LAW ON TRANSPORTATION AND PUBLIC UTILITIES
services to the public. (NOT the means of transportation)
Contract of Transportation – person obligates himself to transport
persons or property from one place to another for a consideration.
2 KINDS:
1. CARRIAGE OF PASSENGERS
Parties: common carrier & passenger (carried gratuitously or not)
Passenger – one who travels in a public conveyance by virtue of
contract, express or implied, with the carrier as to the payment of fare
or that which is accepted as an equivalent thereof
Perfection:
2 types of contracts of carriage of PASSENGERS:
> contract to carry (agreement to carry the passenger at some future
date) – consensual contract and perfected by mere consent
* AIRCRAFT – perfected even without issuance of ticket as long as
there was already meeting of minds with respect to the subject matter
and consideration
> Contract of Carriage
– real contract; not until the facilities of the carrier are actually used
can the carrier be said to have assumed the obligation of the carrier;
perfected by actual use.
* AIRCRAFT – perfected if it was established that the passenger had
checked in at the departure counter, passed through customs and
immigration, boarded the shuttle bus and proceeded to the ramp of
the aircraft and baggage already loaded to the aircraft.
* Public Utility Bus or Jeepneys or Street Cars – once it stops it is in
effect making a continuous offer to riders; perfected when passenger
is already attempting to board the vehicle
* TRAINS – perfected when a person:
a. purchased a ticket/ possess sufficient fare with which to
pay for his passage
b. presented himself at the proper place and in a proper
manner to be transported
c. has a bona fide intention to use facilities of the carrier
2. CARRIAGE OF GOODS
Parties: shipper & carrier
Shipper – the person who delivers the goods to the carrier for
transportation; pays the consideration or on whose behalf payment is
made
Consignee – person to whom the goods are to be delivered. May be
the shipper himself or a third person who is not actually a party to the
contract
Perfection:
> contract to carry goods – consensual
> contract of carriage - act of delivery of goods ( goods are
unconditionally placed in the possession and control of the carrier and
upon their receipt by the carrier for transportation)
CARRIER:
Common carriers (CC) (1732)
– persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their
– one that holds itself out as ready to engage in the
transportation of goods for hire as a public employment and
not as a casual occupation.
Tests for determining WON a party is a common carrier of goods:
1. He must be engaged in the business of carrying goods for
others as a public employment, and must hold himself out as
ready to engage in the transportation of goods for persons
generally as a business and not as a casual occupation.
2. He must undertake to carry good of the kind to which his
business is confined.
3. He must undertake to carry by the method by which his
business is conducted and over his established roads.
4. Transportation must be for hire.
Characteristics of Common carriers (CC):
 no distinction between one whose principal business is the
transportation of persons/goods and one who does such as
an ancillary business (sideline)
 no distinction between regular or scheduled basis and one
offering such service on an occasional, episodic or
unscheduled business
 still a CC even if services offered to a limited clientele
(between the general public and a narrow segment of the
general population)
 Still considered a CC even if he did not secure a Certificate of
Public Convenience
 No distinction as to the means of transporting, as long as it is
by land, water or air
 The Civil Code does not provide that the transportation
should be by motor vehicle
 Still a CC even if he has no fixed and publicly know route,
maintains no terminals, and issues no tickets
 pipeline operators are CCs – not necessarily motor vehicles
(Case: First Philippine Industrial Corp. vs. CA)
Case: Jose Mendoza vs. Philippine Airlines Inc
- The test of whether one is a common carrier by air is
whether he holds out that he will carry for hire, so long as he
has room, goods of everyone bringing goods to him for
carriage, not whether he is carrying as a public employment
or whether he carries to a fixed place
CHARTER PARTY:
- Contract by which an entire ship or some principal part
thereof is let by the owner to another person for a specified
time or use.
Q: What is the effect of charter party?
A: It may transform a common carrier into a private carrier. However,
it must be a bareboat or demise charter where the charterer mans the
vessel with his own people and becomes, in effect, the owner for the
voyage or service stipulated
2 types:
1. Contract of Affreightment
- involves the use of shipping space on vessels leased
by the owner in part or as a whole, to carry goods
for another
- CC = observe extraordinary diligence; in case of
loss, deterioration or destruction of goods of
 goods, CCs are presumed to be at fault or have
acted negligently
- 2 types
i. Time charter: vessel is leased to the
charterer for a fixed period of time
ii. Voyage charter: ship is leased for a single
voyage
2. Charter by demise/ Bareboat Charter
- whole vessel is let to the charterer with a transfer
to him of its entire command and possession and
consequent control over its navigation including
the master and the crew who are his servants.
- charter includes both vessel and crew—CC
becomes private carrier (PC) insofar as that
particular voyage is concerned
- if it is already a PC- ordinary diligence in the
carriage of goods will suffice
- PC = undertaking is a single transaction, not a part
of the general business or occupation, although
involving the carriage of goods for a fee; NO
presumption of negligence applies – whosoever
alleges damage to or deterioration of the goods
carried has the burden of proving that the cause
was the negligence of the carrier.
Distinction between Common Carriers and Private Carriers
COMMON CARRIER PRIVATE CARRIER
Extraordinary diligence in the Ordinary diligence in the carriage
vigilance over the goods they of goods will suffice
carry
In case of loss, destruction, or No such presumption applies to
deterioration of goods, they are private carriers, for whosoever
presumed to have been at fault or alleges damage to or
to have acted negligently; burden deterioration n of the goods
of proving otherwise rests on carried has the onus of proving
them that the cause was the negligence
of the carrier
Cannot stipulate that it is exempt May validly enter into such
from liability for the negligence of stipulation
its agents or employees
Factors to be considered whether a carrier is common/private:
 Law applicable
o Common  Civil Code
o Private  contract
 Diligence required
o Common  extraordinary diligence
o Private  diligence of a good father of a family
 Burden of proof in relation to negligence
o Common – the carrier
o Private – on the party having a claim against the
carrier
Case: Planters Products, Inc. vs. CA
- It is therefore imperative that a public carrier shall remain as
such, notwithstanding the charter of the whole or portion of
a vessel by one or more persons, provided the charter is
limited to the ship only, as in the case of a time-charter or
voyage-charter. It is only when the charter includes both the
vessel and its crew that a common carrier becomes private
True Test of Common Carrier Is the carriage of passengers or goods,
provided it has space, for all who opt to avail themselves of its
transportation service for a fee
Generally, private carriage is undertaken by spcial agreement and the
carrier does not hold hiself out to carry goods for the general public
Case: Estela Crisostomo vs. CA and Caravan Travel and Tours
International
- By definition, a contract of carriage is one whereby a certain
person or association of persons obligate themselves to
transport person, thing or new from one place to another for
a fixed price
- It is obvious from the above definition that respondent is not
an entity engaged in the business of transporting either
passengers or goods and is therefore, neither a private nor a
common carrier. Its covenant with its customers is simply to
make travel arrangements in their behalf.
- It is in this sense that the contract between the parties in this
case was an ordinary one for services and not one of
carriage; it is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation.
COMMON CARRIERS vs. TOWAGE, ARRASTRE AND STEVEDORING
Towage
- A vessel is hired to bring another vessel to another place
- e.g. a tugboat may be hired by CC to bring the vessel to a
port (operator of tugboat not CC)
- in maritime law: towing for the mere purpose of expediting
her voyage without reference to any circumstances of
danger
Arrastre
- Arrastre operator’s functions has nothing to do with the
trade and business of navigation nor to the use or operation
of vessels
- Services are not maritime
- Functions of arrastre operator:
o Receive, handle, care for, and deliver all
merchandise imported and exported, upon or
passing over Government-owned wharves and
piers in the port
o Record or check all merchandise which may be
delivered to said port ant shipside
o Furnish light, and water services and other
incidental service in order to undertake its arrastre
service
- Such service is in face, no different from those of a
depositary or warehouseman
Stevedoring
- involves the loading and unloading of coastwise vessels
calling at the port.
>>> Common carriers are public utilities, impressed with public interest
and concern subject to regulation by the state.
GOVERNING LAWS
- read summary of rules on page 40 of book
Article 1766 (Civil Code). In all matters not regulated by this
Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws.
NATURE OF BUSINESS
- Common Carriers exercise a sort of public office
- Consequently, common carriers are subject to regulation
by the State
REGISTERED OWNER RULE/REGISTRATION LAWS
- Governed by the Land Transportation and Traffic Code and
administered by the Land Transportation Office
- The registered owner of a vehicle is liable fro any damage
caused by the negligent operation of the vehicle although
the same was already sold or conveyed to another person at
the time of the accident.
- The registered owner is liable to the injured party subject to
his right of recourse against the transferee or the buyer
- Applicable in case of lease
- Registered owner not liable if vehicle was taken form him
without his knowledge and consent.
Q: what is the purpose of such law?
A: The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is caused
by the vehicle on the public highways, responsibility therefor can be
fixed on a definite individual – the registered owner.
KABIT SYSTEM
- The “registered owner” rule is applicable to people involved on a
“kabit system”
- arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own
motor vehicles to operate them under his license, sometimes for
a fee or percentage of the earnings --- contrary to public policy
(thus VOID and INEXISTENT)
- parties to the “kabit system” cannot invoke the same as against
each other either to enforce their illegal agreement or to invoke
the same to escape liability --- pari delicto rule
- having entered into an illegal contract, neither can seek relief
from the courts and each must bear the consequences of his acts
- also applicable to aircrafts and vessels – basic rule that no person
can operate a common carrier without securing a certificate of
public convenience and necessity.
Case: Dizon vs. Octavio
- the primary factors considered in the granting of a certificate
of public convenience for the business of public
transportation is the financial capacity of the holder of the
license, so that liabilities arising from accidents may be duly
compensated
- Thus, for the safety of passengers and the public who may
have been wronged and deceived through the baneful kabit
system, the registered owner of the vehicle is not allowed to
prove that another person has become the owner so that he
may be thereby relived of responsibility
CHAPTER 2
OBLIGATIONS OF THE PARTIES
I. Obligations of the carrier
A. DUTY TO ACCEPT
- A common carrier granted a certificate of public convenience
is duty bound to accept passengers or cargo without any
discrimination.
- It is illegal for domestic ship operators to refuse to accept or
carry passengers or cargo without just cause. (Section 16, RA
9295)
Note: In air transportation, passengers with confirmed tickets who
were not allowed to board are provided with denied boarding
compensation and priority boarding rules.
No compensation for refusal if it is because of:
1. government requisition of the space
2. substitution of equipment of lesser capacity when required
by operational and or safety and/or other causes beyond the
control of the carrier, and
3. if arrangements have been made for the passenger to take
another flight in a comparable air transportation which will
arrive not later than three hours after the time of flight on
which the confirmed space is held is supposed to arrive. (Civil
Aeronautics Board Economic Regulation)
Grounds for Valid Refusal to Accept Goods
- GR: common carriers cannot lawfully decline to accept a
particular class of goods
- EXC: it appears that for some sufficient reason the
discrimination against the traffic in such goods is reasonable
and necessary:
i. dangerous objects or substances including dynamites
and other explosives
ii. goods are unfit for transportation
iii. acceptance would result in overloading
iv. contrabands or illegal goods
v. goods injurious to health
vi. goods will be exposed to untoward danger like flood,
capture by enemies and the like
vii. goods like livestock will be exposed to diseases
viii. strike
ix. failure to tender goods on time
Case: Fisher v. Yangco
- factors in determining reasonable discrimination include:
i. suitability to the vessel for the transportation of such
products;
ii. reasonable possibility of danger or disaster resulting from
their transportation in the form and under the conditions
in which they are offered for carriage; and
iii. the general nature of the business done by the carrier.
(1) Hazardous and Dangerous Substances
- Carrier not properly equipped to transport dangerous
chemicals or explosives may validly refuse to accept the
same for transport.
- Those which are not authorized by the Maritime Industry
Authority to carry such goods may also validly refuse the
same for transport.
- There must be a Special Permit to Carry from the MARINA.
(accept only if the said cargoes are covered by the necessary
clearance from appropriate government agencies)
(2) Unfit for Transport
- Carriers may refuse to accept goods that are unfit for
transportation
- These goods may by nature be unfit for transportation or are
unfit because of improper packaging or defect in their
containers.
- However, carriers may accept the goods and limit its liability
by stipulation.
If by reason of well-founded suspicion of falsity in the declaration as to
the contents of the package carrier should decide to examine and
investigate it in the presence of witnesses, with the shipper and
consignee in attendance. If declaration of shipper is true, expenses
occasioned by the examination and of repacking the packages shall be
for the account of the carrier
Even if the cause of the loss, destruction or deterioration of the goods
should be caused by the character of the goods, or the faulty nature of
the packing or of the containers, the common carrier must exercise
due diligence to forestall or lessen the loss.
B. DUTY TO DELIVER THE GOODS
 Time of Delivery
- Where a carrier has made an express contract, the goods must be
delivered within a specified time otherwise he is liable for any
delay (indemnity for damages).
- In the absence of any agreement, goods must be delivered at its
destination within a reasonable time (depending on the attending
circumstances, nature of the goods; expected date of arrival in the
BOL may be considered).
- In the absence of a special contract, a carrier is NOT an insurer
against delay in transportation of goods
 Consequences/Effects of Delay
- Excusable delays in carriage suspend, but do not generally
terminate, the contract of carriage; when the cause is removed,
the master must proceed with the voyage and make delivery.
- During the detention or delay, vessel continues to be liable as a
common carrier, not a warehouseman, and remains duty bound
to exercise extraordinary diligence.
Article 1740 (NCC). If common carrier negligently delays in
transporting the goods, a natural disaster shall not free it from
responsibility.
Article 1747 (NCC). If common carrier delays , without just cause, in
transporting the goods or changes the stipulated or usual route, the
contract limiting its liability cannot be availed of in case of the loss,
destruction, or deterioration of the goods.
Note: read page 72 of book for other provisions.
(1) Abandonment
- In case of delay through the fault of the carrier, the
consignee may refuse to accept the goods or may leave the
goods in the hands of the carrier. It must be communicated
to the carrier in writing.
- This right must be exercised between the time of delay and
before the arrival of the goods at its destination.
- The carrier must pay the full value of the goods as if they had
been lost or mislaid.
Note: If abandonment is not made, indemnification for the losses and
damages by reason of the delay cannot exceed the current price which
the goods would have on the day and at the place they are to be
delivered.
The value of the goods which the carrier must pay in case of loss or
misplacement shall be that what is declared in the bill of lading.
Consignee must not defer the payment of the expenses and
transportation charges of the goods otherwise carrier may demand the
judicial sale of the goods.
Case: Magellan Mfg. Marketing Corp. vs. CA
- Abandonment may also be made by virtue of stipulation or
agreement between parties
(2) Rights of Passengers in Case of Delay
- As to the rights and duties of the parties strictly arising out of
delay, the Civil Code is silent. However, the Code of
Commerce provides for such a situation:
ARTICLE 698. In case a voyage already begun should be interrupted,
the passengers shall be obliged to pay the fare in proportion to the
distance covered, without right to recover for losses and damages if
the interruption is due to fortuitous event of force majeure, but with a
right to indemnity if the interruption should have been caused by the
captain exclusively. If the interruption should be caused by the
disability of the vessel and a passenger should agree to await the
repairs, he may not be required to pay any increased price of passage,
but his living expenses during the stay shall be for his own account.
Note: the carrier is liable for any loss or damage, including any
pecuniary loss or loss of profit, which the passenger may have suffered
by reason thereof.
In case the vessel is not able to depart on time and the delay is
unreasonable, the passenger may opt to have his/her ticket
immediately refunded without any refund service fee from the
authorized issuing/ticketing office.
 Where and to Whom Delivered
a. Place – Goods should be delivered to the consignee in the
place agreed upon by the parties.
The shipper may change the consignment of the goods provided that
at the time of ordering the change of the consignee the bill of lading
signed by the carrier be returned to him, in exchange for another
wherein the novation of the contract appears. The expenses
occasioned by the change shall be for the account of the shipper.
b. Consignee – Delivery must generally be made to the owner
or consignee or to someone lawfully authorized by him to
receive the goods for his account or to the holder of the
negotiable instrument.
c. Delay to Transport Passengers – A carrier is duty bound to
transport the passenger with reasonable dispatch
Effects of ‘delayed and unfinished voyage’ in inter-island vessels:
 vessel cannot continue or complete her voyage for any cause
– carrier is under obligation to transport the passenger to
his/her destination at the expense of the carrier including
free meals and lodging before the passenger is transported
to his/her destination; the passenger may opt to have his/her
ticket refunded in full if the cause of the unfinished voyage is
due to the negligence of the carrier or to an amount that will
suffice to defray transportation cost at the shortest possible
route if the cause of the unfinished voyage is fortuitous
event.
 vessel is delayed in arrival at the port of destination – free
meals during mealtime
 delay in departure at the point of origin due to carrier’s
negligence; fortuitous event - free meals during mealtime;
carrier not obliged to serve free meals
 carrier is not obliged to inform passengers of sailing schedule
of the vessel

C. DUTY TO EXERCISE EXTRAORDINARY DELIGENCE
- Goods should be delivered in the same condition that they
were received and to transport the passengers without
encountering any harm or loss.
- Read page 79-80 for provisions
ARTICLE 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances. (Civil Code)
- Presumption of Negligence
- Two conditions for the birth of the presumption of negligence:
1. there exists a contract between the passenger or the shipper
and the common carrier
2. the loss, deterioration, injury or death took place during the
existence of the contract
Doctrine of Proximate Cause – there is presumption of negligence
If the goods are lost, destroyed or deteriorated, common carriers are
presumed to have acted negligently, unless they prove that they
observed extraordinary diligence. In case of death of or injuries to
passengers, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed
extraordinary diligence.
- Duration of Duty:
(1) Carriage of Goods
- Due diligence should be exercised the moment the
goods are delivered to the carrier.
- Goods are deemed delivered to the carrier when the
goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier
for the purpose of their immediate transportation and
the carrier has accepted them
ARTICLE 1736. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the
consignee or to the person who has a right to receive them…
ARTICLE 1737. The common carrier’s duty to observe extraordinary
diligence over the goods remains in full force and effect even when
they are temporarily unloaded or stored in transit, unless the shipper
or owner has made use of the right of stoppage in transitu. (common
carrier becomes a warehouseman – ordinary diligence)
ARTICLE 1738. The extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored in
a warehouse of the carrier at the place if destination, until the
consignee has been advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or otherwise
dispose of them.
(2) Carriage of Passengers
By trains – the extraordinary responsibility of common carrier
commences the moment the person who purchases the ticket (or a
‘token’ or ‘card’) from the carrier presents himself at the proper place
and in a proper manner to be transported with a bona fide intent to
ride the coach.
* Mere purchase of a ticket does not of itself create the relation of
carrier and passenger but it is an element in the inception of the
relation.
* A proper person who enters upon the carrier’s premises (station,
ticketing office, or waiting room) with the intention of becoming a
passenger will ordinarily be viewed as assuming the status of a
passenger.
* One who goes to the railroad station to inquire as to the possibility of
securing passage on a freight train, which he knows, by the rules of the
company, is not allowed to carry passengers, and to secure passage
thereon if possible, is not entitled to the rights of a passenger but is a
mere trespasser.
* One who rides upon any part of the vehicle or conveyance which is
unsuitable or dangerous, or which he knows is not intended for
passengers, is not presumed to be a passenger.
* One who secures free passage by fraud or stealth is precluded from
recovery for injuries sustained through the negligence of the carrier,
for he has not assumed the status of a passenger.
* A person riding on a freight train, on a driver’s pass or similar
arrangement, to look after livestock being transported and as incident
to such transportation is, generally regarded as a passenger for hire.
Motor vehicles like jeepneys and buses – are duty bound to stop their
conveyances for a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for
injuries suffered by boarding passengers resulting from the sudden
starting up or jerking of their conveyances while they do so. Once a
public utility bus or jeepney stops, it is making a continuous offer to
bus riders.
Case: Dangwa Transportation Company vs. CA
- When the bus is not in motion there is no necessity for a person
who wants to ride the same to signal his intention to board. A
public utility bus, once it stops, is in effect making a continuous
offer to bus riders
- The premature acceleration of the bus in this case was a breach
of such duty
Case: La Mallorca vs. CA
- Duty to exercise utmost diligence with respect to passengers
will not ordinarily terminate until the passenger has, after
reaching his destination, safely alighted from the carrier’s
conveyance or had a reasonable opportunity to leave the
carriers premises. And what is reasonable time or a reasonable
delay within this rule is to be determined from all the
circumstances.
Case: Aboitiz Shipping Corporation vs. CA
- Same ruling with La Mallorca vs. CA
- That reasonableness of time should be made to depend on the
attending circumstances of the case, such as the kind of
common carrier, the nature of its business, the customs of the
place, and so forth, and therefore precludes a consideration of
the time element per se without taking into account such other
factors
- The primary factor to be considered is the existence of a
reasonable cause as will justify the presence of the victim on or
near the petitioner’s vessel. We believe there exists such a
justifiable cause (baggage were left)
DEFENSES OF COMMON CARRIERS
Article 1734 (No other defense may be raised: exclusive or closed list)
1. Flood, storm, earthquake, lightning, or other natural disaster or
calamity
2. Act of the public enemy in war, whether international or civil
3. Act or omission of the shipper or owner of the goods
4. The character of the goods or defects in the packing or in the
containers
5. Order or act of competent public authority
6. Exercise of extraordinary diligence
Fortuitous Event – to be a valid defense must be established to be the
proximate cause of the loss
Note: Since common carrier is presumed is to be negligent, it has been
observed that the DOCTRINE of PROXIMATE CAUSE is INAPPLICABLE to
a contract of carriage. The injured passenger or owner of goods need
not prove causation to establish his case.
The absence of causal connection is only a matter of defense.
Requisites of Fortuitous Event:
1. The cause of the unforeseen and the unexpected occurrence,
or of the failure of the debtor to comply with his obligation,
must be independent of the human will
2. It must be impossible to foresee the event which constitutes
the caso fortuito, or if it can be foreseen, it must be impossible
to avoid
3. The occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner
4. The obligor (debtor) must be free from any participation in or
the aggravation of the injury resulting to the creditor
In order for the common carrier to be exempted from responsibility,
the natural disaster must have been the proximate and only cause of
the loss. However, the common carrier must exercise due diligence to
prevent or minimize loss before, during and after the occurrence of
flood, storm or other natural disaster in order that the common carrier
may be exempted from liability for the loss, destruction, or
deterioration of the goods.
Fire – not considered as a natural calamity or disaster
Fire caused by lightning – a natural calamity
Hijacking – does not fall under the categories of exempting causes; the
common carrier is presumed to be at fault or to have acted negligently
unless there is a proof of extraordinary diligence on its part
Mechanical defects – damage or injury resulting from mechanical
defects is not a damage or injury that was caused by fortuitous event;
carrier is liable to its passengers for damages caused by mechanical
defects of the conveyance (breakage of a faulty drag-link spring,
fracture of the vehicle’s right steering knuckle, defective breaks)
- One of the reason why carrier is made liable despite the
presence of mechanical defect is the absence of privity
between the passenger and the manufacturer
Case: Juntilla v. Fontanar
- “Tire-blowouts” was not considered as fortuitous event although
it was alleged that the tires were in good condition; no evidence
was presented to show that the evidence were due to adverse
road conditions – the carrier must prove all angles.
- The explosion could have been caused by too much air pressure
injected into the tires and the fact that the jeepney was
overloaded and speeding at the time of the accident.
OTHER INVALID DEFENSES
1. Damage to cargo due to EXPLOSION of another cargo – not
attributable to peril of the seas or accidents of navigation.
2. Damage by WORMS and RATS resulting to damage to
cargoes – can’t be cited as an excuse by the carrier.
3. Damage by WATER through a port which had been left open
or insufficiently fastened on sailing.
4. Carrier cannot escape liabilities to third persons if damage
was caused by BARRATRY – where the master or crew of the
ship committed unlawful acts contrary to their duties –
includes theft and fraudulently running the ship ashore.
Cases:
1. Problem: A carrier bus on its way to its destination
encountered an engine failure, thus, it has to be repaired for
2 days. And while in the repair shop, a typhoon came
resulting to the spoilage of cargoes.
Answer: A typhoon although a natural disaster, is not a valid
defense if it is shown that it was not the only cause of the
loss. Especially when the facts indicate that the typhoon was
foreseeable and could have been detected through the
exercise of reasonable care. Cargoes should have been
secured while the bus was being repaired for 2 days.
2. Problem: A passenger told the driver that he has valuable
items in his bag which was placed under his feet and he
asked the driver (to which he is seated near) to watch for the
bag while he is asleep.
(a) There have been incidents of throwing of stones at
passing vehicles in the North Express Way. While the
bus was traversing the super highway, a stone hurled
from the overpass and hit the passenger resulting to
injuries. Can the passenger hold the bus liable for
damages?
Answer: Yes. The incident was foreseeable due the prior
incidents of stone hurling. The bus should have
exercised utmost diligence and employed adequate
precautionary measures to secure safety of passengers
since the incident was foreseeable. .
HOWEVER, if the stone throwing was entirely
unforeseeable and the carrier exercised the utmost
diligence, then, the bus can’t be held liable.
Nonetheless, the burden of proof is on the carrier to
prove such exercise of diligence. It is up to the carrier to
overthrow the presumption of negligence.
If the passenger decides to file a case, al the passenger
has to do is to prove that she was a passenger of the bus
and that she suffered injuries while on board the bus.
(b) Supposing that there were armed men who staged a
hold-up while the bus was speeding along the highway.
One of them stole the passenger’s bag and wallet while
pointing a gun him. Is the bus liable?
Answer: No. Hand-carried luggages are governed by
necessary deposit. Besides, theft with use of arms or
through irresistible force is a force majeure which
exempts carriers from liability.
3. Hi-jacking cannot exculpate the carrier from liability if it is
shown that the employees of the carrier were not
 overwhelmed by the hijackers and that there was no
showing of irresistible force. Since, there were 4 employers
while there were only 2 hijackers and only one of them was
armed with bladed weapon.
ON THE OTHER HAND, a hijacking by 3 armed men is an
event which is considered to be beyond the control of the
carrier. Thus, the carrier may be adjudged from liability if it
can be proven that the hijacking was unforeseeable.
Case: Philippine American General Insurance Co. vs. MCG
- Even in cases where a natural disaster is the proximate and
only cause of the loss, a common carrier is still required to
exercise due diligence to prevent or minimize loss before,
during and after the occurrence of the natural disaster, for it
to be exempt from liability under the law for the loss of the
goods
Case: Pilapil vs. CA
- Facts: a bystander alongside national highway hurled a stone
at the left side of the bus, hitting petition above his left eye
which resulted to partial loss of the left eye’s vision
- SC: A common carrier does not give its consent to become an
insurer of any and all risks to passengers and goods. It merely
undertakes to perform certain duties to the public as the law
imposes, and holds itself liable for any breach thereof.
- The law does not make the carrier an insurer of the absolute
safety of its passengers
- Article 1763: A common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the
common carrier’s employees through the exercise of the
diligence of a good father of a family could have prevented or
stopped the act or omission
o Clearly, a tort committed by a stranger which
causes injury to a passenger does not accord the
latter a cause of action against the carrier. The
negligence for which a common carrier is held
responsible is the negligent omission by the
carrier’s employees to prevent the tort from being
committed when the same could have been
foreseen and prevented by them
Case: Franklin Gacal vs. PAL
- It is therefore not enough that the event should not have
been foreseen or anticipated, as is commonly believed, but it
must be one impossible to foresee or to avoid.
- The mere difficulty to foresee the happening is not the
impossibility to foresee the same
PUBLIC ENEMY
- Presupposes a state of war and refers to the government of a
foreign nation at war with the country to which the carrier
belongs, though not necessarily with that to which the owner of
the gods owes allegiance.
- Thieves, rioter, and insurrectionists are not included. They are
merely private depredators for whose acts a carrier is answerable.
- Rebels in insurrection against their own government are generally
not embraced in the definition of public enemy. However, if the
rebels hold a portion of territory, they have declared their
impendence, cast off their allegiance and has organized armed
hostility to the government, and the authority of the latter is at
the time overthrown, such an uprising may take on the dignity of
a civil war, and so matured and magnified, the parties are
belligerent and are entitled to belligerent rights.
- Depredation by pirates (which are enemy of all civilized nation)
excuses the carrier from liability.
- Common carriers may be exempted from responsibility only if the
act of the public enemy has been the proximate and only cause of
the loss. Moreover, due diligence must be exercised to prevent or
at least minimize the loss before, during and after the
performance of the act of the public enemy in order that the
carrier may be exempted from liability for the loss, destruction, or
deterioration of the goods.
IMPROPER PACKING
Character of the goods and defects in the packaging or in the
containers are defenses available to the common carrier. Similarly, the
Carriage of Good by Sea Act provides that carrier shall not liable for:
1. Wastage in bulk or weight or any damages arising form the
inherent defect, quality or vice of goods;
2. Insufficiency of packing;
3. Insufficiency or inadequacy of the marks, or
4. Latent defects no discoverable by due diligence.
However, NCC likewise provides:
Art. 1742. Even if the loss, destruction, or deterioration of the goods
should be caused by the character of the goods, or the faulty nature
of the packing or the containers, the common carrier must exercise
due diligence to forestall or lessen the loss.
Thus, if the carrier accepted the goods knowing the fact of improper
packing or even if the carrier does not know but the defect was
nonetheless apparent upon ordinary observation, it is not relived
from liability for loss or injury to goods resulting therefrom.
Cases:
1. Problem: A carrier knowing that some of a cargo of sacks of
rice had big holes and others had openings just loosely tied
with strings resulting to the spillage of rice during the trip.
Thus, there was shortage in the delivery of the cargoes.
When sued due to the shortage, the carrier interposed a
defense that it was not liable since the shortage was due to
the defective condition of the sacks. Decide.
Answer: Carrier must still exercise extraordinary diligence if
the fact of improper packing is known to the carrier or its
servants, or apparent upon ordinary observation. If the
carrier accepted the cargo without protests or exception
notwithstanding such condition, he is not relived of liability
for damage resulting therefrom. Apply Article 1742.
ORDER OF PUBLIC AUTHORITY
Art. 1743. If through the order of public authority the goods
are seized or destroyed, the common carrier is not responsible,
provided said public authority had power to issue order.
Cases:
1. Carrier was not excused from liability since the order of an
acting mayor was not considered as a valid order of a public
authority. It is required that public authority who issued the
order must be duly authorized to issue the order.
2. Carriage of Goods by Sea Act – provides that carrier shall not
responsible for loss or damage resulting from “arrest or
restraint of princes, rulers, or people, or seizure under legal
process” and from “quarantine restrictions”.
DEFENSES IN CARRIAGE OF PASSENGERS
- Primary defense of carrier is exercise of extraordinary diligence in
transporting passengers. Even if there is a fortuitous event, the carriers
must also present proof of exercise of extraordinary diligence.
Art. 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the carrier’s
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common
carriers.
The liability does not cease even upon proof that they exercised
diligence in the selection and supervision of their employees.
Art. 1763. Carrier is responsible for injuries suffered by a passenger
on account of the willful acts or negligence of other passengers or of
strangers, if the common carrier’s employees through the exercise of
the diligence of a good father of a family could have prevented or
stopped the act or omission.
a. Employees
- Carrier is liable for the acts of its employees. It can’t escape
liability by claiming that it exercised due diligence in
supervision and selection of its employees (unlike in quasi-
delicts).
Reasons for the rule:
1. Undertaking of the carrier requires that its passenger that
full measure of protection afforded by the exercise of high
degree of care prescribed by law, inter alia from violence and
insults at the hands of strangers and other passengers, but
above all, from the acts of the carrier’s own servants.
2. The liability of the carrier for the servant’s violation of duty
to performance of his contract to safely transport the
passenger, delegating therewith the duty of protecting the
passenger with utmost care prescribed by law.
3. As between the carrier and the passenger, the former must
bear the risk of wrongful acts or negligence of the carrier’s
employees against passenger, since it, and not the
passenger, has the power to select and remove them.
Rationale: On the other hand, if the ship owner derives profits
from the results of the choice of the captain and the crew,
when the choice turns out successful, it is also just that he
should suffer the consequences of an unsuccessful
appointment, by application of the rule of natural law
contained in the partidas --- that he who enjoys the benefits
derived from a thing must likewise suffer the losses that
ensue therefrom
- Note: Willful acts of the employees include theft
b. Other Passengers and Third Persons
- With respect to acts of strangers and other passengers
resulting in injury to a passenger, the availability of such
defense is also subject to the exercise of a carrier of due
diligence to prevent or stop the act or omission.
- Negligence of the carrier need not be the sole cause of the
damage or injury to the passenger or the goods. The carrier
would still be liable even if the contractual breach concurs
with the negligent act or omission of another person.
Remember: the negligence of the other river in a collision is NOT a
prejudicial question to an action against the carrier’s company.
Article 1759. Common carriers are liable for the death of or injuries to
passenger through the negligence or willful acts of the former’s
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common
carriers.
PASSENGER’S BAGGAGES
- The term baggage has been defined to include whatever
articles a passenger usually takes with him for his own personal
use, comfort and convenience
- Rules that are applicable to goods that are being shipped are
also applicable to baggage delivered to the custody of the
carrier. Arts. 1733. 1734 and 1736 of Civil Code are applicable.
- However, if the luggage was hand-carried, Arts. 1998, 2000-
2003 shall apply.
Distinction: W/N the baggage is in the personal custody of the
passenger.
 if yes, hand carried baggage
 if no, checked-in baggage
Art. 1998. The deposit of effects made by the travellers in hotels or
inns shall also be regarded as necessary. The keepers of hotels or inns
shall be responsible for them as depositaries, provided that notice
was given to them, or to their employees, of the effects brought by
the guests and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes advised
relative to the care and vigilance of their effects. (1783)
Art. 2000. The responsibility referred to in the two preceding articles
shall include the loss of, or injury to the personal property of the
guests caused by the servants or employees of the keepers of hotels
or inns as well as strangers; but not that which may proceed from any
force majeure. The fact that travellers are constrained to rely on the
vigilance of the keeper of the hotels or inns shall be considered in
determining the degree of care required of him. (1784a)
Art. 2001. The act of a thief or robber, who has entered the hotel is
not deemed force majeure, unless it is done with the use of arms or
through an irresistible force. (n)
Art. 2002. The hotel-keeper is not liable for compensation if the loss
is due to the acts of the guest, his family, servants or visitors, or if the
loss arises from the character of the things brought into the hotel.
(n)
Art. 2003. The hotel-keeper cannot free himself from responsibility
by posting notices to the effect that he is not liable for the articles
brought by the guest. Any stipulation between the hotel-keeper and
the guest whereby the responsibility of the former as set forth in
articles 1998 to 2001 is suppressed or diminished shall be void. (n)
Cases:
1. Despite the fact that the carrier gave notice that it shall not
be liable for baggage brought in by passengers, the carrier is
still liable for lost hand-carried luggage since it is governed by
rules on necessary deposits. Under Art. 20000, the
responsibility of the depositary includes the loss of property
of the guest caused by strangers but not that which may
proceed from force majeure. Moreover, article 2001
considers theft as force majeure if it is done with use of arms
or through irresistible force.
 2. Even if the passenger did not declare his baggage nor pay its b. Assumption of Risk
charges contrary to the regulations of the bus company, the
carrier is still liable in case of loss of the baggage. Since, it has Passengers must take such risks incident to the mode of travel. Carriers
the duty to exercise extraordinary diligence over the baggage are not insurers of the lives of their passengers. Thus, in air travel,
that was turned over to the carrier or placed in the baggage adverse weather conditions or extreme climatic changes are some of
compartment of the bus. The non-payment of the charges is the perils involved in air travel, the consequence of which the
immaterial as long as the baggage was received by the carrier passenger must assume or expect.
for transportation.
However, there is no assumption of risk in a case wherein a passenger
II. OBLIGATIONS OF SHIPPER, CONSIGNEE and PASSENGER
boarded a carrier that was filled to capacity. The act of the passenger
in taking the extension chair does not amount to implied assumption
A. NEGLIGENCE OF SHIPPER OR PASSENGER
of risk.
- The obligation to exercise due diligence is not limited to the
Note: there is also no assumption of risk by the mere fact that the
carrier. The shipper is obliged to exercise due diligence in
carrier posted notices against such liability
avoiding damage or injury.
- Nevertheless, contributory negligence on the part of the
Problem: Although, there is a sign in the bus that says: “do not talk to
shipper/ passenger would only mitigate the carrier’s
the driver while the bus is in motion, otherwise, the company would
liability; it is not a total excuse.
not assume responsibility for any accident:. Nonetheless, the
- However, if the negligence of the shipper/ passenger is the
passengers dared the driver to race with another bus, as the bus
proximate and only cause of the loss, then, the carrier shall
speeds up in the attempt to overtake the other bus, it failed to slow
not be liable. The carrier may overcome the presumption of
down. As a result, the bus turns turtle causing the death and injuries to
negligence and may be able to prove that it exercised
passengers. Is the bus company liable?
extraordinary diligence in handling the goods or in
Answer: Yes. The bus company is obligated to exercise utmost
transporting the passenger.
diligence in carrying passengers. This liability cannot be eliminated or
limited by simply posting notices. The passenger cannot be said to
The carrier may be able to prove that the only cause of the loss of
have assumed the risk of being injured when he urged the driver to
the goods is any of the following:
accept the dare. At most, the passengers can only be said to be guilty
1. Failure of the shipper to disclose the nature of the goods;
of contributory negligence which would mitigate the liability of the
2. Improper marking or direction as to the destination;
driver, since the proximate cause of the accident was the driver’s
3. Improper loading when he assumes such responsibility.
willful and reckless act in running the race with the other bus.
The shipper must likewise see to it that the goods are
Case: Cesar Isaac vs. A.L. Ammen Transportation Co, Inc.
properly packed; otherwise, liability of the carrier may either be
- Where a carrier’s employee is confronted with a sudden
mitigated or barred depending on the circumstances.
emergency, the fact that he is obliged to act quickly and
without a chance for deliberation must be taken into
Art. 1741. If the shipper or owner merely contributed to the loss,
account, and he is not led to the same degree of care that he
destruction or deterioration of the goods, the proximate cause
would otherwise be required to exercise in the absence of
thereof being the negligence of the common carrier, the latter
such emergency but must exercise only such care as any
shall be liable in damages, which however, shall be equitably
ordinary prudent person would exercise under like
reduced.
circumstances and conditions, and the failure on his part to
exercise the best judgment the case renders possible does no
Art. 1761. The passenger must observe the diligence of a good father establish lack of care and skill on his part which renders the
of a family to avoid injury to himself. company liable.

Art. 1762. The contributory negligence of the passenger does not bar Case: Compania Maritima vs. CA and Vicente Concepcion
recovery of damages for his death or injuries, if the proximate cause - While the act of private respondent in furnishing petitioner
thereof is the negligence of the common carrier, but the amount of with an inaccurate with of the payloader cannot successfully
damages shall be equitably reduced. be used as an excuse by petitioner to avoid liability to the
damage thus caused, said act constitutes a CONTRIBUTORY
a. Last Clear Chance CIRCUMSTANCE to the damage caused on the payloader,
which mitigates the liability for damages of petitioner in
accordance with Article 1741.
A negligent carrier is liable to a negligent passenger in placing himself
in peril, if the carrier was aware of the passenger’s peril, or should
Case: Philippine National Railways vs. CA
have been aware of it in the reasonable exercise of due care, had in
- While petitioner failed to exercise extraordinary diligence as
fact an opportunity later than that of the passenger to avoid an
required by law, it appears that the deceased was chargeable
accident.
with contributory negligence.
- Since he opted to sit on the open platform between the
Last clear chance applies in a suit between the owners and drivers of coaches of the train, he should have held tightly and
colliding vehicles. It does not arise where a passenger demands tenaciously on the upright metal bar found at the side of said
responsibility from the carrier to enforce its contractual obligations. platform to avoid falling off from the speeding train
For it would be inequitable to exempt the negligent driver of the
carrier and its owner on the ground that the other driver was likewise
guilty of negligence.
 B. FREIGHT
a. Amount to be Paid
The regulation of rates is founded upon the valid exercise of the Police
Power of the state in order to protect the public from arbitrary and
excessive rates while maintaining the efficiency and quality of services
rendered. The fixing of just and reasonable rates involves a balancing
of investor and the consumer interest.
Although the consideration that should be paid to the carrier is still
subject to the agreement between parties, what can be agreed upon
should not be beyond the maximum amount fixed by appropriate
government agency.
b. Who will pay
Although either of the shipper or the consignor may pay the freight
before or at time the goods are delivered to the carrier for shipment,
nonetheless, it is the consignor (whom the contract of carriage is
made) who is primarily liable for the payment of freight whether or not
he is the owner of the goods. The obligation to pay is implied from the
mere fact that the consignor has placed the goods with the carrier for
the purpose of transportation.
c. Time to pay
Code of Commerce provides that in the absence of any agreement, the
consignee who is supposed to pay must do so within 24-hours from the
time of delivery.
Article 374. The consignees to whom the shipment was made may
not defer the payment of the expenses and transportation charges of
the goods they receive after the lapse of twenty-four hours following
their delivery; and in case of delay in this payment, the carrier may
demand the judicial sale of the goods transported in an amount
necessary to cover the cost of transportation and the expenses
incurred.
(1) Carriage of Passengers by Sea
With respect to carriage of goods by sea, the tickets are purchased in
advance. Carriers are not supposed to allow passengers without tickets
--- the carrier is bound to observe a “No Ticket, No Boarding Policy”.
The carrier shall collect/ inspect the passenger’s ticket within one hour
from vessel’s departure as not to disrupt resting or sleeping
passengers.
If the vessel is not able to depart on time and the delay is
unreasonable, the passenger may opt to have his/ her ticket refunded
without refund service fee.
Delayed voyage means “late departure of the vessel from its port of
origin and/ or late arrival of the vessel to its port of destination”.
Unreasonable delay means “the period of time that has lapsed without
just cause and is solely attributable to the carrier which has prejudiced
the transportation of the passenger and/ or cargoes to their port of
destination.
A passenger who failed to board the vessel can refund or revalidate the
ticket subject to surcharges. Revalidation means “the accreditation of
the ticket that is not used and intended to be used for another voyage.
(2) Carrier’s Lien
If consignor or the consignee fails to pay the consideration for the
transportation of goods, the carrier may exercise his lien in accordance
with Art. 375 of Code of Commerce:
ARTICLE 375. The goods transported shall be especially bound to
answer for the cost of transportation and for the expenses and fees
incurred for them during their conveyance and until the moment of
their delivery.
This special right shall prescribe eight days after the delivery has been
made, and once prescribed, the carrier shall have no other action than
that corresponding to him as an ordinary creditor.
DEMURRAGE
Demurrage is the compensation provided for the contract of
affreightment for the detention of the vessel beyond the time agreed
on for loading and unloading. It is the claim for damages for failure to
accept delivery. In broad sense, very improper detention of a vessel
may be considered a demurrage. Technically, liability for demurrage
exists only when expressly stipulated in the contract.
Using the term in broader sense, damages in the nature of demurrage
are recoverable for a breach of the implied obligation to load or unload
the cargo with reasonable dispatch, but only by the party to whom the
duty is owed and only against on who is a party to the shipping
contract. Notice of arrival of vessels or conveyances, or their
placement for purposes of unloading is often a condition precedent to
the right to collect demurrage charges.
CHAPTER 3
EXTRAORDINARY DILIGENCE
I. RATIONALE
A common carrier is bound to carry the passengers safely as
far a human care and foresight provide, using the utmost diligence of
very cautious persons, with due regard for all circumstances.
Extraordinary diligence: Calculated to protect the passengers
from the tragic mishaps that frequently occur in connection with rapid
modern transportation.
II. HOW DUTY IS COMPLIED WITH
- There is no hard and fast rule in the exercise of extraordinary
diligence
- Common carrier binds itself to carry the passengers safely as
far as human care and foresight can provide, using the
utmost diligence of a very cautious person, with due regard
for all the circumstances.
- The duty even extends to the members of the crew or
complement operating the carrier
Case: Kapalaran Bus Lines vs. Coronado
- If common carriers carefully observed the statutory standard
of extraordinary diligence in respect of their own passengers,
they cannot help but simultaneously benefit pedestrians and
the owners and passengers of other vehicles who are equally
entitled to the safe and convenient use of our roads and
highways
A reasonable man or a good father of a family in the position of the
carrier must exercise extraordinary diligence in the performance of his
contractual obligation.
 - Generally, what should be determines is whether or not a
reasonable man, exercising extraordinary diligence, could
have foreseen and prevented the damage or loss that
occurred.
III. EFFECT OF STIPULATION
A. GOODS
- The parties cannot stipulate that the carrier will NOT exercise
ANY diligence in the custody of goods
- The law allows a stipulation whereby the carrier will exercise
a degree of diligence which is less than extraordinary with
respect to goods.
Art. 1744. A stipulation between the common carrier and the
shipper owner limiting the liability of the former for the loss,
destruction, or deterioration of the goods to a degree less
than extraordinary diligence shall be valid, provided it be:
1. In writing, signed by the shipper/owner;
2. Supported by a valuable consideration other than the
service rendered by the common carrier (Note: Typically
fare/freight); and
3. Reasonable, just and contrary to public policy.
B. PASSENGERS
- There can be no stipulation lessening the utmost diligence
that is owed to passengers.
Art. 1757. The responsibility of a common carrier for the
safety of passengers as required in Arts. 1733 and 1755
cannot be dispensed with or lessened by stipulation, by the
posting of notices, by statements on tickets, or otherwise.
(Note: Absolute; extraordinary at all times.)
Gratuitous passenger – A stipulation limiting the common carrier’s
liability for negligence is valid, but not for willful acts of gross
negligence. The reduction of fare does not justify any limitation.
Case: Lara vs. Valencia
- Diligence owed to accommodation passengers is only
ordinary diligence
- However, this case is not controlling with respect to common
carriers because the defendant in the said case was not a
common carrier
IV. EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA
A. SEAWORTHINESS
a. Warranty of Seaworthiness of Ship
- This is the first step that should be undertaken
- Extraordinary diligence requires that the ship which will
transport the passengers and goods is seaworthy.
- Seaworthiness of the vessel is impliedly warranted.
- The carrier shall be bound before and at the beginning
of the voyage to exercise due diligence to make the ship
seaworthy.
b. No duty to inquire
- Because of the implied warranty of seaworthiness,
shippers of goods, when transacting with common
carriers, are not expected to inquire into the vessels
seaworthiness, genuineness of its licenses and
compliance with all maritime laws. Passengers cannot
be expected to inquire everytime they board a common
carrier, whether the carrier possesses the necessary
papers or that all the carrier’s employees are qualified.
- It is the carrier that carries such burden of proving that
the ship is seaworthy.
- Sufficient evidence must be submitted and the
presentation of certificates of seaworthiness is not
sufficient to overcome the presumption of negligence.
c. Meaning of Seaworthiness
- A vessel must have such degree of fitness which an
owner who is exercising extraordinary diligence would
require his vessel to have at the commencement of the
voyage, having regard to all the probable circumstances
of it. This includes fitness of the vessel itself to
withstand the rigors of voyage, fitness of the vessel to
store the cargoes and accommodate passengers to be
transported and that it is adequately equipped and
properly manned.
- Seaworthiness is that strength, durability and
engineering skill made a part of a ship’s construction
and continued maintenance, together with a competent
and sufficient crew, which would withstand the
vicissitudes and dangers of the elements which might
reasonably be expected or encountered during her
voyage without loss or damage to her particular cargo
Example: The carrier was able to establish that the ship itself was
seaworthy because the records reveal that the vessel was dry-docked
and inspected by the Phil. Coast Guard before its first destination.
A warranty of seaworthiness requires that it be properly laden, and
provided with a competent master, a sufficient number of competent
officers and seamen, and the requisite appurtenances and equipment.
The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to:
1. Make the ship seaworthy;
2. Properly man, equip, and supply the ship;
3. Make all parts of the ship in which goods are carried, fit
and safe for their reception, carriage, and preservation.
The carrier shall properly and carefully load, handle, stow, carry, keep,
care for, and discharge the goods carried.
Note: Seaworthiness is relative it its construction and its application
depends on the facts of a particular case (ex. Length and nature of the
voyage)
Fitness of the Vessel Itself
- It is necessary that the vessel can be expected to meet the
normal hazards of the journey
- General Test of Seaworthiness: Whether the ship and its
appurtenances are reasonably fit to perform the service
undertaken.
The ship must be “cargoworthy”
- Even if the vessel was properly maintained and is free from
defect, the carrier must not accept the goods that cannot
properly be transported in the ship
- The ship must be efficiently strong and equipped to carry the
particular kind of cargo which she has contracted to carry
and her cargo must be so loaded that it is safe for her to
proceed on her voyage.
The vessel must be adequately equipped and properly manned.
- On top of regular maintenance and inspection, Captains,
masters or patrons of vessels must prove the skill, capacity,
and qualifications necessary to command and direct the
vessel.
- If the owner of a vessel desires to be the captain without
having the legal qualifications, he shall limit himself to the
financial administration of the vessel and shall entrust the
navigation to a qualified person.
Note: It is not an excuse that the carrier cannot afford the salaries of
competent and licensed crew or that latter is unavailable.
Adequate Equipment
- With respect to vessels that carries passengers, the Maritime
Industry Authority prescribes rules which provide for
indispensable equipment and facilities
- ex. Exit doors, life boats, live vests
B. OVERLOADING
- Duty to exercise due diligence likewise includes the duty to
take passengers or cargoes that are within the carrying
capacity of the vessel.
C. PROPER STORAGE
- The vessel itself may be suitable for the cargo but this is not
enough because the cargo must also be properly stored.
Cargo must generally not be placed on deck. The carrying of deck cargo
raises the presumption of unseaworthiness unless it can be shown that
the deck cargo will not interfere with the proper management of the
ship.
D. NEGLIGENCE OF CAPTAIN AND CREW
- Failure on the part of the carrier to provide competent
captain and crew should be distinguished from the
negligence of the said captain and crew, because the latter is
covered by the Limited Liability Rule (liability of the
shipowner may be limited to the value of the vessel).
- If the negligence of the captain and crew can be traced to the
fact that they are really incompetent, the Limited Liability
Rule cannot be invoked because the shipowner may be
deemed negligent.
Rules on passenger safety
- Negligence on the part of the captain and crew as well as the
operator includes failure to comply with the regulation
issued by the Maritime Industry Authority (MARINA) on the
safety of the passengers
- Memorandum Circular No. 112 : passengers do not merely
contract for transportation because they have the right to be
treated by the carrier and its employees with kindness,
respect, courtesy and due consideration. They are entitled to
be protected against personal conduct, injurious language,
indignities and abuses from the said carrier and its
employees
- Read Memorandum Circular No. 114: p. 204
Case: Planters Products Inc. vs. CA
- The period during which private respondent was to observe
the degree of diligence required of it as a public carrier
began from the time the cargo was unconditionally placed in
its charge after the vessel’s holds were duly inspected and
passed scrutiny by the shipper, up to and until the vessel
reached its destination and its hull was re-examined by the
consignee, but prior to unloading
- A ship owner is liable for damage to the cargo resulting from
improper stowage ONLY when the stowing si done by
stevedores employed by him, and therefore under his
control and supervision, not when the same is done by the
consignee or stevedores under the employ of the latter
E. DEVIATION AND TRANSSHIPMENT
1. Deviation
- If there is an agreement between the shipper and the carrier
as to the road over which the conveyance is to be made
(subject to the approval by the Maritime Industry Authority),
the carrier may not change the route, unless it be by reason
of force majeure. Without this cause, he shall be liable for all
the losses which the goods may suffer, aside from paying the
sum stipulated for that case.
- When on account of the force majeure, the carrier had to
take another route which resulted to an increase in
transportation charges, he shall be reimbursed upon formal
proof.
Note: With respect to carriers by sea, the routes are subject to
approval by MARINA and the same cannot generally be changed
without the authorization from said administrative agency
2. Transshipment
- The act of taking cargo out of one ship and loading it into
another; to transfer goods from the vessel stipulated in the
contract of affreightment to another vessel before the place
of destination named in the contract has been reached.
- Transshipment of freight without legal excuse is a violation of
the contract and subjects the carrier to liability if the freight
is lost even by a cause otherwise excepted.
Note: there is transshipment whether or not the same person, firm or
entity owns the vessels (what matters is the actual physical transfer of
cargo from one vessel to another)
V. EXTRAORDINARY DILIGENCE IN CARRIAGE BY LAND
A. CONDITION OF VEHICLE
- Common carriers that offer transportation by land are
similarly required to make sure that the vehicles that they
are using are in good order and condition.
Rule on Mechanical Defects – If the carriers will replace certain parts of
the motor vehicle, they are duty bound to make sure that the parts
that they are purchasing are not defective. Hence, it is a long-standing
rule that a carrier cannot escape liability by claiming that the accident
that resulted because of a defective break or tire is due to a fortuitous
event. This is true even if it can be established that the tire that was
subject of a blow-out is brand new. The duty to exercise extraordinary
diligence requires the carrier to purchase and use vehicle parts that are
not defective.
B. TRAFFIC RULES
- The carrier fails to exercise extraordinary diligence if it will
not comply with basic traffic rules. The Civil Code provides
for a presumption of negligence in case the accident occurs
 while the operator of the motor vehicle is violating traffic
rules.
In cases involving breach of contract of carriage, proof of violation of
traffic rules confirms that the carrier failed to exercise extraordinary
diligence.
Case: Mallari Sr and Jr vs. CA
- The rule is settled that a driver abandoning his proper lane
for the purpose of overtaking another vehicle in an ordinary
situation has the duty to see to it that the road is clear and
not to proceed if he cannot do so in safety
C. DUTY TO INSPECT
- There is no unbending duty to inspect each and every
package or baggage that is being brought inside the bus or
jeepney. The carrier is duty bound to conduct such
inspection depending on the circumstances.
Case: Nocum vs. Laguna Tayabas Bus Company
- While it is true the passengers of appellant’s bus should not
be made to suffer for something over which they had no
control, fairness demands that in measuring a common
carrier’s duty towards its passengers, allowance must be
given to the reliance that should be reposed on the sense of
responsibility of all the passengers in regard to their common
safety.
- It is to be presumed that a passenger will not take with him
anything dangerous to the lives and limbs of his co-
passengers not to speak of his own.
- Not to be lightly considered is the right to privacy to which
each passenger is entitled
- In other words, inquiry may be verbally made as to the
nature of a passenger’s baggage when such is not outwardly
perceptible, but beyond this, constitutional boundaries are
already in danger of being transgressed
- SC held that carrier has succeeded in rebutting the
presumption of negligence by showing that it has exercised
extraordinary diligence for the safety of its passenger,
according to the circumstances of each case
Note: although overland transportation are not bound nor empowered
to make an examination on the contents of packages or bags
particularly those hand carried by passengers, such is different with
regards to an airline company.
VI. EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR
- The aircraft must be in such a condition that it must be able
to withstand the rigors of flight.
Airworthiness – An aircraft, its engines propellers, and other
components and accessories, are of proper design and construction,
and are safe for air navigation purposes, such design and construction
being consistent with accepted engineering practice and in accordance
with aerodynamic laws and aircraft science.
Proof of airworthiness is not by itself sufficient to prove exercise of
extraordinary diligence.
Case: Japan Airlines vs. CA
- The fact that the flight was cancelled due to fortuitous event
does not mean that the carrier’s duty already ended. The
carrier is still obligated to look after the convenience and
comfort of the passenger
- Thus the carrier was obligated to make the necessary
arrangements to transport the passenger on the first
available flight.
A. INSPECTION
- It is the duty of the carrier to make inquiry as to the general
nature of the articles shipped and of their value before it
consents to carry them; and its failure to do so cannot defeat
the shipper’s right to recovery of full value of the package if
lost, in the absence of showing of fraud or deceit on the part
of the shipper.
Where a common carrier has reasonable ground to suspect that the
offered goods are of a dangerous character, the carrier has the right to
know the character of such goods and to insist inspection, if
reasonable and practical under the circumstances, as a condition of
receiving and transporting such goods. To be subjected to unusual
search, other than the routinary inspection procedure customarily
undertaken, there must exist proof that would justify cause for
apprehension that the baggage is dangerous as to warrant exhaustive
inspection, or even refusal to accept carriage of the same.
Case: Northwest Airlines vs. Laya
- The fact that the plaintiff was greatly inconvenienced by the
fact that his attaché case was subjected to further inspection
does not warrant imposition of liability because he was not
singled out and discriminated by the employees of the carrier
- Protection of passengers must take precedence over
convenience
- Nevertheless, the implementation of security measures must
be attended by basic courtesies
CHAPTER 4
BILL OF LADING
I. CONCEPTS, DEFINITION AND KINDS
Bill of Lading (BOL)
- a written acknowledgement, signed by the master of a vessel
or other authorized agent of the carrier, that he has received
the described goods from the shipper, to be transported on
the expressed terms to be described the place of destination,
and to be delivered to the designated consignees of the
parties.
- It operates as a (1) RECEIPT (2) as a CONTRACT (3) as a
DOCUMENT OF TITLE.
A BOL is not necessary for the perfection of a contract of carriage.
Thus, the obligation to exercise extraordinary diligence by the carrier is
still required even if there is no bill of lading.
In the absence of the bill of lading, disputes shall be determined on
the basis of the provisions in the New Civil Code and suppletory by the
Code of Commerce.
KINDS of BILL of LADING:
1. Clean Bill of Does not contain any notation indicating any
Lading defect in the goods.
2. Foul Bill of One that contains the abovementioned notation.
Lading
3. Spent Bill of The goods are already delivered but the bill of
Lading lading was not yet returned (upon delivery, the
carrier is supposed to retrieve the covering bill of
the goods)
4. Through Bill Issued by a carrier who is obliged to use the
of Lading 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 BOL is honored by the second and
other interested carriers who don’t issue their
own BOL.
5. On Board -states that the goods have been received on
Bill board the vessel which is to carry the goods.
-apparently guarantees the certainty of shipping
as well as the seaworthiness of the vessel to
carry the goods.
-basically means that the goods are already
inside the vessel
6. Received -states that the goods have been received for
for Shipment shipment with or without specifying the vessel
Bill by which the goods are to be shipped.
-issued when conditions are not normal and
there is insufficiency of shipping space.
7. Custody Bill The goods are already receied by the carrier but
of Lading the vessel indicated therein has not yet arrived
in the port.
8. Port Bill of The vessel indicated in the BOL that will
Lading transport the goods is already in the port.
Note: A party to a maritime contract would require an on board bill of
lading because of its apparent guaranty of certainty of shipping as well
as the seaworthiness of the vessel which is to carry the goods.
Effectivity of BOL
- upon its delivery to and acceptance by the shipper.
- The acceptance of the bill without dissent raises the
presumption that all the terms therein were brought to the
knowledge of the shipper and agreed to by him, and in the
absence of fraud or mistake, he is stopped thereafter from
denying that he assented to such claims (whether he reads
the bill or not)
THE 3-FOLD NATURE OF THE BILL OF LADING
- The three fold nature of a bill of lading is obviously applicable
only to carriage of goods
- As receipt and document of title: issued for goods
- As contract: applies to tickets issued to passengers
I. RECEIPT
- As comprehending all methods of transportation, a
BOL may be defined as a written acknowledgement of the
receipt of goods and an agreement to transport and to
deliver them at a specified place to a person named or on his
order.
- Other terms, “shipping receipts”, “forwarders receipts”, and
“receipts for transportation”.
- (SC) the designation however is not material, and neither is
the form of the instrument. If it contains an
acknowledgement by the carrier of the receipt of goods for
transportation it is, in legal effect a BOL.
- The issuance of a bill of lading carries the presumption that
the goods were delivered to the carrier issuing the bill, for
immediate shipment, and it is nowhere questioned that a bill
of lading is prima facie evidence of the receipt of the goods
by the carrier
II. CONTRACT
- It expresses the terms and conditions of the agreement
between the parties; names the parties; includes consignees
etc. It is the law between the parties bound by its terms and
conditions.
Contracts of Adhesion
- It is to be construed liberally in favor of the shipper who
adhered to such bill as it is a contract of adhesion. The only
participation of the party is the signing of his signature or his
adhesion thereto.
- The shipper or passenger is bound by the terms and
conditions if there is no occasion to speak of ambiguities or
obscurities
- If the words appear to be contrary to the evident intention of
the parties, the latter shall prevail over the former
ART. 24 (NCC). In all contractual property or other relations, when one
of the parties is at a disadvanatge on account of his moral dependence,
ignorance indigence, mental weakness, tender age and other handicap,
the court must be vigilant for his protection.
Parole Evidence Rule
- BOL is covered by the parol evidence rule, that the terms of
the contract are conclusive upon the parties and evidence
aliunde is not admissible to vary or contradict a complete
enforceable agreement, subject to well defined exceptions
- The mistake contemplated as an exception to the parol
evidence rule is one which is a mistake of fact mutual to the
parties.
- Note that if such is not raised inceptively in the complaint or
in the answer, a party cannot later on be permitted to
introduce parol evidence thereon
Bill of Lading as Evidence
- The BOL is the legal evidence of the contract and the entries
thereof constitutes prima facie evidence of the contract.
- All the essential elements of a valid contract (cause, consent,
object) are present when such bill are issued.
III. ACTIONABLE DOCUMENT/DOCUMENT OF TITLE
- In a contractual obligation, the bill of lading can be
categorized as an actionable document under the Rules of
Court. Hence, the bill of lading must be properly pleaded
either as causes of action or defenses
- ART 1507 (NCC). A document of title 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 in such document is a
negotiable document of title.
- If the document of title contains the required words of
negotiability to make the instrument negotiable under Article
1507 of the NCC, the document remains to be negotiable
even if the words “not negotiable” or non negotiable are
places thereon
o a. Bearer document- negotiated by delivery
o b. Order document- negotiated by indorsement of
the specified person so named
- Effects of negotiation. Negotiation of the document has the
effect of manual delivery so as to constitute the transferee
the owner of the goods.
BASIC STIPULATIONS
- Provided for in the Code of Commerce
- (for overland transportation, maritime commerce and
electronic documents, please refer to the textbook for the
codal pp. 203-210)
PROHIBITED AND LIMITING STIPULATION
1. Exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence - INVALID as it is
contrary to public policy.
2. Parties may stipulate that the diligence to be exercised by
the carrier for the carriage of goods be less than
extraordinary diligence if it is:
a. in writing and signed by both parties
b. supported by a valuable consideration other than
the service rendered by the common carrier
c. the stipulation is just, reasonable and not contrary
to law.
3. Providing an unqualified limitation of such liability to an
agreed valuation - INVALID
4. Limiting the liability of the carrier to an agreed valuation
unless the shipper declares a higher value and pays a higher
rate of freight- VALID and ENFORCEABLE.
Note: the purpose of limiting stipulations in the bill of lading is to
protect th common carrier. Such stipulation obliges the
shipper/consignee to notify the common carrier of the amount that
the latter may be liable for in case of loss of the goods
Remember:
1. The parties cannot stipulate so as to totally exempt the
carrier from exercising any degree of diligence whatsoever
2. The parties cannot stipulate that the common carrier shall
exercise diligence less than the diligence of a good father of a
family
RECOVERY OF DAMAGES FROM CARRIER FOR CARRIAGE OF GOODS:
1. Inter-island - if goods arrived in damaged condition (Art. 366):
a. If damage is apparent, the shipper must file a claim immediately (it
may be oral or written);
b. If damage is not apparent, he should file a claim within 24 hours
from delivery.
The filing of claim under either (1) or (2) is a condition precedent for
recovery.
If the claim is filed, but the carrier refuses to pay: enforce carrier’s
liability in court by filing a case:
a. within 6 year, if no bill of lading has been issued; or
b. within 10 years, if a bill of lading has been issued.
2. Overseas –where goods arrived in a damaged condition from a
foreign port to a Philippine port of entry: (COGSA)
a. upon discharge of goods, if the damage is apparent, claim should be
filled immediately;
b. if damage is not apparent, claim should be filled within 3 days from
delivery.
Filing of claim is not a condition precedent, but an action must be filed
against the carrier within a period of 1 year from discharge; if there is
no delivery, the one-year period starts to run from the day the vessel
left port (in case of undelivered or lost cargo), or from delivery to the
arrastre (in case of damaged cargo).
Where there was delivery to the wrong person, the prescriptive period
is 10 years because there is a violation of contract, and the carriage of
goods by sea act does not apply to misdelivery. (Ang v. American SS
Agencies (19 SCRA 631)
CARRIAGE OF GOODS BY SEA ACT (C.A. No. 65)
- Applies suppletorily to the Civil Code if the goods are to be
shipped form a foreign port to the Philippines
- COGSA is applicable in international maritime commerce. It
can be applied in domestic sea transportation if agreed upon
by the parties. (paramount clause)
- Under the Sec. 4 (5), the liability limit is set at $500 per
package 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 v.
IAC, 150 SCRA 463).
- If by agreement, another maximum amount than that
mentioned may be fixed provided that such maximum shall
not be less than $500 and in no event shall the carrier be
liable for more than the amount of damage actually
sustained
Note that Art. 1749 of the NCC applies to inter-island trade.
Meaning of Package
- If the goods are shipped in cartons, each carton is considered
a package even if they are stored in container vans
- When what ordinarily be considered packages are shipped in
a container supplied by the carrier and the number of such
units is disclosed in the shipping documents, each of those
units and not the container constitutes the package.
Prescriptive periods
- Suit for loss or damage to the cargo should be brought within
one year after:
a. delivery of the goods; or
b. the date when the goods should be delivered. (Sec.
3[6])
The one-year prescriptive period is suspended by:
1. express agreement of the parties (Universal Shipping Lines,
Inc. v. IAC, 188 SCRA 170)
2. when an action is filed in court until it is dismissed. (Stevens
& Co. v. Nordeutscher Lloyd, 6 SCRA 180)
Things to Remember:
1. Article 1757 provides that the responsibility of a common
carrier to exercise utmost diligence for the safety of
PASSENGERS CANNOT be dispensed with or lessened by
stipulation or statement on tickets or otherwise
2. Article 1750 of the Civil Code provides that a contract fixing
the sum that may be recovered by the owner or shipper for
the loss, destruction, or deterioration of the GOODS is VALID,
if it is REASONABLE and JUST under the circumstances, and
has been FAIRLY AND FREELY AGREED UPON
3. It is unfair to deny the shipper the right to declare the actual
value of his cargos and to recover such true value in case of
loss or damage
Note: it has been suggested that the signature of the shipper
in the bill of lading with regards to the limitation applies only
to reduction of diligence and not to the stipulated amount to
be paid.
4. It is unjust and contrary to public policy if the common
carrier’s liability for acts committed by thieves, or of robbers
who do not act with grave or irresistible threat, violence or
force, is dispensed with or diminished
 5. The common carrier may EXEMPT itself from liability if he
can prove that:
a. He observed extraordinary diligence
b. The proximate and only cause of the incident is a
fortuitous event or force majeure
c. The proximate and only cause of the loss is the
character of the goods or defects in the packing or
in the containers
d. The proximate and only cause of the loss is the
order or act of competent public authority
Note: to limit its liability or at least mitigate the same, the
carrier can cite CONTRIBUTORY NEGLIGENCE of the plaintiff
and the DOCTIRNE OF AVOIDABLE CONSEQUENCES
Case: Sea-Land Service Inc. vs. IAC
- Liability of a common carrier for loss of or damage to goods
transported by it under a contract of carriage is governed by
the laws of the country of destination
- COGSA is applicable up to the final port of destination and
that the fact that transshipment was made on an interisland
vessel did not remove the contract of carriage of goods from
the operation of said Act.
Case: Citadel Lines Inc. vs. CA
- The duty of the consignee is to prove merely that the goods
were lost. Thereafter, the burden is shifted to the carrier to
prove that it has exercised the extraordinary diligence
required by law. And, its extraordinary responsibility lasts
from the times that 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
Case: Everett Steamship Corporation vs. CA
- Considering that the shipper did not declare a higher
valuation it had itself to blame for not complying with the
situations
- The trial court’s ratiocination that private respondent could
not have “fairly and freely” agreed to the limited liability
clause in the bill of lading because the said conditions were
printed in small letters does not make the bill of lading
invalid
WARSAW CONVENTION of 1929
WHEN APPLICABLE:
- Applies to all international transportation of person, baggage
or goods performed by aircraft for hire.
- “International transportation” means any transportation in
which the place of departure and the place of destination are
situated either:
o within the territories of two High Contracting
Parties regardless of whether or not there be a
break in the transportation or transshipment, or
o 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.
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)
NOTE: Warsaw prevails over the Civil Code, Rules of Court and all
laws in the Philippines since an international law prevails over
general law.
WHEN NOT APPLICABLE:
1. If there is willful misconduct on the part of the carrier’s
employees. The Convention does not regulate, much less
exempt, carrier from liability for damages for violating the
rights of its passengers under the contract of carriage (PAL v.
CA, 257 SCRA 33). --- if the damage is similarly caused by any
agent of the carrier acting within the scope of his
employment
2. when it contradicts public policy;
3. if the requirements under the Convention are not complied
with.
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;
(Art. 17)
2. Destruction, loss or damage to any luggage or goods, if it
took place during the carriage; (Art. 18) and
3. Delay in the transportation of passengers, luggage or goods.
(Art. 19)
NOTE: The Hague Protocol amended the Warsaw Convention 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 v. IAC, 192 SCRA 9)
Remember: The said provisions merely declare the carrier liable for
damages in the enumerated cases if the conditions therein specified
are present. Neither said provisions nor others in the aforementioned
Convention regulate or exclude liability for OTHER BREACHES of
contract of carrier.
The Convention does not thus operate as an exclusive enumeration of
the instances of an airline’s liability, or as an absolute limit of the
extent of that liability.
LIMIT OF LIABILITY
1. passengers - limited to 250,000 francs;
 except: agreement to a higher limit
2. goods and checked-in baggage - 250 francs/kg
 except: consigner declared its value and paid a
supplementary sum, carrier liable to not more than
the declared sum unless it proves the sum is
greater than its actual value.
3. hand-carry baggage - limited to 5,000 francs/passenger
An agreement relieving the carrier from liability or fixing a lower limit
is null and void. (Art. 23)
Carrier not entitled to the foregoing limit if the damage is caused by
willful misconduct or default on its part. (Art. 25)
Case: China Airlines vs. Daniel Chiok
- The ticket-issuing airline acts as principal in a contract of
carriage and is thus liable for the acts and the omissions of
any errant carrier to which it may have endorsed any sector
of the entire, continuous trip.
Place of Destination- within the meaning of the Warsaw Convention, is
determined by the terms of the contract of carriage, or specifically the
ticket between the passenger and the carrier. It is the destination and
not an agreed stopping place that controls for the purpose of
ascertaining jurisdiction under the Convention. (Case: Santos III vs.
Northwest Orient Airlines and CA)
ACTION FOR DAMAGES
1. Condition precedent
A written complaint must be made within:
- 3 days from receipt of baggage
- 7 days from receipt of goods
- in case of delay, 14 days from receipt of baggage/goods
F otherwise the action is barred except in case of fraud on the part of
the carrier. (Art. 26)
2. Jurisdiction – governed by domestic law
3. Venue – at the option of the plaintiff:
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;
d. court of the place of destination. (Art. 28)
4. Prescriptive period – 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped. (Art. 29)
5. Rule in case of various successive carriers,
a. In case of transportation of passengers – the action is filed only
against the carrier in which the accident or delay occurred
unless there is an agreement whereby the first carrier assumed
liability for the whole journey.
b. In case of transportation of baggage or goods
i. the consignor can file an action against the first carrier and
the carrier in which the damage occurred
ii. the 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)
Nota Bene: COGSA/WARSAW applies to foreign vessels or airplane or
international travel
Code of Commerce applies to inter-island or domestic
travel.
Bill of Lading as Document of Title
 Bill of lading is a document of title under the Civil Code. It can
be a negotiable document of title.
A. Negotiability
- It is negotiable if it is deliverable to the bearer, or to the order of any
person named in such document. (Art. 1507, Civil Code)
a) Effect of Stamp or Notation “Non-Negotiable”
 the document remains to be negotiable even if the words
“not-negotiable” or “non-negotiable” are placed thereon. -
Art. 1510 (Civil Code)
B. How Negotiated
a) Bearer document (Art. 1508 and 1511)
- may be negotiated be delivery
b) Order document (Sec. 38, NIL and Art. 1509, NCC)
- can only be negotiated through the indorsement of the specified
person so named.
- such indorsement may be in blank, to bearer or to a specified person.
 Where a negotiable document of title is transferred for value
by delivery, and the endorsement of the transferor is
essential for negotiation, the transferee acquires a right
against the transferor to compel him to endorse the
document. xxx (Art. 1515, Civil Code)
C. Effects of Negotiation
- has the effect of manual delivery so as to constitute the transferee
the owner of the goods
- results in the transfer of ownership because transfer of document
likewise transfers control over the goods
- refer to Art. 1513
Chapter 5
Actions and Damages in Case of Breach
 Cause of action of a passenger and shipper:
a) against common carrier – based on culpa contractual or culpa
aquiliana
b) on the part of the driver – based on either culpa delictual or culpa
aquiliana
Note: The source of obligation based on culpa contractual is separate
and distinct from quasi-delict.
Article 1903 (last paragraph) – 2 things are apparent:
1. That when an injury is caused by the negligence of a servant
or employee there instantly arises a presumption of law that
there was negligence on the part of the master or the
employer either in the selection of the servant or employee,
or in supervision over him after the selection, or both.
2. That presumption is juris tantum and not juris et de jure (of
law and of right), and consequently may be rebutted
Note however: that Article 1903 of the Civil Code is not applicable to
acts of negligence which constitute the breach of contract. It is
applicable only to culpa contractual.
 The fundamental distinction between obligation of extra-
contractual and those which arise from contract, rests upon the
fact that in cases of non-contractual obligation it is the wrongful
or negligent act or omission itself which creates the vinculum
juris, whereas in contractual relations the vinculum (bond) exists
independently of the breach of the voluntary duty assumed by
the parties when entering into the contractual relation.
CONCURRENT CAUSES OF ACTION
- There is one action but several causes of action
- The same act that breaches the contract may also be
tort
Note: The cause of action of a passenger or shipper against the
common carrier can be culpa contractual or culpa aquiliana while the
basis of liability on the part of the driver is either culpa delictual or
culpa aquiliana. The driver of the carrier is not liable based on contract
because there is NO PRIVITY of contract between him and the
passenger or shipper.
If the negligence of third persons concurs with the breach, the liability
of the third person who was driving the vehicle and/or his employer
may be based on quasi delict. The driver alone may be held criminally
liable and civil liability may be imposed upon him based on delict. In
the latter case, the employer is subsidiarily liable.
Remember: It does not make any difference that the liability of one
springs from the contract while that of the other arises from quasi-
delict. If the owner and driver of the other vehicle are not impleaded,
the carrier may implead them by filing a third party complaint.
 Solidary liability
- In case the negligence of the carrier’s driver and a third
person concurs, the liability of the parties – carrier and his
driver, third person – is joint and several.
NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD
A. Overland Transportation of Goods and Coastwise Shipping
a) When to file a claim with carrier
- Art. 366 constitutes a condition precedent to the accrual
of a right of action against a carrier for damage caused
to the merchandise.
 Under Art. 366 of the Code of Commerce, an action for
damages is barred if the goods arrived in damaged condition
and no claim is filed by the shipper within the following period:
1. Immediately if damage is apparent;
2. within twenty four (24) hours from delivery if damage is
not apparent.
- The period does not begin to run until the consignee has
received possession of the merchandise that he may exercise
over it the ordinary control pertinent to ownership.
- This provision applies even to transportation by sea within
the Phils. or coastwise shipping.
- Does NOT apply to misdelivery of goods.
Q: Why does it not apply to misdelivery of goods?
A: In such cases (misdelivery), there can be no question of claim for
damages suffered by the goods while in transport, since the claim for
damages arises exclusively out of the failure to make delivery.
Case: Monica Roldan vs. Lim Ponzo and Co.
- Article 366 of the Commercial Code is limited to cases of
claims for damage to goods actually turned over by the
carrier and received by the consignee.
 But the period prescribed in Art. 366 may be subject to
modification by agreement of the parties.
 The validity of a contractual limitation of time for filing the suit
itself against a carrier shorter than the statutory period thereof
has generally been upheld as such stipulation merely affects
the shipper’s remedy and does not affect the liability of the
carrier.
b) Extinctive Prescription
- six (6) years if there is no written contract (bill of lading)
- ten (10) years if there is written contract
 This rule likewise applies to carriage of passengers for domestic
transportation.
B. International Carriage of Goods by Sea
 A claim must be filed with the carrier within the following
period:
1. if the damage is apparent, the claim should be filed
immediately upon discharge of the goods; or
2. within 3 days from delivery, if damage is not apparent.
 Filing of claim is not condition precedent. Thus, regardless of
whether the notice of loss or damage has been given, the
shipper can still bring an action to recover said loss or damage
within one year after the delivery of the goods or the date when
the goods should have been delivered
a) Prescription
 Action for damages must be filed within a period of one (1) year
from discharge of the goods.
 The period is not suspended by an extra-judicial demand. (Why?
Transportation of goods by sea should be decided in as short a
time as possible)
o Case: Dole Philippines Inc. vs. Maritime Company of
the Philippines - the prescriptive period is not tolled
or interrupted by a written extra-judicial demand.
Article 1155 is NOT applicable.
 The period does not apply to conversion or misdelivery.
 The one (1) year period refers to loss of goods and not to
misdelivery.
- Damages arising from delay or late delivery are not the
damage or loss contemplated under the COGSA. The goods
are not actually lost or damaged. The applicable period is ten
(10) years.
- Case: Domingo Ang vs. American Steamship Agencies
 What is to be resolved – in order to determine the
applicability of the prescriptive period of one year
– is whether or not there was loss of the goods
subject matter of the complaint.
 Loss contemplates merely 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.
(Note: It is not loss due to misdelivery or delivery
to the wrong person.)
 This rule applies in collision cases. The one (1) year period starts
not from the date of the collision but when the goods should
have been delivered, had the cargoes been saved.
Case: Maritime Agencies and Services Inc. vs. CA
- When there is two destination of delivery, the one year
period should commence when the last item was delivered
to the consignee.
Insurance
 The insurer who is exercising its right of subrogation is also
bound by the one (1) year prescriptive period.
 However, it does not apply to the claim against the insurer for
the insurance proceeds. The claim against the insurer is based
on contract that expires in ten (10) years.
II. Recoverable Damages
 Damages – is the pecuniary compensation, recompense or
satisfaction for an injury sustained, or as otherwise expressed,
the pecuniary consequences which the law imposes for the
breach of some duty or violation of some rights.
A. Extent of Recovery (Contractual Breach: Art. 220, NCC)
 Carrier in good faith – is liable only to pay for the damages
that are the natural and probable consequences of the
breach of the obligation and which the parties have foreseen
or could have reasonably foreseen at the time the obligation
was constituted.
  Carrier in bad faith or guilty of gross negligence – liable for all
damages, whether the same can be foreseen or not. Those
which may be reasonably attributed to the non-performance
of the obligation.
Note: The carrier who may be compelled to pay has the right of
recourse against the employee who committed the negligent, willful or
fraudulent act.
B. Kinds of Damages
Article 2216 provides that no proof of pecuniary loss is necessary in
order that moral, nominal, temperate, liquidated or exemplary
damages may be adjudicated. The assessment of such damages, except
liquidated ones, is left to the discretion of the court, according to the
circumstances of each case. However, proof of pecuniary loss is
necessary if actual or compensatory damages are being claimed.
a) Actual or Compensatory Damages
- only for the pecuniary loss suffered by him as he has duly
proved
- not only the value of the loss suffered, but also that of the
profits which the obligee failed to obtain
- 2 Kinds:
1. the loss of what a person already possesses (daňo
emergente);
2. the failure to receive as a benefit that would have pertained
to him (lucro cesante).
- It should be proven: cannot be decided based on the
consideration of the judge; not to be based on the
perception, observation and consideration of the judge
- With respect to restorative medical procedure: to be entitled
to actual damage, you need to have an EXPERT TESTIMONY.
Without such, you cannot recover.
 Damages may be recovered: Art. 2205 (Civil Code)
1) For loss or impairment of earning capacity in cases of temporary
or permanent personal injury;
2) For injury to the plaintiff’s business standing or commercial credit.
 Damages cannot be presumed. The burden of proof rests on the
plaintiff who is claiming actual damages against the carrier.
 In case of goods – the plaintiff is entitled to their value at the
time of destruction. The award is the sum of money which
plaintiff would have to pay in the market for identical or
essentially similar goods
 For personal injury and even death – the claimant is entitled to
all medical expenses as well as other reasonable expenses that
he incurred to treat his or her relative’s injuries.
 In case of death – the plaintiff is entitled to the amount that he
spent during the wake and funeral of the deceased. But,
expenses after the burial are not compensable.
 Read Art. 2206 (Civil Code):
 death caused by a crime or quasi-delict shall be at
least P3,000; [The amount of fixed damages is now
P50,000.00]
 the defendant shall be liable for the loss of the
earning capacity of the deceased;
 If deceased is obliged to give support, recipient
may demand support from the person causing the
death for a period not exceeding five years
 Spouse, legitimate and illegitimate descendant and
descendants may demand moral damages for
mental anguish by reason of the death of the
deceased
1) Loss of earning capacity
Net Earning Capacity = Life Expectancy x [Gross Annual Income less
Necessary Living Expenses]
 Life expectancy – (2/3 x 80 – age at death)
 Net earnings – based on the gross income of the victim minus
the necessary incidental living expenses which the victim would
have incurred if he were alive.
 Amount of living expenses must be established. In the absence
of proof, it is fixed at fifty (50%) of the gross income.
 Rules on loss of earning apply when the breach of the carrier
resulted in the plaintiff’s permanent incapacity.
2) Attorney’s fees
- refer to Art. 2208 of the Civil Code
- attorney’s fees may be awarded in an action for breach of
contract of carriage under par. 1,2,4,5,10 and 11 of Art.
2208.
- If awarded exemplary, one is entitled to attorney’s fees
- 2 kinds: ordinary (compensation to the lawyer);
extraordinary (indemnity as a form of damages suffered
due to the breach of contract)
- You can be awarded if you show that you were forced to
litigate and when you are entitled to exemplary damage.
- But this award is subject to the discretion of the court (you
cannot dictate – usually 10%-15%)
3) Interests
 12% per annum – if it constitutes a loan or forbearance of
money
 6% per annum – if it does not constitute loan or forbearance
of money
 12% - for final judgment
Note: No interest, however, shall be adjudged on unliquidated claims
for damages except when or until the demand can be established with
reasonably certainty, the interest shall begin to run form the time the
claim is made judicially or extrajudicially.
b) Moral Damages
- Includes physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social
humiliation and similar injury.
- Though incapable of pecuniary computation, moral damages may
be recovered if they were the proximate result of the defendant’s
wrongful act or omission.
- Moral damages are not awarded to punish the defendant but to
compensate the victim
- May be recovered when there is death or there is malice or bad
faith. (in transportation of passengers)
- Refer to Art. 2219 and 2220 (enumerates cases when moral
damages may be awarded)
- Generally, no moral damages may be awarded where the breach
of contract is not malicious.
- Moral damages may be awarded if the contractual negligence is
considered gross negligence.
- Subject to three conditions in transportation law:
o Death
o Malice or bad faith (must be done in the
performance of the contract of carriage)
 o Physical Injuries
- Requisites:
o There must be an injury, whether physical, mental
or psychological, clearly sustained by the claimant
o There must be a culpable act or omission factually
established
o The wrongful act or omission of the defendant is
the proximate cause of the injury sustained by the
claimant
o The award of damages is predicated on any of the
cases stated in Art. 2219.
- Factors to consider that could affect the amount to be
recovered:
o The extent of humiliation may also determine the
amount of moral damages that can be awarded
o The extent of pain and suffering likewise
determines the award
o Official, political, social and financial standing of
the offended party and the business and financial
position of the offender affect the amount of
damages
o The age of the claimant.
c) Nominal Damages
- Refer to Art. 2221-2223 (Civil Code)
- It is adjudicated in order that the right of plaintiff may be
vindicated or recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.
- The assessment of nominal damages is left to the discretion of the
court according to the circumstances of the case.
- The award of nominal damages is also justified in the absence of
competent proof of the specific amounts of actual damages
suffered.
- Cannot co-exist with actual damages.
- There is no loss in nominal damages, unlike in actual and
temperate damages, loss is present which is proven and not
proven but rather ascertained by the court, respectively.
Case: Japan Airlines vs. CA
- The award of moral damages was justified because JAL failed
to make necessary arrangement to transport the plaintiffs on
the first available connecting flight to Manila.
- Only Nominal damages were awarded in the absence of
proof of actual damages
d) Temperate or Moderate Damages
- More than nominal but less than compensatory damages.
- Art. 2224 provides:
 may be recovered when the court finds that some pecuniary
loss has been suffered but its amount cannot, from the nature
of the case, be provided with certainty.
- cannot co-exist with actual damages
- Definite proof of pecuniary loss cannot be offered, although the
court is convinced that there has been such loss.
e) Liquidated Damages
- Those agreed by the parties to a contract, to be paid in case
of breach thereof.
- Ordinarily, the court cannot change the amount of liquidated
damages agreed upon by the parties. However, Art. 2227 of
the Civil Code provides that liquidated damages, whether
intended as an indemnity or a penalty, shall be equitably
reduced if they were iniquitous or unconscionable.
f) Exemplary or Corrective Damages
- Requisites for the award of exemplary damages:
1. They may be imposed by way of example in addition to
compensatory damages, and only after the claimant’s right
to them has been established.
2. They cannot be recovered as a matter of right, their
determination depending upon the amount of compensatory
damages that may be awarded to the claimant.
3. The act must be accompanied by bad faith or done in
wanton, fraudulent, oppressive or malevolent manner.
Note: If gross negligence warrants the award of exemplary damages,
with more reason is its imposition justified when the act performed is
deliberate, malicious and tainted with bad faith. The rationale behind
exemplary or corrective damage is to provide an example or correction
from public good.
 The award of exemplary damages in breach of contract of
carriage is subject to the provisions under Art. 2232-2235 of the
Civil Code.
Case: Air France vs. Rafael Carrascoso and CA
- The inference of bad faith is there; it may be drawn from the
facts and circumstances set forth therein. The contract was
averred to establish the relation between the parties.
- Deficiency in the complaint in stating that there was bad
faith, if any, was cured by the evidence.
Case: Philippine Airlines Inc. vs. CA
- Moral damages are recoverable in a breach of contract of
carriage where the air carrier thought its agents acted
fraudulently or in bad faith.
- The contract of air carriage generates a relation attended
with a public duty. Neglect or malfeasance of the carrier’s
employees naturally could give ground for an action for
damages.
MARITIME LAW
A. CONCEPTS (Chapter 6)
Maritime Law – is the system of laws which particularly relates to the
affairs and business of the sea, to ships, their crews and navigation and
to marine conveyance of persons and property
Governing Laws:
1. New Civil Code – primary law on maritime commerce
2. Book III Code of Commerce – applied suppletorily
3. Special Laws
a. Salvage Law (Act No. 2616)
b. Carriage of Goods by Sea Act (CA No. 65)
c. Ship Mortgage Decree of 1978 (PD 1521)
REAL AND HYPOTHECARY NATURE OF MARITIME LAW
Case: Philippine Shipping Company, et al. vs. Francisco Garcia Vergara
 That which distinguishes the maritime from the civil law and
even from the mercantile law in general is the real and
hypothecary nature of the former
 Evidence of this “real “ nature of maritime law:
 o The limitation of the liability of the agents to the
actual value of the vessel and the freight money
o The right to retain the cargo and the embargo and
detention of the vessel even cases where the
ordinary civil law would not allow more than a
personal action against the debtor or person liable
 This repeals the civil law to such extent that, in certain cases
where the mortgaged property is lost no personal action lies
against the owner or agent of the vessel
 Two reasons why it is impossible to do away with these
privileges:
o The risk to which the thing is exposed
o The real nature of maritime law, exclusively real,
according to which the liability of the parties is
limited to a thing to which is at mercy of the waves
Case: Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation, Ltd.
 The real and hypothecary nature of maritime law simply
means that the liability of the carrier in connection with
losses related to maritime contracts is confined to the vessel,
which is hypothecated for such obligations or which stands
as the guaranty for their settlement
 Purpose: It was designed to offset such adverse conditions
and to encourage people and entities to venture into
maritime commerce despite the risks and prohibitive cost of
shipbuilding
 Thus, the liability of the vessel owner and agent arising from
the operation of such vessel were confined to the (1) vessel
itself, (2) its equipment, (3) freight, (4) and insurance if any,
which limitation served to induce capitalists into effectively
wagering their resources against the consideration of the
large profits attainable in trade
Real – similar to transactions over real property where to effect against
third persons, registration is necessary
Hypothecary – the liability of the owner of the value of the vessel is
limited to the vessel itself
STATUTORY PROVISIONS
Article 837, 587, 590 and 643 – provides for limited liability of
shipowner. (read full provision)
Art. 837: civil liability incurred by the ship owner: liability limited to
value of the vessel + appurtenances + freightage earned during voyage
Art. 643: vessel and cargo lost by reason of capture or wreck: all rights
shall be extinguished, both as regards the crew to demand any wages
whatsoever, and as regards the ship agent to recover the advances
made
If a portion of the vessel or of the cargo, or both, should be
saved, the crew engaged on wages, including the captain, shall retain
their rights on the salvage, so far as they go, on the remainder of the
vessel as well on the amount of the freightage of the cargo saved; but
sailors who are engaged on shares shall not have any right whatsoever
on the salvage of the hull, but only the portion of the freightage saved.
If they should have worded to recover the remainder of the
shipwrecked vessel they shall be given from the amount of the salvage
an award in proportion of the efforts made and to the risks
encountered in order to accomplish the salvage
Art. 587: ship agent may exempt himself of the civil liabilities for the
indemnities in favor of third persons by abandoning vessel with all
equipments and freight it earned during voyage
Art. 590: co-owners civilly liable in proportion to their interest and may
exempt liability by abandonment of the part of the vessel belonging to
him
Limited liability rule – means that the liability of a shipowner for
damages in case of loss is limited to the value of his vessel.
 No vessel, no liability.
 The civil liability for collision is merely co-existent with the
interest in the vessel; if there was total loss, liability is also
extinguished.
GR: If the ship is totally lost, liability is extinguished. If the ship or part
thereof still exists, he can escape liability by abandoning the vessel, its
appurtenances and its freight.
Case: Monarch Insurance Co., Inc. vs. Court of Appeals
 The total destruction of the vessel extinguishes maritime
liens because there are no longer any res to which it can
attach. This doctrine is based on the real and hypothecary
nature of maritime law.
Note: Since the Civil Code contains no provision regulating liability of
shipowners or agents in the event of total loss or destruction of the
vessel, Article 587 of the Code of Commerce governs.
Article 837, 587 and 590 of Code of Commerce cover only:
1. Liability to third persons
2. Acts of the captain
3. Collisions
EXCEPTIONS TO THE LIMITED LIABILITY RULE
1. Where the injury or death to a passenger is due either to the
fault of the shipowner, or to the concurring negligence of the
shipowner and the captain (NEGLIGENCE)
GR: Shipowner is liable for the negligence of the captain in
collision cases
---- liability is limited to value of the vessel
 Limited liability rule applies if the captain or the crew caused
the damage or injury as when unseaworthiness of the vessel
was caused by the negligence of the captain or crew during
the voyage
 However, if the failure to maintain the seaworthiness of the
vessel can be ascribed to the shipowner alone or the
shipowner concurrently with the captain, then the limited
liability principle cannot be invoked --- LIABILITY FOR THE
DAMAGES IS TO THE FULL EXTENT (ex. Overloading,
unseaworthiness even at the time of departure)
2. Where the vessel is insured (INSURANCE)
 Limited liability rule does not apply to insurance claims
Case: Vasquez vs. CA
- The total loss of the vessel did not extinguish the
liability of the carrier’s insrured
- Despite the loss of the vessel, therefore, its insurance
answers for the damages that a shipowner or agent,
may be held liable for by reason of the death of its
passengers.
 3. In the workmen’s compensation claims (WORKER’S
COMPENSATION)
 The provisions of the Code of Commerce have no room in
the application of the Workmen’s Compensation Act which
seeks to improve, and aims at the amelioration of, the
condition of laborers and employees
 If an accident is compensable under the Workmen’s
Compensation Act, it must be compensated even when the
workman’s right is not recognized by or is in conflict with
other provisions of the Civil Code or of the Code of
Commerce
 Liability under the Workmen’s compensation Act, even if the
vessel was lost, is still enforceable against the employer or
shipowner.
4. Expenses for repairs and provisioning of the ship prior to the
departure thereof
5. The vessel is not abandoned (ABANDONMENT)
 Abandonment of the vessel, its appurtenances and the
freightage is an indispensable requirement before the
shipowner or ship agent can enjoy the benefits of the limited
liability rule. If the carrier does not want to abandon the
vessel, he is still liable even beyond the value of the vessel
 The only instance where abandonment is dispensed with is
when the vessel was entirely lost. In such case, the obligation
is extinguished.
 Only shipowner and ship agent can make an abandonment
PROCEDURE FOR ENFORCEMENT
Case: Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation, Ltd.
- Rights of the parties to claim against an agent or owner of
vessel may be compared to those of creditors against an
insolvent corporation whose assets are not enough to satisfy
the totality of claims as against it.
- Creditors must limit their recovery to what is left in the name
of the corporation
- In the sinking of a vessel, the claimants or creditors are
limited in their recovery to the remaining value of accessible
assets. In the case of lost vessel, these assets are the
insurance proceeds and pending freightage for the particular
voyage
PROTESTS
- is the written statement by the master of a vessel or any
authorized officer, attested by proper officer or a notary, to
the effect that damages has been suffered by the ship
Required under the following cases:
1. When the vessel makes an arrival under stress
2. Where the vessel is shipwrecked
3. Where the vessel has gone through a hurricane or the
captain believe that the cargo has suffered damages or
averages
4. Maritime collisions
Q: when is it not required?
A:
1. when it does not fall under the four cases mentioned above
2. when what is not involve is not a vessel
ADMIRALTY JURISDICTION (RTC)
- Section 19 (3) of BP 129 as amended by RA 7691
(3) In all actions in admiralty and maritime
jurisdiction where the demand or claim exceeds 300,
000 or in Metro manila, where such demand or claim
exceeds 400,000.
- if less  MTC
3 concepts: (they are the same)
1. real and hypothecary --- the supreme court did not explain the
literal meaning of it.
- real: refers to the risk in maritime that’s why there are privileges for
the shipowner. Risks are certain to happen
- hypothecary: remember guaranty and collateral which is the vessel.
For the particular voyage, the guaranty is the vessel wherein if the
vessel is lost, the shipowner no longer has the liability
2. limited liabililty rule --- no literal explanation
- limited: it means that the liability is limited to the value of the vessel
-liability: assumption that the shipowner is liable for the losses. There
are no valid defenses that shipowner can invoke to escape liability.
Same concept with 1479. Difference is that there is a fixed amount and
there is qualification
-under the limited liability – no fixed amount but amount is confined
on the vessel
The question here: is this a right to limit the liability?
A: admittedly it is a right that only shipowner can exercise
Q; how to exercise?
A: by way of pleading. But do not follow the way it was filed in yangco.
Here it was after judgment that the shipowner sought to abandon the
ship to abandon liability
But right now, it is a matter of procedure. To limit liability by
abandoning the vessel; IF it is a matter of procedure, you check the
rules of civil procedure
Q: so when does shipowner inform the court the right to limit liability?
A: in a pleading and normally in an answer. IT will be raised as a
defense. If shipownver cannot allege, then that defense is deemed
waiver. Therefore you cannot seek abandonment after judgment was
been rendered.
CASES:
Yangco vs. Lacerna
- even captain was aware of the typhoon and the vessel capsized, SC
upheld limited liability
Chua Hek Kong
- there being no exceptions, the court upheld limited liability
The more critical issue is on the EXCEPTIONS in the LLRule:
1. workmen’s compensation (Abueg case: the repairs constitue
maritime lient)
2. insurance coverage--- if the vessel is lost in the course of voyage and
it is insured, is it automatic that the limited liability rule does not
apply?
A: No. the basis of supreme court (Vasquez vs. CA --- court mentioned
very little about insurance: if the vessel is insured, the insurance
proceeds shall answer the credit)
If the plaintiff was injured or heirs will file action from insurance
company, and since shipowner cannot avail of limited liability, this is
not advisable to the plaintiff because it has no privity of contract with
the insurance company
Q: when does insurance argument come in?
A: only when the shipowner will bring the insurance company to the
case filed by the plaintiff—by way of third party complaint. Once
insurance company is impleaded then this can be used: that the owner
cannot avail of limited liability.
But no shipowner will ever implead the insurance. Because they will be
the one who will claim the insurance without telling the plaintiffs. In
the case, there is no proof that the vessel is insured. Even if we know
outside court, it is insured because in the court, there is no proof that
the vessel is insured. Court will not identify evidence not properly
identified and recoded in court.
Q: is it really an exception in its strict sense?
A: Not really (CAPANAS). What is the implication if you properly invoke
the LLRule – the plaintiff cannot avail beyond the value of the vessel.
If not apply – plaintiff will recover more than the value of vessel
subject to rules on claiming of damages.
But question, if vessel if covered with insurance, does this mean that
plaintiff can recover to the amount applied? No, they can only recover
until the coverage of the insurance proceeds.
3. Negligence
- common carrier is presumed negligent if common carrier. However,
this does not apply when there is an invocation on limited liability. (in
all cases except MONARCH vs. CA) --- the rest of the case, the court has
found negligence based on the facts presented. You cannot invoke
presumption of negligence so that limited liability rule will not apply.
Monarch _-- SC: since there is a presumption of negligence then LLR
will not apply. But SC also said that if LLR is invoked, the initial burden
to invoke negligence shifts to the shipowner. They should prove that
there is no privity or knowledge on the negligence of the ship captain.
Q: what is the relationship of Civil Code and LLR?
A: There is none. Under 1766 in all matters not provided by Civil Code,
Code of Commerce or Special law will apply. There is no rule in Civil
Code in limited liability rule thus Code of Commerce will apply. (but in
monarch, this was not applied--- all the negligence was related to the
absence of exercising extraordinary diligence)
Note: that in the subsequent cases, Consolidated of Aboitiz case: there
were findings of facts of the negligence of Aboitiz. The point is when it
comes to LLR, the Code of Commerce apply. You cannot invoke
presumption of negligence. In order to refute, petitioner should prove
negligence.
REMEMBER: PROVE THE FACTS OF NEGLIGENCE. Not presumption.
Loadstar case
- the shipowner is aware of the typhoon
- insufficient manning – negligent
- Captain playing mahjong – there was negligence. But SC said that it
was negligent because the shipowner did not prove that it was the
first. Supposedly facts are established in court proceedings and not on
presumption.
3. no vessel, no liability
- they all mean one and the same such that the liability of the
shipowner for the losses is confined to the value of the vessel and the
freight, if any.
MARITIME PROTEST (4 INSTANCES) – REQUIRED (LOOK AT CODE OF
COMMERCE and above notes)
INSTANCES WHEN IT DOES NOT APPLY:
1. NOT based CODE OF COMMERCE AND BASED ON QUASI-DELICT
THEN NOT MARITIME PROTEST
2. when what was is involve is not a vessel (Lopez vs. Duruel: the motor
boat is not a vessel under maritime law, it is only engaged in bay
traffic. A vessel in maritime law, should be engaged in transporting
goods, persons, or both from one port to another)
(But to be sure: you file maritime and allege such bahala dili kelangan
coz otherwise dismiss ang case)
Since a vessel is a personal property, it can be mortgaged…
Same concept with mortgage but different rule
- PD 1521:
Q: what about process of extra judicial foreclosure of vessel?
A: chattel mortgage law should govern
Q: what to remember under PD 1521?
A: Section 4
registration, non waiver
Section17: priority of claims…
Q: are there claims in maritime law over and above preferred
mortgage?
A: yes. Look at section 17.
Case: Poliand Industrial
- facts shows that the proceeds debted from hardwood was for the
modification of the vessel (extended for vessels benefit), for crews
wage
Characteristics of maritime lien:
1. maritime property
2. travels with the property--- it cannot be extinguished
3. enforceable in an action in rem--- action directed to the property
(crescent case: ang gi kiha ang vessel)
Under section 22: persons authorize to procure repairs (presumed):
1. managing agent
2. ship’s husband --- agent of the vessel
If mortgagor does not pay:
1. judicial foreclosure – file actual case and implead the vessel as party
defendant (served to captain or authorized person); you can ask the
court order to arrest the vessel.
2. extrajudicial
- the problem with vessel, mortgagee is not in possession of the vessel.
It is with the mortgagor, you cannot sell the property not in your
possession.
In PD 1521—the order of arrest can be asked
Grounds to discharge
1. irregularly issued (mortgagee na ilad. Wala pa diay due obligation
2. posting of a bond to discharge..the bond to be posted is double the
value of the claim.
Maritime lien on necessaries (5 requisites) – brief yourself cresent
petroleum case (look at book for requisites)
B. VESSELS (Chapter 7)
1. General Concepts
 A vessel or watercraft is defined under PD No. 447 as any barge,
lighter, bulk carrier, passenger ship freighter, tanker, container
ship, fishing boats, or other artificial contrivance utilizing any
source of motive power, designed use or capable of being used as
a means of transportation operating either as a common carrier,
including fishing vessels covered under PD No. 43,
Except:
1. Those owned and/or operated by the Armed Forces of the
Philippines and by the Foreign Government for its Military
Purpose.
2. Bancas, sailboat and other waterbone contrivance of less than
three tons capacity and not motorized.
Case: Yu Con vs. Ipil
- The word vessel serves to designate every kind of craft by
whatever particular or technical name it may not be known
or which nautical advancements may give it in the future
- The court held that a small vessel used for the transportation
of merchandise by sea and for the making of voyages from
one port to another of these Islands, equipped and victualed
for this purpose by its owner, is a vessel, within the purview
of the Code of Commerce, for the determination of the
character and effect of the relations created between the
owners of the merchandise laden on it and its owner
 When the mercantile code speaks of vessels, they refer solely and
exclusively to mercantile ships, as they do not include warships,
and furthermore, they almost always refer to craft which are not
accessory to another as in the case of launches, lifeboats and etc.
 Further, they refer exclusively to those which are engaged in the
transportation of passengers and freight from one port to
another or from one place to another
 They refer to merchant vessels and in NO WAY can they or should
they be understood as referring to pleasure craft, yachts,
pontoons, health service and harbor police vessels, etc.
 Ships ought to be understood in the sense of vessel serving the
purpose of maritime navigation or seagoing vessel, and not in the
sense of vessel devoted to the navigation of rivers
 The third book of the code of commerce, dealing with maritime
commerce, was evidently intended to define laws relative to
merchant vessels and maritime shipping; and as appears from
said code, the vessel intended in that book are such run by
masters having special training with elaborate apparatus of crew
and equipment indicated in the code.
 Only vessels engaged in what is ordinarily known as maritime
commerce are within the provision of law conferring limited
liability on the owner in case of maritime disaster.
 Other vessel of minor nature not engaged in maritime commerce,
such as river boats and those carrying passengers from ship to
shore, must be governed, as to their liability to passenger, by the
provision of the civil code or other appropriate special provisions
of law.
Case: Augusto Lopez vs. Juan Duruelo, et. al
- The code of commerce are not applicable to small craft
which are only subject to administrative (customs)
regulations in the matter of port service and in the fishing
industry
- Only vessels engaged in what is ordinarily known as maritime
commerce are within the provisions of law conferring limited
liability on the owner in case of maritime disaster
- It is therefore clear that a passenger on a boat like the Jison,
in the case before use, is not required to make protest as a
condition precedent to his right of action for the injury
suffered by him in the collision described in the complaint –
article 835 of the Code of Commerce does not apply
CONSTRUCTION, EQUIPMENT AND MANNING
The Construction, equipment and manning of vessel are subject to the
rules issued by the Maritime Industry Authority (MARINA) and
consistent with Article 574 of the Code of Commerce
Article 574. Builders of vessels may employ the materials and follow,
with respect to their construction and rigging, the systems most
suitable to their interests. Ship owners and seamen shall be subject to
what the laws and regulations of the public administration on
navigation, customs, health, safety of vessels, and other similar
matters.
PERSONAL PROPERTY
Vessels are considered personal property under the Civil Law. The
Code of Commerce likewise expressly acknowledges the special nature
of a vessel as personal property.
Case: Philippine Refining Company vs. Jargue
- Vessels are personal property although occasionally referred
to as a peculiar kind of personal property
- They are subject to mortgage agreeably to the provisions of
the Chattel Mortgage Law
- The only difference between a chattel mortgage of a vessel
and a chattel mortgage of other personality is that it is not
now necessary for a chattel mortgage of a vessel to be noted
in the registry of the register of deeds, but it is essential that
a record of documents affecting the title to a vessel be
entered in the record of the Collector of Customs at the port
of entry
Case: Rubiso and Calixto vs. Rivera
- Ships or vessels, whether moved by steam or by sail, partake,
to a certain extent, of the nature and conditions of real
property, on account of their value and importance in the
world of commerce
- Transfer of vessels should be in writing and must be recorded
in the appropriate registry
2. OWNERSHIP
ACQUISITION
 Vessel may be acquired or transferred by any means recognized
by laws. Thus, vessel may be sold, donated and may even be
acquired through prescription.
 Under the present laws, vessels that are under the jurisdiction of
MARINA can be transferred only with notice to said
administrative agency.

A. Prescription (Code of Commerce)
Article 573. Merchant vessels constitute property which may be
acquired and transferred by any of the means recognized by law. The
acquisition of a vessel must appear in a written instrument, which shall
not produce any effect with respect to third persons if not inscribed in
the registry of vessels.
The ownership of a vessel shall likewise be acquired by possession in
good faith, continued for three years, with a just title duly recorded.
In the absence of any of these requisites, continuous possession for
ten years shall be necessary in order to acquire ownership.
A captain may not acquire by prescription the vessel of which he is in
command.
ARTICLE 575. Co-owners of vessels shall have the right of repurchase
and redemption in sales made to strangers, but they may exercise the
same only within the nine days following the inscription of the sale in
the registry, and by depositing the price at the same time.
B. Sale (Code of Commerce)
Article 576. In the sale of a vessel it shall always be understood as
included the rigging, masts, stores and engine of a streamer
appurtenant thereto, which at the time belongs to the vendor.
The arms, munitions of war, provisions and fuel shall not be considered
as included in the sale.
The vendor shall be under the obligation to deliver to the purchaser a
certified copy of the record sheet of the vessel in the registry up to the
date of the sale.
Article 577. If the alienation of the vessel should be made while it is on
a voyage, the freightage which it earns from the time it receives its last
cargo shall pertain entirely to the purchaser, and the payment of the
crew and other persons who make up its complement for the same
voyage shall be for his account.
If the sale is made after the vessel has arrived at the port of its
destination, the freightage shall pertain to the vendor, and the
payment of the crew and other individuals who make up its
complement shall be for his account, unless the contrary is stipulated
in either case.
Article 578. If the vessel being on a voyage or in a foreign port, its
owner or owners should voluntarily alienate it, either to Filipinos or to
foreigners domiciled in the capital or in a port of another country, the
bill of sale shall be executed before the consul of the Republic of the
Philippines at the port where it terminates its voyage and said
instrument shall produce no effect with respect to third persons if it is
not inscribed in the registry of the consulate. The consul shall
immediately forward a true copy of the instrument of purchase and
sale of the vessel to the registry of vessels of the port where said vessel
is inscribed and registered.
In every case the alienation of the vessel must be made to appear with
a statement of whether the vendor receives its price in whole or in
part, or whether he preserves in whole or in part any claim on said
vessel. In case the sale is made to a Filipino, this fact shall be stated in
the certificate of navigation.
When a vessel, being on a voyage, shall be rendered useless for
navigation, the captain shall apply to the competent judge on court of
the port of arrival, should it be in the Philippines; and should it be in a
foreign country, to the consul of the Republic of the Philippines, should
there be one, or, where there is none, to the judge or court or to the
local authority; and the consul, or the judge or court, shall order an
examination of the vessel to be made.
If the consignee or the insurer should reside at said port, or should
have representatives there, they must be cited in order that they may
take part in the proceedings on behalf of whoever may be concerned.
REGISTRATION
 Vessels are now registered through MARINA. It is a long standing
rule that the person who is the registered owner of the vessel is
presumed to be the owner of the vessel.
 It is a settled rule that the sale or transfer of the vessel is not
binding on the third person unless the same is registered.
SHIP'S MANIFEST
 Vessels are required to carry manifest coast-wise trade.
 A manifest is a declaration of the entire cargo. The object of a
manifest is to furnish custom officers with list of check against, to
inform the revenue officers what goods are being brought into a
port of the country on a vessel.
 The requirement that a vessel must carry a manifest is not
complied with even if a bill of lading can be presented. A bill of
lading is just a declaration of a specific cargo rather than the
entire cargo
 Sec 906 of the Tariff and Custom Code provides that “manifest
shall be required for cargo and passengers transported from one
place to another only when one or both of such place is a port of
entry.”
MORTGAGE
 Since the term personal property includes vessel, they are subject
to mortgage agreeably to the provisions of the Chattel Mortgage
Law.
 Mortgage and other encumbrances over vessels are governed by
the provisions of presidential decree 1521 (Ship Mortgage Decree
of 1978)
OTHER CODE OF COMMERCE PROVISIONS
 The provisions of the Code of Commerce reproduced hereunder
are deemed modified not only by the Civil Code but also by
special laws
SAFETY REGULATIONS
 On February 23, 2000, the Maritime Industry Authority directed
all domestic shipowners and operators under Memorandum
Circular No. 154 to strictly comply with existing Safety-Related
Policies, Guidelines, Rules and Regulations
 Rules include: (read book page 488-489)
 Monitoring of compliances shall be undertaken by the Authority
and its Maritime Regional Offices, together with the needed
coordination with the Philippine Coast Guard
The MARINA shall have the power to inspect vessels and all equipment
on board to ensure compliance with safety standards
C. PERSONS WHO TAKE PART IN MARITIME COMMERCE
In sum, the following are persons who take part in Maritime
Commerce:
 SHIPOWNERS and SHIP AGENTS;
 CAPTAINS and MASTERS OF VESSELS;
 OFFICERS and CREW OF VESSELS
SHIPOWNER V. SHIP AGENT
SHIPOWNER – the person who is primarily liable for damages
sustained in the operation of vessel.
Code of Commerce – places the primary responsibility on the owner of
the vessel.
(Uses the term naviero which has been construed to include
shipowner, ship agent and even the charterer who is considered as
owner pro hac vice.)
SHIP AGENT (Code of Commerce) – the person entrusted with
provisioning of the vessel, or who represents her in the port in
which she happens to be. There is also the intention under the
Code of Commerce to make the ship agent solidarily liable with
the owner. The solidary liability applies both for breach of
contract and extra-contractual obligations such as tort. The ship
agent, even though he is not the owner, is liable in every way to
the creditor for losses and damages without prejudice to his right
against the owner, the vessel and its equipment and freight. But
his liability, however is subject to the LIMITED LIABILITY RULE
(Chapter 6 of the Aquino book).
CAPTAINS V. MASTERS OF VESSELS
For purposes of Maritime Commerce:
The words “captain” and “master” have the same meaning; both
being chiefs or commanders of ships. Thus, the terms “captain”
and “master” are used synonymously in the Code of Commerce.
MARINA regulations:
MASTER – the person having command of the ship. The same term is
being used both for domestic trade and international trade.
BOAT CAPTAIN – a person authorized by the MARINA to act as officer
and/or in command of a boat/ship or has the qualification/license
to act as such.
3 Distinct Roles a captain commonly performs:
(Inter-Orient Maritime case)
1. He is a GENERAL AGENT OF THE SHIPOWNER;
2. He is a COMMANDER and TECHNICAL DIRECTOR of the vessel
(most important role for this has something to do with the
operation and preservation of the vessel during its voyage and the
protection of the passengers, if any, and crew and cargo);
3. He is a REPRESENTATIVE OF THE COUNTRY under whose flag he
navigates.
Based on the first aforementioned role, the captain is regarded as the
GENERAL AGENT of the shipowner and as such, he:
a. Has authority to sign bills of lading;
b. Carry goods aboard and deal with the freight earned;
c. Agree upon rates and decide whether to take cargo;
d. Has legal authority to enter into contracts with respect to the
vessel and the trading of the vessel, subject to applicable
limitations established by statute, contract or instructions and
regulations of the shipowner.
All aforementioned functions verily commits to the captain the
governance, care, and management of the vessel. Clearly then, the
captain is vested with both MANAGEMENT and FIDUCIARY functions.
POWERS AND OBLIGATIONS INHERENT TO THE CAPTAIN AND THE
MASTER: (See Arts. 610-612 of the Code of Commerce)
DISCRETION OF CAPTAIN AND MASTER
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.
Presumption: A captain is knowledgeable as to the specific
requirements of seaworthiness and the particular risks and perils of
the voyage he is to embark upon.
Applicable Principle: The captain has control of ALL departments of
service in the vessel, and reasonable discretion as to its navigation.
Basic Principle in Admiralty Law: In navigating the vessel, the master
must be left free to exercise his own best judgment.
Requirements of Safe Navigation: The judgment and discretion of the
captain of a vessel may be confined within a straitjacket, even in this
age of electronic communications.
PILOTAGE: Who is a pilot?
Maritime Law: a person duly qualified, and licensed, to conduct a
vessel into or out of ports, or in certain waters.
Broad sense: includes both (1) those whose duty it is to guide vessels
into or out of ports, or in particular waters; and (2) those entrusted
with the navigation of vessels on the high seas.
General understanding: a person taken on board at a particular place
for the purpose of conducting a ship through a river, road or channel,
or from a port.
COMPULSORY PILOTAGE. In compulsory pilotage, states possessing
harbors enacted laws or promulgated rules requiring vessels
approaching their ports to take on board pilots licensed under local
law. In the Philippines, compulsory pilotage is being implemented in
the Port of Manila, the latter being within the Manila Pilotage District.
a. Master and Pilot (See Far Eastern Shipping case on page 520 of
the Aquino book for the SC discussion on the duties of a pilot)
b. Shipowner and Pilot
GENERAL RULE: the pilot is PERSONALLY LIABLE for damages
caused by his own negligence or default to the OWNERS of the
vessel, and to THIRD PARTIES for damages sustained in a collision.
Such negligence of the pilot in the performance of duty
constitutes a MARITIME TORT.
In cases of COLLISION: the COLLIDING VESSEL is prima facie
responsible, hence, the burden of proof is upon the party
claiming benefit of the exemption from liability. Thus, it must be
shown affirmatively that the pilot was at fault, and that there was
no fault on the part of the officers or crew, which might have
been conducive to the damage. The fact that the law compelled
the master to take the pilot does not exonerate the vessel from
liability. The injured party shall seek redress from the vessel. The
owners of the vessel are responsible to the injured party for the
acts of the pilot, and they must be left to recover the amount as
well as they can against him.
c. Pilot and his Association
The fact that the pilot is a member of an association does not
make the association jointly and severally liable. Article 2180 of
the Civil Code does not apply because there is NO EMPLOYER-
EMPLOYEE Relationship.
Well-established is the rule that pilot associations are immune to
vicarious liability for the tort of their members. They are not the
employer of their members and exercise no control over them
once they take the helm of the vessel. They are also not
partnerships because the members do not function as agents for
the association or for each other. Pilots’ associations are also not
liable for negligently assuring the competence of their members
because as PROFESSIONAL ASSOCIATIONS, they made no
guarantee of the professional conduct of their members to the
general public.
CODE OF COMMERCE PROVISIONS ON CAPTAINS (See page 528 of the
Aquino book)
OFFICERS AND CREW OF VESSELS
COMPLEMENT OF A VESSEL (Art. 648, Code of Commerce)
-- all the persons on board from the captain to the cabin boy,
necessary for the management, maneuvers, and service, and
therefore, it includes the CREW, the SAILING MATES, ENGINEERS,
STOKERS, and OTHER EMPLOYEES ON BOARD not having specific
designations; but it SHALL NOT INCLUDE the passengers or the persons
whom the vessel is transporting.
REGULATION OF MERCHANT MARINE PROFESSION
The practice of marine profession is now governed by special laws and
pertinent rules issued by the:
- MARINA;
- BOARD OF MARINE DECK OFFICERS;
- BOARD OF MARINE ENGINEER OFFICERS
MINIMUM SAFE MANNING
It is not enough that the officers manning the merchant vessel
have all the qualifications imposed by the Philippine Merchant
Marine Officers Act and other special laws or regulations. It is also
required that there is sufficient number of officers and crew that
are serving in the vessel. (Quality and Quantity)
SECURITY OF TENURE
The Labor Code provisions apply to OFFICERS and CREW of
merchant vessels in DOMESTIC Trade or COASTWISE Shipping.
Hence, matters concerning their dismissal or disciplinary action
must be in accordance with provisions of the Labor Code. For
officers and crew who are working in foreign vessels who are
involved in overseas shipping, there must be compliance with the
applicable laws on overseas employment as well as regulations
issued by the Philippine Overseas Employment Administration
(POEA).
CODE OF COMMERCE PROVISIONS on Sailing Mates, Second Mate and
Marine Engineer, Crew, and Captain (See pages 552-560 of the Aquino
book).
Parties --- those provided above… plus seamen, other members of the
complement including the stokers (incharge of boilers) and supercargo
(agent of the shippers who has authority to sell goods while on voyage)
4 maritime contracts
1. charter parties
2. Botomry
3. Repondentia
4. Marine insurance (incorporated in the subject insurance)
ON PERSONS
Shipowner
- he has the privilege to invoke limited liability rule
- what if with a charter party with charterer, who can invoke
the LLR? No jurisprudence. Personal opinion of sir:
distinguish on the type of charter party. If affreightment,
shipowner retains possession, command and navigation of
the vessel. If bareboat it is vested upon the charterer.
- Jurisprudence: except for registration, the charterer is the
temporary owner of the vessel. With this, the charterer can
invoke LLR (this part no juris)
Note: there is not distinction of liability of shipowner and ship agent.
They are civilly liable
There is a situation in maritime law that shipower and agent they are
held liable for the act or omission of a third person which is the ship
captain or master.
ACTS of CAPTAIN
Case: Yucon case and Sweetlines case
- In Yucon, money was entrusted to the captain and the
money was lost. SC concluded that shipowner was liable for
the lost because the captain failed to put up measures while
in custody of the money. It may not technically to an act but
may refer to admission but would fall under the term acts
- In sweetlines, bound for catbalogan but the captain chose to
allow the passengers to disembark in tacloban. This time, this
is the act of captain. The SC concluded that the damages
sustained by passengers bound for catbalogan are to
shouldered by the shiponwer
Indemnities in Favor of 3rd person: OTTA devt case sited in walter smith
case
- In OTTA the owner of the pier was at the same time the
owner of the goods. SC, because there was a relationship of
owner of vessel and goods, then there is presumption of
negligence new civil code prevails
- Walter smith case: There was no relationship. Owner of port
and owner of goods are different. What was applied by court
was the law on torts. No presumption of negligence. There
should be proof of negligence. The owner of vessel proved
that he exercised ordinary diligence (required in ports). What
was presented was the competence of shipcaptain. The
shipowner proved ordinary diligence in choosing the ship
captain
Contracts entered into by shipcaptain or master
Inter orient case: one role is they are the general agent of the
shipowener. But if the obligation contracted by the captain does not
enure to the benefit of the vessel, then the shipowner has no liability.
There is no conflict bec. 586 obligations contracted by the shipper
while 1759 death or injury of passenger as result of contract of
carriage.
The case in point with the contracts entered into was the case Wing
Kee. There were supplies delivered. Shipagent was said to be liable. SC
said at the time you were still an agent you were liable but at the time
agency was terminated you are no longer liable.
If both SO and SA are sued, being solidarily liable, the SA has right of
recourse over SO.
Shipcaptain or master
- The difference is with regard to the tonnage of the vessel
(higher: captain; lower: master; major patron and minor
patron)
- The question on the shipcaptain or master is the exercise of
discretion
- Inter orient case: captain tayong did not want to proceed
with the voyage from Singapore to Africa bec. Of lack of
oxygen and acetylene. But because of order of management
he proceeded. He was then ordered to repatriated and then
another captain took his place. He filed for illegal dismissal.
The issue was the discretion exercised by the captain. WON
he has the discretion not to proceed bec. Of lack of supply.
SC said you should emphasize reasonable discretion--- it is
the captain’s duty
- Inter Orient: triple roles of the captain --- general agent,
commander and technical manager, representative of
country
Shipcaptain and harbor pilot
- Harbor pilot: distinguish if voluntary or compulsory
- Case cited by SC on proper relationship of captain and pilot.
In far eastern shipping case 521 3rd par --- ther are occasion
when the master may and should interfere and even displace
the pilot when he is obviously incapacitate and intoxicated….
(look at the book)
- In this case, there is relevance on when the captain should
interfere. If it is voluntary (pilot engaged by shipowner) ---
damages caused by pilot, shipowner is liable. If compulsory,
shipowner can escape liability
- If compulsory distinguish whether there was circumstances
that would require the shipcaptain to interfere with the ship
pilot. If there are circumstances but captain did not interfere
then shipowner is liable. If there are circumstances and
captain interfere but still there is damage, the shipowner will
not be liable.
- Cebu Port Authority --- covered by compulsory pilotage
Chiefmate or sailing mate (then there are engineers)
- 2008 case, citing the article the code of commerce specifying
the functions of chiefmate being second in command of the
vessel… Chiefmate is a managerial employee (as provided in
labor code --- loss of trust and confidence
- There was a voyage charter; collision between MT Vector (tanker) and
Seaman
- On security of tenure: distinguish DOMESTIN (labor code)
abroad (POEA).. there is a standard contract (poea prepared
and drafted it and every seaman shall comply with this ---
this is to protect filipino seaman working abroad) that will be
signed by every seaman stipulating the security of tenure,
repatriation, benefits, etc.
- Difference for abroad: bigger income but contractual (after
contract go home).. DOMEstic, you can be a regular
employee in accordance with the labor code
- JumpShip scenario: it is a valid ground to terminate a seaman
Shipcaptain should conduct preliminary investigation for crimes
conducted on board
D. CHARTER PARTIES
Charter Parties
- a contract whereby the entire ship, or some of the principal part,
is let by the owner to a merchant or other person for a specified
time or use for the conveyance of goods, consideration of
payment of freight
- it is a contract, hence, parties are free to stipulate upon such
terms and conditions that would suit their purposes subject to the
caveat that these should not be contrary to law or public policy
Parties
1. Charterer- merchant or a person who desire s to lease ship or vessel
owned by another by transport of his or her goods for commercial
purposes or persons from one port to another
2. Shipowner (SO)
KINDS:
1. bareboat or demise charterer – shipowner leases to the charterer
the whole vessel, transferring to the charterer the entire command,
possession and consequent control over the vessel’s navigation,
including the master and the crew, who becomes the charterer’s
“servants”
- charterer becomes an owner “pro hac vice”
2. Contract of affreightment – charterer hires the vessel only, either for
a determinate period of time or for a single or consecutive voyage,
with the SO providing for the provision of the ship, wages of the
master and crew, and expenses for maintenance of the vessel
a. time charter – vessel is leased to a charterer for a fixed
period of time
b. voyage charter – vessel is leased for a single or particular
voyage
REQUISITES OF A VALID CHARTER PARTY
1. consent of the contracting parties
2. an existing vessel which should be placed at the disposition
of the shipper
3. the freight
4. compliance with requirements of art 652 of Code of
commerce
(Aticle 652 of the Code of Commerce provides that the
charter party shall contain, among others, the name,
surname, and domicile of the charterer, and if he states that
he is acting by commission, that of the person for whose
account he makes the contract.)
Caltex v. Sulpicio Lines
Doña Paz (owned by Sulpicio) ; breach of contract filed by the
passengers’s heirs against Sulpicio ; 3d party complaint against
registered owner of the tanker including Caltex ( that they were
negligent and in bad faith by not seeing to it that the tanker was
seaworthy)
Issue: WON charterer shall be liable under Maritime Law?
Ruling: Liability cannot be attached to Caltex; the charter did not affect
the business of Sulpicio as a common carrier ; rights and
responsibilities of ownership still rested on the owner
Planters Product v CA
- time charter; Planters purchased fertilizers from the US;
voyage to the Philippines ; upon arrival, shortage in the cargo
 was discovered ; filed actions against carrier fro damages (
breach of Contract) ; RTC ruled in favor of the Planters; Ca
reversed & absolved carrier as it was converted from
common carrier to private ;
- Ruling : It cannot become a private carrier ; bareboat charter
can become a private carrier but in contract of affreightment
remains as common carrier ( action based on contract of
carriage ; presumption of negligence ) ; carrier was able to
rebut the presumption of negligence ( result the inherent
character of the fertilizers)
Coastwise Lighterage v. CA
- WON private carrier would convert to a common carrier;
contract of affreightment
- Ruling : reiterated Planters ruling ; but was not able to rebut
presumption of negligence ; did not exercise EO diligence (
hired unlicensed patron)
Home Insurance v. American Steamship
- case mostly used by the common carrier as defense ; Home
Insurance is subrogee (paid SMC of loss cargo shipped thru
American Steamship ; no reference as to what contract but
there was a mention that it was in affreightment
- Ruling : Common Carrier undertaking to carry special cargo
(chartered to special person only ) become a private carrier
and stipulation exempting owner from liability for loss due to
the negligence of its agents is valid;
Shipowner can appoint senior officers for the vessel even if bareboat
contract. But technically it is an affreightment. Most conflicts will occur
if these various principles will have to be mixed.
The whereabouts of the vessel is important to know the time for
loading and unloading…
Policy – marina
Implementing or enforcement --- Coastguard
2 conditions implied in charter party
1. seaworthiness (Caltex Phil Case) --- it need not be written in the
charter party
2. --- look at book (ala kaapas)
JURISDICTION OF ADMIRALTY CASES
- depends on the jurisdictional amount
- important element of the contract = the subject matter of
the contract (nature and character)
International Harvester v Aragon
-involves loss of cargo shipped from LA to Manila; cargo owner filed an
action against common carrier
-SC said liability of petitioner was predicated upon the contract of
carriage ; admiralty would involve all maritime contract in whatever
form and wherever made
Macondry v Delgado Brothers
- Delgado was an operator of a pier service ; WON operator
exercised its duty in loading and unloading of cargos ; no
contract of carriage ; obligation was only to load the to the
ship ; no application of admiralty
FRIEGHT OR FREIGHTAGE
- price of carriage
- shall accrue according to what is stipulated in the contract
- should there be no stipulation or if it is ambiguous , rules
shall be
a. freight shall begin to run from the day of loading on the
vessel
b. in charters with fixed period, the freight shall begin to
run upon that very day
c. If freight is charged according o weight , payment shall
be made according to gross weight , including the
weight of the containers
LAST DAYS- period of time stipulated fro loading and unloading (
provided for in charter party ) ; if no lay days provided for in the
charter party, it is understood that the charterer will unload and
discharge cargoes within a reasonable time or with reasonable
diligence
Demurrage – a sum of money due by express contract for detention of
the vessel in loading , beyond time allowed for that purpose in that
charter party ; sum of which is usually fixed by the parties in the
charter party ; liability for this exists only when expressly stipulated
Deadfreight – where the charterer failed to occupy the leased portion
of the vessel, he may thereby be liable by the shipowner for the
deadfreight that occurred
STIPULATION IN CHARTER PARTIES
GR: parties are free to stipulate subject to art 1744 t01754 0f NCC
Art. 1744. A stipulation between the common carrier and the shipper
or owner limiting the liability of the former for the loss, destruction,
or deterioration of the goods to a degree less than extraordinary
diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the
service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner
or shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence
in the custody of the goods;
(4) That the common carrier shall exercise a degree of
diligence less than that of a good father of a family, or of a
man of ordinary prudence in the vigilance over the
movables transported;
(5) That the common carrier shall not be responsible for the
acts or omission of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or
irresistible threat, violence or force, is dispensed with or
diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or
other equipment used in the contract of carriage.
Art. 1746. An agreement limiting the common carrier's liability may
be annulled by the shipper or owner if the common carrier refused to
carry the goods unless the former agreed to such stipulation.
Art. 1747. If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual route,
the contract limiting the common carrier's liability cannot be availed
of in case of the loss, destruction, or deterioration of the goods.
Art. 1748. An agreement limiting the common carrier's liability for
delay on account of strikes or riots is valid.
Art. 1749. A stipulation that the common carrier's liability is limited
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered. by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been fairly and freely agreed upon.
Art. 1751. The fact that the common carrier has no competitor along
the line or route, or a part thereof, to which the contract refers shall
be taken into consideration on the question of whether or not a
stipulation limiting the common carrier's liability is reasonable, just
and in consonance with public policy.
2. For a definite term and with extraordinary interest called
premium
3. Secured by pledged of vessel or portion thereof in the case on
loan on Bottomry; or pledge of goods in case of Respondentia
4. Loan repayment depends or conditioned on the safe arrival of
goods for respondentia and obligation to repay is extinguished
if pledged goods are lost (Respondentia)
5. Obligation to repay is extinguished if vessel is lost due to
specified marine perils in the course of voyage or within limited
time (Bottomry)
FORMS OF A LOAN ON BOTTOMRY/RESPONDENTIA:
 May be executed by means of:
1. public instrument
2. policy signed by the contracting parties and the broker taking part
therein
3. private instrument (Art. 720)
GR: The captain cannot contract loans on respondentia secured by
the cargo, and should he do so, the contract shall be void. Neither can
he borrow money or Bottomry for his own transactions.

Art. 1752. Even when there is an agreement limiting the liability of
the common carrier in the vigilance over the goods, the common
carrier is disputably presumed to have been negligent in case of their
loss, destruction or deterioration.
Art. 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their
loss, destruction or deterioration.
Art. 1754. The provisions of Articles 1733 to 1753 shall apply to the
passenger's baggage which is not in his personal custody or in that of
his employee. As to other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotel-keepers shall be
applicable.
EXCEPTIONS:
1. On the portion of the vessel he owns, provided no money has been
previously borrowed on the whole vessel, nor exists any other kind of
lien or obligation chargeable against her.
2. When he is permitted to do so, he must necessarily state what
interest he has in the vessel.
CONTENTS OF THE LOAN CONTRACT:
1. kind, name and registry of the vessel;
2. name, surname and domicile of the captain;
3. names, surnames and domiciles of the borrower and the lender;
4. amount of the loan and the premium stipulated;
5. time for repayment;
6. goods pledged to secure repayment;
7. voyage during which the risk is run (Art.721)

ART. 653. if the cargo should be received without the charter party WHO MAY CONTRACT:
having been signed, the contract shall be understood as executed In
1. Bottomry – by the ship owner or ship agent; outside of the
accordance with what appears in the bill of lading, the sole evidence of
residence of the owners, the captain.
title with regard to the cargo for determining the rights and obligations
2. Respondentia – only the owner of the cargo
of the ship agent, captain and charterer
DISTINCTIONS:
- If there is charter party or bill of lading (BOL) = no contract at all; but
according to Blanco, if there is delivery and receipt of cargo combined BOTTOMRY/ RESPONDENTIA ORDINARY LOAN
with the GF and mutual consent = contract present , better than BOL 1. Not subject to Usury Law 1. Subject to Usury Law

E. LOANS ON BOTTOMRY AND RESPONDENTIA 2. Liability of the borrower is 2. Not subject to any
contingent on the safe arrival of contingency
LOAN ON BOTTOMRY – loan made by shipowner or ship agent the vessel or cargo at destination
guaranteed by vessel itself and repayable upon arrival of vessel at 3. The last lender is a preferred 3. The first lender is a
destination; vessel/portion creditor preferred creditor

LOAN ON RESPONDENTIA – loan, taken on security of the cargo laden 4. Must have a collateral 4. May or may not have
on a vessel, and repayable upon safe arrival of cargo at destination; collateral
cargo/goods 5. Collateral is the vessel or cargo 5. Maybe property, real or
subject to maritime risk personal
COMMON ELEMENTS OF LOANS ON BOTTOMRY AND RESPONDENTS: 6. Must be in writing 6. Need not be in writing but
1. Exposure of security to marine peril; interest shall not be due unless
2. Obligation of the debtor conditioned only upon safe arrival of the expressly stipulated in writing
security at the point of destination. 7. To be binding on third person 7. Need not be registered
must be recorded in the registry
Requisites of a Loan on Bottomry/Respondentia: of vessels of port of registry of
1. Shipowner borrows money for use, equipment or repair of the vessel
vessel 8. Loss of collateral extinguishes 8. Does not extinguished if
the same there is a loss of the collateral
 (if any) of the vessel must be mortgaged (no jurisprudence on this
matter whether a part of the vessel can be mortgaged)
- In bottomry the whole or the part of the vessel can be the
Consequences of loss of effects of the loans
subject
- IF the part of the vessel can be pledged, is it necessary that
1. Effects of loans be lost due to accident of the sea during the time,
there should be goods? No. no need for goods.
and on the occasion of the voyage which has been designated in the
contract and proven that the cargo was on board
RESPONDENTIA
- lender losses the right to institute the action which would pertain to
- The vessel should have goods. The goods must be laden in
him
the vessel
- Is it necessary that the boat is on voyage? The vessel must be
Except: when the loss was
in the actual course of voyage because this is the objective of
1. caused by inherent defect of the thing
the law. Because if the vessel is docked in the port the owner
2. through fault or malice of the borrower
can simply obtain loans. And besides there is no risk when
3. through barratry on the part of the captain
the vessel is docked (but no jurisprudence)
4. caused by damages suffered by the vessel as a
consequence of being engaged in a contraband
Distinction of this two types of loan vs. SIMPLE LOAN (for purposes of
5. loaded the goods on a vessel different from that
the bar) --- 5 differences
designated in the contract unless the change was caused by
1. with respect to form --- can you validly execute a bottomry or
force majeure
respondentia verbally? You cannot. Bec under the code of commerce
no judicial action can arise when the contract is not reduced in writing.
2. The lenders on bottomry or respondentia shall suffer in proportion
But this is not the case in simple loan. But in simple loan you take note
to their respective interest, the general average which may take place
the statute of frauds… if not in writing B and R, you can dismiss case
in the things upon which the loans were made.
due to failure to state cause of action.
3. In case of shipwreck, the amount for payment of the loan shall be
Q: why hardly used at present?
deduced to the proceeds of the effects which have been saved but
A: because of sophistication. Captains can just call up any agent the
only after deducting the costs of the salvage.
shipowner to deliver anything for the use of the vessel to deliver. …
This contract was recognized in medieval times.
4. If the loan should be on the vessel or any of her parts, the freight
earned during the voyage for which the loan was contracted shall also
be liable for its payment, as far as it may reach.
F. AVERAGES AND COLLISIONS
5. If the same vessel or cargo should be the object of the loan of
ACCIDENTS IN MARITIME COMMERCE:
Bottomry or respondentia and maritime insurance, the value of what
1. Averages
may be saved in case of shipwreck shall be divided between the lender
2. Arrival Under Stress
and the insurer, in proportion to the legitimate interest of each one,
3. Collision
taking in consideration, for this purpose only, the principal with
4. Shipwreck
respect to the
* Averages – an extra-ordinary or accidental expense incurred during
Maritime contracts include charter parties… and loans on bottomry
the voyage in order to preserve the cargo, vessel or both; and all
and respondentia are considered maritime contracts
damages or deterioration suffered by the vessel from departure to the
Q: why do we have to study this topic? Are these relevant?
port of destination, and to the cargo from the port of loading to the
A: they are hardly used at present. However, we have to study this just
port consignment. (Art. 806)
in case this will be asked in the bar. Especially in the unique terms used
in this topic..
CLASSES OF AVERAGES:
A. Particular or Simple Average
General provisions in contracts will govern
B. Gross or General Average
Basic provision you should not forget:
A. Particular or Simple Average
1. there should be a marine risk
2. the condition that the vessel or the goods has perished then the
Damage or expenses caused to the vessel or cargo that did not inure
right of the lender to collect everything as well as stipulated interest is
to common benefit, and borne by respective owners. (809)
extinguished
 The owner of the goods which gave rise to the expense or suffered
(not sure if there are other more.. basin ala ko kaapas)
th e damage shall bear this average. (Art. 810)
res perit domino applies
BOTTOMRY
if the vessel or goods are hypothecated by loan on bottomry and
- It may refer to the vessel
respondentia, the lender shall bear the loss in proportion to his
- The bottom or the hull or the kill of the vessel can be pledged
interest
in this case
- The whole vessel can be a subject of a security or collateral
Examples: see article 809 of the code of commerce
- PD. 1521: (is this different) --- loan is the principal, mortgage
is the accessory.
- The contract of bottomry is principal, the mortgage under pd
1521 is merely a security
- In pd 1521 under section 4 it is a requirement that the whole

RULES ON AVERAGES:
1. Averages is defined as damage deliberately caused or an expense
deliberately incurred due to a marine peril and which has resulted
in saving both vessel and cargo or only the vessel or cargo.
2. Where both vessel and cargo are saved, it is general average;
where only the vessel or only the cargo is saved, it is particular
average.
3. The person whose property has been saved must contribute to
reimburse the damage caused or expense incurred if the situation
constitutes general average.
B. Gross or General Average
 Damage or expenses deliberately caused in order to save the vessel,
its cargo or both from real and known risk. (Art. 811)
 All the persons having an interest in the vessel and the cargo therein
at the time of the occurrence of the average shall contribute to satisfy
this average. (Art. 812)
REQUISITES:
1. common danger present
2. arising from accidents of sea, disposition of authority
3. peril imminent and ascertained
4. part of vessel or cargo deliberately sacrificed
5. intended to save vessel or cargo
6. proper legal steps and authority taken
Common danger
- means both the ship and the cargo, after has been loaded, are subject
to the same danger, whether during the voyage, or in the port of
loading or unloading, that the danger arises from the accidents of the
sea, disposition of authority, or faults of men, provided that
circumstances producing the peril should be ascertained and imminent
or may rationally be said to be certain and imminent
- When the measure of precaution adopted solely and exclusively for
the preservation of the vessel from the danger of seizure or capture
and not for the common safety is not considered as common danger
Deliberate Sacrifice
- voluntary sacrifice of a part for the benefit of the whole in order to
justify the average contribution
* voluntary jettison- the casting away of some portion of the
associated interests for the purpose of avoiding the common peril
from the whole to a particular portion of those interests
- the goods on board refer to in jettison should be proven by means of
bill of lading and with regards to those belonging to vessel by means of
inventory prepared before the departure
2 cases where there can also be general averages even if the sacrifice
was not made during the voyage:
a. where the sinking of the vessel is necessary to extinguish a
fire in a port, roadstead, creek or bay
b. where cargo is transferred to lighten the ship on account
of a storm to facilitate entry into a port
Art. 816: in order that the goods jettisoned may be included in the
gross average and the owners entitled to indemnity – it is necessary
that the cargo’s existence on board be proven by a bill of lading; and
with regard to those belonging to the vessel, by means of an inventory
prepared before departure.
Art. 817: if in lightening of a vessel on account of a storm to facilitate
its entry to a port or roadstead, part of the cargo should be transferred
to barges or lighters and be lost, the owner of the said part is entitled
to indemnity as if the loss originated from a gross average, the amount
being distributed between the vessel and cargo from which it came.
If on the contrary the merchandise transferred should be saved and
the vessel should be lost, no liability may be demanded of the salvage.
Art. 818: if, as a necessary measure to extinguish a fire in a port,
roadstead, creek, or bay, it should be decided to sink any vessel, this
loss shall be considered gross average, to which the vessels saved
should contribute.
Note: the loss or damage sustained by cutting away wreck or parts of
the ship which have been previously carried away or effectively lost by
accident shall not be made good as general average
Sacrifice must be Successful
- no general contribution can be demanded if the vessel and other
cargo that are sought to be saved were in fact not saved (art. 860)
- owners of the goods saved shall not be liable for the indemnification
of those jettisoned, lost or damaged
- hence when the sacrifice was not successful in saving the ship, there
will be no general contribution
Compliance with Legal Steps
- Procedure for recovery: (Art. 813-814)
1. There must be a resolution of the captain, adopted after a
deliberation with the other officers of the vessel and after
hearing all persons interested in the cargoes. If the latter
disagree, the decision of the captain should prevail but they shall
register their objections.
2. The resolution must be entered in the logbook, stating the
reasons and motives for the dissent, and the irresistible and
urgent causes if he acted in his own accord. It must be signed, in
the first case, by all persons present in the hearing. In the second
case, by the captain and all the officers of the vessel.
3. The minutes must also contain a detail of all the goods jettisoned
and those injuries caused to those on board.
4. The captain shall deliver it to the maritime judicial authority of
the first port he may make, within 24 hours after his arrival, and
to ratify it immediately under oath.
- ORDER OF GOODS TO BE CAST OVERBOARD IN CASE OF JETTISON:
1. those which are on the deck, preferring the heaviest one with the
least utility and value;
2. those which are below the upper deck, beginning with the one
with greatest weight and smallest value. (Art. 815)
Examples of General Average
Read Art 811 of the Code of Commerce
By Whom Borne
- shall be borne by those who benefited from the sacrifice; the
shipowner and the owner of the cargoes that were saved
Contribution may be imposed to;
a. insurers ( Insurance Code of the Philippines)
- they are obliged to pay for the indemnification of the gross average
provided that the liability shall be limited to the proportion of
contribution attaching to his policy value where this is less than the
contributing value of the thing insured
b. lenders of bottomry and respondentia (Code of Commerce)
-obliged to pay in proportion to their respective interest, the general
average which may take place in the goods which the loan is made
Who is entitled to indemnity?
Owner of the goods which were sacrificed is entitled to receive the
general contribution
Except;
1. goods carried on desk unless the rule special law or
customs of the place allow the same
2. goods that are not recorded in the books or records
of the vessel
3. fuel of the vessel if there is more than sufficient
fuel for the voyage
American Home Insurance v. CA
Art 848 states that claims shall not be admitted if they do not exceed
5% of the interest which the claimant may have in the vessels or cargo
if it is general average, and 1% of the goods damaged if particular
average… deducting in both cases the expenses of appraisal, unless
there is an agreement to the contrary.
It is clear that the damage of the cargo is particular average since the
loss is less than 1% to the value of the cargo and there appears to be
no allegations as to any agreement defendants and consignee of the
goods to the contrary, by express provision of law, plaintiff is barred
from suing for recovery.
Law on averages does not apply if the CC is negligent.
YORK-ANTWERP RULES ON DETERMINING LIABILITY FOR
CONTRIBUTION ON AVERAGES
 Under the rule, deck cargo is permitted in coastwise shipping but
prohibited in overseas shipping.
1. If deck cargo is located with the consent of the shipper on
overseas trade, it must always contribute to general average,
but should the same be jettisoned, it would not be entitled to
reimbursement because there is violation of the Y-A Rules.
2. If deck cargo is loaded with the consent of the shipper on
coastwise shipping, it must always contribute to general average
and if jettisoned would be entitled to reimbursement.
- may also be used to solve controversies where no provision
of the code of commerce is in point because the said rules
embody the custom of maritime states
AVERAGES
- the same concept that was existing in medieval times can be applied
at present
Relevance of averages (take note these ex. Connected to expenses
under 806)
under 806 --- averages are:
o Extraordinary expenses – ex. If machine does not
work, you have to ask help of a tugboat… the
expenses on the use of tugboat is a question of
averages. This is extraordinary because it is not
foreseen. --- assuming the engine of the vessel was
defective, can that be considered an average? YES.
(question now if it is particular or general)
o Damages or deterioration suffered – refer to the
physical feature or attribute of the goods.
- these two are different
DISTINCTION OF PARTICULAR AND GENERAL AVERAGES
Hernandez – averages are losses. If there is a loss incurred, the loss will
be shouldered on where it falls. (ex. If you have goods transported
from origin to destination but in process it was damaged by sea water.
The shipper or owner will shoulder the loss. What will shipper do to
recover loss? If insured go after insurance. Insurance then files action
against common carrier due to negligence) --- if general average, there
is special circumstance, the loss will not be shouldered on where it falls
but wil be shouldered proportionately by persons who have benefited
the circumstance
4 reqs for general averages (see above notes) – MEMORIZE;
MAGSAYSAY VS. AGAN
1. common danger TO Both vessel and cargo
2. deliberate sacrifice
3. successful saving
4. compliance with the proper steps
If no special circumstance, it is a particular or simple average --- the
owner of the vessel will be the one who will shoulder the loss. The
negligence of captain, the owner of the vessel will shoulder. But if
there is special circumstance, the loss will be shouldered
proportionately by those who benefited
Standard oil case – the ship captain will not release goods to the
shipper unless the shipper will contribute their share. The issue was
the duty of the captain to liquidate – he did not file for the appropriate
proceeding, you should result to legal liquidation. Captain here failed
TO INITIATE proper proceeding thus shipowner is liable for actions of
captain
Q: is the duty of captain to initiate a condition precedent?
A: no. even if ship captain does not initiate, the shipowner can still file
the appropriate proceeding in court.
COMMON DANGER – both to vessel and cargo. If one invokes general
average then that person must prove what he allege. In standard oil
since ship captain invoked gen aver – they should be the one to prove.
Failure to prove, they cannot ask for contribution from owners of the
goods.
It is also possible that there are no goods involved. Only extraordinary
expense Phil. Home assurance case --- discussed also in chapter 3 ---
when it exploded, vessel got burned, another vessel came to the
rescue to extinguish the fire and towed the vessel to the nearest
destination. Goods were saved from the subject vessel. The shipowner
asked for contribution to the owner of the goods which were saved. SC
said, shipowner did not comply legal steps 813-815 thus you cannot
allege general averages.
If the averages are not general, it is particular. the shipowner will be
solely liable… in the case of Magsaysay, there was no deliberate
sacrifice.
SUCCESSFUL SAVING
- Both vessel and goods must be saved
- If vessel not saved, no general averages. Even if goods were
saved
- You have to start with resolution, placing of reso in the log
book, accounting of goods thrown away starting those on
deck and to follow from those not on deck (read 83-815)
American Home insurance (take note this case--- bar)
 - Transportation of tv sets, the shipcapatain was uprised of the
typhoon. Still captain continued with the journey. Then na
abot ang typhoon captain directed that the tv sets should be
jettison. Saved vessel. Reklamo owner. Is there general
average? No. if the shipowner is negligent, the law on
general averages does not apply.
Note that examples of the two types of averages are not exclusive.
There is a word “especially” thus there may be other example that may
fall under this two type of averages.
YORK AND TURP RULES
- THIS CAN be stipulated in a contract that this rule will apply
in respect to averages
- In the absence of stipulation in the contract in applying this
rule, such rule is inapplicable
Q: ordinary expenses are not averages bec. They are foreseeable, are
there instance that they can be considered to be extraordinary ave
A; if the parties agree that the averages will cover ordinary expenses.
The code of commerce does not prohibit the inclusion of other
expenses under averages.
G. COLLISIONS
Collisions - impact of 2 vessels both of which are moving.
Allision - impact between a moving vessel and a stationary one.
 3 Zones of Time in the Collision of vessels:
1. First zone – all time up to the moment when risk of collision
begins;
2. Second zone – time between moment when risk of collision
begins and moment it becomes a practical certainty;
3. Third zone – time when collision is certain and time of impact.
 Error in Extremis - sudden movement made by a faultless vessel
during the 3rd 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).
 Rules on Collision of Vessels under Code of Commerce:
1. The collision may be due to the fault, negligence or lack of skill of
the captain, sailing mate, or any other member of the
complement of the vessel. The owner of the vessel at fault be
liable for losses or damage. (Art. 826)
2. The collision may be due to the fault of both vessels. Each vessel
shall suffer its own losses, but as regards the owner of cargoes
both vessels shall be jointly and severally liable. (Art. 827)
3. If it cannot be determined which vessel is at fault. Each vessel
shall also suffer its own losses and both shall be solidarily liable
for losses o damages on the cargoes. (Art. 828)
4. The vessels may collide with each other through fortuitous event
or force majeure. In this case each shall bear its own damage.
(Art. 830)
5. Two vessels may collide with each other without their fault by
reason of a third vessel. The third vessel will be liable for losses
and damages. (Art. 831)
6. A vessel which is properly anchored and moored may collide with
those nearby reasons of storm or other cause of force majeure.
The vessel run into shall suffer its own damage and expense. (Art.
832)
 Cases covered by collision and allision:
1. One vessel at fault – such vessel is liable for damage caused to
innocent vessel as well as damages suffered by the owners of
cargo of both vessels.
2. Both vessels at fault – each vessel must bear its own loss, but the
shippers of both vessels may go against the ship owners who will
be solidarily liable.
3. Vessel at fault not known – same as rule as (2). (Doctrine of
Inscrutable Fault)
4. Third vessel at fault – same rule as (1).
5. Fortuitous event – no liability. Each bears its own loss.
Prerequisite to recovery:
 Protest should be made within 24 hours before the 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)
 Injuries to persons and damage to cargo of owners not on board on
collision time need not be protested. (Art. 836)
DOCTRINE OF LAST CLEAR CHANCE OR CONTRIBUTORY NEGLIGENCE
NOT APPLICABLE.
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.
NOTE: The Doctrine of Limited Liability applies in case of collisions, but
it shall be limited only to the value of the vessel with all its
appurtenances and freightage earned during the voyage. When the
latter is not sufficient to cover all the liabilities, the indemnity due by
reason of the death or injury of persons shall have preference. (Arts.
837 and 838)
H. ARRIVAL UNDER STRESS
* ARRIVAL UNDER STRESS – arrival of a vessel at a port of destination
on account of lack of provision, well founded fear of seizure,
privateers, pirates, or accidents of sea disabling navigation. (Art. 819)
NOTE: Captain must make a protest
Steps to be taken in the determination of the propriety of arrival
under stress
1. captain should determine during the voyage if there is a well
founded fear of seizure, privateers of other valid grounds
2. captain shall then assemble the officers
3. captain shall summon the persons interested in the cargo who
may be present and who may attend but without right to vote
4. the officers shall determine and agree if there is well founded
reason after examining the circumstances; Captain shall have the
deciding vote
5. agreement shall be drafter and the proper minutes shall be
signed and entered into the log book
6. objections and protests shall likewise be entered in the minutes
- Absence of one of the steps, can still be considered arrival under
stress.
When not lawful:
1. lack of provisions due to negligence to carry according to usage
and customs;
2. risk of enemy not well known or manifest
3. defect of vessel due to improper repair; and
4. malice, negligence, want of foresight or lack of skill of captain.
(Art. 820)
Who bears expenses:
 if arrival under stress is proper  shipowner or ship agent
will only be liable for the expenses of the arrival
 if arrival under stress is improper  shipowner and ship
agent will be liable for the same expenses and, in addition,
they shall be solidarily liable for damages caused to the
cargoes by such arrival under stress
(Art. 821)
NOTE:
- After cessation of the cause of the arrival under stress, captain
should continue voyage or else he shall be liable.
Unloading of cargoes to make repairs:
- in order to make repairs to the vessel or because there is
danger that cargo may suffer damage  necessary to
unload; captain must request authorization from competent
judge or court for removal, and carry it out w/ knowledge of
the person interested in the cargo
- in a foreign port  Philippine Consul
- in case of the vessel  expenses shall be for the account of
the ship owner or agent
- in case of the cargo  chargeable against the owners of the
merchandise for whose benefit the act was performed
- if both  expenses to be divided proportionately between
the value of the vessel and cargo
(Art. 822)
Custody of cargo:
 intrusted to the captain (except in cases of force majeure)
(Art. 823)
 if entire cargo or part thereof should appear to be damaged,
or there should be imminent danger of its being damaged
 captain may request judge of competent court / consul,
the sale of all or part of the cargo
 person taking cognizance shall authorize it (after
examination and declaration)
 captain shall justify the legality of his conduct, answering
to the shipper for the price of the merchandise would have
brought if they had arrived in good condition
(Art. 824)
Liability of captain:
 captain responsible for the damages caused by his delay
 if cause of arrival under stress ceases  he should not
continue the voyage
 if cause of arrival should have been the fear of enemies 
deliberation and resolution (in a meeting of officers of the
vessel and persons interested in the cargo) shall precede the
departure
(Art. 825)
* Shipwreck – the demolition or shattering of a vessel caused by her
driving ashore or on rocks and shoals in the midseas, or by the violence
of winds or waves in tempests
- loss of the vessel at sea as a consequence of its grounding, or running
against an object in sea or on the coast
 Loss or deteriorations of vessel or cargo caused by shipwreck or
stranding  individually account of the owners; part which may be
saved belonging to them, same proportion. (Art. 840)
 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 goods saved from the wreck to be specially bound for the
payment of the expenses of the respective salvage. (Art. 842)
 If several vessels sail under convoy, and any of them should be
wrecked, the cargo saved will be distributed among the rest in
proportion to the amount which each one is able to take. … If any
captain should refuse, without sufficient cause, to receive what may
correspond to him, the captain of the wrecked vessel to enter a marine
protest against him. … If it is not possible to transfer to the other
vessels the entire cargo of the vessel wrecked, the goods of the highest
value and smallest volume to be saved first. Designation to be made by
the captain with concurrence of his officers. (Art. 843)
 The captain taking on-board the goods saved from the wreck to
continue his course to the port of destination and upon arrival he
should deposit the goods for disposal to their owners. … In case the
captain changes his course, and if he can unload them at the port of
which they were consigned, he may make said port if the shippers or
supercargoes present and the officers and passengers of the vessel
consent thereto. But he is not required to do so even if he has the
consent during time of war or when the port is difficult and dangerous
to make. … The owners of the cargo to defray all the expenses of this
arrival and the payment of the freightage. (Art. 844)
 If cannot be, proceed to judicial sale complying with the formalities
and on publicity. (Art. 845)
I. SALVAGE LAW (Act No. 2616)
* SALVAGE – 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.
Kinds of Salvage:
 Voluntary – compensation is dependent on the success.
 Under contract for a per diem or per horam wage – payable
at all events.
 Under contract for compensation – payable only in case of
success.
Claim for valid salvage:
- Provides for a reward for voluntary salvage
- Other persons who assist in saving the vessel or its cargo
from shipwreck shall be entitled to a similar award
Persons not entitled to salvage compensation:
1. Crew of the vessel shipwrecked or which was in danger of
shipwreck
2. He who shall have commenced the salvage in spite of
opposition of the captain or of his representatives
3. He who shall have failed to comply with the provisions of
Section 3 (Section 3. Tthe salvor who saves or picks up a
vessel or merchandise at sea, in the absence of the ship
captain, ship owner or a representative of either of them,
they being unknown, shall convey and deliver the vessel or
merchandise ASAP to the collector of customs if the port has
a collector and otherwise to the provincial treasurer or
municipal mayor.)
Requisites of compensation or salvage reward:
1. Object must have been exposed to marine peril (fire, acts of
pirate, thieves)
2. Salvage services rendered voluntarily and is not required as
an existing duty or a form of contract (See Sec. 8)
* Pilots are not entitled to a reward – (Atty.
Capanas)
 3. Salvage services are successful in whole or in part
4. Valid vessel which is shipwrecked beyond the control of the
crew or shall have been abandoned (not necessary)
* Courts will not interfere in the agreement of the parties except but
where there is no agreement or it is excessive the reward is fixed by
the RTC judge.
* Derelict – a ship or cargo which is abandoned and deserted at sea by
those who were in charge of it, without any hope of recovering it or
without any intention of returning to it
- determined by ascertaining what was the intention and expectation
of those in charge of it when they quitted it
- boat or vessel found entirely deserted or abandoned on the sea
without hope or intention of recovery or return by the master or the
crew, whether resulting from wreck, accident, necessity, or voluntary
abandonment
JETSAM, FLOTSAM, LIGAN:
 Jetsam – goods that were thrown off a ship which was in
danger
 Flotsam – goods that floated off the ship while ship was in
danger or when it sank
 Ligan – goods left as sea on the wreck or tied to a buoy so
that they can be recovered later
Basis of entitlement to salvage reward (Circumstances to consider):
1. The labor expended by the salvors in rendering the salvage
service
2. The promptitude, skill and energy displayed in rendering the
service and saving the property
3. The value of the property employed by the salvors in
rendering the service, and danger to which such property
was exposed
4. The risk incurred by the salvors in rescuing the property from
the impending peril
5. The value of the property salved
6. The degree of danger which the property was rescued
Rights and obligations of salvors and owners:
 Salvor is entitled to compensation for services rendered. He
has, under the Salvage Law, a lien upon the property
salvaged.
 On the other hand, the owner does not denounce his right to
the property. There is no presumption of an intention to
abandon such property rights.
Maritime Lien
 A salvor, in maritime law, has an interest in the property; called a
lien, but it never goes, in the absence of a contract expressly made,
upon the idea of debt due from the owner to the salvor but upon the
principle that the service creates a property in the thing saved.
Rule on salvage reward:
1. The reward is fixed by the RTC judge in the absence of agreement
or where the latter is excessive (Sec. 9).
2. If sold (no claim being made within 3 months from publication),
the proceeds, after deducting expenses and the salvage claim,
shall go to the owner; if the latter does not claim it within 3 years,
50% of the said proceeds shall go to the salvors, who shall divide
it equitably, and the other half to the government (Secs. 11-12).
3. If a vessel is the salvor, the reward shall be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in proportion to their salaries
SALVAGE LAW
SECTION 1. WHEN IN CASE OF SHIPWRECK, THE VESSEL OR ITS CARGO
SHALL BE BEYOND THE CONTROL OF THE CREW, OR SHALL HAVE BEEN
ABANDONED BY THEM, AND PICKED UP AND CONVEYED TO A SAFE
PLACE BY OTHER PERSONS, THE LATTER SHALL BE ENTITLED TO A
REWARD FOR THE SALVAGE.
THOSE WHO, NOT BEING INCLUDED IN THE ABOVE PARAGRAPH,
ASSIST IN SAVING A VESSEL OR ITS CARGO FROM SHIPWRECK, SHALL
BE ENTITLED TO A LIKE REWARD.
SEC. 2. IF THE CAPTAIN OF THE VESSEL, OR THE PERSON ACTING IN HIS
STEAD, IS PRESENT, NO ONE SHALL TAKE FROM THE SEA, OR FROM
THE SHORES OR COAST MERCHANDISE OR EFFECTS PROCEEDING
FROM A SHIPWRECK OR PROCEED TO THE SALVAGE OF THE VESSEL,
WITHOUT THE CONSENT OF SUCH CAPTAIN OR PERSON ACTING IN HIS
STEAD.
SEC. 3. HE WHO SHALL SAVE OR PICK UP A VESSEL OR MERCHANDISE
AT SEA, IN THE ABSENCE OF THE CAPTAIN OF THE VESSEL, OWNER, OR
A REPRESENTATIVE OF EITHER OF THEM, THEY BEING UNKNOWN,
SHALL CONVEY AND DELIVER SUCH VESSEL OR MERCHANDISE, AS
SOON AS POSSIBLE, TO THE COLLECTOR OF CUSTOMS, IF THE PORT
HAS A COLLECTOR, AND OTHERWISE TO THE PROVINCIAL TREASURER
OR MUNICIPAL MAYOR.
SEC. 4. AFTER THE SALVAGE IS ACCOMPLISHED, THE OWNER OR HIS
REPRESENTATIVE SHALL HAVE A RIGHT TO THE DELIVERY OF THE
VESSEL OR THINGS SAVED, PROVIDED THAT HE PAYS, OR GIVES A
BOND TO SECURE, THE EXPENSES AND THE PROPER REWARD.
THE AMOUNT AND SUFFICIENCY OF THE BOND, IN THE ABSENCE OF
AGREEMENT, SHALL BE DETERMINED BY THE COLLECTOR OF CUSTOMS
OR BY THE JUDGE OF THE COURT OF FIRST INSTANCE OF THE
PROVINCE IN WHICH THE THINGS SAVED MAY BE FOUND.
SEC. 5. THE COLLECTOR OF CUSTOMS, PROVINCIAL TREASURER, OR
MUNICIPAL MAYOR, TO WHOM A SALVAGE IS REPORTED, SHALL
ORDER:
A. THAT THE THINGS SAVED BE SAFEGUARD AND INVENTORIED.
B. THE SALE AT PUBLIC OPTION OF THE THINGS SAVED WHICH MAY
BE IN DANGER OF IMMEDIATE LOSS OR OF THOSE WHOSE
CONSERVATION IS EVIDENTLY PREJUDICIAL TO THE INTERESTS OF
THE OWNER, WHEN NO OBJECTION IS MADE TO SUCH SALE.
C. THE ADVERTISEMENT WITHIN THE THIRTY DAYS SUBSEQUENT TO
THE SALVAGE, IN ONE OF THE LOCAL NEWSPAPERS OR IN THE
NEAREST NEWS-PAPER PUBLISHED, OF ALL THE DETAILS OF THE
DISASTER, WITH A STATEMENT OF THE MARK AND NUMBER OF
THE EFFECTS REQUESTING ALL INTERESTED PERSONS TO MAKE
THEIR CLAIMS.
SEC. 6. IF, WHILE THE VESSEL OR THINGS SAVED ARE AT THE
DISPOSITION OF THE AUTHORITIES, THE OWNER OR HIS
REPRESENTATIVE SHALL CLAIM THEM, SUCH AUTHORITIES SHALL
ORDER THEIR DELIVERY TO SUCH OWNER OR HIS REPRESENTATIVE,
PROVIDED THAT THERE IS NO CONTROVERSY OVER THEIR VALUE, AND
A BOND IS GIVEN BY THE OWNER OR HIS REPRESENTATIVE TO SECURE
THE PAYMENT OF THE EXPENSES AND THE PROPER REWARD.
OTHERWISE, THE DELIVERY SHALL NOR BE MADE UNTIL THE MATTER IS
DECIDED BY THE COURT OF FIRST INSTANCE OF THE PROVINCE.
SEC. 7. NO CLAIM BEING PRESENTED IN THE THREE MONTHS
SUBSEQUENT TO THE PUBLICATION OF THE ADVERTISEMENT
PRESCRIBED IN SUB-SECTION (C) OF SECTION FIVE, THE THINGS SAVE
SHALL BE SOLD AT PUBLIC AUCTION, AND THEIR PROCEEDS, AFTER
DEDUCTING THE EXPENSES AND THE PROPER REWARD SHALL BE
DEPOSITED IN THE INSULAR TREASURY. IF THREE YEARS SHALL PASS
WITHOUT ANYONE CLAIMING IT, ONE-HALF OF THE DEPOSIT SHALL BE
ADJUDGED TO HIM WHO SAVED THE THINGS, AND THE OTHER HALF
TO THE INSULAR GOVERNMENT.
SEC. 8. THE FOLLOWING SHALL HAVE NO RIGHT TO A REWARD FOR
SALVAGE OR ASSISTANCE:
A. THE CREW OF THE VESSEL SHIPWRECKED OR WHICH WAS IS
DANGER OF SHIPWRECK;
B. HE WHO SHALL HAVE COMMENCED THE SALVAGE IN SPITE OF
OPPOSITION OF THE CAPTAIN OR HIS REPRESENTATIVE; AND
C. HE WHO SHALL HAVE FAILED TO COMPLY WITH THE PROVISIONS OF
SECTION THREE.
SEC. 9. IF, DURING THE DANGER, AN AGREEMENT IS ENTERED INTO
CONCERNING THE AMOUNT OF THE REWARD FOR SALVAGE OR
ASSISTANCE, ITS VALIDITY MAY BE IMPUGNED BECAUSE IT IS
EXCESSIVE, AND IT MAY BE REQUIRED TO BE REDUCED TO AN
AMOUNT PROPORTIONATE TO THE CIRCUMSTANCES.
SEC. 10. IN A CASE COMING UNDER THE LAST PRECEDING SECTION, AS
WELL AS IN THE ABSENCE OF AN AGREEMENT, THE REWARD FOR
SALVAGE OR ASSISTANCE SHALL BE FIXED BY THE COURT OF FIRST
INSTANCE OF THE PROVINCE WHERE THE THINGS SALVAGED ARE
FOUND, TAKING INTO ACCOUNT PRINCIPALLY THE EXPENDITURES
MADE TO RECOVER OR SAVE THE VESSEL OR THE CARGO OR BOTH,
THE ZEAL DEMONSTRATED, THE TIME EMPLOYED, THE SERVICES
RENDERED, THE EXCESSIVE EXPRESS OCCASIONED THE NUMBER OF
PERSONS WHO AIDED, THE DANGER TO WHICH THEY AND THEIR
VESSELS WERE EXPOSED AS WELL AS THAT WHICH MENACED THE
THINGS RECOVERED OR SALVAGED, AND THE VALUE OF SUCH THINGS
AFTER DEDUCTING THE EXPENSES.
SEC. 11. FROM THE PROCEEDS OF THE SALE OF THE THINGS SAVED
SHALL BE DEDUCTED, FIRST, THE EXPENSES OF THEIR CUSTODY,
CONSERVATION, ADVERTISEMENT, AND AUCTION, AS WELL AS
WHATEVER TAXES OR DUTIES THEY SHOULD PAY FOR THEIR
ENTRANCE; THEN THERE SHALL BE DEDUCTED THE EXPENSES OF
SALVAGE; AND FROM THE NET AMOUNT REMAINING SHALL BE TAKEN
THE REWARD FOR THE SALVAGE OR ASSISTANCE WHICH SHALL NOT
EXCEED FIFTY PER CENT OF SUCH AMOUNT REMAINING.
SEC. 12. IF IN THE SALVAGE OR IN THE RENDERING OF ASSISTANCE
DIFFERENT PERSONS SHALL HAVE INTERVENED THE REWARD SHALL BE
DIVIDED BETWEEN THEM IN PROPORTION TO THE SERVICES WHICH
EACH ONE MAY HAVE RENDERED, AND, IN CASE OF DOUBT, IN EQUAL
PARTS.
THOSE WHO, IN ORDER TO SAVE PERSONS, SHALL HAVE BEEN
EXPOSED TO THE SAME DANGERS SHALL ALSO HAVE A RIGHT TO
PARTICIPATION IN THE REWARD.
SEC. 13. IF A VESSEL OR ITS CARGO SHALL HAVE BEEN ASSISTED OR
SAVED, ENTIRELY OR PARTIALLY, BY ANOTHER VESSEL, THE REWARD
FOR SALVAGE OR FOR ASSISTANCE SHALL BE DIVIDED BETWEEN THE
OWNER, THE CAPTAIN, AND THE REMAINDER OF THE CREW OF THE
LATTER VESSEL, SO AS TO GIVE THE OWNER A HALF, THE CAPTAIN A
FOURTH, AND ALL THE REMAINDER OF THE CREW THE OTHER FOURTH
OF THE REWARD, IN PROPORTION TO THEIR RESPECTIVE SALARIES, IN
THE ABSENCE OF AN AGREEMENT TO THE CONTRARY. THE EXPRESS OF
SALVAGE, AS WELL AS THE REWARD FOR SALVAGE OR ASSISTANCE,
SHALL BE A CHARGE ON THE THINGS SALVAGED ON THEIR VALUE.
COGSA (CARRIAGE OF GOODS BY SEA ACT)
- Adopted by the Philippines on October 22, 1936 through
Commonwealth Act No. 65
- New Civil Code  primary law on goods that are being
transported from a foreign port to the Philippines
- COGSA  remains to be a suppletory law for such type of
transportation – international shipping
ART. 1753, NCC: THE LAW OF THE COUNTRY TO WHICH THE GOODS
ARE TO BE TRANSPORTED SHALL GOVERN THE LIABILITY OF THE
COMMON CARRIER FOR THEIR LOSS, DESTRUCTION OR
DETERIORATION.
* Goods – includes goods, wares, merchandise, and articles of every
kinds whatsoever
- does not include live animals and cargo which by the
contract of carriage is stated as being carried on deck and is so carried
Parties:
 Carrier, and
 Shipper
- They are given their respective rights and obligations under COGSA.
- Carrier (covered by COGSA)  not limited to the shipowner; includes
charterer who enters into a contract of carriage with the shipper
- Charterer  charters a vessel and conducts his own business for his
own account
 after chartering the vessel, he uses the vessel to conduct a
business of transportation obtaining goods from 3rd persons to
transport the latter’s goods
Duties of the carrier:
 Civil Code requires international carriers to exercise
extraordinary diligence in the performance of their
contractual obligations
 Section 2 of COGSA  carrier’s obligation and liabilities in
relation to the loading, handling, stowage, carriage, custody,
care and discharge of such goods
 Section 3 of COGSA  responsibilities of the carrier under
COGSA
Document of title required
- evidenced by the Bill of Lading
- BOL serves as prima facie evidence of the receipt by the carrier of the
goods
Notice of claim and prescriptive period
* Notice of claim  must be made within 3 days from delivery if the
damage is not apparent; not mandatory
* Prescriptive period  1 year from delivery for the filing of the case is
a condition precedent or mandatory; does not apply to cases of
misdelivery or conversion
Defenses and immunities
- provided for by Section 4 of COGSA
- Section 49(1) of COGSA – carrier shall not be liable for loss or
damages arising from unseaworthiness
- New Civil Code – carrier will not be liable only if it can present proof
that the unseaworthiness was caused exclusively by any of the
circumstances specified in Art. 1734 of the NCC
Waiver
- The shipowner and the ship agent may waive the benefit of any of the
defenses in its favor provided not only under COGSA but also under
other laws

Limiting provision
- COGSA contains a provision that allows the shipper to recover only
US$500 per package unless there is a special declaration unless there
the real value of the goods is declared
- declaration made by the shipper stating an amount bigger than $500
per package will make the carrier liable for such bigger amount but
only if the amount so declared is the real value of the goods

Right to discharge dangerous cargo

- COGSA allows the carrier to discharge the good of the carrier
discovers that the goods are dangerous, inflammable or are explosives