ruinous and wasteful
accuracy of all meters expenses of competition in order that the interests of the public
and all measuring investigation; would be conserved and preserved.
appliances; 4. Valuation of
5. Issuance of properties of public  It subordinates the prior applicant rule which
orders requiring utilities; gives the first applicant priority only if things and
establishment or 5. Examination and circumstances are equal.
maintenance of test of measuring
extension of facilities; appliances;
 Where the operator either fails or neglects to
make the improvement or effect the increase in
services, especially when given the opportunity, new
operators should be given the chance to give the
services needed by the public.

PRIOR APPLICANT RULE

 Presupposes a situation when two interested
persons apply for a certificate to operate a public
utility in the same community over which no person
has as yet granted any certificate. If it turns out,
after the hearing, that the circumstances between
the two applicants are more or less equal, then the
applicant who applied ahead of the other, will be
granted the certificate.
RATE-FIXING POWER
 The rate to be fixed must be just, founded upon
conditions which are fair and reasonable to both the
owner and the public.
 A rate is just and reasonable if it conforms to the
following requirements:
1. One which yields to the carrier a fair
return upon the value of the property
employed in performing the service; and
2. One which is fair to the public for the
service rendered.
REGISTERED OWNER RULE
 The registered owner of a certificate of public
convenience is liable to the public for the injuries or
damages suffered by third persons caused by the
operation of said vehicle, even though the same had
been transferred to a third person.
 The registered owner is not allowed to escape
responsibility by proving that a third person is the
actual and real owner Reason: It would be easy for
him, by collusion with others or otherwise, to
transfer the responsibility to an indefinite person, or
to one who possesses no property with which to
respond financially for the damage or injury done.
(Erezo, et al. vs. Jepte 102 Phil 103).
2. The registered owner is primarily liable for all
the consequences flowing from the operations
of the carrier.
 The public has the right to assume that the
registered owner is the actual or lawful owner
thereof. It would be very difficult and often
impossible, as a practical matter, for the public
to enforce their rights of action that they may
have for injuries inflicted by the vehicle if they
should be required to prove who the actual
owner is. (Benedicto vs. IAC, 187 SCRA 547)
3. The thrust of the law in enjoining the kabit
system is to identify the person upon whom
responsibility may be fixed with the end in view
of protecting the riding public (Lim vs. CA 373
SCRA 394).
4. The registered owner cannot recover from the
actual owner and the latter cannot obtain
transfer of the vehicle to himself, both being in
pari delicto. (Teja Marketing vs. IAC)
5. For the better protection of the public, both the
registered owner and the actual owner are
jointly and severally liable with the driver.
(Zamboanga Transportation Co. vs. CA)

KABIT SYSTEM
 A system whereby a person who has been
granted a certificate of public convenience allows
other persons who own motor vehicles to operate
under such license, for a fee or percentage of such
earnings. It is void and inexistent under Art. 1409,
Civil Code.
 Effects:
1. The transfer, sale, lease or assignment of the
privilege granted is valid between the
contracting parties but not upon the public or
third persons. (Gelisan vs. Alday, 154 SCRA
388)