U.P.

LAW BOC TRANSPORTATION LAWS COMMERCIAL LAW

TRANSPORTATION LAWS
Commercial Law
U.P. LAW BOC TRANSPORTATION LAWS
Common Carriers
1. Concept
A contract of transportation is one whereby a certain
person or association of persons obligate themselves to
transport persons, things, or news from one to another for a
fixed price [Crisostomo v CA, G.R. No. 138334 (2003)].
PARTIES TO THE CONTRACT:
a. Shipper - one who gives rise to the contract of
transportation by agreeing to deliver the things or
news to be transported, or to present his own person
or those of other or others in the case of transportation
of passengers
b. Carrier or conductor - one who binds himself to
transport person, things, or news, as the case may be,
or one employed in or engaged in the business of
carrying good for others for hire.
c. Consignee - the party to whom the carrier is to deliver
the things being transported; to whom the carrier may
lawfully make delivery in accordance with its contract
of carriage. The shipper and the consignee may be the
same person.
Carriers are persons or corporations who undertake to
transport or convey goods, property or persons, from one
place to another, gratuitously or for hire, and are classified
as:
a. Private or special carriers, who transport or undertake
to transport in a particular instance for hire or reward
[AGBAYANI, Commercial Laws of the Philippines
(1987)]; and
b. Common or public carriers [Art. 1732, NCC]
Common carriers are:
a. Persons, corporations, firms or associations;
b. Engaged in the business of carrying or transporting;
c. Passengers or goods or both;
d. By land, water, or air;
e. For compensation;
f. Offering their services to the public [Art. 1732, NCC].
Art. 1732 makes no distinction:
a. Between one whose principal business activity is the
carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity [Fabre
v. CA, G.R. No. 111127 (1996)];
b. Between a person or enterprise offering transportation
service on a regular or scheduled basis and one
offering such service on an occasional, episodic, or
unscheduled basis [Loadstar Shipping Co., Inc. v. CA,
G.R. No. 131621 (1999)];
c. Between a carrier offering its services to the general
public and one who offers services or solicits business
COMMERCIAL LAW
only from a narrow segment of the general population
[De Guzman v. CA, G.R. No. L-47822 (1988)].
The true test for a common carrier is not the quantity or
extent of the business actually transacted, or the number
and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in
by the carrier that he has held out to the general public as
his business or occupation. If the undertaking is a single
transaction, not a part of the general business or
occupation engaged in, as advertised and held out to the
general public, the individual or the entity rendering such
service is a private, not a common, carrier. The question
must be determined by the character of the business
actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert
when charged with the duties and obligations that the law
imposes [Teodoro v. Nicolas, G.R. No. 157917 (2012)].
A common carrier need not have fixed and publicly known
routes. Neither does it have to maintain terminals or issue
tickets [Asia Lighterage and Shipping v. CA, G.R. No.
147246 (2003)].
One engaged in the business of transporting petroleum
products from refineries via pipeline is a common carrier. It
is engaged in the business of transporting or carrying
goods, i.e., petroleum products, for hire as a public
employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ
its services, and transports the goods by land and for
compensation. The fact that it has a limited clientele does
not exclude it from the definition of a common carrier [First
Phil. Industrial v. CA, G.R. No. 125948 (1998)].
A customs broker may be regarded as a common carrier. As
long as a person holds itself to the public for the purpose of
transporting goods as a business, it is already considered a
common carrier regardless if it owns the vehicle used or
has to hire one. [Schmitz Transport v. Transport Venture,
Inc, G.R. No. 150255. (2005)]
A travel agency is not a common carrier. It 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 on their behalf [Crisostomo v. CA, G.R.
No. 138334 (2003)].
DIFFERENCE BETWEEN COMMON CARRIER AND PRIVATE
CARRIER
Common Carrier Private Carrier
Availability
U.P. LAW BOC TRANSPORTATION LAWS COMMERCIAL LAW

Holds himself out in another and operated under his license. [Dizon v.
common, that is, to all Agrees in some special Octavio (1955)].
persons who choose to case with some private d. However, one who has availed of the kabit system is
employ him, as ready to individual to carry for hire not precluded from filing for damages against another
carry for hire who caused the injury, as the policy against the kabit
Binding Effect system will not be defeated by giving such person
Not bound to carry for any standing to sue. [Lim v. CA, G.R. No. 125817 (2002)]
Bound to carry all who offer
reason, such goods as it is
and tender reasonable TRANSPORTATION NETWORK VEHICLE SERVICE
accustomed to carry,
compensation for carrying Transport Network Company or TNC is defined as an
unless it enters into a
them organization whether a corporation, partnership, or sole
special agreement to do so
Diligence Required proprietor, that provides pre-arranged transportation
Extraordinary diligence Ordinary diligence services for compensation using an internet-based
Governing Law technology application or a digital platform technology to
Civil Code; Code of connect passengers with drivers using their personal
Commerce and special vehicles [DOTC D.O. No. 2015-011].
laws, if not regulated by the
Civil Code (Art. 1766); law The TNC may or may not have been granted a Certificate of
of the country to which the Law on obligations and Public Convenience (CPC). If it is a holder of a valid and
goods are to be contracts current CPC, it is known as a common carrier. Otherwise, it
transported, if regarding is classified as a land transportation service contractor.
liability for loss,
destruction, or The Partners (owners of the vehicles used in transporting
deterioration of goods passengers) forming part of the network of a TNC, may or
Regulation may not be a common carrier, depending on whether the
A public service, therefore Partner(s) itself/themselves are holders of a CPC. A mere
subject to provisions Not subject to regulation as Accreditation given by LTFRB is not an equivalent to a CPC
governing common carriers a common carrier and will not make said holder a common carrier. If the
and public utilities Partner is a holder of a CPC, said Partner is a common
carrier. However, if the Partner is not a holder of a CPC,
said Partner is merely a land transportation service
It is not necessary that the carrier be issued a certificate of
contractor [BIR RMC 70-2015].
public convenience [Loadstar Shipping Co., Inc. v. CA, G.R.
No. 131621 (1999)].
Note: Please be guided by the requirements under Art.
1732.
KABIT SYSTEM:
a. It is an arrangement whereby a person who has been
granted a certificate of convenience allows another Diligence Required of Common
person who owns motor vehicles to operate under
such franchise for a fee [Lita Enterprises, Inc. v. IAC, Carriers
G.R. No. L-64693 (1984)].
b. It is invariably recognized as being contrary to public a. Standard of Diligence
policy and therefore void and inexistent under Art.
1409. Thus, for the safety of passengers and the Common carriers, from the nature of their business and for
public, the registered owner of the vehicle is not reasons of public policy, are bound to observe
allowed to prove that another person has become the extraordinary diligence, according to all the circumstances
owner so that he may be thereby relieved of of each case:
responsibility [Lim v. CA, G.R. No. 125817 (2002)]. 1. In the vigilance over the goods, and
c. One of the primary factors considered in the granting 2. For the safety of the passengers transported by them
of a certificate of public convenience for the business [Art. 1733, NCC]
of public transportation is the financial capacity of the
holder of the license, so that liabilities arising from Extraordinary diligence in the vigilance over the goods is
accidents may be duly compensated. The kabit system expressed in Arts 1734, 1735, and 1745, Nos. 5, 6, and 7,
renders illusory such purpose and, worse, may still be while the extraordinary diligence for the safety of the
availed of by the grantee to escape civil liability passengers is further set forth in Arts. 1755 and 1756 [Art.
caused by a negligent use of a vehicle owned by 1733, NCC].
U.P. LAW BOC TRANSPORTATION LAWS COMMERCIAL LAW

EXTRAORDINARY DILIGENCE
Requires carrying 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 [Art. 1755, NCC];
Note: A common carrier is not an insurer of the safety of its
passengers and is not bound absolutely and at all events to
carry them safely and without injury [Yobido v. CA, G.R. No.
113003 (1997)].
Presumption of Negligence
The mere proof of delivery of goods in good order to a
carrier, and of their arrival at the place of destination in bad
order, makes out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred,
the carrier must be held responsible. It is incumbent upon
the carrier to prove that the loss was due to accident or
some other circumstance inconsistent with its
liability [Ynchausti Steamship v. Dexter and Unson, G.R.
No. L-15652 (1920)].
Liabilities of Common Carriers
The obligation of the common carrier consists in the
transportation of passengers or goods or both [Art. 1732,
NCC].
Principles governing the liability of common carriers:
a. The liability of a carrier is contractual and arises upon
breach of its obligation. There is breach if it fails to
exert extraordinary diligence according to all
circumstances of each case;
b. A carrier is obliged to carry its passenger with the
utmost diligence of a very cautious person, having due
regard for all the circumstances;
c. A carrier is presumed to be at fault or to have acted
negligently in case of death of, or injury to,
passengers, it being its duty to prove that it exercised
extraordinary diligence; and
d. The carrier is not an insurer against all risks of travel.
[Isaac v. A.L. Ammen, G.R. No. L-9671 (1957)].

Note: While delay in the delivery of goods is a breach of

contract of carriage, it does not raise the presumption of
negligence because the goods are not lost, deteriorated, or
destroyed [Art. 1735, NCC].

In case of death of or injuries to passengers, common

carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed
extraordinary diligence as prescribed in Arts 1733 and
1755 [Art. 1756, NCC].

Art. 1733, NCC. Common carriers, from the nature of their

business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the

goods is further expressed in Articles 1734, 1735, and
1745, Nos. 5, 6, and 7, while the extraordinary diligence
for the safety of the passengers is further set forth in
Articles 1755 and 1756.

Art. 1755, NCC. 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.

Note: Mere failure to reach one’s destination, without injury

or death, does not raise the presumption of negligence
because it does not involve safety of the passengers.
U.P. LAW BOC TRANSPORTATION LAWS
Vigilance over Goods
1. Liability, in General
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. 1753, NCC].
Under Philippine law, the liability of the common carrier
with respect to vigilance over goods, in general, are as
follows:
a. Common carriers are responsible for the loss,
destruction, or deterioration of the goods [Art. 1734,
NCC]. In fact, they are liable even in those cases where
the cause of the loss or damage is unknown
[AGBAYANI].
b. Moreover, if the goods are lost, destroyed, or
deteriorated, common carriers are presumed to have
been at fault or to have acted negligently [Art. 1735,
NCC].
Note: Two-pronged analysis in determining liability:
a. Whether or not the cause of the loss, destruction, or
deterioration is included under Art. 1734;
b. If not, whether or not the common carrier exercised
extraordinary diligence.
Exempting Causes
General rule: Common carriers are responsible for the loss,
destruction, or deterioration of the goods.
Exception: The same is due to any of the following causes
only:
a. Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
b. Act of the public enemy in war, whether international
or civil;
c. Act of omission of the shipper or owner of the goods;
d. The character of the goods or defects in the packing or
in the containers;
e. Order or act of competent public authority [Art. 1734,
NCC].
In all other cases of loss, destruction, or deterioration, the
common carrier is presumed to have been at fault or to
have acted negligently, unless they prove that they
observed extraordinary diligence [Art. 1735, NCC].
Thus, in De Guzman v. CA [G.R. No. L-47822 (1988)], it was
held that hijacking, not being included in Art. 1734, must
be dealt with under the provisions of Art. 1735, and thus,
the common carrier is presumed to have been at fault or
negligent.
COMMERCIAL LAW
NATURAL DISASTER OR CALAMITY
Requisites:
a. The natural disaster must have been the proximate
and only cause of the loss;
b. The common carrier must exercise due diligence to
prevent or minimize the loss before, during and after
the occurrence of the flood, storm or natural disaster
[Art. 1739, NCC]; and
c. The common carrier must not have negligently
incurred delay [Art. 1740, NCC];
In order that a common carrier may be absolved from
liability where the loss, destruction or deterioration of the
goods is due to a natural disaster or calamity, it must be
shown that such natural disaster or calamity was the
proximate and only cause of the loss; there must be an
entire exclusion of human agency from the cause of the
injury of the loss [Philippine American General Insurance
Co., Inc. v. MGG Marine Services, Inc., G.R. No. 135645
(2002)].
Fire may not be considered a natural disaster or calamity.
This must be so as it arises almost invariably from some act
of man or by human means. It does not fall within the
category of an act of God unless caused by lightning or by
other natural disaster or calamity. It may even be caused by
the actual fault or privity of the carrier [Eastern Shipping
Lines v. IAC, G.R. No. L-69044 (1987)].
Note: If the common carrier negligently incurs in delay in
transporting the goods, a natural disaster shall not free
such carrier from responsibility [Art. 1740].
ACT OF PUBLIC ENEMY
Requisites:
a. The act of the public enemy was committed either in
an international or civil war [Art. 1734 (2), NCC];
b. The act of the public enemy must have been the
proximate and only cause; and
c. The common carrier must exercise due diligence to
prevent or minimize the loss before, during and after
the act of the public enemy causing the loss,
destruction or deterioration of the goods [Art. 1739,
NCC].
Thieves, rioters, robbers, and insurrectionists, though at
war with social order, are not in a legal sense classed as
public enemies, but are merely private depredators for
whose acts a carrier is answerable. Pirates on the high
seas, however, stand as an exception to this rule. They are
considered the enemies of all civilized nations, and indeed
of the human race, and consequently their depredations on
a common carrier will excuse him from liability. [AQUINO].
ACT OR OMISSION OF SHIPPER OR OWNER
U.P. LAW BOC TRANSPORTATION LAWS
The act or omission of the shipper must have been the
proximate and only cause of the loss, destruction, or
deterioration of the goods.
If the shipper or owner merely contributed to the loss,
destruction or deterioration of the goods, the proximate
cause being the negligence of the common carrier, the
latter shall be liable for the damages, which shall, however,
be equitably reduced [Art. 1741, NCC].
CHARACTER OF THE GOODS
Requisites:
a. The loss, destruction, or deterioration of the goods is
due to the character of the goods or defects in the
packing or in the containers [Art. 1734 (4), NCC]; and
b. The common carrier must exercise due diligence to
forestall or lessen the loss [Art. 1742, NCC].
If the fact of improper packing is known to the carrier or its
servants or apparent upon ordinary observation, but it
accepts the goods notwithstanding such condition, it is not
relieved of liability for loss or injury resulting therefrom
[Southern Lines v. CA, G.R. No. L-16629 (1962)].
ORDER OF COMPETENT AUTHORITY
Requisites:
a. There must be an order or act of competent public
authority through which the goods are seized or
destroyed [Art. 1734 (5), NCC]; and
b. The said public authority must have had the power to
issue the order [Art. 1743, NCC].
The intervention of the municipal officials was not of a
character that would render impossible the fulfillment by
the carrier of the obligation. A carrier is not duty bound to
obey an illegal order (of a mayor) to dump into the sea the
scrap iron. There is absence of sufficient proof that the
issuance of the order was attended with such force or
intimidation as to completely overpower the will of the
carrier’s employees [Ganzon v. CA, G.R. No. L-48757
(1988)].
FORCE MAJEURE
Force majeure – in general, has also been invoked as an
exempting cause based on Art. 1174, which states that no
person shall be responsible for a fortuitous event which
could not be foreseen, or which, though foreseen, was
inevitable.
A fortuitous event has the following characteristics:
a. The cause of the unforeseen and unexpected
occurrence, or the failure of the debtor to comply with
his obligations, must be independent of human will;
b. 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;
COMMERCIAL LAW
c. The occurrence must be such as to render it impossible
for the debtor to fulfill his obligation in a normal
manner; and
d. The obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.
There must be an entire exclusion of human agency from
the cause of injury or loss.
Moreover, a common carrier may not be absolved from
liability in case of force majeure or fortuitous event alone.
The common carrier must still prove that it was not
negligent in causing the death or injury resulting from an
accident [Yobido v. CA, G.R. No. 113003 (1997)].
Loss of a ship and of its cargo, in a wreck due to accident or
force majeure must, as a general rule, fall upon their
respective owners, except in cases where the wrecking or
stranding of the vessel occurred through the malice,
carelessness, or lack of skill on the part of the captain or
because the vessel put to sea is insufficiently repaired and
prepared.
In order that the exemption due to force majeure would
apply, the carrier must prove that the loss or destruction of
the merchandise was due to accident and force majeure
and not to fraud, fault, or negligence on the part of the
captain or owner of the ship [Tan Chiong Sian v. Inchausti,
G.R. No. L-6092 (1912)].
Contributory Negligence
The liability of the common carrier shall be equitably
reduced when the loss, destruction, or deterioration of the
goods when:
a. The negligence of the common carrier was the
proximate cause thereof; and
b. The shipper or owner merely contributed to such loss,
destruction, or deterioration [Art. 1741, NCC].
Duration of Extraordinary
Responsibility for Goods
a. Instances when carrier has responsibility to exercise
extraordinary diligence: From the time the goods
are unconditionally placed in the possession of, and
received by the carrier [Art 1736, NCC] or its
authorized agent [Compania Maritima v Insurance
Co., G.R. No. L-18965 (1964)], until the same are
delivered actually and constructively by the carrier to
the consignee or to the person who has a right to
receive them;
b. When goods are temporarily unloaded or stored in
transit, unless the shipper or owner has made use of
the right of stoppage in transitu [Art 1737, NCC];
U.P. LAW BOC TRANSPORTATION LAWS
c. During storage in a warehouse of the carrier at the
place of destination, until consignee has been
advised of the arrival of the goods and has had
reasonable opportunity to remove or dispose them
[Art 1738, NCC];
In dealing with the contract of common carriage of
passengers, for purpose of accuracy, there are two (2)
aspects of the same, namely:
1. contract ‘to carry (at some future time),’ which
contract is consensual and is necessarily perfected
by mere consent; and
2. contract ‘of carriage’ or ‘of common carriage,’ which
should be considered as a real contract for not until
the carrier is actually used can the carrier be said to
have already assumed the obligation of a carrier
[PARAS, Civil Code Annotated, 11th Ed].
Note: The distinction is important in determining when the
common carrier is required to exercise extraordinary
responsibility. The birth of the contract is not necessarily
the birth of the duty to exercise extraordinary responsibility.
a. Delivery of Goods to Common
Carriers
Under Art. 1736, delivery means unconditionally placing
the goods in the possession of the carrier and the carrier
receiving them for transportation.
Thus, if the common carrier received the goods not for
transportation but only for safekeeping, then the duty of
extraordinary diligence has not yet started.
Unconditionally placing the goods in the possession of the
carrier means the shipper cannot get them back from the
common carrier at will.
The liability of the carrier as common carrier begins with the
actual delivery of the goods for transportation and not
merely with the formal execution of a receipt or bill of
lading; the issuance of a bill of lading is not necessary to
complete delivery and acceptance. Even where it is
provided by statute that liability commences with the
issuance of the bill of lading actual delivery and
acceptance are sufficient to bind the carrier [Compania
Maritima v Insurance Co., G.R. No. L-18965 (1964)].
Actual or Constructive Delivery
The extraordinary responsibility of the common carrier ends
when, subject to Art. 1738, the goods are delivered
actually or constructively by the carrier to:
1. The consignee; or
COMMERCIAL LAW
2. The person who has a right to receive them, such as
agents, brokers, and the like.
Art. 1738 provides that the extraordinary liability of the
common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at
the place of destination, until the consignee has:
1. Been advised of the arrival of the goods; and
2. Had reasonable opportunity thereafter to remove them
or otherwise dispose of them.
Delivery of the cargo to the customs authorities is not
delivery to the consignee or “to the person who has a right
to receive them” as contemplated in Art. 1736 because in
such case the goods are still in the hands of the
government and the owner cannot exercise dominion over
them. However, the parties may agree to limit the liability of
the carrier considering that the goods still have to go
through the inspection of the customs authorities before
they are actually turned over to the consignee. This
stipulation is not contrary to morals or public policy. This is
a situation where it may be said that the carrier loses
control of the goods because of a custom regulation and it
is unfair that it be made responsible for what may happen
during the interregnum [Lu Do v. Binamira, G.R. No. L-9840
(1957)].
It is settled in maritime law jurisprudence that cargoes
while being unloaded generally remain under the custody
of the carrier [Asian Terminals, Inc. v. Philam Insurance Co.,
G.R. No. 181163 (2013)]
Temporary Unloading or Storage
General rule: Extraordinary diligence over the goods
remains even when the goods are temporarily unloaded or
stored in transit.
Exception: The duty to observe such diligence ceases when
shipper or owner made use of the right of stoppage in
transitu [Art 1737, NCC] .
Stoppage in transitu is the act by which the unpaid vendor
of goods stops their progress and resumes possession of
them constructively while they are in the course of transit
from him to the purchaser, and not yet actually delivered to
the latter [AGBAYANI].
Basis: Under Art. 1530, when the buyer of the goods
becomes insolvent, the unpaid seller who has parted with
the possession of the goods at any time while they are in
transit, may resume the possession of the goods as he
would have had if he had never parted with the possession.
When the right of stoppage in transitu is exercised, the
common carrier holds the goods in the capacity of an
U.P. LAW BOC TRANSPORTATION LAWS
ordinary bailee or warehouseman upon the theory that the
exercise of the right of stoppage in transitu terminates the
contract of carriage. Hence, only ordinary diligence is
required [AGBAYANI].
Stipulation for Limitation of
Liability
There are two possible stipulations limiting the liability of
the common carrier:
a. Stipulation limiting the common carrier’s liability as to
the diligence required;
b. Stipulation limiting the common carrier’s liability as to
the amount of liability.
An agreement limiting the common carrier’s liability for
delay on account of strikes or riots is also valid [Art. 1748,
NCC].
a. As to Diligence Required
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.
1744, NCC].
COMMERCIAL LAW
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. 1745, NCC].
The following stipulations are also void:
1. Stipulation exempting the common carrier from any
and all liability for loss or damage occasioned by its
own negligence;
2. Stipulation providing for an unqualified limitation of
such liability to an agreed stipulation [Heacock v.
Macondray, G.R. No. L-16598 (1921)].
Limitation of Liability to Fixed Amount
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. 1749, NCC].
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:
1. It is reasonable and just under the circumstances; and
2. It has been fairly and freely agreed upon [Art. 1750,
NCC].
While a passenger may not have signed the plane ticket, he
is nevertheless bound by the provision thereof; such
provisions have been held to be part of the contract of
carriage and valid and binding upon the passenger
regardless of the latter’s lack of knowledge or assent to the
regulation. It is what is known as a contract of adhesion
wherein one party imposes a ready-made form of contract
on the other. The one who adheres to the contract is in
reality free to reject it entirely. A contract limiting liability
U.P. LAW BOC TRANSPORTATION LAWS
upon an agreed valuation does not offend against the
policy of the law forbidding one from contracting against
his own negligence [Ong Yiu v. CA, G.R. No. l-40597
(1979)].
[However], the fact that the conditions are printed at the
back of the ticket stub in letters so small that they are hard
to read would not warrant the presumption that the
[shipper] was aware of those conditions such that he had
“fairly and freely agreed” to those conditions [Shewaram v.
PAL, G.R. No. L-20099 (1966)].
Factors Affecting Agreement
The effect of these stipulations is subject to the following
provisions:
1. 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. 1746, NCC].
2. 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.
1747, NCC]. The limitation may be availed of if the
delay or change of route was due to a just cause.
3. 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 [Art. 1751, NCC].
4. 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. 1752, NCC].
Limitation of Liability in Absence of
Declaration of Greater Value
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. 1749, NCC].
Liability for Baggage of
Passengers
Baggage are things that a passenger will bring with him
consistent with a temporary absence from where he lives.
Passenger’s baggage must have a direct relationship with
the passenger who is traveling.
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For instance, a balikbayan box or suitcase is passenger’s
baggage. However, 10,000 cans of corned beef is not
considered as passenger baggage. They are considered as
goods. They are not part of the contract of carriage [of
passenger]. A separate contract of carriage [or bill of
lading] must be entered into in order to transport them.
These goods will then be transported whether or not a
person is physically traveling with them [AGBAYANI].
There are two kinds of passenger’s baggage, which are
governed differently:
a. Passenger baggage in the custody of the passenger
(or carry-on luggage); and
b. Passenger baggage not in the custody of the
passenger (or checked-in luggage).
The liability is greater for baggage that is in the custody of
the carrier, or checked-in baggage, as compared to those
in the possession of the passenger.
a. Checked-In baggage
The provisions of Arts 1733-1753 shall apply to
passenger’s baggage which is not in his personal custody
or in that of his employee [Art. 1754, NCC].
In other words, the rules governing the responsibility of a
common carrier in the transportation of goods just
discussed apply. Thus, extraordinary diligence is required.
Baggage in Possession of Passengers
As to baggage other than checked-in baggage, they are
governed by Arts 1998, and 2000-2003, concerning the
responsibility of hotel-keepers [Art. 1754, NCC].
Art. 1998, as applied by analogy, the baggage of
passengers in their personal custody or in that of their
employees, while being transported, are regarded as
necessary deposits. The common carriers are responsible
as depositaries, provided that:
1. Notice was given to them, or to their employees, of the
effects brought by the passengers; and
2. The passengers take the precautions which the
common carrier advised relative to the care and
vigilance of their baggage.
In case of loss or injury to the baggage of passengers in
their personal custody, or in that of their employees, while
being transported, the carrier is liable if the loss or injury is
caused by:
1. His servants;
2. His employees;
U.P. LAW BOC TRANSPORTATION LAWS
3.
4.
Strangers [Art. 2000, NCC]; or
A thief or robber done without the use of arms or
irresistible force [Art. 2001, NCC].
The carrier is not liable if loss or injury is caused by:
1. Force majeure [Art 2000, NCC];
2. Theft or robbery with the use of arms or irresistible
force[Art 2001, NCC];
3. The acts of the passenger, his family, servants, or
visitors;
4. The character of the baggage [Art 2002, NCC].
The following provisions also figure in determining the
liability of the common carrier:
1. The fact that passengers are constrained to rely on the
vigilance of the common carrier shall be considered in
determining the degree of care required of him [Art
2000, NCC].
2. The common carrier cannot free himself from
responsibility by posting notices to the effect that he is
not liable for the articles brought by the passenger.
3. Any stipulation whereby the responsibility of the
common carrier as set forth in Articles 1998-2001 is
suppressed or diminished shall be void [Art. 2003,
NCC].
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Safety of Passengers
1. Liability, in general
Under Philippine law, the liability of the common carrier
with respect to the safety of passengers, in general, are as
follows:
1. 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 [Art. 1755,
NCC].
2. 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 [Art. 1756, NCC].
Note: It is not enough that the accident was caused by force
majeure, the common carrier must still prove that it was not
negligent in causing the injuries resulting from such
accident. [Bachelor Express v. CA, G.R. No. 85691 (1990)]
Bachelor Express illustrates that force majeure is not itself
a defense; the exercise of the diligence required by law is
the defense.
Void Stipulations
General rule: The responsibility of a common carrier for the
safety of passengers cannot be dispensed with or lessened
by stipulation by the posting of notices, by statements on
tickets, or otherwise [Art. 1757, NCC].
Exception: When a passenger is carried gratuitously, a
stipulation limiting the common carrier’s liability for
negligence is valid [Art 1758, NCC].
Exception to the exception: Even when a passenger is
carried gratuitously, a stipulation limiting the common
carrier’s liability for willful acts or gross negligence is
invalid [Art 1758, NCC].
The reduction of fare does not justify any limitation of the
common carrier’s liability [Art. 1758, NCC].
Duration of Liability
As in the contract of carriage for goods, the perfection of
the contract of carriage of passengers does not necessarily
coincide with the commencement of the duty of
extraordinary diligence. It may occur at the same time or
later.
Based on jurisprudence, the duty that the carrier of
passengers owes to its patrons extends to persons
U.P. LAW BOC TRANSPORTATION LAWS
boarding the cars as well as those alighting therefrom [Del
Prado v. Manila Electric Company, G.R. No. L-29462
(1929)].
This is also reflected in [Art. 17, Warsaw Convention], which
applies to international air carriage. It provides that the
liability of a common carrier for injury to the passenger
lasts from embarkation to disembarkation, including the
period when the passenger is on board the aircraft.
In maritime commerce, [Art. 698, Code of Commerce]
relates to the period of the voyage:
a. In case a voyage already begun should be interrupted:
1. The passengers shall be obliged to pay the fare in
proportion to the distance covered; and
2. If the interruption is due to a fortuitous event,
without right to recover for losses and damages;
if caused by the captain exclusively, with a right
to indemnity.
b. If the interruption should be caused by the disability of
the vessel, and a passenger should agree to await the
repairs:
1. He may not be required to pay any increased
price of passage; but
2. His living expenses during the stay shall be for his
own account.
c. In case of delay in the departure of the vessel, the
passengers have:
1. The right to remain on board;
2. If the delay is not due to a fortuitous event or
force majeure, with the right to be furnished with
food for the account of the vessel;
3. If the delay should exceed ten days:
i. Passengers requesting the same shall be
entitled to the return of the fare; and
ii. If it is due exclusively to the fault of the
captain or ship agent, they may also
demand indemnity for losses and
damages.
A vessel exclusively devoted to the transportation of
passengers must take them directly to the port or ports of
destination, no matter what the number of passengers may
be, making all the stops indicated in its itinerary.
a. Waiting for Carrier or Boarding of
Carrier
As to the commencement of the duty of the common
carrier, it was held that the duty that the carrier of
passengers owes to its patrons extends to persons
boarding the cars as well as to those alighting therefrom. In
this connection, however, a person boarding a moving car
must be taken to assume the risk of injury from boarding
the car under the conditions open to his view, but he cannot
fairly be held to assume the risk that the motorman, having
COMMERCIAL LAW
the situation in view, will increase the peril by accelerating
the speed of the car before he is planted safely on the
platform [Del Prado v. Manila Electric Company, G.R. No. L-
29462 (1929)].
Thus, it is the duty of common carriers of passengers to
stop their conveyances at 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 are doing so [Dangwa
Transportation v. CA, G.R. No. 95582 (1991)].
With respect to carriage of passengers by trains, the
extraordinary responsibility of common carriers
commences the moment the person who purchases the
ticket from the carrier presents himself at the proper place
and in a proper manner to be transported with a bona fide
intent to ride the coach [AQUINO citing Vda. de Nueca, et
al. vs. Manila Railroad Company].
Similarly, with respect to carriage of passengers by sea, the
duty of the carrier commences as soon as the person with
bona fide intention of taking passage places himself in the
care of the carrier or its employees and is accepted as
passenger. [AQUINO]
Arrival at Destination
As to the termination of the duty of the common carrier, it
has been held that the relation of carrier and passenger
does not cease at the moment the passenger alights from
the carrier’s vehicle at a place selected by the carrier at the
point of destination, but continues until the passenger has
had a reasonable time or a reasonable opportunity to leave
the carrier’s premises. What is a reasonable time or a
reasonable delay within this rule is to be determined from
all the circumstances:
1. A person who, after alighting from a train, walks along
the station platform is considered still a passenger;
2. A passenger, who has alighted at his destination and
is proceeding by the usual way to leave the company’s
premises, but before actually doing so is halted by the
report that his brother, a fellow passenger, has been
shot, and he in good faith and without intent of
engaging in the difficulty, returns to relieve his brother,
is deemed reasonably and necessarily delayed and
thus continues to be a passenger entitled as such to
the protection of the railroad and company and its
agents [La Mallorca v. CA, G.R. No. L-20761 (1966)].
The 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
U.P. LAW BOC TRANSPORTATION LAWS
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.
In the case of a shipper, the passengers of vessels are
allotted a longer period of time to disembark from the ship
than other common carriers such as a passenger bus, since
such vessels are capable of accommodating a bigger
volume of both passenger and baggage as compared to the
capacity of a regular commuter bus. Consequently, a ship
passenger will need at least an hour as is the usual
practice, to disembark from the vessel and claim his
baggage whereas a bus passenger can easily get off the
bus and retrieve his luggage in a very short period of time
[Aboitiz Shipping v. CA, G.R. No. 84458 (1989)].
The relation of carrier and passenger continues until the
latter has been landed at the port of destination and has
left the carrier’s premises. Hence, the carrier necessarily
would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its
stranded passengers until they have reached their final
destination [PAL v. CA, G.R. No. L-82619 (1993)].
Note: Despite the Court’s pronouncement in PAL v. CA, note
that common carriers are bound to observe extraordinary
diligence in the ‘safety’ of its passengers. The law does not
mention the words ‘comfort’ and ‘convenience.’
Liability for Acts of Others
a. Employees
General rule: Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts
of the former’s employees, although such employees may
have acted beyond the scope of their authority or in
violation of the orders of the common carriers.
This liability does not cease even upon proof that they
exercised all the diligence of a good father of a family in the
selection and supervision of their employees [Art. 1759,
NCC].
This liability cannot be eliminated or limited by stipulation,
by the posting of notices, by statements on the tickets or
otherwise [Art. 1760, NCC].
Ratio: The servant is clothed with delegated authority and
charged with the duty to execute the carrier’s undertaking
to carry the passenger safely [AGBAYANI]. Also, the defense
of diligence in the selection and supervision of employees
does not obtain because the liability is not based on quasi-
delict, but on culpa contractual. However, there must be a
COMMERCIAL LAW
reasonable connection between the act and the contract of
carriage.
Note: The employee must be on duty at the time of the act.
It is enough that the assault happens within the course of
the employee’s duty. It is no defense for the carrier that the
act was done in excess of authority or in disobedience of
the carrier’s orders. The carrier’s liability here is absolute in
the sense that it practically secures the passengers from
assaults committed by its own employees [Maranan v.
Perez, G.R. No. L-22272 (1967)].
Exception: A common carrier is not responsible for acts
falling under force majeure.
When a party is unable to fulfill his obligation because of
force majeure, the general rule is that he cannot be held
liable for damages for non-performance [Japan Airlines vs.
CA, G.R. No. 118664 (1998)].
Note: In order to be exempted from liability due to a
fortuitous event, a common carrier must still prove that it
was not negligent in causing the death or injury resulting
from an accident. In other words, there must be a complete
exclusion of human agency from the cause of injury or
death. Hence, it was held that, under the circumstances,
the explosion of the new tire may not be considered a
fortuitous event as there are human factors involved in the
situation [Yobido v. CA, G.R. No. 113003 (1997)].
Other Passengers and Strangers
General Rule: A common carrier is not liable for injuries
inflicted by strangers or co-passengers.
Exception: 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 [Art. 1763, NCC].
Note: The law speaks of injuries suffered by the passenger
but not death. However, there appears to be no reason why
the common carrier should not be held liable under such
circumstances. The word “injuries” should be interpreted to
include death [AGBAYANI (1987)].
Under Art. 1763, 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. Further, when the violation of the
U.P. LAW BOC TRANSPORTATION LAWS
contract is due to the willful acts of strangers, the degree of
care essential to be exercised by the common carrier for the
protection of its passenger is only that of a good father of a
family [Pilapil v. CA, G.R. No. 52159 (1989)].
Manufacturers of Equipment
In case of mechanical defects, it was held that while a
carrier is not an insurer of the safety of the passengers, it
should nevertheless be held to answer for the laws its
equipment if such flaws were at all discoverable. In this
connection, the manufacturer of the defective appliance is
considered in law the agent of the carrier, and the good
repute of the manufacturer will not relieve the carrier from
liability. The rationale of the carrier’s liability is the fact
that the passenger has no privity with the manufacturer of
the defective equipment; hence, he has no remedy against
him, while the carrier usually has [Necesito vs. Paras, G.R.
No. L-10605 (1958)].
Contributory Negligence
The passenger must observe the diligence of a good father
of a family to avoid injury to himself [Art. 1761, NCC].
The contributory negligence of the passenger does not bar
recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common
carrier, but the amount of damages shall be equitably
reduced [Art. 1762, NCC].
It is negligence per se for a passenger on a railroad to
voluntarily or inadvertently protrude his arm, hand, elbow,
or any other part of his body through the window of a
moving car beyond the outer edge of the window or outer
surface of the car, so as to come in contact with objects or
obstacles near the track; no recovery can be had for an
injury which but for such negligence would not have been
sustained [Isaac v. A.L. Ammen, G.R. No. L-9671 (1957)].
In this case, the negligence of the passenger was not
contributory, but was the proximate cause of the injury.
Hence, the common carrier was exempted from liability.
Extent of Liability for Damages
Damages recoverable from common carriers, both in cases
of carriage of passengers and goods, shall be awarded in
accordance with Title XVIII concerning Damages.
Art. 2206, on liability, in case of death, for loss of earning
capacity, support, and moral damages for mental anguish,
shall also apply to the death of a passenger caused by the
breach of contract by a common carrier [Art. 1764, NCC].
Thus, the damages recoverable are:
COMMERCIAL LAW
a. Actual or compensatory damages;
b. Moral damages;
c. Exemplary damages;
d. Nominal, temperate, and liquidated damages;
e. Attorney’s fees.
a. Actual or Compensatory Damages
Actual or compensatory damages refer to adequate
compensation for such pecuniary loss suffered as duly
proved [Art. 2199, NCC].
Under Art. 2201, the liability for damages include:
1. In case the common carrier acted in good faith:
a. The natural and probable consequence of the
breach of the obligation; and
b. Those which the parties have foreseen or could
have reasonably foreseen at the time the
obligation was constituted;
2. In case of fraud, bad faith, malice or wanton attitude,
all damages which may be reasonably attributed to
the non-performance of the obligation.
In case of death, actual damages also include:
1. Loss of earning capacity, unless the deceased had no
earning capacity at the time of death; and
2. Support for a period not exceeding five years [Art.
2206, NCC].
In the absence of a showing that common carrier’s
attention was called to the special circumstances requiring
prompt delivery of a passenger’s luggage, the common
carrier cannot be held liable for the cancellation of
passenger’s contracts [for exhibition of films] as it could
not have foreseen such an eventuality when it accepted the
luggage for transit [Pan-Am World Airways v. IAC, G.R. No.
70462 (1988)].
Moral Damages
Moral damages, though incapable of pecuniary
computation, if they are the proximate result of the
common carrier’s wrongful act or omission, may be
recovered [Art. 2217, NCC].
In cases of breach of contract of carriage, moral damages
may be recovered where:
1. The common carrier acted fraudulently;
2. The common carrier acted in bad faith [Art. 2220,
NCC];
3. Death of a passenger resulted even in the absence of
bad faith or fraud [Art. 2206, NCC].
U.P. LAW BOC TRANSPORTATION LAWS
Bad faith contemplates a state of mind affirmatively
operating with furtive design or with some motive of self-
interest or will or for ulterior purpose [Air France v.
Carrascoso, G.R. No. L-21438 (1966)].
When it comes to contracts of common carriage,
inattention and lack of care on the part of the carrier
resulting in the failure of the passenger to be
accommodated in the class contracted for amounts to bad
faith or fraud which entitles the passenger to the award of
moral damages in accordance with Art. 2220 [Ortigas v.
Lufthansa, G.R. No. L-28773 (1975)].
Willful and deliberate overbooking on the part of the airline
carrier constitutes bad faith. Under Section 3, Economic
Regulations No. 7 of the Civil Aeronautics Board,
overbooking, which does not exceed ten percent, is not
considered as deliberate and therefore does not amount to
bad faith [United Airlines v. CA, G.R. No. 124110 (2001)].
Exemplary Damages
In a contract of carriage, exemplary damages may be
awarded if the common carrier acted in wanton, fraudulent,
reckless, oppressive, or malevolent manner [Art. 2232,
NCC].
Exemplary damages serves as an instrument to serve the
ends of law and public policy by reshaping socially
deleterious behaviors, specifically, in the case, to compel
the common carrier to control their employees, to tame
their reckless instincts, and to force them to take adequate
care of human beings and their property [Mecenas v. CA,
G.R. No. 88052 (1989)].
Nominal, Temperate, and Liquidated
Damages
Nominal damages are adjudicated in order that a right of
the plaintiff, which has been violated by the defendant,
may be vindicated or recognized, not for the purpose of
indemnifying the plaintiff for any loss suffered by him [Art.
2221, NCC]. It may be awarded in case of breach of
contract of carriage and in every case where any property
right has been invaded [Art. 2222, NCC].
A violation of the passenger’s right to be treated with
courtesy in accordance with the degree of diligence
required by law to be exercised by every common carrier
entitles the passenger to nominal damages [Saludo v. CA,
G.R. No. 95536 (1922)].
Temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be
recovered when some pecuniary loss has been suffered but
COMMERCIAL LAW
its amount cannot, from the nature of the case, be proved
with certainty [Art. 2224, NCC].
In the case of Philtranco v Paras [G.R. No. 161909(2012)],
the Supreme Court upheld the award of temperate
damages by the CA. Paras failed to show receipts of at
least two surgeries as well as rehabilitative therapy.
Nonetheless, the CA was convinced that Paras should not
suffer from the lack of definite proof of his actual expenses
for the surgeries and rehabilitative therapy. As the records
indicated, Paras was first rushed for emergency treatment
to the San Pablo Medical Center in San Pablo City, Laguna,
and was later brought to the National Orthopedic Hospital
in Quezon City where he was diagnosed to have suffered a
dislocated hip, fracture of the fibula on the right leg,
fracture of the small bone of the right leg, and closed
fracture on the tibial plateau of the left leg. He underwent
surgeries on March 4, 1987 and April 15, 1987 to repair
the fractures. Thus, the CA awarded to him temperate
damages of P50,000.00 in the absence of definite proof of
his actual expenses towards that end.
Liquidated damages are those damages agreed upon by
the parties to a contract, to be paid in case of breach
thereof [Art. 2226, NCC].
Attorney’s Fees
Under Art. 2208, as applicable to a contract of carriage,
attorney’s fees and expenses of litigation may be recovered
in the following cases:
1. When exemplary damages are awarded;
2. When the common carrier’s act or omission has
compelled the plaintiff to litigate with third persons or
to incur expenses to protect his interest;
3. Where the common carrier acted in gross and evident
bad faith in refusing to satisfy the plaintiff’s valid, just
and demandable claim;
4. In any other case where the court deems it just and
equitable that attorney’s fees and expenses of
litigation should be recovered.
U.P. LAW BOC TRANSPORTATION LAWS COMMERCIAL LAW

Bill of Lading
Bill of lading – a written acknowledgement, signed by the
master of a vessel or other authorized agent of the carrier,
that he has received the described goods from the shipper,
to be transported on the expressed terms to the described
place of destination, and to be delivered there to the
designated consignee or parties [70 Am. Jur. 2d 924].
It is not, however, indispensable for the creation of a
contract of carriage [Compania Maritima v Insurance Co.,
G.R. No. L-18965 (1964)]
In the absence of a bill of lading, disputes shall be
determined by the legal proofs which the parties may
present in support of their respective claims, according to
the general provisions established in the Code of
Commerce for commercial contracts [Art. 354, Code of
Commerce].
The bill of lading becomes effective usually upon its
delivery to and acceptance by the shipper [ Aquino,
Essentials of Transportation & Public Utilities Law (2011)].
In the absence of fraud, concealment, or improper conduct,
it is presumed that the stipulations of the bill are known to
the shipper, and he is generally bound by his acceptance
whether he reads the bill or not [Magellan Mfg. Marketing
Corp. v. CA, G.R. No. 95529 (1991)].
1. Three-Fold Character
Delivery of Goods
The goods should be delivered to the consignee or any
other person to whom the bill of lading was validly
transferred or negotiated.
The carrier is duty bound to deliver the goods in the same
condition in which, according to the bill of lading, they were
found at the time of there were received, without damage or
impairment [Art. 363, COC].
a. Period of Delivery
Delivery should be made within the period fixed for the
delivery of the goods as stipulated in the bill of lading [Art.
370, COC].
In case of failure to deliver, the carrier shall pay the
indemnity agreed upon in the bill of lading, neither the
shipper nor consignee being entitled to anything else.
Should there be no period previously fixed, the carrier is
bound to forward the goods in the first shipment of the
same or similar merchandise which he may make to the
point of delivery. Should he not do so, he shall be liable for
damages cause by the delay [Art. 358, COC].
If no indemnity is fixed and there is delay, the carrier shall
be liable for the damages which may have been caused by
the delay [Art. 370, COC].

a. Receipt as to the quantity and description of the Period of delivery is Delivery must be made
goods shipped; stipulated within period fixed
b. Contract to transport and deliver the goods to the Delivery must be made
consignee or other person therein designated, on the through the first shipment
terms specified in such instrument; and Period of delivery is NOT of the same or similar
c. Document of title, which makes it a symbol of the stipulated merchandise. If not made
goods. on the first shipment, delay
arises.
The bill of lading constitutes the legal evidence of the
contract of transportation, and all disputes between the Indemnity for delay is fixed Liability is limited to the
parties regarding the execution and performance of the in Bill of Lading stipulation
contract shall be decided by the contents of the bill of Liable for all damages which
Indemnity for delay NOT
lading issued by the carrier. The law admits no exceptions may have been caused by
fixed
other than the falsity and material error in its drafting [Art. the delay.
353, Code of Commerce]
Delivery Without Surrender of Bill of
Bill of Lading is covered by the Parol Evidence Rule in which
the terms of the contract are rendered conclusive upon the
Lading
parties and evidence aliunde is not admissible to vary or
contradict a complete and enforceable agreement After the contract has been complied with, the bill of lading
embodied in a document, subject to well defined which the carrier has issued shall be returned to him, and
exceptions [Magellan Mfg. Marketing Corp. v. CA, G.R. No. by virtue of the exchange of this title with the thing
95529 (1991)]. transported, the respective obligations and actions shall be
considered cancelled, unless in the same act the claim
U.P. LAW BOC TRANSPORTATION LAWS
which the parties may wish to reserve be reduced to writing,
exception being made of the provisions of Art. 366, on
period for filing claims [Art. 353, par. 2, COC].
If, in case of loss or for any other reason whatsoever, the
consignee cannot return, upon receiving the merchandise,
the bill of lading subscribed by the carrier, he shall give
said carrier a receipt for the goods delivered. This receipt
produces the same effects as the return of the bill of lading
[Art. 353, par. 3, COC].
The surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its
contractual obligation. If surrender of the original bill of
lading is not possible, acknowledgment of the delivery by
signing the delivery receipt suffices [National Trucking and
Forwarding Corp v Lorenzo Shipping Corp, G.R. No.
153563 (2005)].
Refusal of Consignee to Take Delivery
The consignee may refuse to take delivery in the following
cases:
1. If only part of the goods transported should be
delivered, when he proves that he cannot make use
thereof without the others [Art. 363, COC].
2. When the goods are rendered useless for purposes of
sale or consumption in the use for which they are
properly destined, in which case the consignee may
demand payment of the goods at current market
prices [Art. 365, COC];
3. In case part of the goods is in good condition and
separation is possible, the consignee may refuse to
receive only the damaged goods [Art. 365, COC].
4. Where the delay is through the fault of the carrier [Art.
371, COC].
In case of dispute as to the condition of the goods, the
same shall be examined by experts appointed by the
parties, and the third one, in case of disagreement,
appointed by the judicial authority.
If the persons interested should not agree with the report,
said judicial authority shall order the deposits of the
merchandise in a safe warehouse, and the parties
interested shall make use of their rights in the proper
manner. [Art. 367, COC].
Period for Filing Claims
Pursuant to Art. 366, Code of Commerce, a claim, on
account of damage found upon opening the packages,
must be made against the carrier:
a. Within 24 hours, if the indications of the damage
cannot be ascertained from the exterior of the
packages (i.e., latent damage); or
COMMERCIAL LAW
b. At the time of receipt, if the indications damage can
be so ascertained (i.e., patent damage).
But the Court in [Aboitiz v Insurance Company of North
America, GR No. 168402(2008)] made a pro hac vice
ruling, in that even if the notice was given more than 24 hrs
after the receipt of the goods, the notice requirement was
held nevertheless to have been complied with, due to the
peculiar circumstances: “Provisions specifying a time to
give notice of damage to common carriers are ordinarily to
be given a reasonable and practical, rather than a strict
construction. We give due consideration to the fact that the
final destination of the damaged cargo was a school
institution where authorities are bound by rules and
regulations governing their actions. Understandably, when
the goods were delivered, the necessary clearance had to
be made before the package was opened. Upon opening
and discovery of the damaged condition of the goods, a
report to this effect had to pass through the proper
channels before it could be finalized and endorsed by the
institution to the claims department of the shipping
company.”
No claim whatsoever shall be admitted against the carrier
with regard to the condition in which the goods transported
were delivered:
a. After the periods mentioned have elapsed; or
b. After the transportation charges have been paid.
The periods mentioned commence upon delivery of cargo
to the consignee at the place of destination.
Thus, Art. 366 is limited to cases of claims for damage to
goods actually turned over by the carrier and received by
the consignee. It does not apply to misdelivery of goods.
Failure to file a claim bars recovery [Aquino (2011)].
Ratio: The rule protects the carrier by affording it an
opportunity to make an investigation of a claim while the
matter is still fresh and easily investigated so as to
safeguard itself from false and fraudulent claims [UCPB
General Ins. Co., Inc. v. Aboitiz Shipping, G.R. No. 168433
(2009)].
The validity of a contractual limitation of time for filing a
suit against a carrier that is shorter than the statutory
period has been generally held valid as such stipulation
merely affects the shipper’s remedy and does not affect the
liability of the carrier. In the absence of any statutory
limitation and subject only to the requirement on the
reasonableness of the stipulated limitation period, the
parties to a contract of carriage may fix by agreement a
shorter time for the bringing of suit on a claim for the loss of
or damage to the shipment than that provided by the
statute of limitations. Such limitation is not contrary to
public policy for it does not in any way defeat the complete
U.P. LAW BOC TRANSPORTATION LAWS COMMERCIAL LAW

vestiture of the right to recover, but merely requires the transport, but nothing
assertion of that right by action at an earlier period than stops parties from
would be necessary to defeat it through the operation of the stipulating that COGSA
ordinary statute of limitations. [PHILAMGEN v. Sweet Lines, applies in their contract)
Inc., G.R. No. 87434 (1992)]. File claim for apparent loss: upon receipt
File claim within 24 hours
The value of the goods stated in the bill of lading is from delivery if damage or
conclusive between the parties, and the shipper is not loss is not apparent
allowed to prove a higher value [Art. 372, COC]. It is only Filing of the claim is
when the carrier’s fault is so gross as to amount to actual mandatory; condition
fraud that the actual amount of the losses an damages
precedent for filing of
suffered may be proved by the shipper against the carrier. action for damages
Prescriptive period to file
Horses, vehicles, vessels and equipment used by the carrier an action: 10 years from
serves as liens for the payment of the value of the goods breach (if bill of
which the carrier must pay in case of loss or misplacement lading/written
[Art. 372, COC]. receipt/contract is issued), been delivered.
6 years if only through oral
Period for Filing Actions contract
contracts for carriage of
goods by sea to Philippine
ports in foreign trade
File claim within 3 days
from delivery if damage or
loss is not apparent
Not mandatory
Prescriptive period to file
an action: 1 year from
discharge of goods, or date
when they should have
1 year period may be
extended by stipulation.

a. Overland Transportation and False Declaration of Contents

Coastwise Shipping If the carrier has a well-founded suspicion of falsity in the
declaration of the contents of the package, the carrier may
The general rules under the Civil Code on extinctive examine it. If the declaration should be correct,
prescription apply. Thus, action for damages must be filed examination and repacking expenses shall be defrayed by
in court: the carrier, and in the contrary, by the shipper [Art. 357,
1. Within 6 years, if a bill of lading was not issued [Art. COC].
1145, NCC].
2. Within 10 years, if a bill of lading was issued [Art.
1146, NCC].
International Carriage of Goods by Sea
Suit must be brought within one year:
1. After delivery of the goods; or
2. From the date when the goods should have been
delivered.

Otherwise, the carrier and the ship shall be discharged

from all liability in respect of loss or damage.

The absence of notice shall not affect or prejudice the right

of the shipper to bring suit within one year after the delivery
of the goods or the date when the goods should have been
delivered [Section 3(6), Carriage of Goods by Sea Act].

The period for filing the claim is one year, in accordance

with the Carriage of Goods by Sea Act. The COGSA, as
adopted and embodied in CA No. 65, applies because it is
a special law, and, as such, prevails over the general
provisions of the Civil Code on prescription of actions
[Maritime Agencies & Services, Inc. v. CA, G.R. No. 77638
(1990) ].

Code of Commerce COGSA

Primarily governs domestic Applicable law for all
U.P. LAW BOC TRANSPORTATION LAWS
Admiralty and Maritime Commerce
Concept
The concept of admiralty, as distinguished from overland
transportation, depends on:
3. Size of the vessel; and
4. Size of the body of water over which such vessel
traverses.
Under B.P. 129, jurisdiction over admiralty cases depends
on the amount, and not on the nature of the claim. Hence,
jurisdiction is with the MTC if the amount of the claim does
not exceed Php 300,000 outside Metro Manila or Php
400,000 in Metro Manila. Otherwise, jurisdiction is with
the RTC.
Vessel
Vessels are those engaged in navigation, whether
coastwise or on the high seas destined for the services of
the industry or maritime commerce.
The word ‘vessel’ used in the Code of Commerce was not
intended to include all ships, craft, or floating structures of
every kind without limitation [Lopez v. Duruelo, G.R. No. L-
29166 (1928)].
Vessels are considered personal or movable property [Art.
585]; but they 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.
Vessel of domestic ownership and of more than 15 tons
gross is required to acquire a certificate of Philippine
register. The purpose of the certificate is declare the
nationality of a vessel engaged in trade with foreign nations
and to enable her to assert that nationality wherever found.
1. Charter Parties
CHARTER PARTY – a contract by virtue of which the owner or
agent of a vessel binds himself to transport merchandise or
persons for a fixed price.
It is a contract whereby the whole or part of the ship is let by
the owner to a merchant or other person for a specified
time or use for the conveyance of goods, in consideration of
the payment of freight [Caltex v. Sulpicio Lines, G.R. No.
131166 (1999)].
BILL OF LADING DISTINGUISHED FROM A CHARTER PARTY
A charter party is a complete contract, while a bill of lading
is a private receipt which the captain gives to accredit that
such goods belong to such persons.
COMMERCIAL LAW
A charter party is a consensual contract which can be
dissolved by means of indemnity for losses and damages;
while a bill of lading is a real contract which exists only
after delivery of the goods to be transported is made.
Liabilities arising from breach is identical to overland
transport.
TOWAGE is not a charter party. It is a contract for the hire of
services by which a vessel is engaged to tow another vessel
from one port to another for consideration.
In modern maritime law and usage, there are three
distinguishable types of charter parties:
a. Bareboat or demise charter;
b. Time charter; and
c. Voyage or trip charter [Litonjua Shipping, Inc. v.
National Seamen Board, G.R. No. L-51910 (1989)].
Note: Both time and voyage charters are said to be
contracts of affreightment, where a common or public
carrier is not converted into a private carrier.
CONTRACT OF AFFREIGHTMENT – one in which the owner of
the vessel leases part or all of its space to haul goods for
others. It is a contract for special service to be rendered by
the owner of the vessel and under such contract the general
owner retains the possession, command and navigation of
the ship, the charterer or freighter merely having use of the
space in the vessel in return for his payment of the charter
hire. If the charter is a contract of affreightment, which
leaves the general owner in possession of the ship as owner
for the voyage, the rights, responsibilities of ownership rest
on the owner and the charterer is usually free from liability
to third persons in respect of the ship [Puromines Inc. v. CA,
G.R. No. 91228 (1993)].
BAREBOAT DISTINGUISHED FROM CONTRACT OF
AFFREIGHTMENT
Demise or Bareboat Contract of Affreightment
Charterer becomes liable Owner remains liable as
to others caused by its carrier and must answer for
negligence any breach of duty
Charterer regarded as
Charterer is not regarded as
owner pro hac vice for the
owner
voyage
Owner of vessel
The vessel owner retains
relinquishes possession,
possession, command, and
command, and navigation
navigation of the ship
to charterer
Common carrier is Common carrier is not
converted to private carrier converted to private carrier
Persons who make a charter
U.P. LAW BOC TRANSPORTATION LAWS
a. Owner or owners of the vessel, either in whole or in
part, who have legal control and possession of the
vessel;
b. Charterer may subcharter entire vessel to 3rd person
only if not prohibited in original charter [Art 679,
COC];
c. Ship agent if authorized by the owner/s or given such
power in the certificate of appointment [Art 598,
COC]; or
d. Captain in the absence of the ship agent or consignee
and only if he acts in accordance with the instructions
of the agent or owner and protects the latter’s interest
[Art 609, COC].
Requisites for a valid charter party
a. Consent of the contracting parties;
b. Existing vessel which should be placed at the
disposition of the shipper;
c. Freight; and
d. Compliance with the formal requisites under Article
652 of the Code of Commerce which include the
requirement that the charter party must be in (a)
writing, (b) drawn in duplicate, and (c) signed by the
parties [AQUINO (2016)].
a. Bareboat or Demise Charter
In a bareboat or demise charter, the ship owner leases to
the charterer the whole vessel, transferring to the latter the
entire command, possession and consequent control over
the vessel’s navigation, including the master and the crew,
who thereby become the charterer’s “servants” [AQUINO
(2011)].
To create a demise, the owner of a vessel must completely
and exclusively relinquish possession, command and
navigation thereof to the charterer, anything short of such a
complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.
Although a charter party may transform a common carrier
into a private one, the same, however, is not true in a
contract of affreightment on account of the distinctions
between a contract of affreightment and a demise or
bareboat charter [Puromines Inc. v. CA, G.R. No. 91228
(1993)].
Note: In a bareboat or demise charter, the common carrier
is converted to private carrier.
The charterer, to whom the owner of the vessel
relinquishes, completely and exclusively, the possession,
command and navigation of the vessel, by virtue of a
demise charter, is considered the owner pro hac vice. He
mans and equips the vessel and assumes all responsibility
for navigation, management and operation. He thus acts as
COMMERCIAL LAW
the owner of the vessel in all important aspects during the
duration of the charter [Puromines Inc. v. CA, G.R. No.
91228 (1993)].
Time Charter
Time charter – a contract for the use of a vessel for a
specified period of time or for the duration of one or more
specified voyages.
In this case, the owner of a time-chartered vessel retains
possession and control through the master and crew, who
remain his employees. What the time charterer acquires is
the right to utilize the carrying capacity and facilities of the
vessel and to designate her destinations during the term of
the charter [Litonjua Shipping Co., Inc. v. National Seamen
Board, G.R. No. L-51910(1898)].
Voyage or Trip Charter
In a voyage charter, the vessel is leased for a single or
particular voyage. The master and crew remain the employ
of the owner of the vessel [Litonjua Shipping Co., Inc. v.
National Seamen Board, G.R. No. L-51910(1898)].
Liability of Ship Owners and
Shipping Agents
The persons participating in maritime commerce are the
following:
a. Ship owners or ship agents
b. Captains and masters
c. Other officers and crew
d. Supercargoes
Ship Owner - has possession, control and management of
the vessel and the consequent right to direct her navigation
and receive freight earned and paid, while his possession
continues; he is the person who is primarily liable for
damages sustained in the operation of the vessel, based on
the provisions of the Code of Commerce.
Ship Agent - the person entrusted with the provisioning of a
vessel, or who represents her in the port in which she
happens to be [Art. 586, COC].
Based on the definition of the ship agent in the Code of
Commerce, it is evident that the ship agent is jointly and
severally liable with the owner. The joint and several liability
applies both for breach of contract and extra-contractual
obligation 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 the right of the
owner, the vessel and its equipment and freight [AQUINO
(2016)].
U.P. LAW BOC TRANSPORTATION LAWS
Captains - those who govern vessels that navigate the high
seas or ships of large dimensions and importance,
although they may be engaged in coastwise trade.
Masters - those who command smaller ships engaged
exclusively in coastwise trade. In maritime commerce,
masters and captains are the same.
Crew - a person on board who is involved in highly technical
tasks and in manning of the vessel (e.g. master, mate).
Complement - a person, not a crew, who is not directly
involved in the manning of the vessel (e.g. cook).
Supercargo - a person on board the vessel, who functions
as an agent of the owner of the goods shipped as cargo on
a vessel, who has charge of the cargo on board, sells the
same to the best advantage in the foreign markets, buys
cargo to be brought back on the return voyage of the ship,
and comes home with it.
The powers and liabilities of the captain shall cease, when
there is a supercargo, with regard to that part of the
administration legitimately conferred upon the latter, but
shall continue in force for all acts which are inseparable
from his authority and office [Art. 649, COC].
The ship owner or ship agent is liable:
a. For the acts of the captain, unless the latter exceeds
his authority [Art. 586, COC].
b. For contracts entered into by the captain to repair,
equip and provision the vessel, provided that the
amount claimed was invested for the benefit of the
vessel [Art. 586, COC].
c. For the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of the
goods transported, as well as for the safety of
passengers transported [Art. 587, COC].
d. For damages to third persons for tort or quasi-delict
committed by the captain, except collision with
another vessel [Art. 1759, NCC]
e. For damages in case of collision due to the fault,
negligence, or want of skill of the captain, sailing
mate, or any other member of the complement [Art.
826, COC].
a. Liability for Acts of Captain
Three (3) distinct roles of a captain:
1. General agent of the ship owner;
2. Commander and technical director of the vessel;
3. Representative of the country under whose flag he
navigates [Inter-Orient Marine Enterprises v. NLRC,
G.R. No. 115286 (1994)].
COMMERCIAL LAW
The captain shall be liable to the agent, and the latter to
third persons [Art. 618, COC]:
1. For all the damages suffered by the vessel and his
cargo by reason of want of skill or negligence on his
part;
2. For all the thefts committed by the crew, reserving his
right of action against the guilty parties;
3. For the losses, fines, and confiscations imposed on
account of violation of the laws and regulations of
customs, police, health, and navigation;
4. For the losses and damages caused by mutinies on
board the vessel, or by reason of faults committed by
the crew in the service and defense of the same, if he
does not prove that he made full use of his authority to
prevent or avoid them;
5. For those arising by reason of an undue use of powers
and non-fulfillment of the obligations which are his;
6. For those arising by reason of his going out of his
course or taking a course which he should not have
taken without sufficient cause, in the opinion of the
officers of the vessel at a meeting with the shippers or
supercargoes who may be on board;
7. For those arising by reason of his voluntarily entering a
port other than that of his destination;
8. For those arising by reason of non-observance of the
provisions contained in the regulations on situation of
lights and maneuvers for the purpose of preventing
collisions.
Limited Liability Rule
THE DOCTRINE OF LIMITED LIABILITY (HYPOTHECARY RULE)
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.
It has its origin by reason of the conditions and risks
attending maritime trade in its earliest years when such
trade was replete with innumerable and unknown hazards
since vessels had to go through largely uncharted waters to
ply their trade. It was designed to offset such adverse
conditions and to encourage people and entities to venture
into maritime commerce despite the risks and the
prohibitive cost of shipbuilding.
Thus, the liability of the vessel owner and agent arising
from the operation of such vessel were confined to the
vessel itself, its equipment, freight, and insurance, if any,
which limitation served to induce capitalists into effectively
wagering their resources against the consideration of the
large profits attainable in the trade [Aboitiz Shipping Corp.
v. General Accident Fire and Life Assurance Corp., G.R. No.
100446 (1993)].
Thus, under the doctrine of abandonment:
U.P. LAW BOC TRANSPORTATION LAWS
1. The agent shall be civilly liable for the indemnities in
favor of third persons which arise from the conduct of
the captain in the care of the goods which the vessel
carried, but he may exempt himself therefrom by
abandoning the vessel with all her equipment and the
freight he may have earned during the voyage [Art.
587, COC];
2. The owners of a vessel shall be civilly liable in the
proportion of their contribution to the common fund,
for the results of the acts of the captain, referred to in
Art. 587. Each part owner may exempt himself from
this liability by the abandonment before a notary of
the part of the vessel belonging to him [Art. 590,
COC].
3. In case of collision, the liability of the ship owner shall
be understood as limited to the value of the vessel
with all her appurtenances and all the freight earned
during the voyage [Art. 837, COC].
4. If the vessel and her freight should be totally lost, by
reason of capture or wreck, all rights of the crew to
demand any wages whatsoever shall be extinguished,
as well as the agent for the recovery of the advances
made [Art. 643, COC].
If the ship owner or agent may in any way be held civilly
liable at all for injury to or death of passengers arising from
the negligence of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive with his
interest in the vessel such that a total loss thereof results in
its extinction. This is based on the exclusively “real and
hypothecary nature” of maritime law, which operates to
limit such liability to the value of the vessel, or to the
insurance thereon, if any. [Yangco v. Laserna, G.R. No. L-
47447 (1941)]
Exceptions to the Limited Liability Rule
1. Claims under the Workmen’s Compensation Act
[Abueg v. San Diego, G.R. No. L-773 (1946)];
2. Expenses for repairing, provisioning and equipping the
vessel [Government v Insular Maritime, G.R. No. L-
21495 (1924)];
3. There is an actual finding of negligence on the part of
the vessel owner or agent [Aboitiz Shipping v. General
Accident Fire and Life Assurance Corp., G.R. No.
100446 (1993) ];
4. Vessel is insured, to the extent of the insurance
proceeds [Vasquez v. CA, G.R. No. L-42926 (1985)];
5. There was no total loss and the vessel is not
abandoned [Yangco v. Laserna, G.R. No. L-47447
(1941)];
6. Collision between two negligent vessels.
COMMERCIAL LAW
Accidents and Damages in
Maritime Commerce
a. Averages
The following shall be considered averages:
1. All extraordinary or accidental expenses incurred
during the navigation for the preservation of the vessel
or cargo, or both;
2. All damages or deterioration the vessel may suffer
from the time she puts to sea from the port of
departure until she casts anchor in the port of
destination, and those suffered by the merchandise
from the time it is loaded in the port of shipment until
it is unloaded in the port of consignment [Art. 806,
COC].
There are two kinds of averages:
1. Particular or simple average; and
2. Gross or general average.
Averages pertain to expenses and damages:
1. Expense – to constitute an average, an expense must
be:
a. Extraordinary or accidental
b. Incurred during the voyage, and
c. Incurred in order to preserve the vessel, the
cargo, or both.
2. Damages or Deterioration – to constitute and average,
it must:
a. Have been suffered from the time the vessel put
to sea from the port of departure until it casts
anchor in the port of destination, and
b. Have been suffered by the merchandise from the
time they are loaded in the port of shipment until
they are unloaded in the port of consignment.
PARTICULAR AVERAGE
Particular or simple averages shall include all damages
and expenses caused to the vessel or cargo that did not
inure to the common benefit and profit of all persons
interested in the vessel and her cargo [Art. 809, COC].
The owner of the goods which gave rise to the expense or
suffered the damage shall bear this average [Art. 810,
COC].
GENERAL AVERAGE
General or gross averages shall include all the damages
and expenses which are deliberately caused in order to
save the vessel, her cargo, or both at the same time, from a
real and known risk [Art. 811, COC].
The gross or general average shall be borne by those who
benefited from the sacrifice. These include the ship owner
U.P. LAW BOC TRANSPORTATION LAWS
and the owners of the cargoes that were saved.
Contribution may also be imposed on the insurers of the
vessel or cargoes that were saved, as well as lenders on
bottomry or respondentia.
Requisites
1. There must be a common danger;
2. That for the common safety, part of the vessel or of the
cargo or both is sacrificed deliberately;
3. That from the expenses or damages caused follows
the successful saving of the vessel and cargo; and
4. That the expenses or damages should have been
incurred or inflicted after taking proper legal steps and
authority [Magsaysay, Inc. v. Agan, G.R. No. L-6393
(1955)].
Common danger means both the ship and the cargo, after
it 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, dispositions of the authority, or faults of men, provided
that the circumstances producing the peril should be
ascertained and imminent or may rationally be said to be
certain and imminent. This last requirement excludes
measures undertaken against a distant peril [ Magsaysay,
Inc. v. Agan, G.R. No. L-6393 (1955)].
Note: When a vessel is stranded unintentionally, the
damages incurred cannot constitute general averages.
Cases of general average
1. The goods or cash invested in the redemption of the
vessel or cargo captured by enemies, privateers, or
pirates, and the provisions, wages, and expenses of
the vessel detained during the time the arrangement
or redemption is taking place;
2. The goods jettisoned to lighten the vessel, whether
they belong to the vessel, to the cargo, or to the crew,
and the damage suffered through said act by the
goods kept;
3. The cables and masts which are cut or rendered
useless, the anchors and the chains which are
abandoned in order to save the cargo, the vessel, or
both;
4. The expenses of removing or transferring a portion of
the cargo in order to lighten the vessel and place her
in condition to enter a port or roadstead, and the
damage resulting therefrom to the goods removed or
transferred;
5. The damage suffered by the goods of the cargo
through the opening made in the vessel in order to
drain her and prevent her sinking;
6. The expenses caused through floating a vessel
intentionally stranded for the purpose of saving her;
7. The damage caused to the vessel which it is necessary
to break open, scuttle, or smash in order to save the
cargo;
COMMERCIAL LAW
8. The expenses of curing and maintaining the members
of the crew who may have been wounded or crippled in
defending or saving the vessel;
9. The wages of any member of the crew detained as
hostage by enemies, privateers, or pirates, and the
necessary expenses which he may incur in his
imprisonment, until he is returned to the vessel or to
his domicile, should he prefer it;
10. The wages and victuals of the crew of a vessel
chartered by the month during the time it should be
embargoed or detained by force majeure or by order of
the Government, or in order to repair the damage
caused for the common good;
11. The loss suffered in the value of the goods sold at
arrivals under stress in order to repair the vessel
because of gross average;
12. The expenses of the liquidation of the average [Art.
811];
13. If in lightening a vessel on account of a storm, in order
to facilitate her entry into a port or roadstead, part of
her cargo should be transferred to lighters or barges
and be lost, the owner of said part shall be entitled to
indemnity, as if the loss has originated from a gross
average [Art. 817];
14. 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 shall contribute.
Jettison
The captain shall direct the jettison, and shall order the
goods cast overboard in the following order:
1. Goods on deck - beginning with those which
embarrass the maneuver or damage the vessel,
preferring if possible, the heaviest ones with the least
utility and value;
2. Goods below the upper deck - always beginning with
those of the greatest weight and smallest value, to the
amount and number absolutely indispensable [Art.
815].
To include the goods jettisoned in the general or gross
average, the existence of the cargo or goods must be
proved:
1. For cargo – by means of bill of lading;
2. For good belonging to the vessel – by means the
inventory prepared prior to departure [Art. 816].
Jason clause
Jason clause is a provision in the contract of carriage that
requires the cargo owners to contribute in general average
though the event which gave rise to the sacrifice or
expenditure may have been due to the fault of one of the
parties to the adventure [Rule D, York Antwerp Rules].
Although the Code of Commerce provisions on averages are
still in force, the parties may, by stipulation in the charter
party or any written agreement, agree that the York-Antwerp
U.P. LAW BOC TRANSPORTATION LAWS
Rules shall be applied. In addition, the York-Antwerp Rules
may also be used to solve controversies where no provision
in the Code of Commerce is in point because said rules
embody the custom of maritime states [AQUINO (2016)].
Procedure for recovery
1. Assembly and deliberation with the sailing mate and
other officers;
2. Resolution of the captain adopted;
3. Hearing of the persons interested. In case an
interested person should not be heard, he shall not
contribute to the gross average[Art 813, COC];
4. Resolution to be entered in the log book, stating the
motives and reasons therefore as well as the votes and
reason for disagreement[Art 814, COC];
5. Minutes to be signed by all the persons present or in
urgent cases, the captain;
6. Captain shall deliver one copy of the minutes to the
maritime judicial authority of the first port he may
make within 24 hours [Art. 814, COC];
7. Captain shall ratify the minutes under oath [Art. 814,
COC].
Collisions
Collision is an impact or sudden contact between two
moving vessels [AQUINO (2011)].
Allision is the striking of a moving vessel against one that is
stationary.
The steamer’s greater facility of maneuvering over a sail
vessel means it has the greater ability to avoid collisions;
so as a general rule, when meeting a sailing vessel, whether
close hauled or with the wind free, the sail vessel has a
right to keep her course, and it is the duty of the steamer to
adopt precautions as will avoid the sail vessel […] Subject
to the general rules of evidence in collision cases as to the
burden of proof, in the case of a collision between a steam
vessel and a sail vessel, the presumption is against the
steam vessel, and she must show that she took the proper
measures to avoid a collision. [A. Urrutia & Co. v. Baco
River Plantation Co, G.R. No. L-7675. [1913)].
When 2 power-driven vessels are meeting head on, or
nearly head on, so as to involve risk of collision, each shall
alter her course to starboard (right side), so that each may
pass on the port (left) side of the other. [ Smith Bell and Co.
v. CA, G.R. No. L-56294 (1991)].
Note: Although the liability with respect to collision is not
governed by quasi-delict, liability in collision cases is still
negligence based. In other words, courts are still called
upon to determine the negligence of the persons involved
in order to impose liability. The person who caused the
injury is both civilly and criminally liable [AQUINO (2016)].
COMMERCIAL LAW
In some respect, however, the rules that apply to quasi-
delict cannot be applied to collision cases. For example,
the view is that the doctrine of last clear chance and the
rule on contributory negligence cannot be applied in
collision cases because of Art. 827 of the Code of
Commerce.
Thus if both vessels were negligently operated, it does not
matter if the other has the last clear chance of avoiding the
injury because under Article 827, each must suffer its own
damage if both of them are negligent [C.B. Williams v.
Teodoro Yanco, G.R. No. L-8325 (1914)].
Similarly, proof that the plaintiff was negligent will bar
recovery from the defendant in collision cases even if the
plaintiff’s negligence can be classified as merely
contributory [Gorgonio De Sarasola v. Yu Biao Sontua, G.R.
No. 22630 (1925)].
Classes of Collision:
1. Fortuitous - none was at fault;
2. Culpable - one or more vessels were at fault;
3. Inscrutable Fault - it cannot be determined which of
the vessels was at fault.
FORTUITOUS
When it is due to a fortuitous event or force majeure, each
vessel and its cargo shall bear its own damages [Art. 830,
COC].
When, by reason of force majeure, a vessel properly
anchored and moored collides with another, the injury
occasioned shall be looked upon as particular average to
the vessel run into [Art. 832, COC].
CULPABLE
When only one vessel is at fault, the owner of the vessel at
fault shall indemnify the losses and damages suffered,
after an expert appraisal.
When both vessels are at fault , each shall suffer its own
damages, and both shall be solidarily responsible for the
losses and damages occasioned to their cargoes [Art. 826,
COC].
Note: The ship owners cannot successfully maintain an
action against the other for the loss or injury to his vessel.
When a third vessel at fault, the owner of the third vessel
shall indemnify the losses and damages caused, the
captain thereof being civilly liable to said owner [Art. 831,
COC].
INSCRUTABLE FAULT
In case of inscrutable fault, that is, if it cannot be decided
which of the two vessels was the cause of the collision,
U.P. LAW BOC TRANSPORTATION LAWS
each shall bear his own damage and both shall be jointly
responsible for the losses and damages suffered by their
cargoes [Art. 828, COC].
Arrival under stress
Arrival under stress is the arrival of a vessel at the nearest
and most convenient port instead of the port of destination,
if during the voyage the vessel cannot continue the trip to
the port of destination.
It is lawful when the inability to continue voyage is due to
[Art 819, COC]:
1. Lack of provisions;
2. Well-founded fear of seizure, privateers, or pirates; or
3. Any accident of the sea disabling it to navigate.
It is unlawful when [Art 820, COC]:
1. The lack of provisions should arise from the failure to
take the necessary provisions for the voyage,
according to usage and custom, or if they should have
been rendered useless or lost through bad stowage or
negligence in their care;
2. The risk of enemies, privateers, or pirates should not
have been well known or manifest, and based on
positive and justifiable facts;
3. The injury to the vessel should have been caused by
reason of her not being repaired, rigged, equipped,
and arranged in a convenient manner for the voyage,
or by reason of some erroneous order of the captain;
or
4. Malice, negligence, want of foresight, or lack of skill
on the part of the captain is the reason for the act
causing the damage.
The captain has the duty to continue the voyage without
delay after the cause of the arrival under stress has ceased,
otherwise, he shall be liable for damages caused by the
delay [Art. 825, COC].
Note: Expenses for arrival under stress are particular
averages Art. 821, COC].
Shipwrecks
Shipwreck denotes loss or wreck of a vessel at sea as a
consequence of running against another vessel or thing at
sea or on coast where the vessel is rendered incapable of
navigation.
The losses and deterioration suffered by the vessel and her
cargo shall be individually for the account of the owners
[Art. 840, COC].
If the wreck was due to malice, negligence or lack of skill of
the captain, or because the vessel put to sea was
COMMERCIAL LAW
insufficiently repaired and equipped, the ship agent or the
shippers may demand indemnity from said captain. [Art.
841, COC].
Salvage
Salvage is defined as the service which one person renders
to the owner of a ship or goods, by his own labor, preserving
the goods or the ship which the owner or those entrusted
with the care of them have either abandoned in distress at
sea, or are unable to protect and secure. It is founded on
equity and is compensation for actual services rendered.
Three elements are necessary to a valid salvage claim:
1. A marine peril;
2. Service voluntarily rendered when not required as an
existing duty or from a special contract; and
3. Success, in whole or in part, or that the service
rendered contributed to such success [Erlanger &
Galinger v. Swedish East Asiatic Co. Ltd, G.R. No. L-
10051 (1916)].
The goods saved from the wreck shall be specially bound
for the payment of the expenses of the respective salvage,
and the amount thereof must be paid by the owners of the
former before they are delivered to them [Art. 842].
Where a personal action is brought by the salvor against
the owner of the ship, the liability of the latter is limited to
such part of the salvage compensation due for the entire
service as is proportionate to the value of the ship.
Derelict Required
The requirement of Section 1 of the Salvage Law that the
vessel sought to be salvaged is shipwrecked beyond the
control of the crew or abandoned, is present when the
vessel is considered a derelict AQUINO (2016)].
A derelict is defined as a ship or her cargo which is
abandoned and deserted at sea by those who were in
charge of it, without any hope of recovering it (sine spe
recuperandi), or without any intention of returning it (sine
animo revertendi)
If those in charge left with the intention of returning, or of
procuring assistance, the property is derelict, but if they
quitted the property with the intention of finally leaving it, it
is derelict, and a change of their intention and an attempt
to return will not change its nature [Erlanger & Galinger v.
Swedish East Asiatic Co. Ltd, G.R. No. L-10051 (1916)]
Distinction between salvage and towage:
Towage – a vessel is engaged to tow another vessel from
one port to another for consideration.
U.P. LAW BOC TRANSPORTATION LAWS
In contract for towage, the crew does not have any interest
or rights with the remuneration pursuant to the contract;
only the owner of the towing vessel is entitled to
remuneration.
Salvage – a person preserves the goods or the ship which
the owner either abandoned in distress at sea, or is unable
to protect and secure.
In salvage, the crew of the salvaging ship is entitled to
salvage, and can look to the salvage vessel for its share
[Barrios v. Go Thong, G.R. No. L-17192 (1963)].
Carriage of Goods by Sea Act
a. Application
COGSA [Commonwealth Act No. 65] is a special law that
governs all contracts of carriage of goods by sea between
or to and from the Philippine ports.
Its application is according to the following scheme:
Common Carrier Private carrier
Coming to the Philippines from foreign trade*
1. New Civil Code 1. COGSA
(Common Carriers) 2. Code of Commerce
2. COGSA 3. New Civil Code
3. Code of Commerce (Provisions NOT on
common carriers, i.e.
torts, contracts)
From Philippines to foreign country
Apply laws of such foreign country [1753, NCC]
* Nothing stops parties from stipulating that COGSA shall
primarily apply; even domestic carriers can stipulate such.
With respect to vessels destined for foreign ports, the
COGSA does not apply unless parties make it applicable.
Under Art. 1766, in all matters not regulated by the Civil
Code, the rights and obligations of common carriers shall
be governed by the Code of Commerce and special laws.
Thus, although a special law, COGSA only applies when the
Civil Code has no provision dealing with the matter.
Notice of Loss or Damage
Notice of claim and the general nature of the loss or
damage must be given in writing to the carrier or his agent
at the port of discharge before or at the time of the removal
of the goods [Section 3(6), COGSA].
If damage is not patent or cannot be ascertained from the
package, the shipper should file the claim with the carrier
within three days from delivery.
COMMERCIAL LAW
Under Section 3(6), COGSA, a failure to file a notice of
claim within three (3) days will not bar recovery if it is
nonetheless filed within one year. This one-year prescriptive
period also applies to the shipper, the consignee, the
insurer of the goods or any legal holder of the bill of lading.
Inasmuch as the neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the
matter, the COGSA may be applied [Belgian Overseas
Chartering and Shipping v. Philippine First Ins. Co, G.R. No.
143133 (2002)].
Note: In the Warsaw Convention, as well as the Code of
Commerce, the notice requirement is a condition
precedent for the right of action against the shipowner to
accrue.
Period of Prescription
The carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought
within one year after delivery of the goods or the date when
the goods should have been delivered.
The absence of a notice shall not affect or prejudice the
right of the shipper to bring suit within one year after the
delivery of the goods or the date when the goods should
have been delivered [Section 3 (6), COGSA].
COGSA, as a special law, prevails over the general
provisions of the Civil Code on prescription of actions
[Maritime Agencies & Services, Inc. v. CA, G.R. No. 77638
(1990)].
Limitation of Liability
Under Section 4(5), COGSA, the limit is set at a maximum
of $500 per package or customary freight unit.
This is deemed incorporated in the bill of lading even if not
mention therein [Eastern Shipping Lines v. IAC, G.R. No. L-
69044 (1987)].
The 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 goods [AQUINO (2011)].
The Civil Code does not limit the liability of the common
carrier to a fixed amount per package. In all matters not
regulated by the Civil Code, the right and the obligations of
common carriers shall be governed by the Code of
Commerce and special laws. Thus, the COGSA, which is
suppletory to the provisions of the Civil Code, supplements
the latter by establishing a statutory provision limiting the
carrier’s liability in the absence of a shipper’s declaration
of a higher value in the bill of lading. [Belgian Overseas
U.P. LAW BOC TRANSPORTATION LAWS COMMERCIAL LAW

Chartering and Shipping v. Philippine First Ins. Co, G.R. No.
143133 (2002)]
Special Contracts of Maritime
Commerce
a. Loans on Bottomry and
Respondentia
Loan on bottomry is a contract in the nature of a mortgage,
by which the owner of the ship borrows money for the use,
equipment and repair of the vessel and for a definite term,
and pledges the ship as a security for its repayment, with
maritime or extraordinary interest on account of the
maritime risks to be borne by the lender, it being stipulated
that if the ship be lost in the course of the specific voyage
or during the limited time, by any of the perils enumerated
in the contract, the lender shall also lose his money.
may not be required to pay any increased price of
passage, but his living expenses during the delay
shall be for his own account [Art. 698, COC].
3. In case of delay in the departure, the passengers have
a right to remain on board and to be furnished food,
unless the delay is due to accidental cause or to force
majeure. If the delay exceeds 10 days, the
passengers are entitled to the return of the fare upon
request. If the delay is due to the sole fault of the
captain or ship agent, they may demand indemnity for
losses and damages.
4. To be taken directly to the port or ports of destination,
making all the stops indicated in its itinerary [Art. 698,
COC].

Loan on respondentia is one made on the goods laden on

board the ship, and which are to be sold or exchanged in
the course of the voyage, the borrower’s personal
responsibility being deemed the principal security for the
performance of the contract, which is therefore called
respondentia. The lender must be paid his principal and
interest, though the ship perishes, provided that the goods
are saved.

Passengers on Sea Voyage

The right to passage issued to a specified person is non-
transferrable without the consent of the captain or of the
consignee [Art. 695, COC].

Rights of passengers include:

1. In case of suspension of voyage
a. If through the sole fault of the captain or ship
agent, the passengers shall be entitled to have
their passage refunded and to recover for losses
and damages.
b. If due to accidental cause or force majeure, the
passengers shall only be entitled to the return of
the passage money [Art. 697, COC].
2. In case of interruption of voyage
a. If due to fortuitous event or force majeure, the
passengers shall be obliged to pay only the fare
in proportion to their distance covered, without
right to recover for losses or damages.
b. If due to the sole fault of the captain, the
passengers shall be obliged to pay only the fare
in proportion to their distance covered, with a
right to indemnity.
c. If due to the disability of the vessel and the
passenger should agree to await the repairs, he
U.P. LAW BOC TRANSPORTATION LAWS
The Warsaw Convention
1. Applicability
The Warsaw Convention applies to:
a. All international carriage of persons, baggage, or
cargo performed by aircraft for reward;
b. Gratuitous carriage by aircraft performed by an air
transport undertaking [Art. 1(1), Warsaw Convention].
International air carriage or international air transport
means transportation by air between points of contact of
two high contracting parties, or those countries that have
acceded to the Warsaw Convention, wherein the place of
departure and the place of destination are situated:
a. Within the territories of two high contracting parties,
regardless of whether or not there be a break in the
transportation or a transshipment; or
b. 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 the power is not a party to
the Convention [Art. 1(2), WC].
A carriage to be performed by several successive air
carriers is deemed, for the purposes of the Convention, to
be one undivided carriage, if it has been regarded by the
parties as a single operation, whether it had been agreed
upon under the form of a single contract or of a series of
contracts [Art. 1(3), WC].
The carrier is liable for damages for:
a. Death or injury of a passenger if the accident causing
it took place:
1. On board the aircraft;
2. In the course of the operations of embarking or
disembarking; or
3. When there was delay [Art. 17 and 19, WC];
b. Destruction, loss, or damage to any baggage or goods
that are checked in, if damage occurred:
1. During the transportation by air; or
2. When there was delay [Art. 18 and 19, WC];
c. Delay in the transport by air of passengers, baggage
or goods [Art. 19, WC].
The carriage by air contemplated comprises the period in
which the baggage or goods are in charge of the carrier,
whether in an airport or on board an aircraft, or, in the case
of a landing outside an airport, in any place whatsoever.
It does not cover any transportation by land, by sea, or by
river performed outside an airport.
If transportation takes place in the performance of a
contract by air, for the purpose of loading, delivery, or
COMMERCIAL LAW
transshipment, any damage is presumed, subject to proof
to the contrary, to have been the result of an event which
took place during the transportation by air. [Art. 18, WC].
The Warsaw Convention does not provide for an exclusive
enumeration of instances when the carrier is liable. It does
not provide an absolute limit of liability and it does not
preclude the application of the Civil Code and other
pertinent local laws in the determination of the extent of
liability of the common carrier. [Philippine Airlines v. CA,
G.R. No. (1996)] Hence, a complaint for quasi-delict can
still be filed even if the filing is beyond the prescriptive
period provided for under the Convention so long as it is
within the prescriptive period of four years under the Civil
Code. [Villanueva]
Notice of claim with the international carrier is a mandatory
or condition precedent under the Warsaw Convention.
a. Baggage: within 3 days from receipt; in case of delay,
within 14 days from the time the baggage was placed
at the disposal of the passenger
b. Goods: within 7 days from delivery
In case of an action for damage to passenger baggage, the
case must be filed in court within two years.
Limitation of Liability
With respect to the following limitations of liability, Art. 23,
Warsaw Convention provides that any provision tending to
relieve the carrier of liability or to fix a lower limit than that
which is laid down shall be null and void, but the nullity of
any such provision does not involve the nullity of the whole
contract.
Also, under Art. 25, WC:
a. The carrier shall not be entitled to avail himself of the
provisions which exclude or limit his liability, if the
damage is caused by his willful misconduct or by such
default on his part as is considered to be equivalent to
willful misconduct;
b. Similarly the carrier shall not be entitled to avail
himself of the said provisions, if the damage is caused
as aforesaid by any agent of the carrier acting within
the scope of his employment.
Under Art. 29, WC, the right to damages under the WC is
extinguished after two years from the date of arrival at the
destination or from the date on which the aircraft ought to
have arrived, or from the date on which the carriage
stopped. The method of calculating the period of limitation
shall be determined by the law of the court seized of the
case.
Sec. 22(2), WC does not operate as an exclusive
enumeration of the instances of an airline’s liability, or as
U.P. LAW BOC TRANSPORTATION LAWS
an absolute limit of the extent of that liability. The
Convention’s provisions do not regulate or exclude the
following areas:
a. Liability for other breaches of the contract by the
carrier;
b. Misconduct of its officers and employees; and
c. For some particular or exceptional type of damage (i.e.
moral, nominal, temperate or exemplary damages)
[Alitalia v. IAC, G.R. No. 71929 (1990)]
a. Liability to Passengers
General rule: In the carriage of passengers, the liability of
the carrier for each passenger is limited to 250,000 francs
passenger.
Exception: By special contract, the carrier and the
passenger may agree to a higher limit [Art. 22(1), WC].
Liability for Checked Baggage
General rule: In the carriage of baggage and goods, the
liability of the carrier is limited to 250 francs per kilogram.
Exception: The limit does not apply when the consignor has
made, at the time when the package was handed over to
the carrier, a special declaration of the value at delivery
and has paid a supplementary sum if the case so requires.
In that case the carrier will be liable to pay a sum not
exceeding the declared sum, unless he proves that that
sum is greater than the actual value to the consignor at
delivery [Art. 22(2), WC].
Liability for Hand-Carried Baggage
As regards hand-carried baggage, the liability of the carrier
is limited to 5,000 francs per passenger [Art. 22(3), WC].
The Guatemala Protocol of 1971 increased the limit for
passengers to $100,000 and to $1,000 for baggage.
However, the Supreme Court noted in [ Santos III v.
Northwest Orient Airlines, G.R. No. 101538(1992)], that
the Guatemala Protocol is still ineffective [Sundiang and
Aquino (2013)].
The Warsaw Convention should be deemed a limit of
liability only in those cases where the cause of death or
injury to person, or destruction, loss or damage to property
COMMERCIAL LAW
or delay in its transport is not attributable to or attended by
any willful misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any official or
employee for which the carrier is responsible; and there is
otherwise no special or extraordinary form of resulting
injury [Alitalia v. IAC, G.R. No. 71929 (1990)]
Willful Misconduct
A common carrier may not avail of the limitation in the
following cases:
a. Willful misconduct;
b. Default amounting to willful misconduct [Art. 25, WC];
c. Accepting passengers without ticket [Art. 3(2), WC];
d. Accepting goods without airway bill or baggage
without baggage check.
Receipt by the person entitled to the delivery of baggage or
cargo without complaint is prima facie evidence that the
same have been delivered in good condition and in
accordance with the document of carriage [Art. 26, WC].
Jurisdiction
An action for damages must be brought at the option of the
plaintiff:
a. Before the court of the domicile of the carrier;
b. The court of its principal place of business;
c. The court where it has a place of business through
which the contract had been made; or
d. The court of the place of destination [Art. 28 (2) WC].
When a passenger buys a roundtrip ticket, the place of
destination is the place of first departure. E.g. In a round-
trip ticket from San Francisco – Manila, the place of
destination is San Francisco [Santos III v Northwest
Airlines, supra].
It is settled that allegations of tortious conduct committed
against an airline passenger during the course of the
international carriage do not bring the case outside the
ambit of the Warsaw Convention [Lhuillier v. British
Airways, G.R. No. 171092 (2010)].
Note: The Montreal Convention adds a 5th jurisdiction:
residence of the plaintiff.